The heavy capital gains tax surcharge on multiple homeowners has been reinstated after a four-year hiatus.

Reinstatement of Capital Gains Tax Surcharge [Yonhap News Photo]

According to government ministries on the 10th, the temporary suspension of the capital gains tax surcharge ended yesterday, and starting today, the surcharge will be reapplied to multiple homeowners in designated speculative zones.

The capital gains tax surcharge system imposes additional tax rates on top of the basic tax rates (6-45%) when multiple homeowners sell properties located in designated speculative zones.

When the surcharge rates are applied, a 20% point increase is added to the basic tax rate for owners of two homes, and a 30% point increase for owners of three or more homes. Including the 10% local income tax, the effective tax rate for owners of three or more homes can rise to a maximum of 82.5%.

Depending on the capital gains, the capital gains tax for owners of three or more homes can more than double.

A simulation conducted by Yonhap News, commissioned by Woo Byung-taek, a specialized consultant at Shinhan Premier Pathfinder, assumed a home purchased for 1.5 billion won six years ago in a designated speculative zone is sold for 2.5 billion won (capital gains of 1 billion won). For a homeowner with one property, the capital gains tax would be approximately 333 million won, applying the basic tax rate and a six-year long-term holding special deduction (hereinafter referred to as the "special deduction").

For a homeowner with two properties in a designated speculative zone, the capital gains tax would increase to 574 million won, an increase of 241 million won (72.4%) more than a homeowner with one property, as the special deduction is not applied and a 20% point surcharge is added to the basic tax rate.

If it were a homeowner with three or more properties, the surcharge would be 30% points, increasing the tax burden to 687 million won, more than double (106%) that of a homeowner with one property.

The government had temporarily suspended the capital gains tax surcharge on multiple homeowners since May 2022 to alleviate a slump in real estate transactions and a decrease in property listings. The suspension was subsequently extended considering market conditions but has now concluded.

However, supplementary measures have been prepared to allow multiple homeowners willing to sell to dispose of their properties without the surcharge.

In principle, the surcharge will not apply if the transfer process is completed by May 9th, the last day of the suspension. However, if a land transaction permit is applied for and the transfer process is completed within the specified deadline, the surcharge can be avoided.

For the 21 districts in Seoul and 12 areas in Gyeonggi Province that were newly designated as speculative zones under the "10.15 Measures" last year, the transfer must be completed within six months from the date of the sales contract. For Gangnam 3 districts (Gangnam, Seocho, Songpa) in Seoul and Yongsan-gu, which were previously designated speculative zones, the transfer must be completed within four months from the contract date.

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol stated at the Economic and Real Estate Ministers' Meeting on the 8th, "While there are concerns about a freeze in listings after May 9th, speculative purchases are fundamentally blocked by loan regulations and the land transaction permit system, and expectations for housing price increases are also declining. We will create an environment where transactions for actual residency can proceed smoothly."