Discussions surrounding the South Korean government's 2026 real estate tax reform plan are heating up. The ruling Democratic Party is demanding revisions to the proposal aimed at easing the comprehensive real estate tax burden on non-resident homeowners, while the opposition People Power Party is introducing legislation to expand tax benefits for long-term homeowners.
According to relevant authorities on the 26th, the government is reviewing whether to amend the tax reform plan, which includes measures to reduce the tax burden for non-resident homeowners. The discussions between the ruling party and the government are expected to cover the scope of reasons for failing to meet residency requirements and the level of basic deductions for the comprehensive real estate tax.
Earlier, on the 23rd, the ruling party and the government held a high-level meeting to discuss ways to alleviate the tax burden on non-resident homeowners. They agreed to expand the criteria for recognizing actual residency in cases where homeowners cannot reside in their properties due to unavoidable reasons such as job relocation, children's education, or caring for parents.
Democratic Party leader Kim Min-seok expressed the need for revisions to the government's proposal, which lowers the basic deduction for non-resident homeowners from 1.2 billion won to 900 million won and raises the tax burden cap to 200%.
The Democratic Party specifically requested that the government distinguish between resident and non-resident homeowners when imposing the comprehensive real estate tax. They emphasized the need for caution in lowering the basic deduction for non-residents amid rising tax burdens due to increased property valuations.
It is reported that the ruling party generally agrees with the government's direction to adjust tax benefits based on actual residency for capital gains tax. The government is pushing to shift the long-term holding special deduction from being based on the duration of ownership to the duration of residency.
The People Power Party has been consistently introducing bills aimed at reducing the tax burden for long-term homeowners. Representative Seong Mi-ok proposed a revision to the Income Tax Act that would raise the capital gains tax exemption threshold for one-household, one-home owners from the current 1.2 billion won to 1.5 billion won and increase the upper limit of the long-term holding special deduction rate from 40% to 50%.
Representative Kim Eun-hye suggested recognizing property taxes and comprehensive real estate taxes paid during the holding period as necessary expenses when calculating capital gains upon the sale of a home. This aims to reduce the tax burden by considering taxes paid during the holding phase at the time of sale.
Representative Park Soo-min proposed a tax deferral plan that would allow homeowners who have owned and lived in their homes for over three years to postpone the payment of a portion of the capital gains tax when moving to a property priced lower than their current home until they sell the new property. Additionally, Representative Na Kyung-won is preparing a transitional measure bill that would recognize the existing deduction rate for the holding period prior to the implementation of the long-term holding special deduction reform to prevent retroactive application.
In the National Assembly, discussions are expected to continue between the ruling and opposition parties regarding whether to expand tax benefits for actual residents or alleviate the tax burden for long-term homeowners.
The first major point of contention in the proposed amendments will likely be the level of relief for non-residents' comprehensive real estate tax and the timing of the repeal of the long-term holding special deduction. The National Assembly is anticipated to see ongoing debates between the parties over whether to expand tax benefits for actual residents or alleviate the tax burden for long-term homeowners. The scope of any amendments to the government's proposal could also affect the anticipated revenue impact of the real estate tax reform.
Professor Ko Jun-seok of Dongguk University stated, "The market's demand is to maintain the current levels of the comprehensive real estate tax and capital gains tax. In a situation where both the comprehensive real estate tax and transaction taxes are rising, we can expect increases in market prices and rental crises." He added, "Theoretically, raising taxes could increase revenue, but in reality, that is not always the case. Increased transactions are necessary for actual revenue growth, and we need to carefully consider whether to view non-resident homeowners as speculators or genuine demanders."
* This article has been translated by AI.
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