Luxury compact cars subject to tax next year

The government said Thursday that it would levy an acquisition tax on pricey compact cars starting next year, to strengthen tax balance.

Buyers of compact cars have been exempted from paying the tax so far, while purchases of regular cars are subject to a 4 percent acquisition tax.

The tax deduction rate of a compact car priced at over 50 million won will be reduced to 85 percent from the current 100 percent. Smart Fortwo, manufactured by German carmaker Daimler AG, is the only compact car model priced over 50 million won here.

Providers of rental houses sized 60 square meters or smaller will also have to pay an acquisition tax if they are valued over 200 million won and also a property tax for those worth more than 455 million won.

Reducing the tax benefits for smaller cars and houses is part of the government’s effort to make a fairer tax system, an official at the Ministry of Home Affairs said. The ministry also plans to scale down the range of tax exemptions on other subjects.

By Cho Chung-un (christory@heraldcorp.com)