Even After Holding It for 17 Years, Failure to Live There Means 12.038 Million Won in Annual Tax on a 3 Billion-Won Single Home

[Financial News] The government will increase the comprehensive real estate holding tax burden on single-home owners who have not actually lived in their homes for an extended period, starting next year. Even if a homeowner has held one property for 17 years, tax benefits for long-term ownership will be limited if the actual period of residence is short. If the government’s tax reform plan takes effect, the calculated comprehensive real estate holding tax for a non-resident single-home owner with an officially assessed property value of 3 billion won is estimated to rise by about 55% from the current level.
According to data that the Ministry of Economy and Finance submitted to the National Assembly ahead of the confirmation hearing for Lee Hyoung-il, nominee for deputy prime minister and minister of economy and finance, scheduled for the 15th, the calculated comprehensive real estate holding tax for a non-resident single-home owner with an officially assessed property value of 3 billion won, or a market value of about 4.3 billion won, will rise from 7.747 million won under the current system to 12.038 million won next year. That represents an increase of 4.291 million won, or 55.4%, in one year.
The tax burden would have been even higher under the original tax reform plan announced by the government on the 3rd of last month. The government proposed lowering the basic deduction for non-resident single-home owners from the current 1.2 billion won to 900 million won. If the original plan had been implemented unchanged, the calculated comprehensive real estate holding tax on a home with an officially assessed value of 3 billion won was estimated to rise to 15.365 million won.
The estimated tax was subsequently reduced by 3.327 million won from the original plan after the government decided to keep the basic deduction at the current 1.2 billion won. Although the plan to reduce the basic deduction was withdrawn, the broader policy of strengthening taxation on non-resident single-home owners remains in place.
The tax burden will also increase in lower price ranges. For a non-resident single-home owner with an officially assessed property value of 1.5 billion won, or a market value of about 2.2 billion won, the calculated comprehensive real estate holding tax is estimated to rise 16.6% from 691,000 won currently to 806,000 won next year. For a property with an officially assessed value of 2 billion won, or a market value of about 2.9 billion won, it is expected to increase 21.9%, from 2.275 million won to 2.774 million won.
These estimates are based on an owner under the age of 60 and exclude tax credits and the tax burden cap of 150%. The actual tax payable may vary depending on the home’s price, the owner’s age, and the periods of ownership and residence.
The government’s proposed taxation principle for non-resident homes could also apply to an apartment that the nominee held for an extended period. According to the confirmation hearing request submitted to the National Assembly, the nominee purchased an apartment in Gwacheon, Gyeonggi Province, in February 2009 and held it for 17 years. However, based on the resident registration report, the nominee actually lived there for a total of only four months. The apartment has since been demolished for reconstruction.
The Ministry of Economy and Finance explained the background to the nominee’s failure to live there for an extended period, saying, "The nominee’s family moved from 2009 to the present for reasons including the relocation of the Ministry of Strategy and Finance, now the Ministry of Economy and Finance, to Sejong City."
In response to a question from the National Assembly about whether the government’s proposed taxation principle for non-resident homes could be applied equally to the nominee, the ministry replied, "Under the government bill submitted to the National Assembly, it is judged difficult to recognize periods of non-residence as periods of residence."
Accordingly, even if a person has held one home for an extended period, a short actual residence period is expected to make it difficult to receive tax benefits tied to the period of residence under the revised comprehensive real estate holding tax system.
However, the Ministry of Economy and Finance maintains that the nominee’s long-term ownership of a non-resident home itself should not be viewed as being for speculative purposes. The ministry explained, "The mere fact that the nominee did not live there does not necessarily establish that the demand was speculative."
[email protected] Lee Dong-hyuk Reporter