South Korea Proposes 2026 Tax Overhaul Targeting High Value Homes and Strategic Production

South Korea has unveiled a 2026 tax reform package that reduces tax benefits for owners of high value homes while introducing new incentives for domestic production in strategic industries. Finance Minister Koo Yun-cheol stated that the revisions aim to establish a more reasonable property tax system based on the principle that homes are for living rather than for buying. A central feature of the proposal is the shift of the comprehensive real estate holding tax from a system based on the number of homes owned to one based on the combined total value of the properties. For single home owners who occupy their property, the basic deduction will rise from 1.2 billion won to 1.4 billion won, which effectively exempts homes with a market value of up to about 2 billion won. Conversely, the deduction for single home owners who do not live in the property will decrease to 900 million won. Capital gains tax deductions will also shift toward actual residence, with a residence based deduction of 8 percent per year taking full effect by 2029. To support economic growth, the government will introduce production tax credits for six strategic sectors, including semiconductors, AI robot components, and secondary batteries. These credits will be based on the volume manufactured and sold within Korea. Additionally, the optional flat income tax rate for foreign employees will increase from 19 percent to 21 percent. Center leaning reports frame the move as a way to stabilize the property market and ensure fairness, while center right reporting emphasizes the reward for resident homeowners and the support for sustainable economic growth.