Korea to expand first-time homebuyer acquisition tax breaks for youth, low-income earners

Ministry of Interior and Safety unveils 2026 local tax reform plan, expected to boost tax revenue by 54.7 billion won ($39.5 million)

Officetels to qualify for first-time homebuyer tax exemptions; public housing project tax benefits strengthened

Single-home property tax rate special provision extended through 2029; social solidarity economy organizations to receive acquisition and property tax cuts

Lee Hyeon-jeong, director general of the local tax bureau at the Ministry of Interior and Safety, presents the key details of the 2026 local tax reform plan at a policy briefing held Tuesday at Government Complex Sejong. [Ministry of Interior and Safety]

Acquisition tax breaks for first-time homebuyers will be expanded to cover young and low-income buyers, and officetels will be added to the list of eligible property types. Acquisition tax exemptions for pre-sale housing supplied by public housing developers will also be extended.

The Ministry of Interior and Safety announced the 2026 local tax reform plan on Wednesday, saying the restructured local tax expenditure framework is expected to generate an additional 54.7 billion won ($39.5 million) in tax revenue.

Legislative notice for amendments to the Framework Act on Local Taxes, the Local Tax Collection Act, the Local Tax Act and the Restriction of Special Local Taxation Act will begin Thursday.

First-time homebuyer acquisition tax breaks expanded to youth; officetels now eligible

Under the reform plan, acquisition tax exemptions for first-time homebuyers will be broadened to ease the burden of housing prices and living costs for young people buying a home for the first time.

The standard exemption cap is 2 million won, while a preferential cap of 3 million won applies to small homes with an exclusive use area of 60 square meters or less and a standard market value of 300 million won or less — or 600 million won or less in the Greater Seoul area — as well as homes in population-decline regions. The reform adds a new preferential category: buyers under 40 purchasing their first home will also qualify for the higher 3 million won cap.

The acquisition tax exemption, previously limited to multi-unit housing such as apartments, row houses and multi-family homes, will now extend to officetels as well.

The ministry said officetels have seen low purchase demand due to their small land shares and high costs including taxes and maintenance fees. The expansion is intended to strengthen residential support for young workers entering the job market and low-income earners, given that officetels serve as a stepping stone toward homeownership as an alternative to apartments.

However, to prevent buyers who receive the first-time homebuyer exemption on an officetel from losing all future benefits when purchasing an apartment, those who owned and then disposed of a small home or small officetel will be allowed to claim the exemption one additional time.

The additional exemption applies only to homes and officetels with an exclusive use area of 40 square meters or less and a standard market value of 200 million won or less — or 400 million won or less in the Greater Seoul area — and is not available for apartments.

"We believe this is the most effective and persuasive policy tool available given the constrained local fiscal environment," a ministry official said. "We hope young people just starting out in their careers will make the most of this opportunity as they work to build their path to homeownership."

Tobacco consumption-linked local education tax to become local residential welfare tax; housing supply support for middle class, low-income earners strengthened

The local education tax levied on tobacco consumption, set to expire at the end of this year, will be converted into a local residential welfare tax.

Local governments collected approximately 1.5 trillion won from the tobacco consumption-linked local education tax last year, and those funds will be available for local governments to use at their own discretion.

The reform plan also includes measures to accelerate housing supply for middle-class and low-income households.

Developers contracted to supply rental housing to public housing operators will receive acquisition tax reductions of 70 percent through 2027 and 50 percent through 2028 when purchasing real estate and constructing housing.

Property tax exemptions on equity-accumulation pre-sale housing initially supplied by public housing operators will be extended through 2029.

Acquisition taxes on major renovation costs incurred when converting non-residential facilities into residential ones will be fully waived.

Acquisition tax exemptions for development associations purchasing real estate from cash-settlement recipients will also be expanded, and eligibility requirements for acquisition tax exemptions on rental housing mandatorily built under redevelopment projects — available to those who take over such housing in bulk for the first time — will be eased.

The special provision applying a property tax rate 0.05 percentage points lower for single-home households will be extended by three years through 2029, and the deadline for temporary two-home owners to dispose of their previous home will be shortened from three years to two years.

New local tax breaks for social solidarity economy organizations; incentives expanded for companies returning to Korea

The reform plan introduces new acquisition and property tax exemptions for social solidarity economy organizations — including social enterprises, cooperatives and community businesses — that pursue public benefit over profit and drive community innovation through member cooperation and democratic governance.

The benefits will go to organizations less than five years old, those with total assets below 50 million won, or those subject to the minimum corporate local income tax rate, indicating limited tax-paying capacity.

Organizations located outside the Greater Seoul area or in population-decline regions will be eligible for larger benefits.

A separate provision will cut the registration and license tax by 50 percent of the minimum payable amount for cooperatives and federations with fewer than 200 members or less than 3 billion won in contributed capital when they increase their capital.

Incentives for companies returning to South Korea will also be expanded.

"Partial returnees" — companies that scale back overseas operations, as well as those that maintain foreign operations while establishing new domestic facilities — will now qualify for tax support.

Acquisition and property tax exemptions for jeonse fraud victims, senior welfare facilities and national merit recipients will also be extended through 2029.

"This year's local tax reform plan was designed to strengthen residential support for young people and low-income earners and to underpin region-led balanced growth," Minister of Interior and Safety Yun Ho-jung said. "We will work closely with the National Assembly throughout the legislative process to ensure the plan is implemented without a hitch."

thlee@heraldcorp.com