Korean Non-Business Land Surcharge Calculator

Capital gains tax on land in Korea uses one of two rate tables, depending on how the land was used. Land you farmed yourself or used in a business is taxed at the basic rates that apply to other assets. Land you simply held is classed as non-business land and taxed on a table that sits 10 percentage points higher in every band. This calculator does two jobs. First it takes your holding period and the time the land was in business use and applies the period rule in the Enforcement Decree to decide whether the land is non-business. Then it takes the sale price, acquisition price, expenses and holding period, works out the tax, and shows the non-business figure and the business-use figure side by side.

It helps to know why the rule exists. Unlike a house, land costs almost nothing to leave idle, so holding it purely for the price to rise is easy. The tax code discourages that by charging a heavier rate on gains from land that was never actually used. The hard part is measuring "never used", and the code does it by looking at how much of the ownership period was business use through three separate windows.

The first users are people about to sell farmland, forest or vacant land that they inherited or bought long ago. If you live in a city and own land in the countryside, you almost certainly did not farm it yourself, so it will probably be classed as non-business and the tax will be far higher than you expect. The calculator shows how much the surcharge adds before you sell, and whether the timing of the sale can be adjusted.

It is also useful if you farmed the land for some years and left it idle for others. Because meeting any one of the three tests avoids the surcharge, how the land was used in the last few years before the sale can change the answer. The three-threshold display shows whether delaying the sale a little would push the business-use time over a threshold.

The rates come from the table in 소득세법 제104조제1항제8호. They run from 16% to 55% across the tax-base bands, 10 percentage points above the basic rates of 6% to 45% in every band. The classification is governed by 소득세법 시행령 제168조의6. Where the land was held for five years or more, there are three windows: the last five years before the sale, the last three years, and the whole holding period. The land is non-business only if the non-business time exceeds 2 years in the first window, 1 year in the second, and 40% of the holding period in the third, all three at once. Held three years or more but under five, the first window becomes "the holding period less 3 years". Held under three years, only two windows apply: "the holding period less 2 years" and the 40% test.

The tax itself is computed the same way as any other capital gain. Sale price less acquisition price and necessary expenses gives the gain. If the land was held three years or more, the long-term holding deduction under table 1 of 소득세법 제95조제2항 comes off. Subtracting the annual capital gains deduction of ₩2.5 million gives the tax base, the band rate is applied, the progressive deduction is subtracted, and that is the computed tax. Local income tax of 10% of the computed tax is added on top. Non-business land keeps the long-term holding deduction: what 제95조제2항 excludes from the deduction is unregistered assets and housing caught by the multiple-home surcharge, and non-business land is not on that list.

Take the calculator's default figures. Land bought ten years ago for ₩400 million is sold for ₩1 billion with ₩30 million of expenses, so the gain is ₩570 million. Ten years of holding gives a long-term deduction rate of 20%, or ₩114 million. Taking off the ₩2.5 million annual deduction leaves a tax base of ₩453.5 million.

With no business use at all in those ten years, all three thresholds are exceeded and the land is non-business. That tax base falls in the 50% band, giving computed tax of ₩200,810,000 plus local income tax of ₩20,081,000, ₩220,891,000 in total. Had the land been accepted as business use, the 40% band would apply and the total would be ₩171,006,000. The non-business classification alone costs ₩49,885,000, which with local tax included is 11% of the tax base.

The first is assuming that because the land is surcharged it must also lose the long-term holding deduction, and so overestimating the tax. Non-business land gets the deduction. The second is reading the period rule backwards. The statute says all three windows must be exceeded for the land to be non-business, so meeting the business-use condition in any one of them avoids the surcharge. Read it as "exceeding any one makes it non-business" and every result comes out reversed.

The third is estimating the periods in whole years. The Enforcement Decree counts in days, so near a threshold a few days either way flips the result. The calculator warns when the margin is under 0.2 years, but at that point you need to recount from the actual dates on the property register. The fourth is stopping at the period rule. Land subject to separate aggregate or separate property taxation, or sold for an unavoidable reason such as expropriation or inheritance, can fall outside non-business treatment regardless of the periods. This calculator does not decide those questions, so read the scope section alongside it.