From the 10th of this month, for one year from the 10th of this month, capital gains tax for multi-homeowners is excluded… Special deduction for long-term holding is also applied
Heavy capital gains tax on multi-homeowners will be suspended for one year from the 10th of this month. The transfer tax exclusion is an amendment to the enforcement ordinance that the government can independently pursue without the consent of the National Assembly.
In the case of multi-home owners who currently own two or more houses, a penalty rate of 5 to 45% of the basic transfer tax rate is applied. The current Income Tax Act imposes 20% points on the basic transfer tax rate (6-45%) for two-homeowners and 30% points for third-homeowners. Since last year, when a multi-family homeowner in an area subject to adjustment (real estate regulation area) sells a house, the maximum basic tax rate of 45% and heavy taxation of 30% have been added, and a maximum of 75% of the gains from the transfer has to be paid as tax. If local taxes are included in this, the tax will rise to 82.5%. If the one-year transfer tax exclusion is applied, only the basic tax rate of up to 45% is applied, which temporarily lowers the tax burden. If the balance is cleared before June 1, the base date for the taxation of the holding tax, the burden of holding taxes, such as general real estate tax, can be reduced along with the exclusion of heavy transfer tax.
However, since the law stipulates a heavy tax rate on the transfer of short-term housing owned for less than two years, if the law is not amended, owners of less than two years cannot receive the exclusion of heavy penalties. In addition, the Income Tax Act needs to be amended to make the multi-family transfer tax exclusion permanent instead of for one year.
Meanwhile, through the amendment of this enforcement ordinance, long-term ownership of a house for more than three years can receive a special deduction for long-term ownership. This is because, although special deductions for long-term ownership are not possible when the heavy tax rate is applied under the law, long-term possession special deductions can be obtained if they become subject to general taxation through the exclusion of heavy taxation. The special deduction for long-term ownership is a system that can deduct up to 30% of the gains from transfer depending on the period if the house has been owned for 3 years or more.
In a written response to the personnel hearing submitted to the National Assembly, Deputy Prime Minister and Minister of Strategy and Finance Choo Kyung-ho said, “The current heavy duty system for multi-homeowners needs to be normalized in terms of appropriateness of excessive tax burden and stabilization of the real estate market.” We plan to make a decision after review,” he said.
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