Korea's reconstruction excess profit levy (jaechohwan) only applies once the average gain per union member exceeds 80 million won. Anything at or below that is fully exempt, and above it the law carves 50-million-won brackets carrying rates of 10%, 20%, 30%, 40% and 50% in turn. The previous rules set the exemption at 30 million won with 20-million-won brackets, so both the threshold and the bracket width widened.
The critical detail is that the base is not one apartment's capital gain but the average gain per union member. You take the housing value at project completion, subtract the value at project commencement, the normal housing price appreciation, and development costs such as construction, design supervision and taxes, then divide by the number of members. The complex-wide average sets the rate, not your own unit.
The bracket decides the rate
The amendment cleared by the National Assembly land committee subcommittee in November 2023 centered on "raising the excess profit threshold from 30 million won to 80 million won, and the bracket unit from 20 million won to 50 million won." The current table looks like this.
| Average gain per member (KRW) | Rate | Base amount (KRW) |
|---|---|---|
| Up to 80 million | Exempt | 0 |
| 80 million to 130 million | 10% of the excess | 0 |
| 130 million to 180 million | 20% of the excess | 5 million |
| 180 million to 230 million | 30% of the excess | 15 million |
| 230 million to 280 million | 40% of the excess | 30 million |
| Above 280 million | 50% of the excess | 50 million |
The commencement value is the officially published property price adjusted for normal appreciation up to the commencement date; the completion value is assessed by the Korea Real Estate Board at the ministry's request and confirmed by the property price disclosure committee. The normal appreciation deducted along the way equals the commencement value multiplied by whichever is higher, the term deposit interest rate or the regional average housing price growth rate. In a period when local prices ran hot, the deduction grows with them.
What a given average gain produces
Applying the bracket table directly, before any reduction, gives the following.
| Average gain (KRW) | Calculation | Levy (KRW) | Effective rate (%) |
|---|---|---|---|
| 80 million | Exempt | 0 | 0.0 |
| 100 million | 20M x 10% | 2 million | 2.0 |
| 130 million | 50M x 10% | 5 million | 3.8 |
| 150 million | 5M + 20M x 20% | 9 million | 6.0 |
| 180 million | 5M + 50M x 20% | 15 million | 8.3 |
| 200 million | 15M + 20M x 30% | 21 million | 10.5 |
| 250 million | 30M + 20M x 40% | 38 million | 15.2 |
| 300 million | 50M + 20M x 50% | 60 million | 20.0 |
| 500 million | 50M + 220M x 50% | 160 million | 32.0 |
The top marginal rate is 50%, but the effective rate starts far below it. At 100 million won of average gain the effective burden is 2.0%; at 200 million it is 10.5%. Clearing 20% requires passing 300 million won, and reaching 32% takes 500 million. This is where the shorthand "the state takes half your profit" parts ways with the arithmetic.
The 50% rate applies only to the portion above 280 million won, after the 80-million-won exemption. It is not a rate multiplied against the whole gain.
Reversing the notified amounts
Housing Herald's June 2025 tally counted 68 complexes expecting a levy, averaging 105 million won per member. By region: 31 in Seoul averaging 166 million won, 14 in Gyeonggi averaging 57 million, and 11 in Daegu averaging 60 million. The highest was a Seoul complex at 450 million won per member.
Feeding those figures backward through the current table exposes the profit scale behind them. All fall in the top bracket, so the formula collapses to a single line: average gain = 280 million + (levy − 50 million) ÷ 0.5.
| Group | Levy per member (KRW) | Implied average gain (KRW) | Effective rate (%) |
|---|---|---|---|
| Gyeonggi average (14) | 57 million | 294 million | 19.4 |
| Daegu average (11) | 60 million | 300 million | 20.0 |
| National average (68) | 105 million | 390 million | 26.9 |
| Seoul average (31) | 166 million | 512 million | 32.4 |
| Highest complex (Seoul) | 450 million | 1.08 billion | 41.7 |
These are pre-reduction figures, and where a notice was issued under earlier brackets the true gain will differ. Still, the scale registers: Seoul's 166-million-won average levy implies more than 500 million won of gain per member surviving after development costs and normal appreciation are stripped out. The same article notes that to date "no complex has actually paid the levy" — the distance between a preliminary notice and collected revenue remains wide.
Reductions and deferral change the outcome
The formula's output is not the final bill. The amendment layered in holding-period reductions: per Kyunghyang Shinmun, "the maximum reduction for holders of 20 years or more rose from the government's proposed 60% to 70%, with 60% for those holding 10 to 15 years and 40% for those holding 6 to 9 years." Applying 70% to Seoul's 166-million-won average leaves roughly 50 million won.
There is also a timing valve: "single-home owners aged 60 or over may defer payment until they dispose of the home through inheritance, gift or sale, on condition of providing collateral equal to the levy." In treating holding period as a lever on tax, it rhymes with the long-term holding deduction split into 40% for ownership and 40% for residence — except the levy looks only at holding, with no residence requirement.
Whether the system survives is its own variable. The Ministry of Land, Infrastructure and Transport stated in a 14 January 2025 briefing that it "continues to pursue regulatory normalization tasks including abolishing the reconstruction excess profit levy and the official price realization plan, and reforming the two lease acts." Abolition requires legislation, and until it passes the assessment process runs under current law.
What to check
- The basis for the average gain figure — how the notice recorded completion value, commencement value, development costs and normal appreciation.
- The rate used for normal appreciation — whether the term deposit rate or the regional growth rate was applied. This ratio drives the size of the deduction.
- Your holding period — 6, 10 and 20 years are the reduction boundaries. For a succeeded interest, confirm the start date.
- Elderly single-household eligibility — age 60 and the ability to post collateral determine whether payment can be deferred until disposal.
- Scope of recognized development costs — check union accounting records that design supervision fees, taxes and donated land value were all captured alongside construction cost.
- Legislative progress — where abolition or relaxation bills stand, and how effective dates and retroactivity are settled.