Following President Lee Jae-myung's announcement to increase holding costs on corporate non-business real estate, tax reforms including comprehensive real estate tax hikes and new property tax brackets are expected to follow. Beyond simple rate adjustments, pressure tactics combining financial and administrative regulations are also being discussed. However, concerns are rising that additional taxation could burden companies, as non-business properties are already subject to holding taxes up to four times higher than business-use properties.
According to government and real estate industry sources on the 10th, the Presidential Office and relevant ministries plan to discuss revising the tax framework soon, focusing on idle land and non-business real estate held by companies. Strengthening holding taxes is emerging as a key measure. In addition to raising comprehensive real estate tax rates or adjusting tax brackets, creating separate assessment standards for property tax to impose additional burdens is also under consideration.
Currently, corporate non-business land is taxed at 1% for combined publicly assessed land values up to 1.5 billion won ($1.1 million), 2% for values up to 4.5 billion won, and 3% for values exceeding 4.5 billion won. The tax base is calculated by deducting 500 million won from the combined publicly assessed value. The government is reportedly reviewing measures to raise the effective tax burden through reduced deductions, subdivided tax brackets, and rate increases.
"Currently, corporate non-business land is heavily taxed only upon transfer, with virtually no taxation on holding," said Yoon Su-min, a real estate specialist at NH NongHyup Bank. "Along with strengthening holding taxes, comprehensive regulations including restrictions on loans for acquiring non-business land or using it as collateral appear possible."
In particular, as an extension of strengthening holding taxes, imposing separate taxes on unused idle land is also being discussed. Similar to the past "non-business land heavy taxation" system, a structure could be created to impose additional tax burdens on assets unrelated to business purposes.
Non-tax regulations are also likely to be implemented in parallel. On the financial side, measures such as lowering loan-to-value ratios for real estate or restricting related loans are being discussed. This is because holding costs can be increased through adjustments to the realization rate of publicly assessed land prices even without directly raising tax rates.
Some voices suggest that the government's moves could guide corporate-held land to the market, expanding supply and stabilizing prices. In particular, if idle sites near transit stations are converted to residential or logistics facilities, supply expansion effects could materialize.
However, the industry has significant concerns about potential side effects. Corporate real estate is often linked to business operations and is large in scale, making short-term sales difficult. The difficulty of quickly securing new sites for business expansion after selling is also problematic. "Non-business real estate already faces high holding and transfer tax rates, so ultimately this will likely move toward heavier property and capital gains taxes," said Seo Jin-hyung, a professor of real estate law at Kwangwoon University. "This raises concerns that companies may not be able to use real estate for business purposes in a timely manner during expansion."
Assessments already indicate that non-business land significantly impacts corporate holding costs. In fact, the tax rate for corporate non-business land (1-3%) is classified as comprehensively aggregated land under the comprehensive real estate tax, which is higher than business-use land (0.5-0.7%). At the highest rate, the difference reaches more than fourfold. Additionally, while the deduction for non-business land is limited to 500 million won, business-use land receives deductions up to 8 billion won, creating a significant gap in the scope of taxable assets.
"Clear guidelines from the President have not yet been issued," said an official from the Ministry of Economy and Finance. "We need to examine whether regulations will be limited to taxes or will encompass other measures such as loan restrictions."
