Ruling party proposes a bill to exclude long-term ownership deductions for multiple home owners

Aug 03, 2021, 09:16 am

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Yoo Dong-soo, a deputy chief of the ruling Democratic Party’s (DP) policy committee, speaks at a task force meeting on the virtual asset held at the National Assembly in Seoul on July 5, 2021./ Source: Yonhap News

AsiaToday reporter Jeong Geum-min

An amendment to the Income Tax Act has been proposed that does not recognize the period of being a multiple home owner as a deduction period.

Yoo Dong-soo, a deputy chief of the ruling Democratic Party’s (DP) policy committee, representatively proposed Monday the bill, which would make the conditions for applying the special deduction for long-term ownership to be recognized from the day a multiple home owner finally becomes a single-home owner.

Under the current Income Tax Act, a multiple home owner who sells all of his properties except one to become a single home owner could receive a special deduction for long-term ownership of transfer tax up to 80%. The special deduction for long-term ownership is a system that guarantees transfer tax reduction benefits for a resident, who has lived in one house for 10 years or more, when selling a house.

However, if the bill is passed, the transfer tax would be exempted from the time a multiple home owner becomes a single home owner counting the period of possession and residence, starting January 2023. The government is pushing those who want to receive tax benefits from long-term ownership to sell their properties before the bill goes into effect and become a single home owner.

Under the amendment, the maximum deduction rate for the period of residence of 40% is maintained. However, the deduction rate for period of ownership will be applied differently according to the amount of transfer gains. For instance, the deduction rate for period of ownership will be reduced on expensive houses exceeding 1.5 billion won in transfer gains to 10% from the current 40%.

The ruling DP believes that the bill will help curb short-term speculative buying of houses while encouraging long-term ownership.

The revised bill also raised the transfer tax deduction base from the current 900 million won to 1.2 billion won.

“In the case of owning a single house, which has already become essential for living a daily life, the standard amount of capital gains tax exemption has been adjusted in line with the changes of the times. At the same time, the special deduction system for long-term ownership has been significantly revised to focus on single home owners for the purpose of real residence,” Yoo said.

#Democratic Party #long-term ownership #multiple home owner #tax benefit #Income Tax Act