Land that has been assigned a value is subject to the land value increment tax based on the total amount of land value increment at the time title to the land is transferred. Land transferred by succession, public land sold or donated by all levels of government according to law, and private land transferred to any level of government by gift is exempt.

The taxpayers of the land value increment tax are:
(1) The original landowner for land transferred for consideration.
(2) The claimer of land title for land transferred for no consideration.
(3) The dien right assignor for a dien right that has been established on the land.

Where title to land is transferred, if the land value increment tax due is not paid by the taxpayer within the relevant period, the new title holder of the land must pay the past-due tax. If the current value for transfer is reported solely by the title holder, the tax payable should be paid by the title holder.

The tax base of the land value increment tax is the “Total Increment Amount of Land Value? which is calculated as follows:

The land value increment tax is levied at progressive rates ranging from 20% to 40%, based on the increase in land value. If the area of land for a self-use residence sold by the land owner complies with the relevant regulations, a privileged rate of 10% applies.

Reductions of and exemptions from the land value increment tax are as follows:

If a SME moves its premises to an industrial district, urban planning industrial district, or industrial land zoned in accordance with the Statute for the Encouragement of Investment as a result of urban and/or regional planning, to prevent pollution, or for public safety, maintenance of the natural environment or at the recommendation of the government, when the SME sells or transfers the land where it was originally located, land value increment tax will be levied at the lowest rate (i.e. 20%).

Where an investor invests in a SME by providing land in an industrial district, and the SME consents, the shares of the SME may be used as collateral for the payment of the tax. The land value increment tax payable by the investor may be averaged over a five-year period commencing in the year the investment was made.

When a company acquires the assets or shares of another company by shares with voting rights as consideration for the acquisition, if such shares are valued at not less than 65% of the total consideration, transfer of the title to any land owned by the company after the transfer will be immediately completed. The land value increment tax duly borne by the existing land title holder may be registered under the name of the acquiring company.

If, after a landowner has sold land that was used for an owner-operated factory, and within two years following the completion of the transfer of registration, the assessed value for the transfer of the land is higher than the balance of the original land value excluding the land value increment tax, the seller (previous landowner) may apply to the tax office for a refund of the portion of the land value increment tax needed to make up the difference to be paid for the sale of the land.

If, on the day following the receipt of compensation for land reacquired by the government, and if the land was used for an owner-operated factory, the assessed value of the land is higher than the balance of the original land value at the time of the transaction excluding the land value increment tax, the previous landowner may apply to the tax office for a refund of the portion of the land value increment tax needed to make up the difference to be paid for the reacquisition of the land.