Multi-family homeowners, if they choose to donate instead of buying, they will be locked again, fear of headwinds
▲A view of an apartment complex in Nowon-gu and Dobong-gu, Seoul. (yunhap news)
The ruling Democratic Party of Korea has again introduced a proposal to reform the housing capital gains tax. In fact, it is highly likely that this will be the last transfer tax revision by the Moon Jae-in administration.
However, the general view of experts is that even the pressure on multi-homeowners of “a house to live in or a house” will not have much effect on stabilizing house prices and will only produce side effects.
Dong-soo Dong, senior vice chairman of the Democratic Party’s policy committee, proposed a bill to amend the Income Tax Act to reform the housing transfer tax on the 2nd. This is the ruling party argument bill that was finalized at the Democratic National Assembly last month. Considering the remaining term of the Moon Jae-in administration and the presidential election schedule, it is highly likely that the last transfer tax revision will be made during the administration’s term.
The Democratic Party raised the threshold for non-taxation of transfer tax for one homeowner from 900 million won to 1.2 billion won in this reform bill. Now, if you own a house with a market price of 900 million won or less for two years or more (ownership or residence in the area subject to adjustment), you do not pay housing transfer tax, but this standard has been expanded to 1.2 billion won.
Instead, the requirements for special deduction for long-term ownership (special deduction for long-term ownership, a system that deducts up to 80% of capital gains tax depending on the period of ownership and residence when a single homeowner disposes of a house owned for more than three years) become more stringent. Until now, if you own or live in a house for 10 years or more, the deduction rate can be applied up to 80%. If the transfer profit exceeds 1.5 billion won, only a 50% deduction rate can be applied, even for a single homeowner who has owned and lived in the house for 10 years. This reduction in deduction benefits will not be applied retroactively, but will be applied to new housing acquired after September, when the law was amended.
From 2023, it will be difficult to receive special deduction benefits when multiple houses are sorted out and become a single house owner. Until now, the holding and residence period was calculated from the time of acquiring the remaining housing, but from 2023, the holding and residence period will be calculated from the point of becoming the first homeowner. For example, if a multi-residential person cleans up the rest of the house this year, except for the house he bought in 2011, 80% of the deduction rate will be applied.
The market sees the transfer tax reform as the last card that soothes the public sentiment of single-family homeowners and puts pressure on multi-homeowners to dispose of their homes. It contains a warning that if a multi-family homeowner fails to sell their house until next year and becomes a single-family home later, they will have to pay more taxes. The foundation of the ruling party is to stabilize house prices downward through multi-housing voluntary sale.
(Graphic = Reporter Son Mi-kyung [email protected])
Even with this warning message, experts’ evaluations are harsh. Ham Young-jin, head of Big Data Lab in Jikbang, said, “In the current real estate tax, the transfer tax is applied up to 75% for multi-homeowners to clean up their homes.” It can be said that he has already started to endure.”
Experts warn that the transfer tax reform will make the property even more scarce. “Even if multiple homeowners reduce the number of houses in order to receive special deductions, they can choose to donate instead of buying to benefit from a price increase,” said Ham. did.
The tax authorities restrict the sale of a house donated through ‘acquisition value carry-over taxation’ within five years from the date of the gift. If the donated house is sold within 5 years, the transfer tax base is set based on the amount the donor originally purchased the house, not the value of the gift. If the number of donations increases as a means to receive special deductions, it means that the property may be locked for 5 years in the foreign market.
There is a high possibility that the number of hands-on changes is also reduced for single-family items. Park Won-gap, senior real estate expert at KB Kookmin Bank, said, “From a house acquired after September, the benefits of long-term ownership are reduced even for single-homeowners. The advantage of moving to a spacious and expensive house is diluted.” “It may be more profitable to live in a house,” he said.