First-Time Home Purchase Tax Break Extended to Officetels; Young Buyers Get Up to 3 Million Won in Relief — BigGo Finance

The South Korean government is extending first-time homebuyer acquisition tax reductions to officetels and giving preferential treatment to buyers under 40 with a reduction cap of up to 3 million won (approximately $2,200). The Ministry of the Interior and Safety announced the “2026 Local Tax System Reform Plan” containing these measures on the 26th.

The reform is expected to increase tax revenue by 54.7 billion won (approximately $39.5 million) as the local tax expenditure structure is redesigned. Legislative notice for the related law amendments begins on the 27th.

First, officetels will now be included in the first-time home purchase acquisition tax reduction, which previously applied only to multi-unit housing such as apartments, row houses, and multiplex housing. Officetels have had lower purchase preference due to their small land share and higher tax and maintenance fee burdens, but the ministry explained that as an apartment substitute serving as a stepping stone toward homeownership, the measure is designed to strengthen housing support for young professionals and low-income earners.

To prevent the disadvantage of losing the tax break when someone buys an officetel, sells it, and later purchases an apartment, those who owned and disposed of a small home or small officetel can now receive the reduction benefit one additional time. The additional reduction applies only to homes and officetels with a dedicated floor area of 40 square meters or less and a standard market value of 200 million won (approximately $140,000) or less (400 million won or less in the capital region), excluding apartments.

The reduction cap is also being expanded. Previously, the cap was generally 2 million won (approximately $1,400), with preferential treatment of 3 million won (approximately $2,200) for small homes with a dedicated floor area of 60 square meters or less and a standard market value of 300 million won (approximately $220,000) or less (600 million won or less in the capital region) and homes in population-decline areas. Now, buyers under 40 purchasing their first home are also added to the preferential category. A person under 40 who buys an officetel, sells it, and then purchases an apartment can receive a total reduction of 6 million won (approximately $4,300).

A ministry official said, “We believe this is the most effective and persuasive policy tool available under constrained local fiscal conditions,” adding, “We hope young people starting their careers will make the most of these opportunities to build their housing ladder.”

The tobacco consumption tax portion of the local education tax, set to expire at the end of this year, will be converted into a local housing welfare tax. This does not raise the tobacco consumption tax rate but rather changes how funds previously used for local education tax are allocated, meaning the tax burden will not increase. Last year, local governments collected approximately 1.5 trillion won in tobacco consumption tax-based local education tax, and these funds will now be used autonomously by local governments who best understand regional circumstances.

Public housing supply support is also being strengthened. Acquisition tax paid by developers who have agreed to supply rental housing to public housing operators when purchasing real estate and constructing homes will be reduced by 70% through 2027 and 50% through 2028. Property tax reductions for equity-accumulation for-sale housing first supplied by public housing operators will be extended through 2029. Acquisition tax on major repair costs incurred when converting non-residential facilities to residential use will be fully exempted through the end of next year.

The acquisition tax reduction rate for development cooperatives purchasing real estate from cash settlement recipients will increase to 100% in 2027 and 75% in 2028. Currently, redevelopment operators receive a 50% reduction in acquisition tax on land development real estate they acquire. Requirements for acquisition tax reductions available when first acquiring rental housing that must be built as part of redevelopment projects will also be relaxed.

The special provision applying a property tax rate 0.05 percentage points lower for single-home owners will be extended for 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. To prevent loopholes used to avoid the heavy acquisition tax on luxury homes with a published price of 1.2 billion won (approximately $870,000) or more, common area will be included in dedicated floor area instead of reducing the threshold area for the heavy tax. For non-capital regions, a standard 50% higher than the capital region will be applied to improve regional tax equity.

Tax support for social solidarity economy organizations has also been newly established. Acquisition tax and property tax reductions will be granted to social enterprises, cooperatives, and community businesses. Eligible organizations include those established less than five years ago, with total assets under 50 million won, or with low tax-paying capacity subject to the minimum corporate local income tax rate. Organizations in non-capital regions and population-decline areas will receive greater benefits. Registration and license tax for cooperatives and federations with fewer than 200 members or capital contributions under 3 billion won (approximately $2.2 million) will be reduced by 50% of the minimum tax amount when increasing capital.

Support for balanced regional development is also being expanded. Acquisition tax and property tax reduction rates applied to venture business cluster facilities and new technology startup cluster zones will be increased in population-decline areas. Comparing the capital region and population-decline areas, acquisition tax reduction rates are 15% and 50%, and property tax reduction rates are 15% and 75%, respectively. Preferential periods will also be extended for exemptions from heavy acquisition tax on homes purchased for private rental purposes in population-decline areas, exclusion from home count, and heavy acquisition tax exemptions for first-time purchases of unsold apartments in regional areas.

The scope of local tax reductions for companies establishing or expanding operations in opportunity development special zones will be expanded, and “partial return companies” that establish domestic operations while reducing or maintaining overseas operations will also receive tax support.

Support for jeonse fraud victims will also be extended through 2029. Currently, jeonse fraud victims receive 100% acquisition tax reduction, 25-50% property tax reduction, and 100% registration and license tax reduction. However, if benefits were fraudulently obtained or victim status is revoked due to deposit recovery, the reduced amount plus penalty tax will be collected.

Real estate tax rationalization measures are also included. To encourage companies to use their land productively, the building value threshold for separate aggregation will be raised from “when building value is less than 2/100 of the attached land value” to “less than 5/100.” Tax benefits for land with delayed construction starts will be reduced to promote development projects, and the local income tax rate on capital gains from non-business land will be increased.

The fair market value ratio applied to luxury properties such as membership golf courses and high-end entertainment facilities will be raised from 70% to 100%. Grounds for restriction will also be specified to prevent one local government’s ordinance-based local tax reductions from disadvantaging other local governments.

Minister of the Interior and Safety Yoon Ho-joong said, “This year’s local tax reform plan was designed to strengthen housing support for young people and ordinary citizens and to support region-led balanced growth,” adding, “We will communicate and cooperate closely with the National Assembly during the legislative process to ensure the reform plan is implemented without disruption.”