It's a good time to give away residences

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It's a good time to give away residences

Published: 17 Jan. 2021, 18:00

Some people who own multiple residence are giving them away to their family members rather than selling them and being hit with big tax bills by the Moon Jae-in administration.

According to Korea's Supreme Court, which keeps track of such data, on Thursday, the number of residency gifts made in December was 2,471. That number went up to 6,500 before a raised inheritance tax went up last July, and dropped to under 1,000 after. The number of gifts started to rise again eventually.

For three affluent districts in southern Seoul — Gangnam, Seocho and Songpa — the monthly average of residence gifts jumped to 631 in December, compared to a usual average that's below 200.

This year, steep rises in the comprehensive real estate tax and capital gains tax go into effect. The government postponed implementation to June 1 to encourage people to sell residences under the old tax rate.

Inheritance tax rates were also raised from 3.5 percent to 12 percent last July in order to discourage people from giving away their residences as gifts.

But gifts are rising because that can be cheaper than paying the capital gains tax, especially as property prices skyrocket.

Kim Jong-pil, a tax accountant based in Seoul, said that people prefer giving property to family members even if the gift tax is high because they expect the price of the property to continue to rise, which can benefit the whole family.

Such gifts are expected to continue to increase.

Lee Woo-shin, a local tax accountant, said that as property prices rise and tax rates increase, the older generation has been bequeathing properties earlier than usual.

BY AHN JANG-WON [lee.jeeyoung1@joongang.co.kr]