South Korea’s proposed real estate tax overhaul has drawn more than 3,000 public comments within just five days of its legislative notice period. Alongside concerns about rising comprehensive real estate holding tax burdens, demands to broaden residency requirement exceptions are pouring in.
According to the National Public Participation Legislation Center on the 9th, the Comprehensive Real Estate Holding Tax Act revision — announced by the Ministry of Economy and Finance on the 4th — had garnered over 2,200 comments as of 9 a.m. The Income Tax Act amendment, which converts the long-term holding special deduction for capital gains into a long-term residence income deduction, received more than 1,400 comments.
The most frequently raised issue concerns residency requirements. The government’s proposal currently recognizes non-residency periods of up to three years as deemed residency when a homeowner moves from a property they have continuously resided in for over one year due to unavoidable circumstances such as education, job changes or transfers, illness, school transfers, overseas stays, or parental care. However, new demands have emerged to include non-residency due to childcare or family caregiving as exceptions. A representative case involves grandparents who move to their children’s area to care for grandchildren, leaving their own home vacant.
Requests have also been made to treat long-term home vacancies during remodeling construction the same as redevelopment or reconstruction projects, where half the construction period is recognized as residency.
Koo Yun-cheol, Deputy Prime Minister and Minister of Economy and Finance, appeared on MBC Radio’s “Kim Jong-bae’s Focus” on the 7th and stated, “For education, job changes, illness, school transfers, overseas stays, parental care, and other cases where we determine ‘this is unavoidable,’ we are trying to approach this from the public’s perspective.” He added, “Once the law passes next year, we plan to gather more public input when revising the enforcement decree and review matters as flexibly as possible.” Regarding the three-year limit on recognized non-residency, he left room for adjustment, saying, “If there are unavoidable exceptions, we will listen to public opinion and review them once more.” However, he expressed caution about expanding exceptions too broadly, noting, “If we make it too broad, people may start thinking about this in entirely different ways.”
Cautionary voices are also emerging within the ruling party. At a real estate policy forum hosted by the Democratic Party of Korea’s Seoul chapter on the 6th, participants raised concerns about the government’s approach to increasing the comprehensive real estate holding tax burden on non-resident single-homeowners. While agreeing with the reform’s intent to favor actual residents, attendees pointed out that “it should not be applied uniformly without considering individual non-residency circumstances and regional market conditions.” Opinions within the party suggested that non-resident single-homeowners should not all be treated as speculative demand, and exceptions should be recognized for cases where existing lease contracts remain or where immediate occupancy is impossible due to reconstruction or redevelopment. Rep. Oh Ki-hyung of the Democratic Party relayed that “there were opinions calling for flexible application of deemed residency requirements.”
Demands have also surfaced to further increase the basic deduction for couples who jointly own a single home. Under the current revision, the basic deduction for single-homeowners rose from a publicly assessed value of 1.2 billion won (approximately $852,606) to 1.4 billion won (approximately $994,707), but the existing system — where joint owners each receive a 900 million won (approximately $639,454) deduction — remains unchanged.
Critics also noted that the income threshold for the tax payment deferral system, which allows homeowners to postpone comprehensive real estate holding tax payments until they sell their property, remains too low. The revision only eased the threshold by 10 million won, from a total salary of 70 million won (approximately $49,735) (comprehensive income of 60 million won) to 80 million won (approximately $56,840) (comprehensive income of 70 million won).
Regarding the decision to cap the long-term residence income deduction — which replaces the long-term holding special deduction — at 2 billion won (approximately $1.4 million) in 2028 and 1 billion won (approximately $710,505) in 2029, opinions emerged arguing that this cap should not be applied retroactively to those who already own homes. Some also suggested that non-apartment properties such as officetels should be considered when determining multiple-homeowner status.
The core of this tax reform is a shift toward taxation based on property value rather than the number of homes owned. The government plans to aggregate the value of owned properties and impose heavier taxes on higher total values. The comprehensive real estate holding tax rate structure will be gradually unified by the year after next, eliminating distinctions based on the number of homes, with rates for single- and two-homeowners rising to a maximum of 5%, matching the current standard for those with three or more homes. The fair market value ratio is also set to increase from the current 60% to 70% next year for single-homeowner households, and to 80% by the year after next for those with three or more homes. The ceiling on holding tax increases will also rise from 150% to 200% of the previous year’s amount.
