Remember the '5% Rule' Even When Switching from Monthly Rent to Jeonse

Hana Bank 'Tax & Legal Handbook'... Distributed to Branches Nationwide
Supports Understanding Through Various Real Case Studies for Consultation Use

Hana Bank announced that it will publish a "Tax and Legal Consultation Handbook," which contains accumulated consulting know-how in various fields such as inheritance and gifts, real estate taxes, and business succession, to strengthen its capabilities in asset management, and distribute it to branches nationwide. Jeong Won-gi, Head of the Asset Management Business Group (first from the left in the front row), Lee Jae-cheol, Head of the Asset Management Business Support Section (fourth from the left in the back row), and tax accountants from the Inheritance and Gift Center are posing at Hana Bank Club1 Hannam PB Center to commemorate the publication of the "Tax and Legal Consultation Handbook."

[Asia Economy Reporter Kiho Sung] "The initial rent can be set by the lessor. However, once the rent is determined (reported), even if the tenant changes, the ‘5% rule’ (which limits the landlord’s rent increase to within 5%) applies."

Hana Bank has published a ‘Tax and Legal Consultation Handbook’ containing accumulated consulting know-how in various fields such as inheritance and gift tax, real estate tax, and business succession, and distributed it to branches nationwide. It explains the latest laws through case analyses, which is expected to help resolve customer inquiries and improve staff consultation capabilities.

According to Hana Bank on the 28th, the newly published handbook consists of nine parts: ▲Real Estate Tax ▲Housing Lease Business ▲Financial Tax ▲Overseas Financial Account Reporting System ▲Business Tax ▲Inheritance and Gift Tax ▲Source of Funds and Investigation ▲Non-resident Tax ▲Legal Section. It focuses on essential points necessary for asset management consultations.

The handbook is characterized by explaining various real cases in accordance with current laws. In the earlier example, the 5% rule continues to apply even if the tenant changes. According to current law, the rent increase limit applies per leased property.

The handbook advises that the 5% rule should also be considered when converting from monthly rent to jeonse (lump-sum deposit lease). Typically, a monthly rent of 1 million KRW is considered equivalent to a jeonse deposit of 240 million KRW. For example, if a property with a deposit of 100 million KRW and a monthly rent of 1 million KRW is converted entirely to jeonse, the jeonse deposit is regarded as 340 million KRW, and since the rent cannot be increased by more than 5% of this jeonse deposit, the maximum allowable jeonse deposit is 357 million KRW.

With real estate sales becoming difficult, the handbook advises careful consideration regarding the increasing number of gifts recently. If a child borrows from financial institutions to purchase real estate using the parents’ assets as collateral, and the gift benefit (loan interest rate 4.6% minus interest paid to the financial institution) exceeds 10 million KRW annually, it is considered a gift. Also, if a multi-homeowner parent allows a child to reside rent-free in one house, gift tax issues may arise. The handbook introduces various cases and advises caution, noting that if the market value of the relevant real estate exceeds 1.3 billion KRW, it may be considered a gift.

Hana Bank expects that the newly published handbook will significantly enhance the quality of customer consultations. A Hana Bank official said, "The handbook was written by experts in various fields such as tax accountants, accountants, and lawyers from Hana Bank’s Inheritance and Gift Center, compiling cases on topics customers are most curious about," and added, "It will be a great help to customers seeking related information."