[비즈한국] It has been confirmed that GS Honorary Chairman Huh Chang-soo sold his detached house in Seongbuk-dong, Seongbuk-gu, Seoul, just before the expiration of the grace period for heavy capital gains taxation on multi-home owners. At the time the sales contract was signed, Honorary Chairman Huh was a multi-home owner who, in addition to this house, also held a high-priced apartment in Ichon-dong, Yongsan-gu, Seoul. Recently, a series of cases have been identified in the business world where individuals have disposed of their properties ahead of the termination of the capital gains tax relief period.
According to BizHankook's coverage, GS Honorary Chairman Huh Chang-soo sold his detached house in Seongbuk-dong, Seongbuk-gu, Seoul, for 4.5 billion won on the 10th. The buyer is a real estate management company based in Gangnam-gu, Seoul. Both parties completed the transfer of ownership two months after signing the sales contract on May 8. Just before the ownership transfer on the 6th, Honorary Chairman Huh changed the zoning of the house to a neighborhood living facility. However, the reference date for determining whether a seller is a multi-home owner for real estate sales is the date of the sales contract.
Honorary Chairman Huh Chang-soo had owned the Seongbuk-dong house for 33 years. After purchasing the 723㎡ (219-pyeong) land in October 1980, he built a detached house with one basement floor and two floors above ground in October 1993. In October 2009, he also carried out an expansion project to increase the size of the above-ground floors. At the time of the sale, in addition to the Seongbuk-dong detached house, Honorary Chairman Huh also owned a 243㎡ unit at LG Hangang Xi Apartment in Ichon-dong, Yongsan-gu, Seoul.
This sales contract was signed one day before the expiration of the capital gains tax relief for multi-home owners. In February, the government decided to terminate the grace period for heavy capital gains tax on multi-home owners as scheduled on May 9. The scope of the grace period was expanded from contracts signed at the time of the decision to include applications for land transaction permits filed by last April. The heavy capital gains tax on multi-home owners refers to a system that imposes a higher tax rate when multi-home owners in designated adjustment areas sell their houses.
The tax rate applied when a multi-home owner sells a house can reach up to 82.5%. While the current basic capital gains tax rate ranges from 6% to 45% depending on the tax base, an additional 20%p is added for those with two homes, and 30%p for those with three or more homes. Specifically, for those with three or more homes, the total rate can rise to 82.5% by adding the 75% heavily taxed capital gains tax plus local income tax (10%). When heavy capital gains tax is applied, the benefit of the "long-term holding special deduction," which deducts capital gains based on the holding period, is also excluded.
Recently, in the business world, there have been successive cases of selling owned properties ahead of the end of the capital gains tax grace period. Previously, Shinsegae Group Chairman Chung Yong-jin signed a contract to sell his detached house in Hannam-dong, Yongsan-gu, Seoul, for 25.5 billion won on May 6. The buyer was Buyoung Housing, and the ownership transfer was completed on the 8th of the same month. This house was purchased by Chairman Chung from his mother, Shinsegae Group General Chairperson Lee Myung-hee, for 16.1 billion won in September 2018.
Won Jong-hoon, a representative tax accountant at Gaon Tax, analyzed, "Capital gains tax is a tax paid at the time of sale. One might think it is enough to hold onto the house without selling it, but psychological pressure—due to the difficulty of maintaining multiple homes amid expected tax system revisions such as holding taxes—is manifesting as decisions to sell."