South Korea's Real Estate Tax: Long-Term Holding Deduction Benefits Wealthy Homeowners

South Korea's real estate tax policies, especially the long-term holding gains deduction, are under scrutiny for potentially exacerbating wealth inequality. The system allows homeowners who have held properties for extended periods to significantly reduce their capital gains tax liability upon sale. This benefit disproportionately aids those who own multiple high-value properties.

Recent examples highlight the system's impact. Lee Jae-myung, a prominent political figure, reportedly sold an apartment purchased in 1998 for a substantial profit, paying only a fraction of the capital gains tax due to the maximum 80% deduction for long-term ownership. Similarly, former Prime Minister Han Duck-soo profited over 2.7 billion won from selling a Seoul apartment after 20 years, benefiting from the same deduction despite being a multi-homeowner.

The current real estate tax framework is being reconsidered as concerns grow over the widening gap between income levels and soaring property values. In countries like the United States, real estate tax policy typically favors higher property taxes and lower capital gains taxes, reflecting a more stable housing market. South Korea, however, has experienced dramatic price surges, creating a significant disconnect between homeowners' earnings and their property's value.

While homeowners who own a single property may feel it is unfair to face substantial taxes due to market-driven price increases, the debate also encompasses property taxes. These taxes, often seen as a fair return for government-supported development, are also part of the ongoing discussion about reforming the real estate tax system.