Essential Concepts for Filing Korea’s Real Estate Capital Gains Tax: Single-Household Rules, Residency, Partial Ownership, and High-Value Homes
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| When you turn off the lights in a familiar living room and carry out the last box, it’s easy to feel that the move is finally complete. But leaving a home always comes with one final, unseen step — reviewing the capital gains tax that arises when transferring a property. Before settling into a new space, it’s important to take a moment to close this quiet yet essential chapter as well. |
Basic Concepts of Korea’s Capital Gains Tax on Real Estate:
Understanding Single-Household Ownership, Residency Status, and Partial Ownership
Description:
To accurately file capital gains tax on real estate in Korea, it is essential to understand the concepts of a single-household one-home rule, residency vs. non-residency, partial ownership of a property, temporary two-home situations, and high-value properties. This post provides a clear overview of these key ideas.
Introduction:
Hello, dear readers.
Today, I would like to briefly introduce one of Korea’s major tax systems—the capital gains tax. This tax is imposed when you transfer ownership of an asset you previously held.
In Korea, capital gains tax most commonly arises from transferring real estate, and the calculation process can become quite complex depending on the type of property involved. In this post, I will summarize several essential concepts you must understand when filing capital gains tax related to real estate.
1) When No Capital Gains Tax Is Imposed: One Household, One Home Exemption
There are situations in which real estate can be transferred without incurring capital gains tax. The most common example is when the property qualifies under the one household, one home exemption (including apartments).
(Note: In regulated areas, both a minimum two-year holding period and two-year residency requirement must be met.)
In this context, a “household” refers to all family members who share the same residence and livelihood. For example, if a family of five lives together but one family member owns an additional property, the entire family is considered a two-home household.
Likewise, if the home the family lives in is owned by one member while another family member who shares the same household owns a separate residence, Korean tax law still considers this a two-home household.
Please note that commercial properties such as retail spaces or offices are not eligible for this exemption. The rule applies only to residential homes, and exceptional cases will be discussed in future posts.
2) Becoming a Two-Home Owner Without Owning an Entire Property: Partial Ownership
There are situations in which a household becomes a two-home household even if no member fully owns a separate property. This can occur when a family member holds partial ownership of another home.
Korean tax law determines the effective owner of a property based on the following order:
The person with the largest ownership share
The person who actually resides in the home
The oldest individual among those who meet the previous criteria
If two or more people meet the same condition, the determination moves to the next criterion.
Therefore, even if you do not consider yourself a full homeowner, partial ownership may still cause you to be classified as a property owner under tax regulations.
3) Another Key Factor in Filing Capital Gains Tax: Residency Status
Another important concept in filing capital gains tax is determining whether you are considered a resident of Korea. A resident is defined as someone who actually lives in Korea, and this can include foreign nationals if they meet the residency requirement.
To be classified as a resident, you must have stayed in Korea for 183 days or more within a year. This means that even Korean citizens are not considered residents for tax purposes if they spend more than half the year abroad.
Residency status is crucial because various deductions and related tax benefits are granted only to residents.
To summarize the concepts introduced so far:
First, to receive a tax exemption when transferring a home, the property must meet the one household, one home criteria.
Second, to qualify as a resident, you must be in Korea for at least 183 days within a year.
4) When a Two-Home Household Can Still Receive an Exemption: Temporary Two-Home Rule
A household may still receive tax exemption even if it temporarily owns two homes. This is known as the temporary two-home rule.
For example, when planning to sell your current home, you may choose to purchase a new property instead of renting another place. This results in becoming a two-home household.
Considering such situations, the tax law allows exemption if the original home is sold within three years of acquiring the new one.
(However, this requirement is subject to revision—for example, three years, two years, or even one year—so you must check the latest tax law at the time of the actual transaction.)
5) When a Single-Home Household Is Still Taxed: High-Value Properties
Even if you are a one-household, one-home owner, capital gains tax may still apply in certain cases. The most notable example is high-value properties.
If the sale price of the home exceeds 1.2 billion won(KRW) capital gains tax will be imposed.
There are more related concepts that I would like to share, but I will cover them in more detail in the next post.
Conclusion:
Korean tax law is frequently revised in response to changing economic conditions. As with many other countries, when transferring assets such as real estate in Korea, it is highly advisable to seek guidance from a certified tax accountant.
This is because the tax laws you currently know may be different at the actual time of filing.
Thank you for reading to the end.
I look forward to sharing more useful content with you next time.
