Deduction for owner-occupiers raised to 1.4 billion won

Tax burden cap hike to 200% also scrapped

General ISA overhaul abandoned, current rules kept

The government has dropped its plan to lower the basic deduction for the comprehensive real estate tax — known as jongbusae — on non-resident single-home owners from 1.2 billion won ($874,000) to 900 million won. It has also abandoned a proposal to raise the tax burden cap from the current 150 percent to 200 percent. However, a plan to raise the deduction for owner-occupying single-home owners from 1.2 billion won to 1.4 billion won will go ahead, narrowing the gap between residents and non-residents from the originally proposed 500 million won to 200 million won.

The Ministry of Economy and Finance finalized the government's 2026 tax reform package at a Cabinet meeting Tuesday.

A property listings board is displayed outside a real estate agency in Gangnam-gu, Seoul. [Yonhap]
A property listings board is displayed outside a real estate agency in Gangnam-gu, Seoul. [Yonhap]

The most significant change concerns the residential portion of the comprehensive real estate tax. The government will keep its plan to raise the basic deduction for owner-occupying single-home owners to 1.4 billion won, but has reversed course on non-residents, scrapping the plan to cut their deduction to 900 million won and instead maintaining the current 1.2 billion won threshold. The reversal reflects feedback gathered during the legislative notice and inter-agency consultation process.

After the tax reform package was announced, critics argued it was excessive to increase the tax burden on single-home owners who cannot live in their own homes due to unavoidable circumstances such as work, education or caregiving obligations. At a senior ruling party-government consultative meeting last month, calls also emerged to reconsider both the reduction of the non-resident deduction and the proposed cap increase.

The basic deduction for couples who jointly own a single home was also revised. Under the original proposal, couples who did not reside in the home would have received a base deduction of 400 million won, with additional amounts tied to the share of the home's publicly assessed value, while resident couples would have kept the current 900 million won each. The government has now set the non-resident joint-ownership deduction at 600 million won. The plan to raise the tax burden cap on both the residential and land portions of the comprehensive real estate tax from 150 percent to 200 percent has also been dropped, keeping the current 150 percent ceiling.

The proposed overhaul of the individual savings account regime is effectively back to square one. The government has withdrawn plans to cap the maximum contract period for general ISAs at five years, ban the carryover of unused annual contribution limits, and introduce a sunset clause at the end of 2029, opting instead to maintain the current system. Under the existing rules, only a minimum contract period of three years applies, there is no cap on the maximum term, unused annual contribution limits can be carried over to the following year, and no sunset clause applies.

Support will be expanded for the newly introduced productive-finance ISA. The government will remove the 10-year maximum contract period and the end-of-2029 sunset clause, and will allow the carryover of unused annual contribution limits. The annual contribution ceiling of 20 million won and the total cap of 200 million won will remain as originally proposed. Young people below a certain income threshold will be allowed to hold both the youth-type productive-finance ISA — which offers an additional 10 percent income deduction on contributions — and the youth future savings account simultaneously.

Meanwhile, a proposed improvement to the share valuation method for listed shares — which critics said amounted to artificially suppressing share prices — will be subject to further consultations between the ruling party and the government before a reasonable reform plan is drawn up during the regular National Assembly session.

The government announced the tax reform package on Aug. 3 and finalized it Tuesday after completing inter-agency consultations, a legislative notice period and a vice-ministerial meeting. The 11 tax law amendment bills approved at the Cabinet meeting are to be submitted to the National Assembly by Thursday for review during the regular session.


y2k@heraldcorp.com