Korean Acquisition Tax
Overview
Every Korean property transfer triggers an acquisition tax assessed on the purchase price and paid within sixty days of the contract date. For a single-home household the base rate is one percent up to 600 million won, two percent between 600 and 900 million, and three percent above that, with two surcharges layered on top: a rural special tax of 0.2 percent and a local education tax computed as ten percent of the acquisition tax itself. A first home priced at 500 million won therefore attracts five million won of acquisition tax plus about 1.5 million won of surcharges. Households buying additional homes face steeply higher rates — eight percent for a second home and twelve percent for a third in a regulated zone — a settings-driven policy lever that has been adjusted repeatedly to cool speculative demand.
Variables
| Symbol | Name | Unit | Description |
|---|---|---|---|
| $Price$ | Acquisition price | KRW | Contract price of the property, or the assessed value where that is higher. |
| $Rate$ | Acquisition tax rate | % | 1%, 2% or 3% for a first home by price band; 8% or 12% under the multi-home surcharge. |
| $Rural$ | Rural special tax | % | 농어촌특별세, levied at 0.2% of the acquisition price. |
| $Education$ | Local education tax | % | 지방교육세, modelled here as 0.1% of the acquisition price. |
Three Levies, One Payment
Buying residential property in South Korea triggers acquisition tax (취득세) plus two attached surtaxes that are assessed together and remitted in a single filing:
$$Tax = Price \times Rate + Rural + Education$$
The headline rate is the acquisition tax itself. The rural special tax (농어촌특별세) adds 0.2% and the local education tax (지방교육세) adds a further 0.1% in the simplified schedule used here, so the effective burden always exceeds the quoted rate by roughly three tenths of a percentage point.
Price Bands for a First Home
| Acquisition price | Rate |
|---|---|
| Up to 600,000,000 KRW | 1% |
| 600,000,001 – 900,000,000 KRW | 2% |
| Above 900,000,000 KRW | 3% |
The band applies to the whole price, not to the slice above each threshold, which makes the schedule a step function rather than a progressive one. A purchase at 600,000,000 KRW is taxed at 1%; one at 600,000,001 KRW is taxed at 2%.
The Multi-Home Surcharge
Ownership count and location override the price band entirely:
| Households owned | Regulated area | Non-regulated area |
|---|---|---|
| Second home | 8% | 1–3% (base schedule) |
| Third home or more | 12% | 8% |
Designation as a regulated area (조정대상지역) is set administratively and changes with market conditions, so the same transaction can carry a 1% or an 8% rate depending on the district's status on the contract date.
Derivation & History
Acquisition tax descends from the registration tax (등록세) and acquisition tax that were consolidated in the 2011 local tax reform; the two attached surtaxes survived the merger as earmarked revenue, the rural special tax funding agricultural adjustment programmes and the local education tax funding provincial school budgets. The multi-home surcharge structure is a later addition, introduced as a demand-suppression measure aimed at investment purchases in designated districts rather than as a revenue instrument.
Worked Examples
First home at 500,000,000 KRW, non-regulated area
- Price falls in the first band, so Rate = 1%.
- Acquisition tax: 500,000,000 × 0.01 = 5,000,000 KRW
- Rural special tax: 500,000,000 × 0.002 = 1,000,000 KRW
- Local education tax: 500,000,000 × 0.001 = 500,000 KRW
- Sum the three levies: 5,000,000 + 1,000,000 + 500,000
Result: 6,500,000 KRW — an effective rate of 1.3%
Edge Cases & Limitations
Band boundaries are cliffs: because the rate applies to the entire price, a purchase priced a single won above 600,000,000 KRW pays roughly six million won more tax than one priced at the threshold. Contract prices cluster just below each boundary for this reason.
Assessed value can replace the contract price: where the declared price falls below the officially assessed value (시가표준액), the assessment becomes the tax base, which defeats under-declaration.
Regulated-area status is dated: the designation in force on the contract date governs, not the status at registration, so a district released from regulation between the two dates does not retroactively lower the rate.
The 0.1% education tax is a simplification: the statute defines it as 10% of the acquisition tax rather than a flat share of price, so the two coincide only in the 1% band.
Real-World Applications
Acquisition tax is the largest single closing cost in a Korean residential purchase and is settled within sixty days of acquisition, so buyers budget for it alongside the realtor commission and registration fees. Lenders include the levy when sizing the cash requirement for a mortgage-financed purchase, and the multi-home surcharge is the principal lever by which the Ministry of Land adjusts investment demand in overheated districts.