Absence Due to Transfers or Study Abroad Recognized as Up to 3 Years of Residence... 'Paperwork War' Expected in Practice [2026 Tax Reform]

Up to Three Years of Residency Recognized
When Moving Due to Unavoidable Reasons
After More Than One Year in a Home
Half of Construction Period Counted as Residency for Redevelopment and Reconstruction
Potential Confusion Over What Constitutes

The government has introduced exceptions to minimize unintentional harm resulting from its overhaul of the real estate tax system, now focused on actual owner occupancy. Under the new rule, even if homeowners are compelled to vacate their homes for unavoidable reasons such as education, work transfers, or medical treatment, the period may still be counted as residence for up to three years if certain conditions are met. This allows homeowners to retain benefits for capital gains tax and comprehensive real estate holding tax. However, as the number of exceptions increases significantly, concerns are rising that a “paperwork war” between tax authorities and taxpayers over documentation and legal interpretations may erupt.

According to the 2026 tax reform plan announced by the Ministry of Economy and Finance on August 3, if a homeowner who has lived in a property continuously for at least one year moves to another city or county due to schooling, medical treatment, job changes or transfers, school violence-related transfers, or to care for parents over the age of 60, the move-out period will still be recognized as residence for up to three years.

For newly built homes acquired through redevelopment or reconstruction projects, half the construction period—from the date management disposition plan approval is granted until occupancy becomes possible—will be counted as a period of residence. In addition, local low-priced homes, homes in depopulated areas, unsold homes after construction, and registered rental properties—specifically, units used for construction leasing or purchase-based leasing (excluding apartments in regulated areas)—will also have their lease periods included in residence calculations for the purposes of capital gains tax surcharges on multiple home owners or the special exemption for capital gains on a single residence.

These amendments will be implemented sequentially: for capital gains tax, they will apply to transfers on or after January 1, 2028; and for comprehensive real estate holding tax, to taxable events established from January 1, 2027 onward.

Market participants are assessing that these reforms provide realistic tax relief for owners of a single home who are forced to move due to mandatory residence requirements. In particular, the new rule on recognizing the construction period as residence is forecast to become a key variable for tax mitigation, especially for members of redevelopment and reconstruction associations.

However, to have the period recognized as residence, the homeowner must provide documentary evidence for the reason. Given the expanded scope of "unavoidable reasons," some worry this will fuel more disputes between taxpayers and tax authorities over interpretations, resulting in increased confusion in practice. The proliferation of exceptions is also expected to make it harder for taxpayers to assess their own eligibility and will likely raise the cost of legal and tax representation. For example, if a homeowner is posted overseas and leaves their home unoccupied for three years—extending to four years due to tenant contract renewals—they will not receive tax benefits for one year, regardless of their intent.

An official from the Ministry of Economy and Finance stated, “There may be other unavoidable circumstances not specified in the law, so we plan to address possible recognition of such situations in future amendments to enforcement decrees. However, considering tax fairness and the potential for tax avoidance, the maximum period during which absence due to unavoidable reasons can be recognized as residence is three years.”

Experts also warn of possible negative impacts on the market. They note that withholding properties from sale to avoid tax burdens could worsen the ongoing inventory shortage, and that more homeowners might move in themselves after lease contracts end to satisfy residence requirements, thereby shrinking the supply of rental homes.

Inman Kim, Director of the Real Estate Economics Research Institute, noted, “If landlords move back in and displace tenants to avoid taxes, listings will dry up, destabilizing the rental market. Also, owners of luxury apartments subject to higher tax thresholds are likely to fiercely contest the application of exceptions with the tax authorities.”

Questions of fairness in the tax criteria itself have also been raised. A real estate expert who requested anonymity commented, “The reform is well-intentioned, but it isn’t clear why the bar is set at ‘at least one year of residence.’ There could be unfortunate cases, such as people forced to move after only 11 months due to sudden parental illness, which would leave them excluded from benefits. This ambiguity will likely lead to ongoing controversy over how the rules are applied in practice.”

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