As the grace period for heavy capital gains tax on multiple homeowners ends on the 9th, taxes on capital gains for multiple homeowners selling homes in regulated areas will significantly increase starting from the 10th.

However, a supplementary measure has been put in place to defer the heavy capital gains tax for those who complete their land transaction permit applications by the 9th, allowing for an extended period to complete the transfer process, up to November in some regions.

This may lead to a rush of last-minute activity from some buyers and sellers who are still in the process of a transaction.

 [Yonhap News Photo]

According to government officials on the 3rd, in principle, multiple homeowners can only receive a deferral of heavy capital gains tax if the entire transfer process, including the payment of the remaining balance and registration, is completed by the 9th, following a sales contract.

The current basic capital gains tax rates range from 6% to 45%. After the 9th, an additional 20 percentage points will be added for those owning two homes and 30 percentage points for those owning three or more homes in regulated areas. Including the 10% local income tax, the effective tax rate can rise to as high as 82.5%.

However, considering that the clear announcement of the termination of the deferral measure was only made in late January, less than four months before its expiry, and that the transaction period has been extended due to the October 15th measures, which designated all of Seoul and 12 areas in Gyeonggi Province as land transaction permit zones, some supplementary measures have been introduced to provide flexibility to multiple homeowners willing to sell.

Simply completing the land transaction permit application by the 9th will allow for the deferral of heavy capital gains tax.

In Seoul's Gangnam 3 districts (Seocho, Gangnam, Songpa) and Yongsan District, which were already designated as regulated areas before the October 10th and 15th measures, multiple homeowners can avoid heavy capital gains tax if they apply for and receive a land transaction permit by the 9th, sign a sales contract, and complete the transfer process, including the payment of the remaining balance and registration, by September 9th.

The government had previously set a condition in its first supplementary measure announced on February 12th, stating that the sales contract must be completed by the 9th and the transfer finalized within four months of the contract date. However, considering the time required for land transaction permit reviews and the urgency of transactions, an additional supplementary measure was released last month, changing the criterion from completing the sales contract to completing the land transaction permit application.

In the remaining 21 districts of Seoul and 12 areas in Gyeonggi Province, which were incorporated into regulated areas after the October 10th and 15th measures, multiple homeowners will not be subject to heavy capital gains tax if they apply for a land transaction permit by the 9th and complete the transfer process by November 9th.

[Graphic] Supplementary Measures for the Termination of Deferral of Heavy Capital Gains Tax for Multiple Homeowners [Yonhap News]

A special provision will also apply to multiple homeowners who have tenants in the property they wish to sell, allowing for a relaxation of the actual residency requirement only when the home is sold to a non-homeowner.

For properties with existing lease agreements as of February 12th, the announcement date of the enforcement decree amendment to the Act on Real Estate Transaction Reporting, etc., the actual residency requirement will be deferred until the end of the lease agreement if a land transaction permit is applied for by the 9th. Depending on the lease term, the move-in date can be postponed up to February 11, 2028.

However, extensions granted after the announcement of the amendment will not be eligible for deferral.

The deferral of the actual residency requirement is strictly limited to cases where a non-homeowner purchases a property in a regulated area owned by a multiple homeowner. The buyer must be a non-homeowner as of the date of the land transaction permit application. The deferral of actual residency does not apply if the seller is a single homeowner and not a multiple homeowner.

Furthermore, although the June 27th measures last year imposed an obligation to register residency within six months of the execution of a mortgage loan in regulated areas, the current deferral of the actual residency requirement allows for the registration of residency to be postponed until the later of "six months from the loan execution date" or "one month after the lease agreement termination."