"If Not Completed Within Five Years, a Property Tax Bomb"—Industry Says Local Tax Reform Plan 'Ignores Reality'

[Financial News] The industry is pushing back against a proposed amendment to the Local Tax Act that would establish a separate-taxation period during which a lower rate is applied when calculating property taxes on land for development projects, calling it "a measure that ignores reality." For land used to build homes, the separate-taxation period would be limited to five years. Critics say the proposal fails to take into account the nature of development projects, which can take decades from land acquisition through permits, groundbreaking and completion.
On the 16th, housing, construction and development-related associations expressed concern over the provision establishing a separate-taxation period in the 2026 Local Tax System Reform Plan recently announced by the Ministry of the Interior and Safety (MOIS). The associations plan to gather their views and submit recommendations once the detailed amendment is released.
Property taxes on land are divided into comprehensive aggregation, separate aggregation and separate taxation. Separate taxation carries the lowest rate, with ordinary land subject to a single rate of 0.2%. Land for development projects receives separate taxation from a certain point until the project is completed.
Under the reform plan, the government will establish an applicable period for each type of project. For land used to build homes, the period—currently lasting until completion—would be limited to "from the date of approval of the project plan to within five years." Projects not completed within five years would therefore lose eligibility for separate taxation.
For urban development land, the period, which currently runs from the date of public notice of the implementation plan until the completion of supply, would be limited to within 10 years. For industrial-complex land, the period would also change from the current "until completion approval" to "within 10 years." MOIS explained that the measures are intended to prevent excessive tax benefits for non-business land and encourage earlier development and completion. The industry understands the rationale but argues that the plan "fails to reflect reality at all."
An official from Company A said, "Even in housing construction, obtaining approval for a project plan does not eliminate the many hurdles involved, including complaints from nearby residents, disputes over donations of land or facilities to the public, and unexpected problems arising during construction." The official added, "There are quite a few projects that cannot be completed within five years."
An official from Company B pointed out, "Urban development projects can take as long as 30 years, so limiting them to 10 years makes no sense." An official from Company C protested, "There is no penalty for local governments that drag out projects; this measure disadvantages only the project operators."
If a project is not completed within the prescribed period, the land becomes subject to comprehensive or separate aggregation, causing the tax bill to jump sharply. An association official said, "Establishing a separate-taxation period is essentially telling businesses to shut down once the low-tax period ends." The official added, "How many businesses could survive while paying taxes at the higher rate?"
[email protected] Jong-bae Lee Reporter