With Real Estate Tax Revision, Non-Resident Holding Tax at Banpozai Drops from 33.18 Million Won to 26.41 Million Won, Now Matches Primary Residents [Real Estate AtoZ]

Tax Cap Kept at 150% Eliminates Difference Between Owner-Occupiers and Non-Residents

Hannam The Hill 235.31m²: Tax Liability Set at 112.6 Million Won

Variables Remain, Such as Potential Increases to Fair Market Value Ratio

As the government has withdrawn its plan to raise the cap on comprehensive real estate tax from 150% to 200%, it has been found that next year, owners of expensive apartments in Seoul will pay the same amount of tax regardless of whether they are primary residents or non-resident single-home owners. Although the government originally tried to favor primary residents by varying deductions, both types of owners end up hitting the 150% tax cap, resulting in no actual difference in the amount to be paid.

A panoramic view of the apartment complexes in the Gangnam area as seen from the Sky Observatory of Lotte World Tower in Songpa-gu, Seoul. Photo by Dongjoo Yoon

On September 2, specialist Woo Byoungtak of Shinhan Premier Pass Pathfinder analyzed 19 cases involving major expensive and semi-expensive apartments in Seoul, assuming that next year’s officially assessed prices will rise at half the rate of this year. The results showed that for the 84㎡ unit in Banpozai, Seocho-gu, both primary resident and non-resident owners will be liable for the exact same holding tax next year: 26.41 million won. While the basic deduction varies—140 million won for primary residents and 120 million won for non-residents—both end up hitting the 150% cap, so the real tax paid becomes identical. Compared to the originally announced plan on August 3, non-residents’ burden fell from 33.18 million won to about 26.41 million won, a reduction of roughly 7 million won. The tax for primary residents also decreased slightly from 27.64 million won.

For high-end homes such as Hannam The Hill’s 235.31㎡ unit, the result is the same: regardless of actual occupancy, the holding tax comes to 112.6 million won. The original plan would have set this at 140.86 million won, so the revised plan marks a reduction of 28.26 million won. The rate of increase drops from the originally expected 84.5% to 47.5%. This pattern was the same for Acro River Park, Raemian Prestige, Raemian Daechi Palace, Jamsil Jugong Complex 5, Dogok Rexle, Eunma Apartment, and other major properties as well.

This is because the government scrapped its original plan to lower the basic deduction for non-resident single-home owners from 120 million won to 90 million won, and also decided against raising the tax cap from 150% to 200%. Non-resident single-home owners will therefore still benefit from a 120 million won deduction next year. For primary resident owners, the basic deduction will be raised to 140 million won as initially planned.

Woo explained, "If the tax cap had been raised to 200% as originally announced, there would have been a sustained difference in tax amounts based on residency status. But by keeping the cap at 150%, any calculated taxes that exceed this cap—particularly in expensive apartment complexes—mean that the practical difference between residency and non-residency is eliminated for payment purposes." He added, "However, which complexes will be subject to the cap depends on price increases, so it is difficult to generalize uniformly."

In the case of nine semi-expensive apartment examples, the gap in tax burden between primary residents and non-residents remains. Taking the 84㎡ unit in Maporaemian Prugio, in northern Seoul as an example, based on the revised plan, the holding tax next year for a primary resident will be 5.21 million won, while a non-resident will pay 6.05 million won—a difference of 840,000 won. The original plan had this difference at 2.56 million won, so it has now shrunk to about one-third. For non-residents, the original plan projected a 777,000 won (86.8%) increase over the previous year, but under the revised plan the increase is 605,000 won (45.4%), a much smaller rise. This trend was similar for Raemian Oksu Riverzen, Mapo Xi, Wangsimni Ten's Hill, Centras, Heukseok Centreville, Raemian Hillstate Godeok, and Raemian 4th Complex in Dangsan-dong. In complexes where taxes do not hit the cap, differences in basic deductions are directly reflected in the actual tax amount.

The revised plan does not mean that taxes will fall below this year’s levels—only that the rate of increase will be less steep than originally proposed. Lee Eunhyung, a research fellow at Korea Research Institute for Construction Policy, commented on the revision: "Rather than shifting away from a policy of strengthening holding taxes, this simply slows the pace of increase," adding, "policy direction remains largely unchanged as the official market value ratio is still set to go up."

There are still alternative ways to reduce taxes. The government has increased the basic deduction for single-home couples with joint ownership who do not live in the property from the previously proposed 40 million won to 60 million won, which amounts to 120 million won combined for a married couple. For example, if a couple co-owns 50% each of an 84㎡ unit in Banpozai, the total holding tax next year is estimated at 16.84 million won. This is still 43.8% higher than this year’s 11.71 million won, but almost 9.58 million won less than if the property were held under a sole name (26.41 million won).

The slower rate of increase also reduces the need for non-resident single-home owners to rush to sell their properties. Ham Youngjin, head of KB Kookmin Bank’s Real Estate Research Lab, observed, "As the 120 million won deduction for non-resident single-home owners is maintained, upward pressure to list homes in response to higher taxes will be significantly reduced." He added, "The expected increase in listings in Seoul’s high-priced apartment market may also slow as a result."

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