[7.10 Real Estate Measures] Government "Tax Benefits for All Rental Businesses Except 10-Year Long-Term Rentals Abolished"

The 10th Emergency Economic Central Countermeasures Headquarters Meeting

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The government will abolish tax benefits for short-term rental operators with 4-year leases and long-term general apartment purchase rental operators with 8-year leases. However, it plans to strengthen public obligations by extending the mandatory period for long-term rental types from 8 years to 10 years.

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated at a briefing after the 10th Emergency Economic Central Countermeasures Headquarters meeting held at the Government Seoul Office on the 10th, "We plan to abolish the 4-year registered rental business and 8-year apartment registered rental business systems, and automatically cancel the status as rental operators once each operator’s mandatory rental period ends."

Until now, the government has provided tax reduction benefits to rental operators in exchange for adhering to mandatory rental periods of 4 or 8 years and limiting rent increases to within 5%. The reduction of tax benefits for existing rental operators is effectively a 'retroactive application.'

Existing houses that fall under the abolished types will be automatically deregistered immediately after the mandatory rental period expires. If operators wish to voluntarily deregister before the end of the mandatory rental period, voluntary deregistration will be permitted.

The government will regularize joint inspections to ensure compliance with public obligations such as adherence to mandatory rental periods, rent increase restrictions, and lease contract reporting. If violations are detected, measures such as fines, cancellation of rental business registration, and recovery of tax benefits will be taken.

The government has encouraged rental housing registration to stabilize housing prices through the expansion of rental housing. Benefits provided include ▲differential reductions in acquisition tax and property tax upon rental housing registration until 2021 ▲property tax reductions for small rental housing leased for 8 years or more ▲increase of the special long-term holding deduction rate for rental housing leased for 8 years or more from 50% to 70% ▲recognition of up to 70% of rental income as expenses upon rental business registration.

Thanks to these benefits, the number of registered rental operators and registered rental housing in South Korea steadily increased. According to the Ministry of Land, Infrastructure and Transport, the number of rental operators was 330,000 as of June 2018, rising to 440,000 in June 2019 and 523,000 in May 2020, an increase of nearly 200,000 compared to 2018. Registered rental housing also increased from 1.15 million households to 1.43 million households and 1.59 million households during the same period, an increase of 440,000 households compared to 2018.

Meanwhile, the Ministry of Land, Infrastructure and Transport, facing criticism over retroactive application, stated that the tax benefits for registered rentals were only linked to existing benefits from all governments and that no new benefits were introduced.