By Kim Sung-jin
Staff Reporter


South Korea will lower the capital gains tax rate on real estate transactions from next year to offset planned hikes in tax rates for owning properties.

Leaders of the economic ministries and the ruling Uri Party, including Prime Minister Lee Hae-chan and Finance-Economy Minister Lee Hun-jai, on Monday agreed on introducing the proposed comprehensive real estate tax program next year in a meeting at the National Assembly.

``The economic ministries and the ruling party have reached a consensus to introduce the new property tax next year,’’ ruling Uri Party chief policymaker Hong Jae-hyung said in a press meeting at the National Assembly.

Under the proposed system, the more land, houses and buildings people own beyond a combined market value, the higher the tax burden they will face. Currently, each property is taxed separately regardless of how much are owned.

They also agreed to positively review a lowering of the capital gains tax rate for real estate to offset the increased tax burden from the raising of the tax rate for real estate ownership, Hong added.

He said the new comprehensive real estate taxation system was devised to improve equity among real estate owners for tax payments.

The government and the ruling party, however, failed to reach a compromise on the specific rates by which certain types of real estate taxes will be reduced or increased, and the types and sizes of real estate to be subject to the revised taxation rule, with the Uri Party maintaining its hard-line stance opposing any sharp increase in the overall tax burden for real estate owners.

The Uri Party said it would disclose detailed plans for the new taxation system later this year after narrowing its differences with the government through further working-level consultations.

The Ministry of Finance and Economy said in a separate press conference that it would impose comprehensive real estate tax on corporate properties as well as those owned by individuals.

Lee Jong-kyu, deputy finance and economy minister for tax and customs, said the new tax rule should go into effect in 2005 after parliamentary deliberation.

People subject to the proposed comprehensive real estate tax rule are estimated to reach around 50,000. The government is reportedly discussing to levy the new property tax to those who own real estates worth more than 2.5 billion won in terms of market value.

sjkim@koreatimes.co.kr