Capital Gains Tax on Korean Real Estate: Complete Guide

When you sell property in Korea at a profit, the government taxes that gain as income through the 양도소득세 (yangdo sodeuk se) — the capital gains tax. Unlike many countries with flat capital gains rates, Korea uses the same progressive income tax brackets for property gains, then layers on holding-period deductions, basic deductions, and surcharges for multi-home sellers. Understanding how all these components interact is the difference between a tax bill of 5 million KRW and 50 million KRW on the same sale.

Calculating the Taxable Gain: Four Steps

The taxable gain is not simply the sale price minus the purchase price. Korean tax law allows several deductions that reduce the taxable amount substantially.

Step 1: Calculate the raw gain

Gain = Sale price − Purchase price − Acquisition costs

Acquisition costs include the original acquisition tax paid, legal fees, renovation costs that increased the property's value (improvement expenditures), and brokerage fees from both the purchase and the sale. Keep all receipts — these deductions can reduce a taxable gain by 5–15%.

Step 2: Apply the long-term holding deduction (장기보유특별공제)

For properties held three or more years, a percentage of the gain is deducted before tax is calculated. Rates differ depending on whether you own one home or multiple. This deduction is addressed in detail in the companion guide on long-term holding deductions.

Kr Long Term Deduction

Step 3: Subtract the basic deduction (기본공제)

After the long-term holding deduction, subtract the flat annual basic deduction of 2.5 million KRW (한 해당 2,500,000원). This is available once per year regardless of how many properties you sold.

Step 4: Apply the progressive tax rate

Kr Capital Gains

Capital Gains Tax Kr

Progressive Tax Brackets

The taxable gain is taxed using the standard income tax brackets:

Taxable Gain	Rate
Up to 14 million KRW	6%
14 million – 50 million KRW	15%
50 million – 88 million KRW	24%
88 million – 150 million KRW	35%
150 million – 300 million KRW	38%
300 million – 500 million KRW	40%
500 million – 1 billion KRW	42%
Over 1 billion KRW	45%

A local income surtax (지방소득세) of 10% of the calculated income tax is added on top, making the effective top rate 49.5%.

The 1-Home Exemption (1세대 1주택 비과세)

For single-home households that have owned the property for at least two years and lived there for at least two years (거주요건), the entire gain is exempt from capital gains tax if the sale price does not exceed 1.2 billion KRW. This is the most powerful tax benefit in Korean property law.

For sales above 1.2 billion KRW, only the portion of the gain attributable to values above 1.2 billion is taxed — and it qualifies for the full long-term holding deduction rates applicable to primary residences.

Residency requirement: The two-year residency requirement applies specifically when the property is in a regulated area (조정대상지역) at the time of purchase. If it was non-regulated when purchased, residency may not be required. Regulations on this have changed multiple times — confirm the current rules with the National Tax Service (국세청) or a tax accountant.

Surcharges for Multi-Home Sellers

If you own two or more homes at the time of sale: - Two-home holders: +20 percentage points added to each bracket rate - Three-home holders: +30 percentage points added to each bracket rate

These surcharges apply to sales of regulated-area properties. They also eliminate the right to claim long-term holding deductions on the sold property.

Short-Term Sale Penalties

Selling within two years of purchase attracts a flat penalty rate regardless of the progressive brackets: - Under 1 year: 70% flat rate - 1 to 2 years: 60% flat rate

These rates apply even to single-home owners and are designed to discourage quick flipping.

Filing and Payment

Report and pay capital gains tax using a preliminary declaration (예정신고) within two months of the sale completion date. Failure to file on time results in a 20% penalty on the tax due. Alternatively, the final annual settlement (확정신고) is filed in May of the following year, but making the preliminary declaration is generally advantageous because it starts the interest clock later and demonstrates compliance.