Gov't to slash real estate, inheritance tax rates next month

Finance Minister Choi Sang-mok, center, speaks during a ministerial meeting in Sejong on Monday. [YONHAP]

The Korean government will amend real estate and inheritance tax rates next month as it moves to ease the levied burden.

Finance Minister Choi Sang-mok said Monday that the details of the reform will be announced sometime in July, although Sung Tae-yoon, director of national policy at the presidential office, proposed a reduction in inheritance tax rates to a maximum of 30 percent and a restriction of real estate taxes to owners of highly-priced homes or multiple homes with a very high total value.

The ministry also announced Monday and extension of the tax cut on fuel for automobiles by an additional two months but a lowered cap in consideration of global oil prices, inflation and the dwindling tax revenue.

Korea has applied a 25 percent discount on gasoline and a 37 percent discount for diesel and liquefied petroleum gas butane in a scheme that was supposed to expire at the end of June.

Other measures announced include easing regulations for real estate investment trusts (REITs) as part of efforts to help normalize the real estate project financing (PF) sector.

The government will create "project REITs" after drastically lifting regulations so as to allow a greater number of small investors to join projects, and will expand REIT investment targets to health care, data centers and other promising fields, according to the Ministry of Economy and Finance.

REITs are a type of security invested in real estate to be traded on major exchanges, providing investors with stakes in real estate, such as office buildings, apartments and hotels.

The measure comes in the face of risks stemming from rising delinquencies in the real estate PF sector amid a slump in the property market and high interest rates.

Seoul is striving to support an "orderly soft landing" for the debt to minimize its potential impact on the economy.

"The government will help to allow more people to enjoy the benefits of real estate development," Choi said during an economy-related ministers' meeting. "We will continue efforts to normalize the PF market."

BY PARK EUN-JEE, YONHAP [park.eunjee@joongang.co.kr]