Interior ministry unveils local tax reform to support housing and regional growth

The interior ministry on Wednesday announced a 2026 local tax reform plan designed to stabilize housing costs for young people and promote balanced regional growth outside the capital. Minister Yoon Ho-jung said the measures aim to strengthen support for youth and ordinary citizens while fostering a social economy base.

A key provision expands the acquisition tax relief for first-time homebuyers under age 40, raising the cap from 2 million won to 3 million won. The eligibility scope also widens to include residential officetels, allowing buyers of small units to claim exemptions even after selling previous properties.

Homeowners holding a single property will see their special property tax rates extended through 2029, maintaining a rate reduction of 0.05 percentage points below the standard for homes with a publicly assessed value of up to 900 million won.

To encourage development in shrinking areas, the ministry introduced a tiered tax reduction system for venture business clusters and new technology startup zones. Reduction rates will be highest in population-declining regions, followed by non-metropolitan areas, with lower rates applied in the capital region.

Social economy organizations such as cooperatives and village enterprises can receive a basic reduction rate of 55 percent, with additional deductions available to reach a maximum exemption of 100 percent.

The reform package adjusts criteria for taxing luxury homes, raising the price threshold for surtaxes from 900 million won to 1.2 billion won and excluding common areas from size calculations.

"This year's local tax reform was prepared to further strengthen housing support for youth and the public, and to back region-led balanced growth through preferential treatment for non-metropolitan and population-declining areas," Yoon said. He added that the ministry will work closely with the National Assembly during the legislative process to ensure the changes are implemented without disruption.

The ministry plans to open the draft amendments to the Local Tax Act, Local Tax Collection Act, and related laws for public comment starting Thursday. The legislative notice period runs until September 23, after which the bill is scheduled for submission to the National Assembly in late October.