[Exclusive] Tax Benefits for Rental Business Operators Closed on Announcement Day... Sudden Notice to RentHome

"Applications Accepted Only Until 17:59" Sudden Notice
Confusion at Local Government Housing Departments Due to Flood of Lease Registration Applications
Proper Notice Not Given on Lease Business Operator Recognition Date

[Sejong=Asia Economy Reporter Kim Hyunjung] On the afternoon of the day the government announced the '7·10 Measures' to strengthen the tax burden on multi-homeowners, it abruptly closed the registration window for rental business operators at 6 p.m. The move, made without sufficient explanation or notice on the day of the regulation announcement, is expected to spark controversy.

According to the government on the 11th, RentHome, the rental registration system operated by the government, posted a banner on the afternoon of the day before the announcement of the 7·10 Measures stating, "Only applications submitted by 17:59 will be accepted for registration as private rental housing business operators." It explained that this was due to the government's supplementary measures to stabilize the real estate market, which abolished the short-term rental (4 years) and long-term general apartment purchase rental (8 years) systems.

On the same day (the 10th) in the morning, the government announced the abolition of the private rental housing system but stated that already registered rental housing would maintain existing tax benefits until the mandatory rental period ends. In this process, the effective date was only specified as "from July 11, the day after the announcement." There was no detailed guidance on whether applications completed by the 10th through RentHome would be recognized as "already registered rental housing" or only those "approved" would be recognized. Because of this, those who purchased homes considering rental business registration but had not yet actually registered were left frustrated. Since the government had actively encouraged registration two and a half years ago, it was expected that there would be time for rental registration of already contracted homes, but the sudden notice on the RentHome homepage a few hours before the closure on the afternoon of the announcement day has caused outrage.

[Image source=Yonhap News]

There are also criticisms that local governments did not properly inform the government’s policy. In fact, on that day, local governments operating the registration windows did not receive proper notices from the government, leading to disputes in various places. It was unclear whether the condition for being recognized as an existing rental business operator was the application date or the approval date, and it reportedly took a long time before a common guideline was issued regarding the deadline for online applications through the homepage.

The government has yet to present an inter-ministerial agreement on the issue of mismatched mandatory rental periods of 4 to 8 years and the rental period criteria under tax law. For short-term rentals (4 years), if the government’s newly announced policy automatically terminates the contract after 4 years, the condition for tax exemption requiring "maintaining rental for 5 years" cannot be met. The Ministry of Strategy and Finance and the Ministry of Land, Infrastructure and Transport, the responsible ministries, have agreed to prepare alternatives through additional consultations. This is a matter that should have been considered in advance but was announced without completing consultations.

There are also voices claiming that the sudden abolition of the rental business operator policy violates the constitutional "principle of trust protection." The government’s abrupt abolition of the rental business operator system, which it had recently encouraged and positively evaluated, has damaged trust in government policy and administration. However, it is difficult to consider it unconstitutional if the necessity of trust protection is judged not to outweigh the objectives the state aims to achieve. Attorney Kim Yerim of Jeonghyang Law Firm explained, "Since the state induced registration preparations, reducing benefits in a short period and proceeding with abolition may violate the principle of trust protection," but added, "However, it is currently unclear and uncertain whether reducing rental business operator benefits is an appropriate measure to curb speculative demand."