Non-business land: clearing any one of three escapes the surcharge
시행령 제168조의6 treats land as non-business only where all three period thresholds are exceeded. Turned around, meeting the business-use test on any single one escapes the 10 percentage point surcharge. A reform announced on 3 August 2026 would raise this surcharge further from 2028. It has not passed the National Assembly.
Conditions used in the video
- Sale price
- ₩1B
- Purchase price
- ₩400M
- Costs
- ₩30M
- Holding period
- 10 years
- Time in business use
- none
Results
- Taxed as non-business
- ₩220.89M
- Taxed as business land
- ₩171.01M
- Difference
- ₩49.88M
- The surcharge
- 10 points on every band
- Long-term deduction
- 20%, still applies
At a glance
Land held 10 years, bought for ₩400M and sold for ₩1B, with ₩30M in costs.
- Treated as non-business₩220.89M
taxed at 50%
- Accepted as business land₩171.01M
taxed at 40%
Why it works this way
Selling farmland or vacant land sometimes brings a tax bill far larger than expected. Land ruled non-business is taxed 10 percentage points higher on every band.
But once you see how that ruling is made, the picture changes. The provision is built to be harder to trip than people assume.
시행령 제168조의6제1호, the test where the land has been held five years or more. The example is a 10-year holding.
- In the last 5 years before the saleis non-business use over 2 years?
- In the last 3 years before the saleis non-business use over 1 year?
- Over the whole holding periodis non-business use over 40%? (4 years out of 10)
The provision says the period falling under **all** of the three. Fail to exceed even one and the land is not non-business.
Now turn it around. If all three have to be exceeded for the surcharge, then meeting the business-use test on any single one escapes it.
On a 10-year holding, any one of these will do.
- 3 years of business use in the last 5the first threshold is blocked
- 2 years of business use in the last 3the second threshold is blocked
- 6 years of business use over the holdingthe third threshold is blocked
The third means 60% or more of the holding period in business use. The longer the land has been held, the wider that road is.
Take figures. Land bought for ₩400M and sold for ₩1B, ₩30M in costs, held 10 years. The gain is ₩570M.
Take off the 20% long-term holding deduction and the ₩2.5M annual deduction and the tax base is ₩453.5M. At the non-business rate of 50% the bill including local income tax is ₩220.89M; accepted as business land at 40% it is ₩171.01M.
One ruling, ₩49.88M apart.
This is where it differs from the multi-home surcharge.
- Multi-home surcharge (제104조제7항)long-term deduction denied
- Non-business landthe table 1 deduction applies in full
제95조제2항 denies it only to unregistered transfers and to assets under 제104조제7항. Non-business land is not on that list. Ten years of holding gives 20%, fifteen gives 30%.
One caution. The provision counts the periods in days, not years. If your margin against a threshold is only a few days, count it again from the actual dates on the property register.
So: non-business land needs all three thresholds exceeded, blocking any one escapes the surcharge, and even when it applies the long-term holding deduction is untouched.
The legal basis
Drawn from government announcements and the statutes themselves as primary sources, covering only the relevant part.
2026 tax reform: heavier surcharge on non-business land (not yet passed)
In force Submitted to the National Assembly on 3 Sep 2026 (referred to committee 4 Sep) · targeted at disposals from 1 Jan 2028
The surcharge on gains from non-business land rises from +10%p to +20%p, and non-business land is added to the assets excluded from the long-term holding deduction (Income Tax Act §95(4) new, §104(1)). Applies to disposals from 1 January 2028. (Verified against the ministry's full text on 8 Aug 2026.)
What this means
If passed, the gap on this page widens further from 2028, making the business-use tests worth even more. Until then the current +10%p applies.
소득세법 시행령 제168조의6제1호 (the period test, held 5 years or more)
In force in force
Where the land has been held for five years or more, it is treated as non-business land for the period falling under all of the following: the period exceeding two years within the last five years before the transfer; the period exceeding one year within the last three years before the transfer; and the period exceeding 40 hundredths of the holding period.
What this means
All three must be exceeded for the land to be non-business. Turned around, meeting the business-use test on any single one escapes the surcharge.
같은 조 제2호·제3호 (shorter holdings)
In force in force
Where the land has been held three years or more but under five, the first threshold becomes the holding period less three years; under three years, less two years. Where the holding period is under two years, that item does not apply at all.
What this means
A shorter holding lowers the first threshold. The three-year test and the 40% test remain in place.
소득세법 제104조제1항제8호 (the rates)
In force in force 2026-01-01
Capital gains on non-business land are taxed at 16, 25, 34, 45, 48, 50, 52 and 55 percent, which is the general rates plus 10 percentage points on every band of the tax base.
What this means
The surcharge is exactly 10 points on each band. Local income tax follows at 10% of the tax.
소득세법 제95조제2항 (the long-term holding deduction)
In force in force
The long-term holding deduction does not apply to unregistered transferred assets or to the assets listed under 제104조제7항.
What this means
Non-business land is not on that list. It keeps the table 1 deduction even when the surcharge applies, unlike the multi-home surcharge.
Run it on your own numbers
The calculator opens with these conditions already filled in. Change the figures and your own case comes straight out.
Open the Non-Business Land Surcharge
Frequently asked
Does meeting just one of the three really escape it?
Yes. 시행령 제168조의6 treats as non-business the period falling under all of the items. Fail to exceed even one threshold and the land is not non-business land. On a 10-year holding, two years of business use within the last three blocks the second threshold on its own.
If the surcharge applies, is the long-term deduction lost too?
No. 제95조제2항 denies it only to unregistered transfers and assets under 제104조제7항, and non-business land is not there. Ten years of holding gives 20% and fifteen or more gives 30%, exactly as usual. It is easy to confuse this with the multi-home surcharge.
How much more does it cost?
Ten percentage points on every band of the tax base. On land held 10 years, bought for ₩400M and sold for ₩1B, the tax base is ₩453.5M, so 50% and 40% part ways and the gap including local income tax is ₩49.88M.
Can the periods be counted in years?
The provision counts them in days. The calculator takes years for convenience, but a small margin against a threshold can turn over on a few days. If it is close, count again from the actual dates on the property register.
What if the land was held under three years?
The first threshold drops to the holding period less two years, and under two years that item does not apply at all. But the long-term holding deduction is then 0%, so the bill can end up larger anyway.
Which land is caught by this?
제104조의3 sets it out. Farmland the owner does not farm, forest land the owner does not live near, pasture over the standard area, and vacant land with no building on it are the main cases. The period test is how business use is measured.
Results are estimates based on the inputs and on the rules as at the stated date. They may differ from a lender's actual assessment, and the rules change often. Take professional advice before any decision that matters.