Government of South Korea extends heavier capital gains tax grace period for multi-homeowners to cover land permit applications filed by May 9

According to Financial News, the Government of South Korea will broaden the scope of the grace period on the heavier Capital Gains Tax for homes owned by multi-homeowners in Areas Subject to Adjustment, so that it also applies to contracts for which an application under the land transaction permission system has been filed by May 9.
Originally, the government had planned to grant the grace period only for sales contracts concluded by May 9. The change reflects practical issues on the ground, such as delays in processing land transaction permits.
However, the policy that the grace period on the heavier Capital Gains Tax for multi-homeowners will end on May 9 remains unchanged.
On the 9th, the Ministry of Finance and Economy announced supplementary measures that exclude certain cases from the application of the heavier Capital Gains Tax, including this change.
Kim Geon-young, Director General for Property and Consumption Tax Policy at the Ministry of Finance and Economy, said, "Given the recent increase in applications under the land transaction permission system, it is uncertain in many cases whether permission will be granted by early May, even if an application is filed," adding, "We plan to provide the widest possible opportunity to sell without uncertainty arising from the review procedures under the land transaction permission system."
Under the new measures, if a multi-homeowner applies to the city, county and district offices for permission under the land transaction permission system by May 9, obtains that permission, and then signs a sales contract, the heavier Capital Gains Tax will not apply as long as the existing home in an Area Subject to Adjustment (Gangnam District, Seoul; Seocho District; Songpa District; and Yongsan District) is transferred within four months from the contract date. This applies until September 9 next year.
For Areas Subject to Adjustment newly designated on October 16 last year, the heavier Capital Gains Tax will not apply if the home is transferred within six months from the contract date. This applies until November 9 next year. The newly designated Areas Subject to Adjustment include all 25 districts of Seoul and 12 areas in Gyeonggi Province, such as Gwacheon and Gwangmyeong-si.
These supplementary measures on the grace period for heavier Capital Gains Tax on multi-homeowners were introduced because applications under the land transaction permission system have recently surged, and the speed of processing such permits varies greatly by region. In addition, reviews by city, county and district offices under the land transaction permission system typically take more than two weeks, or about 15 business days. As a result, even if a multi-homeowner finds a buyer and files for land transaction permission after mid-April, it is often unclear whether permission will be granted by early May.
Earlier, on the 6th, President Lee Jae-myung stated at a meeting of the State Council of South Korea, "Because permission under the land transaction system must be completed and the contract signed by May 9, many seem to believe that it will be impossible to sell after mid-April when you take the approval procedures into account," and added, "I do not think it is necessary to go that far," instructing officials to review supplementary measures for the grace period on the heavier Capital Gains Tax.
In addition, in land transaction permit zones, when a multi-homeowner sells a home that is currently rented to a third party to a person without housing ownership, if the seller applies to the city, county and district offices for permission under the land transaction permission system by May 9, the buyer's obligation to reside in the property under the land transaction permit system and the obligation to file resident registration of move-in when taking out a mortgage loan will be suspended.
The Ministry of Finance and Economy and the Ministry of Land, Infrastructure and Transport will pre-announce, from the 10th to the 17th, draft amendments to the Enforcement Decree of the Income Tax Act and the Enforcement Decree of the Act on Report on Real Estate Transactions. After deliberation by the State Council of South Korea, the amendments are scheduled to be promulgated and take effect within this month.
skjung@fnnews.com Jung Sang-geun Reporter