National Tax Service Commissioner Lim Gwang-hyeon on the 26th criticized South Korea's Long-Term Holding Special Deduction system for capital gains tax as excessively regressive. The system allows homeowners who hold and reside in properties for 10 years to deduct up to 80% of taxable capital gains with no upper limit, meaning more expensive properties with larger gains receive proportionally larger deductions. Lim's comments come as the government prepares real estate tax reforms, with the deduction system unchanged since its 2009 expansion to the current 80% maximum rate.
Seoul Properties Captured 90% of 5 Trillion Won Deductions in 2024
According to Commissioner Lim's analysis of 2024 tax filing statistics posted on X (formerly Twitter), 24,816 single-home households nationwide received 5.032 trillion won in Long-Term Holding Special Deductions. Of this total, Seoul properties accounted for 4.5 trillion won, representing 90% of all deduction benefits. The deduction applies only to properties exceeding 1.2 billion won in transaction price, as homes below this threshold qualify for full capital gains tax exemption under single-home non-taxation requirements including 2-year holding period. Commissioner Lim noted that the majority of single-home owners remain unaffected by deduction reforms since most properties fall below the 1.2 billion won threshold.
Gangnam Districts Dominated with 3.5 Trillion Won in Tax Benefits
Within Seoul's 4.5 trillion won total, four districts accounted for 3.5 trillion won (78.6%): Gangnam-gu, Seocho-gu, Songpa-gu (collectively known as Gangnam 3 districts), and Yongsan-gu. In contrast, districts including Dobong-gu, Geumcheon-gu, Jungnang-gu, Nowon-gu, Dongdaemun-gu, Gwanak-gu, Eunpyeong-gu, and Guro-gu received almost no deduction benefits. Of the top 100 deduction recipients nationwide, 99 properties were located in Seoul, with 68 in Gangnam-gu and 19 in Seocho-gu. Average deductions in Gangnam-gu reached 4.1 billion won, while Seocho-gu averaged 3.3 billion won. One Gangnam-gu property sale resulted in over 20 billion won in deductions.
Commissioner Lim Calls Unlimited Deductions Unfair to Middle Class
Commissioner Lim stated that taxation should be fair, with progressive principles requiring higher earners to pay more tax. He argued the current system operates in reverse: "Because the system deducts up to 80% of taxable capital gains with no limit, the larger the gain, the greater the tax burden reduction." He characterized the unlimited deduction on ultra-expensive homes as "the ultimate regressivity," noting that capital appreciation benefits accrue more to expensive property owners, yet the deduction system fully protects such unearned income. Lim stated the system effectively encourages concentration in "one solid property." He questioned whether unlimited deductions for ultra-expensive homes are justifiable even if middle-class deductions are protected, stating that 17 years after the 2009 expansion, the government has a duty to make micro-adjustments when unforeseen side effects emerge.
Government to Announce Real Estate Tax Reform Next Month
The government plans to announce real estate tax reforms including Long-Term Holding Special Deduction revisions in early next month. Commissioner Lim emphasized that while tax policy should maintain consistency, adjustments are necessary when laws produce unexpected negative effects. He stated tax benefits should be normalized fairly so everyone can accept them.
FAQ
Q1: What did National Tax Service Commissioner Lim Gwang-hyeon criticize on the 26th?
A1: Commissioner Lim criticized the Long-Term Holding Special Deduction system for capital gains tax as excessively regressive, stating it allows up to 80% deduction of taxable capital gains with no upper limit, giving larger deductions to more expensive properties with bigger gains.
Q2: How much did Seoul properties receive in Long-Term Holding Special Deductions in 2024?
A2: According to Commissioner Lim's analysis of 2024 tax filings, Seoul properties received 4.5 trillion won out of a nationwide total of 5.032 trillion won, representing 90% of all deduction benefits. Within Seoul, Gangnam-gu, Seocho-gu, Songpa-gu, and Yongsan-gu accounted for 3.5 trillion won (78.6%).
Q3: When will the government announce real estate tax reforms?
A3: The government plans to announce real estate tax reforms including Long-Term Holding Special Deduction revisions in early next month.
