If you pay 100 million and sell it for 200 million dollars … LH sparks sprouted on the weekend farm



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Photo = Yonhap News

Photo = Yonhap News

After retiring in 2005, Mr. A (70), who cultivates in a 990m2 field in Yangpyeong, Gyeonggi Province, was surprised to hear the news of the government’s land regulation. Starting next year, since weekend farm land is classified as non-commercial use, the special long-term property deduction will be eliminated and the capital gains tax will be high. He complained: “If we don’t sell the land before the end of the year, we will get a ‘fiscal bomb’,” he said. “The speculation was made by employees of LH (Korea Land and Housing Corporation), but I don’t know why we should suffer so much damage.”

On the 1st, the Korea Economic Daily commissioned Shinhan Bank Real Estate Investment Advisory Center manager Woo Byung-tak to calculate the land transfer tax. It is 3.5 times more than the tax paid at the time of this year’s sale (12.07 million won). This is due to the fact that from next year taxation on non-commercial land will be strengthened in accordance with the “measures to eradicate real estate speculation and prevent its recurrence”, announced by the government on the 29th of last month. Weekend agricultural land (less than 1000㎡) that is currently considered commercial land is classified as non-commercial use. In this case, the tax rate during the transfer tax (10% point → 20% point) will increase and you will not be able to receive special deductions for long-term holdings. Manager Woo said, “The demand for land will be greatly reduced due to the sharp increase in the land transfer tax for weekend farms.”

Weekend farm, classified for non-business purposes starting next year … Long-term withholding deduction waived
When the profit is 100 million won, the transfer tax increases from 12.07 million won to 4259 million won.

The reason why the transfer tax burden on weekend farmland will increase up to 3.5 times from next year is due to overlapping regulations. Currently, it is classified as commercial land and only the basic tax rate (6 ~ 45%) is applied, but if you switch to non-commercial land from next year, the high tax rate is added by 20% points. Also, starting next year, even if it is privately owned land, it will be excluded from the special deduction for long-term tenure for non-commercial purposes. Weekend farm land is also covered by this regulation, so even if it is cultivated for a long period of time, not up to 30% of the special long-term deduction is received.

For other lands with non-commercial purposes, the transmission tax burden will double with the reinforcement of this regulation. Professor Kwon Dae-jung from the Department of Real Estate at Myongji University said: “The problem with this measure is that indiscriminate regulations were applied to prevent the repetition of LH (Korea Land and Housing Corporation) speculation.” He said. they are inevitable side effects, like a cliff in transactions. ”


Land acquisition also becomes difficult

The ‘3 · 29 government measures (measures to eradicate property speculation and prevent recurrence)’ significantly strengthened land acquisition regulations. When buying land for weekend farms, you need to submit an ‘Agriculture Experience Plan’, a kind of agricultural management plan, to obtain a farmland acquisition qualification certificate (agricultural certificate). In the case of weekend farmland, farm odors were emitted without submitting additional documentation. However, in the LH speculation crisis, criticism that such an institutional loophole leads to speculation on farmland has come up urgently with a countermeasure.

Such a shift is feared to intensify the transfer tax and lead to a commercial cliff in farmland. Lee Chang-dong, head of the value map research team, said: “If the new land acquisition is interrupted, the population of returning households will also decline, so the rural housing construction business and the business of Landscaping will also take a number of hits. ” He then emphasized that “while it is possible to suppress the activities of speculative forces such as real estate planning, it can have a negative impact on the economy of rural areas because it also blocks the acquisition of good intentions.”

Sim Gyo-eon, a professor in the Konkuk University real estate department, said: “The stricter the regulations, the more advanced speculators avoid the legal system.”

Older Farmers Hitting Before Retirement

As both transfer taxes and procurement regulations tighten, some point out that older farmers who tried to dispose of farmland immediately would suffer damage. It is common for elderly farmers to sell farmland in retirement and use it as retirement funds. However, if the purchase tax is cut due to institutional change, the disposition of agricultural land itself becomes difficult.

In particular, problems are expected to arise in the underdeveloped regions of the provinces, which are less related to speculation. In order not to be subject to various tax regulations, people have to live and farm while living in the relevant area, because the further away from the metropolitan area or the local metropolitan area, the lower the demand. Kim Soo-seok, Honorary Senior Researcher at the Korea Rural Economics Institute, said: “The government has revised the agricultural land law in the direction of publishing regulations on agricultural land transactions in consideration of the issue of agricultural land disposal. by elderly farmers. ” made.

Emergency farm map

When the reasons for non-farmer ownership of agricultural land are analyzed, there is more inheritance than speculative trading. This is a case where parents inherited the farmland they cultivated and inadvertently became owners of it. However, as a result of this countermeasure, there was a “direct impact” of the expansion of regulations to agricultural land that was normally modified, such as inheritance.

When inherited agricultural land is converted to non-commercial land, a huge transfer tax will be imposed according to the system change. For this reason, in the event of inheriting farmland, a transfer strategy needs to be devised while carefully weighing the conditions for recognizing the land for commercial use.

If the current inherited agricultural land was for commercial use prior to the inheritance, the qualification is recognized for a specified period of time. Even if agricultural land is inherited and not directly cultivated, it is classified as commercial land for three years and then converted to non-commercial land. Taking into account that the conditions to impose a transfer tax on non-commercial land according to the Income Tax Law are “ if the land is for non-commercial use for more than two years out of the five years prior to the transfer ” , you only have to pay the transmission tax corresponding to the commercial land up to 5 years after the inheritance. However, if you miss this period, you will have to pay a transfer tax plus a hefty 20% tax rate as a countermeasure.

Reporter Jinkyu Kang / Jinseok Choi [email protected]

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