End of Capital Gains Tax Deferral and the 2026 Property Tax Reform Impact

Introduction: The End of Tax Deferral and a Shift in Policy Stance

As of May 9, 2026, the temporary capital gains tax grace period for multiple homeowners officially ended. With the expiration of this mitigation measure—initially implemented to induce housing supply into the market—the tax environment for multiple property owners has reached a fundamental turning point. The government is currently evaluating the designation of new regulated zones to control localized market overheating, such as the Dongtan area, which recently experienced an abnormal surge in housing prices fueled by massive corporate bonuses. Concurrently, the upcoming July tax reform bill aims to establish a clear policy framework: increasing the burden of holding properties while lowering barriers to trading them. This signals a strong commitment by policymakers to structurally redesign the incentives for market participation among multiple homeowners.

Key Issues in the 2026 Tax Reform: Stricter Holding Taxes, Lower Transaction Taxes

Market participants are closely observing the impending restructuring of holding taxes, such as the comprehensive real estate holding tax and property tax, slated for the second half of the year. Specific revisions are being discussed from multiple angles to improve tax equity and enforce structural stabilization in the housing market. Tax experts forecast this reform bill will become the core variable altering long-term capital flows in the real estate sector.

Higher Effective Tax Rates Through Fair Market Value Ratios

Rather than directly increasing statutory tax rates, the government is highly likely to raise the fair market value ratio, a core metric used to calculate the tax base for the comprehensive real estate holding tax. Combining this upward adjustment with annually rising officially assessed property values will mathematically amplify the perceived tax burden for multiple homeowners and owners of high-value properties. This approach serves as a strategic method to effectively enforce stricter holding taxes immediately through executive decrees, thereby minimizing direct legislative friction and tax resistance in the National Assembly. It reflects the government's pragmatic route to secure tax revenue while stabilizing the market.

Realigning Tax Benefits for Owner-Occupiers

Requirements for core tax benefits, including the special deduction for long-term holding, will become much stricter, focusing solely on single-home owner-occupiers. Conversely, benefits for multiple homeowners or non-resident owners who fail to meet registered residency requirements will be sharply reduced. This fundamental shift in the tax system reflects the government's medium-to-long-term intention to transition the public perception of housing from pure investment assets generating capital gains to essential capital goods for actual residential purposes. This structural change demands that future investment return calculations rigorously account for post-tax preservation costs alongside rental income.

Easing Transaction Taxes Such as Acquisition Tax

To prevent the adverse effect of a completely frozen housing market caused by rapidly tightening holding taxes, the administration is carefully considering partial reductions in transaction taxes, particularly the acquisition tax. By lowering the entry costs inherently associated with housing transactions, the policy aims to provide a strategic exit route, encouraging multiple homeowners feeling the tax pressure to sell their properties smoothly and restoring the market's autonomous circulation function. This suggests a high probability that distressed properties, unable to bear the holding tax burden, will flood the market simultaneously with the easing of transaction taxes.

Financial Impact of the Revived Capital Gains Surtax

Multiple homeowners selling properties in regulated areas after May 10, 2026, will be subject to strict progressive surtaxes on top of the standard base rates (6% to 45%). A 20 percentage point premium applies to those owning two homes, while a 30 percentage point premium applies to those owning three or more. Crucially, when the surtax is triggered, the special deduction for long-term holding—traditionally the largest tax-saving component in asset sales—is entirely excluded, and an additional 10% local income tax is levied. The probability of encountering a 'tax bomb' surges drastically if the property is located in a newly designated regulated zone. Consequently, depending on specific conditions, sellers may face extreme scenarios where marginal tax rates consume over 70% of their capital gains, making financial calculations highly complex and demanding for investors planning to liquidate or rebalance their assets.

Market Outlook and Asset Management Strategy

The simultaneous, powerful pressure from both holding taxes and capital gains taxes will accelerate portfolio restructuring in the domestic housing market at an unprecedented pace. The trend of consolidating assets into a single premium property in prime locations with high investment value and low risk is highly likely to intensify across the market. With macroeconomic uncertainty heightening due to the U.S. Federal Reserve's hawkish stance on interest rates, multi-unit properties in peripheral areas lacking sufficient upside potential to offset the tax burden are expected to gradually enter the market as listings. Property owners must closely monitor the specific changes in the fair market value ratio, progressive tax rates, and potential new regulated zones in the forthcoming tax revision. Rather than relying solely on asset price appreciation, it is now more critical than ever to establish conservative asset management and portfolio adjustment strategies based strictly on cash flows and post-tax expected returns that accurately reflect the heightened tax burden.