Home buyers who signed a contract from Aug. 28 will pay a less property acquisition tax, as the government and the ruling party agreed Monday on the timeline for the implementation of the tax benefit.
The property tax cut measure was announced by the Ministry of Strategy and Finance on Aug. 28 in a bid to encourage property transactions in the sluggish real estate market, but the measure floated without a fixed timeline for its implementation due to concerns by local governments over a fall in their tax revenue.
Responding to those concerns, the central government considered applying the tax cut starting on Jan. 1, 2014, but the ruling Saenuri Party pushed to apply the cut retroactively from Aug. 28, the day that the tax cut measure was initially announced.
“The party convinced the government to carry out the tax cut measure under the timeline that it had promised, not only for the public trust but also the normalization of the property market. Most of all, it is critical for the government to show predictability of policy in bringing changes in the real estate market,” Rep. Hwang Young-cheul of the ruling party said at a press conference, following a meeting between Security and Public Administration Minister Yoo Jeong-bok and ruling party lawmakers in the National Assembly’s security and public administration committee.
With the agreement of the two sides, buyers who have bought a home valued at less than 600 million won ($565,000) since Aug. 28 will pay a property acquisition tax worth 1 percent of the property value. Previously, a 2 percent rate was applied.
The tax levied on homes valued at between 600 million won and 900 million won will remain at 2 percent, while the tax on homes worth more than 900 million won will lower to 3 percent from the current 4 percent.
With the application of the new property tax cut ruling, local governments are expected to lose about 780 billion won in tax revenue, tax experts said.
The government and the ruling party agreed that they would fill the gap with state funds. Following the agreement, the parliamentary security and public administration committee proposed a revision to the Local Taxes Act to its bill evaluation subcommittee.
The subcommittee is expected to meet as early as Tuesday to discuss the revision and forward it to the security and public administration committee later in the week before the National Assembly puts it to a vote at a plenary session on Nov. 15.
By Seo Jee-yeon and news reports
(
jyseo@heraldcorp.com)
