South Korea Keeps the 1.2 Billion Won Property Tax Deduction for Non-Occupying Owners
South Korea's Cabinet approved a 2026 tax code amendment on 1 September that abandons a plan to cut the comprehensive real estate holding tax deduction for non-occupying single-home owners, keeping the basic deduction at 1.2 billion won instead of lowering it to 900 million won. The bill went to the National Assembly by 3 September, and the ruling party is already seeking further changes to it.
What changed between August and September
The Ministry of Economy and Finance unveiled the original 2026 Tax Reform Plan on 3 August. It drew a sharp line between owners who live in their property and owners who do not. Owner-occupiers of a single home would see the basic deduction on the comprehensive real estate holding tax rise to 1.4 billion won from 1.2 billion won. Single-home owners who do not occupy the property would see theirs fall the other way, from 1.2 billion won to 900 million won.
That cut is now gone. The version approved at the 1 September Cabinet meeting holds the non-occupying deduction at 1.2 billion won. The owner-occupier increase to 1.4 billion won survives.
A second reversal matters as much. The August plan would have raised the annual tax burden cap for non-occupying single-home owners to 200 percent, meaning a bill could double year on year. The final text keeps the cap at 150 percent, so the levy cannot rise by more than half of the prior year's amount in any single year.
For married couples jointly holding one home they do not live in, Seoul Economic Daily reports the deduction was lifted to 600 million won each, against the 400 million won each in the original draft.
What survived unchanged
The rate schedule the August plan set out for high-value homes was not softened. Properties assessed above 3.2 billion won remain the target. For homes valued between 3.22 billion and 4.45 billion won, corresponding to a taxable base of 600 million to 1.2 billion won, the rate rises from 1 percent to 1.3 percent. For homes between 4.45 billion and 7.1 billion won, the single-home owner rate climbs to 1.5 percent in 2027 and 2 percent by 2028.
Capital gains tax was left alone entirely. Long-term holding deductions will be capped at 2.0 billion won from 2028 and 1.0 billion won from 2029, and holding-period-based deductions phase out completely by 2029 in favour of residence-based deductions of up to 80 percent. An owner who has held an apartment for a decade but never lived in it loses the larger part of the relief that structure used to provide.
Finance Minister Koo Yun-cheol has said the government will broaden the circumstances under which periods of non-residency can be counted as residence, which is the mechanism through which any further softening would arrive.
What it means for a foreign buyer
The Korean term translated as "non-resident" in this legislation means an owner who does not occupy the property as a primary residence. It is not a nationality test. But the practical overlap is close to total: a foreign investor who buys a Seoul apartment and lets it out sits squarely in the non-occupying category, and cannot use the owner-occupier deduction, the residence-based capital gains relief, or the age-and-holding-period credits that Korean resident owners rely on.
The September reversal therefore removes a specific, dated increase that would have hit foreign landlords hardest. Under the August draft, a 60-year-old non-occupying single-home owner with a ten-year holding faced roughly a four-fold increase in the annual levy. Keeping the 1.2 billion won deduction and the 150 percent cap takes most of that out of the near-term bill.
What it does not do is change the direction. The capital gains structure still moves against non-occupying owners on a fixed 2028 and 2029 timetable, and the rate rises on homes above 3.2 billion won still land in 2027 and 2028. A foreign buyer modelling a Seoul purchase should treat the holding tax as stabilised for now and the exit tax as tightening on schedule. That pattern, an annual levy that is negotiable and a disposal tax that is not, also runs through Japan's inheritance tax treatment of foreign property owners.
The bill is still moving
On 4 September, Rep. Lee Un-ju of the ruling Democratic Party said she would prepare a redesigned plan and pursue an amendment to the Restriction of Special Taxation Act, the statute carrying the registered-landlord tax benefits whose phase-out is set for 2028. Those benefits currently apply only to purchased apartments in adjustment areas such as Seoul, exclude low-rise multi-unit housing and officetels, and require landlords to cap annual rent increases at 5 percent.
The Ministry of Economy and Finance is separately weighing exceptions to the land transaction permit system for landlords who cannot sell because a tenant is in occupation, and the creation of a public real estate investment trust to buy those properties. The Korea Housing Landlords Association wants the benefit reductions withdrawn outright.
Context
The comprehensive real estate holding tax, levied annually on the assessed value of holdings above a threshold, sits on top of the ordinary local property tax and has been the primary instrument of Korean housing policy through successive administrations. Seoul has separately designated all its districts as speculative zones and tightened lending against them. Foreign nationals face no ownership restriction on Korean residential property, so the tax code, not a permit regime, is what determines the cost of holding. That places Korea between Singapore, where a 60 percent additional buyer's stamp duty prices foreigners out at the point of purchase, and Japan, where foreign buyers face no surcharge at all and land values are published annually.
Sources
- Ruling Party Seeks Changes to Rental Landlord Tax Overhaul, Seoul Economic Daily, 4 September 2026
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