In an effort to stop short-term trading by speculators, the current Act imposes a tax rate of 70% for housing capital gains if a house is owned for less than 1 year and 60% if it is owned for more than 1 year and less than 2 years. Furthermore, a penalty tax is imposed in areas subject to adjustment to collect real estate capital gains from the owners of multiple houses.

Recently, there was a huge public backlash against some employees and officials at the Korea Land and Housing Corporation (LH) who reportedly took advantage of information about development in Gwangmyeong and other Third Generation New Towns in Gyeonggi-do and bought land in advance to reap unfair personal gains.

Since the value of buildings depreciate, the value of real estate lies in land. Therefore, gains are focused on land from changing land use or incorporating it into development land.

However, while capital gains tax, which is higher for short-term sales, is strictly applied to houses and parcel rights, a much lower tax rate is applied to land. Therefore, it is not consistent with the intended purpose of capital gains tax imposed on short-term sales.

Therefore, this Act aims to increase the capital gains tax rate for short-term real estate sales up to 80% for less than 1 year, 70% for more than 1 year and less than 2 years, and 90% for assets transferred without registration and impose a capital gains tax on land, which is used to take profits from short-term sales, as intended herein in an effort to curb speculative real estate transactions and stabilize the real estate market (Article 104, paragraph 1).

Article 104