South Korea Unveils Tax Revisions Targeting High-Value Homes and Supply Chain Support
SEOUL — South Korea's finance ministry on Monday proposed a new set of tax code revisions aimed at reducing tax benefits for owners of high-value homes while extending support to businesses involved in the domestic production of critical supply chain items, according to reports by Yonhap News.
The proposal, which requires approval from the National Assembly and the Cabinet, comes as the government seeks to adopt what it calls a more "reasonable" tax system for the property market, with a focus on high-value home owners amid soaring real estate prices.
Finance Minister Koo Yun-cheol said during a press conference in Sejong last week that the revision mainly focused on establishing a reasonable property tax system under the principle that "homes are for living, not for buying." Koo said the revision aims to impose a heavier tax burden on owners of high-end homes, stressing that taxes on homes with a market value of between 2 billion won (US$1.39 million) and 3 billion won have actually decreased.
"The taxation of homes priced above 4 billion won or 5 billion won will be normalized," Koo said.
One of the major changes under the revision is a revamp of the tax rate system for the comprehensive real estate holding tax, shifting from a home count-based system to one based on the total value of homes owned.
"While the current tax system is based on the number of homes owned, we plan to change the framework to the combined value," said Jo Man-hee, a senior official of tax affairs at the finance ministry.
The tax rate for owners of one or two homes is currently set at 0.5 percent to 2.7 percent, lower than the 0.5 percent to 5 percent range for owners of multiple homes.
The revisions are part of the government's broader vision to lay the groundwork for what it calls the "Irreplaceable Republic of Korea," with key features including strengthening growth potential beyond the semiconductor boom, securing future growth engines, bolstering the competitiveness of mid-sized businesses and venture firms, and developing more productive financial and capital markets.
The plan also includes improving livelihoods for low- and middle-income households and youths, expanding support for those groups, encouraging marriage and childbirth, and promoting province-led economic growth.
Additionally, the revisions pursue reforms for a fairer tax system, including establishing a reasonable real estate tax system, revamping business inheritance tax deductions, and restructuring tax exemptions and incentives. The government also aims to build a more rational tax system and improve taxpayer convenience by preventing tax evasion.
The proposal was announced on Monday, though the finance minister's press conference was held in Sejong on July 30, according to Yonhap. The revisions still need to pass the National Assembly and be approved by the Cabinet before taking effect.