A Study on the Issue of Real Estate Income Taxation

Real Estate Income Taxation was enacted and publicly notified as law No. 1972 on November 29, 1967. While enforced under the tile of Special Taxation Act on prohibition of real estate speculation from Jan 1, 1968 to Dec 31, 1974, targeted only land as taxable under so-called Speculation Prohibition tax. And the area of application was restricted to metropolitan cities including Seoul and certain areas in heavy real estate speculation. Subsequently, Special Taxation Act on prohibition of real estate speculation was discarded. From December 31, 1974, taxation continued under the name of capital income tax pursuant to the Income tax Act up till now. Furthermore, Korean Real Estate Income Taxation regime traditionally repeated heavy taxation and relaxed taxation actions according to necessity of real estate speculation prevention measures or economic cycle measures. In other words, the responding measures to overheated real estate cycle or malicious speculations was heavy taxation of Real Estate Income Taxation. Korean Real Estate Income Taxation is a kind of income tax taxable on capital gain which is earned from transfer of real estate and shares etc. at consideration and is not a regularly earned income. Hence current income tax laws do not sum up any capital gain into global income but assesses separately classified income tax. While taxation objects were regulated very limitedly, tax rate structure has been set under heavy complexity. In income taxation, generally the tax amount follows the scope of taxable income tax rate structure, but Korean Real Estate Income Taxation covers taxation objects in much restricted scope but sets the tax rate structure at very high level. As reviewed above, Korean Real Estate Income Taxation has strong feature of policy measure to prevent real estate speculation, rather than being faithful to tax principle on capital gain. Consequently, Korean Real Estate Income Taxation can be regarded as lacking not only properly established taxation principle, but also fairness or efficacy. Accordingly, this thesis reviews overall problems in Korean capital income tax, and seeks improving measures through review on Korean current tax laws and judicial precedents.