South Korea has reinstated a punitive capital gains tax for individuals owning multiple homes in designated regulation areas [1, 2].

The move aims to stabilize the housing market and curb real estate speculation by increasing the financial burden on investors who hold several properties [1, 2].

The government ended a temporary exemption that had been in place for four years [1, 3]. This suspension of the heavy taxation expired on May 9, 2024 [1, 3]. Starting May 10, 2024, owners selling homes in regulated zones, including all of Seoul and 12 regions in Gyeonggi Province, must pay the reinforced rates [1, 2, 3].

Under the new rules, the basic capital gains tax rate ranges from 6% to 45% [1]. However, additional surcharges are now applied based on the number of properties owned. Owners of two homes face an additional 20 percentage points [1], while those owning three or more homes face a 30 percentage point increase [1]. When combined with a 10% local income tax [1], the total effective tax rate can reach as high as 82.5% [1, 2].

"The temporary exemption for multiple-home owners' capital gains tax, which was applied for the past four years, ended yesterday as the government announced," said a YTN anchor [3].

The high tax rate significantly impacts the net profit of sellers. A reporter for YTN said that if a seller makes 1 billion won in profit, they could be required to pay more than 800 million won in taxes [3].

"Immediately, when selling homes in all of Seoul and 12 areas of Gyeonggi Province, multiple-home owners will be subject to the additional tax rate," said reporter Park Ki-wan [3].

“The total effective tax rate can reach as high as 82.5%.”

The reinstatement of these punitive taxes represents a shift back toward aggressive government intervention in the property market. By targeting high-profit margins for multiple-home owners, the state is attempting to discourage the hoarding of residential assets and incentivize the release of inventory into the market, potentially lowering prices for first-time buyers in high-demand urban centers like Seoul.