Tuesday

Real Estate Tax Levied On 300,000 Houses Up 90%

donga.com APRIL 30, 2007 03:43 The publicly assessed values of apartment and row houses largely increased this year by an average of 22.8 percent from last year. Detached houses increased by 6.22 percent in value.

In particular, there has been a sudden rise in many areas within the Seoul Metropolitan Area, including Yangcheon-gu (46.1 percent) in Seoul, and Gwacheon City (49.2 percent) in Gyeonggi Province. As a result, the tax burden caused by holding real estate, including composite real estate taxes and property taxes, increased.

The Ministry of Construction and Transportation (MOCT) announced yesterday that this year’s publicly assessed value of 9.03 million apartment houses would be released on April 30. The publicly assessed value of 4.05 million detached houses will also be released by each municipal and regional office on April 30.

This publicly assessed value has been confirmed through an opinion hearing period last month. Any issues can be raised to the MOCT, municipal and regional offices, and the Korea Appraisal Board by May 30. The number of houses valued over 600 million won almost doubles- As the publicly assessed value rose remarkably, the number of houses valued over 600 million won, which is a basis for composite real estate taxes, increased to 300,711, up by almost 90 percent from last year (159,115). Among the houses valued over 600 million won, 99.8 percent of apartment houses and 97.1 percent of detached houses are located in the Seoul Metropolitan Area, including Seoul City. According to an estimate conducted by the National Tax Service (NTS), the number of households subject to composite real estate taxes amounts to 381,000 this year, up 149,000 from last year (232,000). This is just from taking into consideration houses owned by individuals and, if corporation-owned houses and land were also considered, composite real estate taxes would be imposed on 505,000 households. The reason why the number of households subject to composite real estate taxes is larger than that of houses valued over 600 million won is because publicly assessed values of all the houses owned by a household are added all together to determine on whether composite a real estate tax should be levied. For example, in cases when a husband and wife own 400 million won and 300 million won apartment houses, a composite real estate tax is not imposed on each apartment house. However, the household should pay composite real estate tax based on the total of each apartment’s value. Those who own only one house will pay 2.31 million won on average in composite real estate taxes- The composite real estate tax burden for households is expected to increase rapidly. According to the NTS, this year’s average composite real estate tax burden for households that paid the composite real estate tax last year amounts to 4,743,000 won, more than double last year’s (2,108,000 won). This is because publicly assessed value has increased remarkably and the taxable amount basis increased to 80 percent from 70 percent last year. Households subject to composite real estate taxes for the first time this year will pay 799,000 won on average. Also, among those who own only one house, 139,000 households became subject to that composite real estate tax this year. These households will pay 2,317,000 won composite real estate taxes on average. Property tax increased by 11.1 percent on average compared to last year, but the tax amount imposed on houses valued over 600 million won jumped by 39.3 percent on average. Accordingly, holding taxes, which are the sum of composite real estate taxes and property taxes, are expected to be close to the tax burden ceiling (three times the tax paid previous year) in many areas. In terms of some areas which local governments exempted from property taxes, real estate holding taxes will actually triple since the exempted amount is not considered when determining the tax burden ceiling. According to Kim Jong-pil, a tax expert, a 34-pyeong unit in Eunma Apartments in Daechi-dong, Gangnam-gu, Seoul was subject to holding taxes of 2.16 million won last year; that went up to 5.80 million won this year. The holding tax amount for a 35-pyeong unit in new town complex 3 located in Mok-dong, Yangcheon-gu will almost triple from 1.35 million won to 3.71 million won. Sudden decline in sale prices followed by civil appeal for “publicly assessed vale adjustments”- There are some areas where publicly assessed value is higher than market value. Some publicly assessed values were dated on January 1, 2007, a time when the market value was higher than now. The actual transaction price of a 34-pyeong unit Eunma apartment reported on April 16 was one billion won, which is lower than this year’s publicly assessed value (1.008 billion won). If house prices continue to fall, the publicly assessed value, which was determined based on 80 percent of market value, will highly likely become similar to or higher than present house prices. Due to a large decline in sale prices, there has been a wave of civil petitions to lower publicly assessed value. The number of petitions sent to the MOCT in the 20 days after March 14 amounted to 56,355, up more than six times from last year (9,000). The MOCT explained, “The publicly assessed value cannot be readjusted with house prices changes since the assessment basis date, according to the rules.”

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