One-home owner A living in Seoul recently purchased a 32-square-meter multi-family house in Singil-d..

Special case for exclusion of heavy duty when registering rental business
Excluding construction benefits for the first sale
Acquisition tax of 6.6 million → 49.84 million won
Administrative Security “Reviewing system improvement next year.”

사진 확대 A view of the villa-dense area in Yongsan-gu, Seoul. [News 1]

One-home owner A living in Seoul recently purchased a 32-square-meter multi-family house in Singil-dong, Yeongdeungpo-gu for 600 million won. It is a 30-year-old villa completed in 1992. Mr. A even registered as a long-term general private rental business before registration to avoid heavy acquisition tax. The government expects the acquisition tax to be around 6.6 million won if it is subject to the special exemption of heavy acquisition tax, which is in place to increase the supply of non-apartment rentals.

However, the acquisition tax notified by the Yeongdeungpo-gu Office was 49.84 million won. It is more than seven times the expected amount. This is because neither new nor built special cases have been applied under the current tax law because it has never been sold since its completion even though it is a construction villa that has been built more than 30 years ago.

According to the real estate industry on the 6th, the government introduced a special exemption from acquisition tax on registered rental of small non-apartments in order to normalize the non-apartment market and expand the supply of rental housing in 2024. It is a system that excludes the house from the number of houses when calculating the acquisition tax if you purchase villas and officetels with an acquisition price of 300 million won or less under 60 million won and rent registration within 60 days in the metropolitan area.

Acquisition tax is applied to 1-3% depending on the price when a homeless person buys a house, but 8% for second-home owners and 12% for three or more houses in areas subject to adjustment. This is why A, who owns an existing house, applied an 8% tax rate to the second house as he/she did not receive a special exemption from heavy taxation.

The problem is that blind spots were created between the new construction and construction by applying different special standards. According to Article 28-4 of the Enforcement Decree of the current Local Tax Act, new non-apartments must be completed after January 10, 2024, in order to receive special cases. Non-construction apartments are for houses acquired within a certain period of time, but houses that are inherited for a fee for the first time after a new construction are excluded.

사진 확대

Mr. A’s villa was completed in 1992 and is not subject to special new construction cases. However, the owner has not changed for more than 30 years since the completion of the project, so the transaction was excluded from the special construction case as it was the first paid succession. The house itself is more than 30 years old, but it cannot be built or built either way under the tax system.

The real estate industry points out that it does not fit the purpose of the system to increase the supply of non-apartment rentals. 2024, when the special case was first implemented, is a time when non-apartment transactions such as villas and rental markets shrank significantly after the nationwide charter fraud. The government also introduced tax special cases to increase the demand for non-apartment purchases and the supply of registered leases.

An official from the Ministry of Public Administration and Security explained, “At that time, we designed special standards according to different goals of revitalizing the purchase of new non-apartments and revitalizing the construction villa market.”

The government is also aware that blind spots are occurring in the system. The official said, “Civil complaints such as A’s case are continuously being received,” and added, “We will review improvements when discussing the extension of special cases for non-construction apartments next year.”

Park Hap-soo, an adjunct professor at Konkuk University’s Graduate School of Real Estate, said, “The purpose of the system is to lower the tax burden on registered rental businesses, but it is not fair to say whether or not it will be changed after the new construction registration.