1 Housing tax and property tax will be eased… Review of additional reduction in fair market value ratio
The government is considering a plan to lower the fair market value ratio, which is used as the basis for calculation of comprehensive real estate tax (hereafter referred to as property tax) and property tax, lower than President Yoon Seok-yeol’s pledge.
Since the tax base is calculated by multiplying the fair market value ratio after deducting a certain amount from the published price, the lower this ratio, the lower the tax burden.
According to the Ministry of Strategy and Finance on May 11, the government is considering a plan to lower the fair market value ratio of the property tax to a lower level than the 95% promised by President Yoon. The fair market value ratio has been steadily increasing from 85% in 2019 to 90% in 2020 and 95% in 2021. In response, President Yoon promised to freeze the fair market value ratio, which was scheduled to rise to 100% this year, to 95%, the 2021 level, to alleviate the tax burden.
Deputy Prime Minister and Minister of Strategy and Finance Choo Kyung-ho also said in a written response submitted prior to the National Assembly personnel hearing, “A review is necessary because raising the fair market value ratio to 100% may cause an excessive tax burden on taxpayers.” .
Currently, the fair market value ratio of taxation is entrusted to be set by the enforcement decree in the range of 60 to 100%, and the government can independently revise it without the consent of the National Assembly. Accordingly, the government will complete the adjustment at the end of August after discussing the scope of the fair market value ratio cut and adjustments related to property tax. This is because the related system must be overhauled before the end of August in order to meet the deadline for sending the tax bill in November.
The additional cut in the fair market value ratio is to alleviate the burden of taxation on the property tax, which has rapidly increased due to the recent surge in publicly announced prices and increase in tax rates. Previously, the government decided to impose a property tax this year by applying the published price of last year to the case of one homeowner per household. However, if the fair market value ratio rises, even if the official price is frozen, the property tax will inevitably rise.
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