South Korea Retains Basic Deduction for Non-Resident Single-Home Owners
Finance ministry finalizes tax code revision, dropping plans to lower basic deduction following criticism over excessive burdens.
Quick Look
South Korea will drop a plan to lower the basic tax deduction for non-resident single-home owners following public criticism, while proceeding with other revisions to impose heavier taxes on high-end homes.
AI-generated summary
Why It Matters
The government proposed lowering the basic deduction under the comprehensive real estate holding tax for non-resident single-home owners from 1.2 billion won to 900 million won.
By Kang Yoon-seung
SEOUL, Sept. 1 (Yonhap) -- South Korea will retain most elements of the tax code revision proposed last month but scrap a plan to lower the existing basic deduction for single-home owners who do not live in their homes following controversy, the finance ministry said Tuesday.
The Ministry of Finance and Economy said the revision package, focused largely on imposing heavier tax burdens on owners of high-end homes, was finalized at a Cabinet meeting held earlier in the day.
The government last month proposed lowering the basic deduction under the comprehensive real estate holding tax for single-home owners who do not reside in their homes from the current 1.2 billion won (US$873,000) to 900 million won but decided to retain the deduction at the current level.
The government will nevertheless raise the basic deduction from the current 1.2 billion won to 1.4 billion won in assessed value for single-home owners who live in their homes.
The government earlier emphasized the importance of owner occupancy, arguing that homes rented out instead of occupied by their owners could fuel speculative trading in the housing market.
Critics, however, argued that the proposed reduction could impose an excessive tax burden, given the prevalence of the jeonse lease system in the country.
Under the jeonse system, tenants provide landlords with a large lump-sum deposit, which is returned in full at the end of a lease typically lasting at least two years.
The decades-old system allows buyers to purchase homes using only the "gap" between the purchase price and the jeonse deposit. Such purchases are especially attractive during housing market booms, as landlords can find new tenants to repay deposits to outgoing tenants while home prices continue to rise.
Open Questions
- How will the final tax revision impact overall government revenue?
- Will the jeonse system face further regulatory changes?
