Abolition of Heavy Tax Rate on Second Homeowners' Comprehensive Real Estate Tax and Two-Year Postponement of Financial Investment Tax Introduction

①Maintain current capital gains tax on stock transfers
②Corporate tax reduced by 1%P per bracket
③Additional tax for over 3 houses exceeding 1.2 billion KRW

[Asia Economy Reporter Hyunju Lee] On the 23rd, the National Assembly held a plenary session to review subsidiary bills related to the revenue budget bill. The 19 subsidiary bills on major tax law amendments, including the Income Tax Act, Corporate Tax Act, Inheritance and Gift Tax Act, and Comprehensive Real Estate Holding Tax Act, were passed as amended by bipartisan agreement.

According to the Income Tax Act passed that day, the introduction of the financial investment tax will be postponed for two years, during which the capital gains tax on stocks will be taxed as currently applied (based on major shareholders and holdings of 1 billion KRW), and the securities transaction tax will be gradually reduced.

On the night of the 23rd, the Comprehensive Real Estate Tax Act partial amendment bill is being passed in the National Assembly plenary session.
[Image source=Yonhap News]

Regarding the amendment to the Income Tax Act, Jang Hye-young, a Justice Party lawmaker, requested a dissenting debate. Lawmaker Jang stated, "This law neither serves the citizens, nor democracy, nor builds the values we cherish," and criticized it as a "bombshell law that completely overturns constitutional principles such as taxing where income exists, bearing tax burdens according to ability, setting tax rates by law, and holding open parliamentary sessions."

The corporate tax rate will be reduced by 1 percentage point for each existing taxable income bracket. The ruling party had proposed lowering the current top rate of 25% (for taxable income exceeding 300 billion KRW) by 3 percentage points, but due to opposition from the opposition party and mediation by National Assembly Speaker Kim Jin-pyo, it was concluded to reduce each bracket by 1 percentage point.

Regarding the corporate tax amendment, Kim Kyung-hyup of the Democratic Party criticized it as a law that only accumulates retained earnings, and Lee Eun-joo of the Justice Party lamented that "although similar proposals had never been discussed, the fate of tens of trillions was decided by a single sentence suddenly appearing in the bipartisan agreement."

On the afternoon of the 23rd, an amendment to the Corporate Tax Act partial revision bill was passed at the National Assembly plenary session. 2022.12.23 [Image source=Yonhap News]

For the comprehensive real estate holding tax, the basic deduction amount was raised from 600 million KRW to 900 million KRW (for single-home households, from 1.1 billion KRW to 1.2 billion KRW). For two-home owners, regardless of whether the area is a regulated zone, the heavy taxation was abolished and the basic tax rate applied. Only owners of three or more homes are subject to heavy taxation on taxable amounts exceeding 1.2 billion KRW, with the maximum tax rate set at 5.0%.

Regarding this, Justice Party lawmaker Ryu Ho-jeong criticized, "The reasons for reducing the comprehensive real estate holding tax keep changing," and said, "While a reform to improve tax rationality is needed, our National Assembly only drastically cuts holding taxes for multi-home owners and real estate asset holders." Lawmaker Ryu pointed out that "the effective tax rate for single-home owners is only 0.05%," and "the benefits go to corporations and multi-home owners who pay 89% of the comprehensive real estate holding tax."

The business succession deduction (Inheritance and Gift Tax Act) will raise the mid-sized enterprise sales threshold to 500 billion KRW (currently under 400 billion KRW) and increase the deduction limit to a maximum of 60 billion KRW (currently 50 billion KRW). The post-management period will be shortened from 7 years to 5 years. The scope of business category changes will be relaxed from medium classification to large classification as per the government proposal.

This content was produced with the assistance of AI translation services.