The government has identified single homes with market values exceeding 4 billion won (approximately $2.8 million) as being squarely in the impact zone. Cho Man-hee, head of the Ministry of Economy and Finance’s tax office, explained, “A 4 billion won home falls around the top 0.4%, and a 5 billion won home around the top 0.2% in terms of housing stock. For single-homeowners, the comprehensive real estate holding tax credit can reach up to 80%, so one might question whether this constitutes excessive benefits.”
For single-homeowner households, actual residency allows a deduction of 1.4 billion won, but non-residency only permits a 900 million won deduction. The basic deduction for multiple homeowners will also be reduced from the current 900 million won to 400 million won (approximately $284,202), with an additional deduction of up to 500 million won (approximately $355,252) calculated based on the proportion of residential property value within the total aggregated housing value.
A single-homeowner residing in an 84-square-meter unit at Banpo Xi in Seoul’s Seocho District is estimated to pay approximately 18.1 million won (approximately $12,860) in holding taxes this year. Under the revised comprehensive real estate holding tax rate structure, however, next year’s holding tax is expected to rise to approximately 27.64 million won (approximately $19,638) — an increase of nearly 10 million won. Without actual residency, the tax could jump to roughly 33.18 million won (approximately $23,575), nearly double this year’s amount.
Significant changes are also coming to capital gains taxes. The government is overhauling the long-term holding special deduction, which currently allows single-homeowner households to deduct up to 80% of capital gains based on the holding period and residency period. Currently, holding and residency deductions each account for 40%, totaling 80%. By 2029, the holding deduction benefit will be gradually eliminated while the residency deduction expands to 80%. A deduction cap of 2 billion won will be introduced the year after next, dropping to 1 billion won in 2029.
For example, assuming a homeowner purchased an 84-square-meter unit at Raemian Firstige in Seocho District’s Banpo-dong for 1.6 billion won (approximately $1.1 million) 10 years ago and sells it for 5.6 billion won (approximately $4.0 million) after 10 years of residency, the capital gains tax under the current system — which remains in effect through next year — would be approximately 241.85 million won. By 2029, when deduction benefits shrink, the tax burden is estimated to surge nearly fourfold to approximately 944.85 million won.
Meanwhile, the heavy capital gains tax surcharge on multiple homeowners will see its rate reduced by 5 to 15 percentage points over the next two years. While this aims to ease the tax burden to encourage multiple homeowners to sell, the announcement of regulatory easing less than half a year later has sparked controversy over policy credibility. President Lee Jae-myung addressed this on the 4th, stating, “Some have pointed out a ‘lack of policy consistency.’ That’s not true. We’re opening an exit path, but rather than abolishing the surcharge entirely, we’re doing it by half…”
Market analysts anticipate that while some properties may be listed — particularly by retirees — the volume will be limited. Nam Hyuk-woo, a real estate researcher at Woori Bank, analyzed, “Among retired seniors who may struggle to bear the increased holding tax, or those who could be disadvantaged by the newly established long-term residence income deduction cap, some may consider selling. However, since the reform timeline is relatively long, we need to watch whether this leads to rapid price adjustments from increased listings.”
As actual residency becomes increasingly important, some predict that landlords will have stronger incentives to occupy their properties, potentially worsening the rental housing crunch. Choi Hwang-soo, an adjunct professor at Konkuk University’s Graduate School of Real Estate, expressed concern: “If you don’t reside in the property, both holding taxes and capital gains taxes become significantly heavier, so many landlords may choose to live in their properties. This could actually intensify the rental crisis, particularly for lower-priced homes or in areas that haven’t seen much activity.”
Debate is heating up in the National Assembly. The opposition People Power Party has denounced the reforms as a “tax bomb” and vowed rigorous scrutiny, while the ruling Democratic Party counters that it is a process of “tax normalization.” At the same time, the ruling party appears to be gauging public sentiment, stating it will “supplement the policy as needed, considering policy effectiveness and public acceptance.”
Since non-residency exception requirements are matters for enforcement decree revision, the government plans to broadly review submitted opinions and develop detailed provisions. Comments received during the legislative notice period will be categorized by type for examination. The legislative notice for the tax reform package runs through the 20th, after which it will proceed to a vice-ministerial meeting on the 27th, a Cabinet meeting on September 1st, and submission to the regular National Assembly session before September 3rd.