Tax Accountants’ Association: “Single-Home Owners Should Be Exempt from Comprehensive Real Estate Tax After 5 Years of Actual Residence”

Improvement Suggestions on the 2026 Tax Revision Plan Submitted to the Ministry of Economy and Finance

"Need to Protect Long-term Single-Home Residents"

There has been an argument that single-home households who have lived in their homes for more than five years should be excluded from the Comprehensive Real Estate Tax. The reasoning is that simply raising the basic deduction is insufficient to alleviate the increased tax burden caused by rising housing prices, therefore long-term actual residents should be given separate protection.

The Korea Association of Certified Public Tax Accountants (KACPTA) announced on the 25th that it had submitted these improvement suggestions regarding the government's '2026 Tax Revision Plan' to the Ministry of Economy and Finance on the 20th.

A panoramic view of apartment complexes in Seoul city as seen from Namsan, Seoul. Photo by Dongju Yoon

The Association previously stated in a commentary on August 3, in response to the government's '2026 Tax Revision Plan', that more fundamental system enhancements are needed to ease the difficulties experienced by the public and businesses. The recent recommendations specifically address tax challenges confirmed on site in daily life and business activities, presenting them as concrete policy proposals. The suggestions include: improving residential stability and rationalizing real estate taxation; revitalizing the people's economy and stabilizing small business management; enhancing the living stability and real income of low-income earners and workers; and supporting the sustainable growth of businesses and generational succession of jobs.

◆Protect long-term single-home residents= First, they proposed exempting single-home households who have continuously resided in their homes for over five years from comprehensive real estate taxation. An official from the Association explained, "The problem of increased tax burden on long-term single-home residents due to rising housing prices cannot be solved by merely increasing the basic deduction, so it is necessary to provide separate protection for long-term residents. Furthermore, the deadline for selling previous homes for those temporarily owning two homes in regulated areas should remain at three years, and prior rental contracts that were signed before the new law comes into effect should continue to be governed by previous rules, in order to protect taxpayer trust and predictability,” he emphasized.

For the special long-term ownership deduction for single-home households, it was recommended to strengthen the residency deduction while recognizing the ownership deduction under the same terms as land and other general assets. While the government’s revised plan includes abolishing the ownership period deduction for single-home residents starting in 2029, the Association stated that excluding those who have owned homes for long periods from deductions simply due to their ownership duration should be reconsidered from the perspectives of tax equity with other assets and the predictability for taxpayers.

◆All business owners should receive tax credits for 'medical expenses, education expenses, and monthly rent' = To support the people’s economy and stabilize small business management, the Association recommended expanding the scope of tax credits on medical expenses, education expenses, and monthly rent to all business owners with business income, not just to so-called ‘faithful reporters’. Their reasoning is that medical expenses, education expenses, and monthly rent are essential living costs incurred regardless of faithful reporting, so differentiating the application of tax credits among business owners is unreasonable.

Additionally, the Association proposed that the preferential tax credit rate and tax credit limit on value-added tax for small business credit card sales should remain unchanged; even if the credit limit must be inevitably reduced, the reduction should be carried out in a phased manner to prevent a sudden increase in the tax burden.

The Association also pointed out that reducing the depreciation limit for standard business-use passenger cars to support eco-friendly vehicles could increase the tax burden for business owners who are not directly related to the policy objective. Accordingly, they recommended that the depreciation limit for business-use passenger vehicles should remain at the current annual limit of KRW 8 million.

◆Prior review system needed to encourage family business succession= The Association emphasized that, while preventing irregular gifts and expedient succession, there is a continued need to encourage sound family business succession for sustainable growth of companies and generational transition of jobs. They proposed clarifying the definition and review criteria for “family business” eligible for inheritance tax deduction, and establishing a prior review system to enhance corporate predictability. Since the government’s revised plan has suggested criteria such as ‘professional skills’ and ‘management know-how’ as standards for defining family businesses, the Association noted that unless detailed review standards and procedures are established, interpretations could vary widely by company, thus reducing predictability.

They also warned that, if the management tenure of the predecessor, the period during which the successor is involved in the business, and the post-management monitoring period are all tightened simultaneously, the number of companies able to use the system could decrease significantly and normal management activities could be hampered. Therefore, the current standards should remain. They further recommended that business-use land eligible for family business succession deduction should not be excluded excessively even if it is directly used for production or sales operations, and thus the current provisions should be maintained.

President Ku Jaei of the Association stated, “Tax reform should not end merely with adjustments to tax rates and deductions, but should become a system that actually works in people’s lives and in corporate economic activities. The Association will continue to submit opinions, drawing on the experience of tax accountants who work most closely with tax issues on the ground, so that truly practical and reasonable tax policies that the public can feel are made through the National Assembly’s legislative review process.”

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