[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 end of the capital gains tax surcharge grace period for 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 confirmed in the business world where individuals disposed of their residential properties ahead of the expiration of the capital gains tax surcharge grace period.
According to Bizhankook’s reporting, GS Honorary Chairman Huh Chang-soo sold the 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. Honorary Chairman Huh changed the zoning of the house to a neighborhood living facility on the 6th, just before the ownership transfer. However, the reference date for determining whether a property is a residential house when selling real estate 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) plot of land in October 1980, he built the detached house—consisting of one basement level and two above-ground floors—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㎡ LG Hangang Xi apartment in Ichon-dong, Yongsan-gu, Seoul.
This sales contract was signed one day before the end of the capital gains tax surcharge grace period for multi-home owners. In February, the government decided to end the capital gains tax surcharge grace period for multi-home owners on May 9, as scheduled. The scope of the grace period was expanded to include sales contracts signed at the time of the decision and applications for land transaction permits filed by last April. The capital gains tax surcharge for multi-home owners refers to a system that imposes heavier capital gains taxes when multi-home owners in adjusted target areas sell their homes.
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, 20%p is added for those who own two homes, and 30%p is added for those who own three or more. In particular, for those with three or more homes, the total maximum tax rate rises to 82.5% when the 75% surcharged capital gains tax is combined with the local income tax (10%). Furthermore, when the capital gains tax surcharge is applied, the "long-term holding special deduction," which deducts capital gains based on the holding period, is excluded.
Recently, there has been a string of cases in the business community where people have disposed of their properties ahead of the expiration of the capital gains tax surcharge 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 Booyoung Housing, and the ownership transfer was completed on the 8th of the same month. Chairman Chung had purchased the house from his mother, Shinsegae Group Chairwoman 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's better to hold onto the property without selling, but the psychological pressure of knowing it is difficult to sustain ownership of multiple homes, especially with the anticipated tax reforms including property taxes, is leading to these decisions to sell."