Hello our readers!
As you all know, a new president was elected in Korea just few weeks ago. The elected is the first female president in Korea, and she is in the limelight these days. However, the reason for the limelight is not just because the elected is ‘female’, but because she suggests unprecedented policy measures dealing with significant issues. For today, I would like to bring one of the suggested measures about real property acquisition tax. Hopefully you do remember this issue written in my previous blog post.
In Korea, it has been quite a while that the government forced policy measures to stabilize real estate market. However, the current Presidential Transition Committee made an official announcement in the media, showing a different stance from the past previous years’ policies regulating the real estate market. That is, the incoming government introduces a policy reducing the real property acquisition tax.
For this ends, the committee recently revised Restriction of Special Local Taxation Act. The revision on the Act shows some of the significant changes in real estate market. For real properties priced less than KRW 9 hundred million, the acquisition tax rate will go down from 2% to 1%. Real estate properties with nominal values between KRW 9 hundred million and KRW 12 hundred million, the tax will be lowered from 4% to 2%. For the other properties priced more than KRW 12 hundred million, the tax will be 3% which is 1% less than the current rate.
With this policy introduced, local governments are facing budget deficit. They cannot expect tax revenues as much as before the revision on the Act. This concern about budget deficit was one of the reasons why this policy measure was not enforced. Due to the big changes by this policy measure, the real estate market is currently under depression. It would take some time for the policy to be settled down. Also, although it seems that this policy is on the right track at the moment, the committee should not ignore that they need to provide a solid ground to let this policy effectively work as expected.