Korea's Reconstruction Excess Profit Levy: How It Is Calculated

Korea's jaegeonchuk budamgeum (reconstruction levy) starts only once the average profit per union member exceeds 80 million won. Anything at or below that is fully exempt, and only the amount above the line is taxed, in brackets running from 10% to 50% (Korea Ministry of Government Legislation). Average profit of 200 million won produces a levy of 21 million won per member; 300 million won produces 60 million won.

The exemption line used to be 30 million won. Legislative changes debated in 2023 raised it to 80 million won, widened each bracket from 20 million to 50 million won, and added a reduction of up to 70% for single-home owners who have held for 20 years or more (Kyunghyang Shinmun). Since the system was created in 2006, not a single complex has actually been billed.

Where the levy starts and how it grows

The calculation begins with excess profit: the housing value at the completion approval date, minus the value at the union establishment approval date, minus normal housing price appreciation over that period, minus development costs including construction. Divide that by the number of members and you have the "average profit per member," which is what the rate table applies to.

The reference dates are fixed in law. The starting point is the date the reconstruction union first received establishment approval; the end point is the completion approval date. If more than ten years separate them, the start is reset to ten years back from the end. Because the start moved from the preparatory committee approval to union establishment approval, price gains from the earliest stage of a project now fall outside the calculation.

What 200 million won of average profit actually costs

Feeding amounts into the statutory formula shows the real burden. The table below applies the brackets directly; the last column divides the levy by average profit to give an effective rate.

The top bracket rate is 50%, but effective rates land far below it, because the rate applies only to the excess within each bracket. A complex with 300 million won of average profit faces an effective 20%; even at 450 million won it is 30%. That is where the phrase "half the profit is taken" parts company with the arithmetic.

The rate attaches to a bracket, the burden attaches to the excess — a top rate and an effective rate are not the same number.

How much a long-term single-home owner saves

Members who own one home at the completion date get reductions by holding period: 10–40% for six to ten years, 50% for ten to fifteen, 60% for fifteen to twenty, and 70% beyond twenty years (Housing Herald). Single-home owners aged 60 and over may also defer payment until they dispose of the property.

Applied to a member facing a 60 million won levy on 300 million won of average profit:

In other words, two members of the same union with identical excess profit can receive bills that differ threefold. The test looks at the number of homes owned at completion, so acquiring another property during the project changes the outcome — the detail that most often trips people up.

Bundamgeum and budamgeum are different money

The names are close but the instruments are not. Bundamgeum is the construction contribution a member pays the union to receive a new apartment; budamgeum is the levy the Ministry of Land, Infrastructure and Transport assesses on excess profit after the project ends. Floor area ratio and public contribution drive the first; post-completion housing value drives the second. Both can be billed on the same apartment.

Enforcement is still at the starting line. KB's summary puts the number of complexes expected to be assessed at 68 nationwide (31 in Seoul), with an estimated average of about 104.67 million won per member and a maximum around 450 million won — yet no levy has ever actually been imposed (KB Think). Some Seoul districts have begun requesting documents for assessment, while the National Assembly continues to debate easing or abolishing the system. Objections to an assessment can be filed with the ministry within 50 days of notification.

Worth checking

• The union establishment approval date — it sets the starting line for excess profit
• Whether more than ten years separate that date from expected completion, triggering the ten-year reset
• Your home count and holding period as of completion, which decide the reduction bracket
• Whether the union's estimated levy uses the amended thresholds (80 million exemption, 50 million brackets)
• Whether construction contributions and the levy are presented as separate estimates
• Progress of the parliamentary debate — the exemption line and rates are statutory

Sources

• Calculation of the reconstruction levy (Korea Ministry of Government Legislation)
• Understanding the reconstruction levy system (Housing Herald)
• Keep it or scrap it: the fate of the reconstruction excess profit levy (KB Think)
• Reconstruction levy exemption raised to 80 million won (Kyunghyang Shinmun)