Did you transfer the house as part of the alimony? Be cautious, as it will be subject to taxation in Korea

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When property ownership is transferred, it generally incurs:

1. Gift tax, inheritance tax, or capital gains tax (gift and inheritance taxes do not apply simultaneously to the same transaction; only one of these taxes will apply, not both).

2. Acquisition tax, along with the corresponding local education tax and special rural development tax.

However, property division during divorce does not incur gift tax or capital gains tax, which has led to the widespread belief that "there is no tax on property division in divorce."

The Basis for Non-Imposition of Gift Tax on Divorce Property Division

Still, excessive division or using divorce as a means of tax avoidance, if deemed to be a de facto gift, can be taxed.

Nevertheless, transfer taxes such as acquisition tax mentioned in item 2 are still imposed, even in the case of divorce, and are not exempted.

However, if the asset transferred during a divorce is classified as "property division," a reduced acquisition tax rate of 1.5% applies instead of the standard 3.5%.

Alimony

Alimony, being compensatory in nature for damages, does not incur any separate tax when paid in cash. However, if real estate is provided as alimony, the recipient is liable for a 3.5% acquisition tax, and the giver is also liable for capital gains tax (as real estate payment is considered a barter or taxable transfer).

Therefore, unless there are unavoidable circumstances, transferring assets as property division rather than alimony can significantly aid in tax savings when it comes to registered assets like real estate.