The government has reversed its plan to reduce the basic exemption for non-resident homeowners from 1.2 billion won to 900 million won. It also decided to maintain the current cap on property tax burdens at 150% of the previous year's property tax, instead of increasing it to 200% as initially proposed.
On September 1, during a Cabinet meeting, the government finalized the "2026 Tax Reform Plan," which reflects feedback received during discussions and legislative announcements following the initial proposal on August 3.
The basic exemption for homeowners will vary based on residency status. For those living in their homes, the exemption will increase from 1.2 billion won to 1.4 billion won, while non-residents will retain the current exemption of 1.2 billion won. The original proposal aimed to lower the exemption for non-resident homeowners to 900 million won.
For couples owning a single home, each will maintain a basic exemption of 900 million won if they reside in the property. For non-resident co-owners, the exemption will be adjusted to 600 million won each.
The cap on property tax burdens for both housing and land will remain at the current 150%. This cap prevents the total property tax from exceeding a certain percentage of the previous year's combined property and comprehensive real estate taxes.
The government initially intended to raise this cap to 200%, allowing property taxes to double compared to the previous year. However, concerns about a sudden increase in taxpayer burdens during the legislative announcement process led to the withdrawal of this plan.
Additionally, the proposed changes to the contract duration and contribution limits for general ISAs have been reverted. The plan to limit the initial contract period to three years and the total contract period to five years has been scrapped, maintaining the current minimum contract period of three years without a maximum limit.
The proposal to prevent the carryover of unused contributions from the annual limit of 20 million won for ISAs has also been canceled. The plan to set an expiration date for the current system at the end of 2029 has been withdrawn, allowing the existing system to continue.
The newly introduced productive finance ISA will expand support. The minimum contract period will remain at three years, but there will be no maximum duration, and unused annual contribution limits will be allowed to carry over. No expiration date will be set for this program.
The contribution limit for the productive finance ISA is set at 20 million won annually, with a total limit of 200 million won. Participants in the youth version of the productive finance ISA can receive a 10% income deduction on contributions if their income is below a certain threshold. Overlapping participation with youth savings accounts will also be permitted.
The government plans to improve the evaluation methods for listed stocks to prevent so-called "stock price suppression" during inheritance and gift processes. After discussions with the ruling party and additional feedback, a reasonable improvement plan will be established during the regular National Assembly review process.
The withholding tax rate for personal service providers will be reduced from 3% to 2%. However, insurance sales agents will maintain the current 3% rate, regardless of whether they are subject to simplified accounting.
The scope of zero-rated VAT for urban railway construction services will be expanded. For private projects, the previous regulations will apply to projects for which feasibility studies or proposals are completed by the end of this year. For public projects, the existing rules will apply to those with basic plans announced by the end of this year and project plans or implementation plans approved by the end of next year.
The government will submit 11 tax law amendment proposals, including the National Tax Basic Law, Income Tax Law, Corporate Tax Law, and Comprehensive Real Estate Tax Law, to the National Assembly by September 3. These will undergo review in the regular National Assembly's standing committees and plenary sessions before final approval.
* This article has been translated by AI.
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