“A one-home household is exempt up to KRW 1.2bn” is correct. The sentence that usually follows is not — crossing 1.2bn does not put the whole gain into tax. Only the excess is taxed, and what sets that share is apportionment.
Ratio = (sale price − 1.2bn) ÷ sale price (Enforcement Decree art. 160).
Both the gain and the long-term holding deduction are multiplied by it. Multiply only one and the answer is badly wrong.
Just above 1.2bn the ratio is close to zero. So 1.2bn is a gentle slope, not a cliff — cross it and the tax stays at zero for a while.
There is a zero-tax stretch above 1.2bn
Take a home bought at KRW 800m with 30m of necessary expenses, held and lived in for ten years.
| Sale price | Ratio | Taxable gain | Tax |
|---|---|---|---|
| KRW 1.2bn | 0% | 0 | 0 |
| KRW 1,237.9m | 3.06% | absorbed by the deductions | 0 |
| KRW 1.25bn | 4.00% | 17.48m | 56,760 |
| KRW 1.3bn | 7.69% | 34,384,615 | 312,231 |
| KRW 1.5bn | 20.00% | 134m | 2,623,500 |
| KRW 2bn | 40.00% | 448m | 18,089,500 |
Selling at 1.5bn on a gain of nearly KRW 670m produces 2.62m of tax — 0.4% of the gain. The impression and the arithmetic are that far apart.
Why it has to be applied twice
Apportionment appears in two places — once on the gain, once on the long-term holding deduction. Doing it once badly distorts the result.
| Step | The 1.5bn example (ratio 20%) |
|---|---|
| Whole gain | KRW 670m |
| × 20% | KRW 134m |
| Whole holding deduction (80%) | KRW 536m |
| × 20% | KRW 107.2m |
| Basic deduction | − KRW 2.5m |
| Taxable base | KRW 24.3m |
Apportion the gain but not the deduction and it is 134m − 536m — negative, so zero tax. Apportion the deduction but not the gain and the base is 670m − 107.2m = 562.8m, giving over KRW 200m of tax. Same home, and only one of the three is right.
So when two calculators disagree, check how many times each applied the ratio.
Three inputs, three documents
Three values feed the apportionment, and each comes from somewhere different.
① Sale price. The actual transaction price — not an assessed value. The 1.2bn test uses this figure.
② Acquisition price. The actual price paid at acquisition. Where it is unknown, a separate converted acquisition value formula applies. That formula and its penalty conditions we could not verify against the statute — for an older property, start there.
③ Necessary expenses. Acquisition tax, agent fees, capital works such as a balcony extension or new windows. Recognised only as far as the receipts go. Leave this empty and the gain grows by that much, before and after apportionment alike.
Joint ownership divides once more
Where a property is held in shares — a married couple jointly, for instance — the 1.2bn test uses the whole value of the home while the tax is computed on each owner’s share.
That gives one KRW 2.5m basic deduction per person — 2.5m for a sole owner, 5m for a couple. And because each taxable base is halved, the progressive band drops too.
But how differing share ratios and acquisition dates are handled, and whose residence period counts for the holding deduction, we could not verify. For a jointly held property, ask the tax office first — the amounts move a long way.
Questions that remain
KRW 1.2bn as at when?
The sale price — what it sold for. What it cost, or what it is assessed at today, does not enter this test. And it is the aggregate actual transaction price, so attached land counts too. Mixed residential and commercial buildings complicate the test, and we could not verify how apportionment works in that case.
What about writing the price down to stay under 1.2bn?
Recording a price other than the real one is prohibited by the Act on Report of Real Estate Transactions. And the point of this article is that there is no reason to — 1.2bn is a slope, not a cliff. Sell at 1.25bn and the tax is 56,760 won. Not a line worth straining for.
If the exemption conditions are not met, is apportionment gone too?
Yes. Apportionment carves the excess out of an exemption that has already been established. Fail the conditions and the whole gain is taxable, and the holding deduction falls from table 2 (up to 80%) to table 1 (up to 30%). In the 1.5bn example, KRW 2.62m becomes 206.94m — seventy-nine times.
Which rate applies after apportionment?
The progressive 6–45%. Apportionment shrinks the taxable base; it does not change the rate. But a smaller base falls into a lower band, so the effective rate drops sharply as a result. The 1.5bn example’s base of KRW 24.3m sits in the 15% band.
Different calculators give me different answers.
Check how many times each applied the ratio. It belongs on both the gain and the holding deduction. Applying it once is common online, and as shown above that produces either zero or over KRW 200m. The calculator applies it twice and shows the two lines separately.
Sources and where to check
Income Tax Act Enforcement Decree art. 160 — the gain and the long-term holding deduction on a high-value home are each apportioned by (sale price − 1.2bn) ÷ sale price.
Income Tax Act art. 89(1)3 — the one-home exemption, excluding “high-value housing exceeding KRW 1.2bn.” art. 95(2) (holding deduction), art. 103 (KRW 2.5m basic deduction).
This article fills a gap this site itself flagged. The one-home exemption recorded that “the formula is an image inside the statute, so again we could not read it” — two unrelated sources have now confirmed it. The statute itself still could not be opened — the national law portal blocks automated retrieval.
Where to check further
Both contracts — buying and selling. Two of the three inputs live there.
The receipts. Necessary expenses count only as far as they go.
For joint ownership, the tax office. Shares, acquisition dates and residence periods are unverified here.
To run your own numbers, use the capital gains tax calculator; for the deduction side, see what residence is worth.
