Proposals include uniform 1.4 billion won threshold for comprehensive real estate tax

Party may also seek to preserve current assessed-value ratio

Opposition calls for scrapping the reform package entirely

Democratic Party of Korea floor leader Han Byung-do speaks at a party policy coordination meeting at the National Assembly on Thursday. [Yonhap]
Democratic Party of Korea floor leader Han Byung-do speaks at a party policy coordination meeting at the National Assembly on Thursday. [Yonhap]

Observers note the Democratic Party of Korea is likely to push for further revisions to the government's tax reform package after the administration submitted a partially amended version to the National Assembly on Thursday. The main thrust of the proposed changes centers on eliminating the residency-based distinction in the comprehensive real estate tax deduction threshold and easing the timeline for abolishing the long-term holding special deduction for capital gains tax. Still, amid growing public discontent over soaring real estate prices, the party appears wary of openly airing differences with the government on the issue.

Democratic Party floor leader Han Byung-do said at a party policy coordination meeting at the National Assembly on Thursday that the revised tax reform package was "a rational outcome reached through careful deliberation between the party and the government, reflecting the views of the public and the market." He added that senior party-government consultations had included discussions on broadly recognizing the circumstances of single-homeowners who were unavoidably unable to live in their homes, and on reconsidering the proposed reduction of the comprehensive real estate tax deduction for non-resident single-homeowners and the accompanying increase in their tax burden.

The Democratic Party's housing market stabilization task force separately issued a notice denying a media report that the ruling party had conveyed to the government a proposal to delay the abolition of the long-term holding special deduction, saying no such communication had taken place.

The Cabinet approved a modified version of the original tax reform proposal at its meeting on Tuesday. The government had initially proposed raising the comprehensive real estate tax basic deduction from 1.2 billion won ($876,000) to 1.4 billion won for owner-occupants while lowering it to 900 million won for non-residents, but revised the plan to keep the deduction at the existing 1.2 billion won for non-residents as well. The government also dropped a proposal to raise the comprehensive real estate tax cap from 150 percent to 200 percent of the previous year's property tax liability, keeping it at the current 150 percent.

The Democratic Party's policy committee said the same day that it "fundamentally agrees with the government's intent to favor owner-occupants" in the tax reform, but noted that the party had "consistently raised various supplementary proposals — including a plan to apply a uniform comprehensive real estate tax deduction for single-homeowners regardless of residency status — to prevent excessive concerns about the tax burden from spreading." The statement echoed the party's earlier position, announced Aug. 23 following senior party-government consultations, that the Democratic Party had "strongly requested that no distinction be made between resident and non-resident single-homeowners for the comprehensive real estate tax."

Despite the revisions, the government's amended plan still differentiates between the deduction amounts for resident and non-resident single-homeowners, fueling expectations both inside and outside the party that the Democratic Party will seek additional changes. The proposal gaining the most traction would raise the non-resident deduction to match the 1.4 billion won threshold set for owner-occupants.

The Democratic Party is also reviewing a proposal to ask the government to maintain the current assessed-value ratio used to calculate the comprehensive real estate tax base.

The assessed-value ratio is applied when calculating the tax base for the comprehensive real estate tax. The government had proposed raising the ratio from 60 percent to 70 percent for single-homeowners, and from 70 percent to 80 percent for those holding three or more homes or properties in designated adjustment zones, excluding single-homeowners. However, because the ratio is set by presidential decree rather than statute, the National Assembly cannot amend it directly, meaning the party and government are expected to continue discussions on the matter.

Some within the party have also raised concerns about the proposed elimination of the holding-period benefit under the long-term holding special deduction for capital gains tax, saying further revision is needed. While the Democratic Party broadly supports the shift toward a residency-focused capital gains tax structure, it is weighing adjustments to the timeline and rates for implementing the changes. A party policy committee official said "there are valid concerns that the interval before introducing the residency deduction is too short."

The government has proposed capping the long-term holding special deduction at 2 billion won in 2028 and 1 billion won from 2029 onward, restructuring it away from holding-period benefits and toward residency-based deductions. Under the current system, single-homeowners receive an 8 percent annual deduction — 4 percent for holding and 4 percent for residency — for up to 10 years, for a maximum deduction of 80 percent. The proposed changes would reduce the holding component to 2 percent and raise the residency component to 6 percent in 2028, then eliminate the holding deduction entirely and raise the residency component to 8 percent from 2029. The Cabinet-approved revision did not include any changes to the long-term holding special deduction.

Separately, some within the party have called for removing the age floor from a government proposal to reduce capital gains tax for single-homeowners aged 65 or older who relocate from the Greater Seoul area to other regions.

The opposition, meanwhile, has sharpened its criticism of the reform package, seizing on public frustration over rising real estate prices to argue that the plan should be scrapped entirely rather than revised.

People Power Party floor leader Jang Dong-hyeok said at a party supreme council meeting Thursday, "What world does President Lee Jae Myung live in? Home prices are not collapsing — they are surging and spreading across the entire country."

President Lee had written on X, formerly Twitter, on Sunday that he had ordered preparations for a system to purchase large quantities of homes below a certain threshold for public housing stock, in anticipation of a potential sharp drop in housing prices driven by early mass supply, suppression of speculative demand, and a surge in loan defaults and foreclosures caused by high interest rates. In response, Jang said, "President Lee handed the real estate tax reform package to the National Assembly and told it to revise the plan as it sees fit. It should not be revised — it should be scrapped entirely," adding that "the plundering of the people's right to housing must stop now."


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