Until a few years ago, the Ewha Womans University commercial district alley, once filled with clothing stores and hair salons and known as the "Mecca of Fashion," is now densely packed with tall officetel buildings. (Photo by Ryu Taemin)
[Asia Economy Reporter Ryu Tae-min] Recently, officetels have been consecutively recording new high prices, gaining popularity comparable to apartments. They are popular among young people with limited funds due to less stringent loan regulations, and as the number of mid-sized officetels in two- or three-room layouts increases, demand as an alternative to apartments is growing. Additionally, they are attracting investment demand as they are perceived to be subject to relatively fewer taxes compared to general housing. However, even when trading the same officetel, the taxes imposed can vary depending on whether the usage is confirmed and the order of housing acquisition, so caution is needed.
Tax Criteria Differ Between Residential and Commercial Use
The taxes applied to officetels vary depending on their intended use. Commercial officetels used by companies or individuals as office or commercial facilities are not classified as housing. Therefore, they are not included in the number of houses and are not subject to multi-homeowner tax surcharges. Commercial officetels are considered general businesses under the Value-Added Tax Act and must pay VAT and income tax on rental income.
On the other hand, residential officetels, commonly called ‘Apateol (Apartment + Officetel),’ are classified as ‘quasi-housing’ under the Housing Act. Previously, they were not included in the number of houses, but the regulations changed following the government’s July 10th measures announced last year. Therefore, owning a residential officetel is considered owning a house, and acquisition tax and capital gains tax are imposed.
The acquisition tax on residential officetels can vary depending on the order of acquisition. If you already own general housing such as an apartment or villa and then acquire a residential officetel, the acquisition tax is 4.6% regardless of the number of existing houses. Conversely, if you own one residential officetel and then acquire general housing such as an apartment or villa, you must pay an 8% acquisition tax. If you own two or more officetels or a combination of officetels and general housing totaling two or more, a 12% surcharge applies when acquiring a new house. Therefore, if you are currently without a house and want to buy both general housing and a residential officetel, it is more advantageous to acquire the general housing first.
The capital gains tax on residential officetels is applied the same as for general housing. The capital gains tax surcharge criteria apply regardless of the order in which other owned houses are sold. However, a single household owning only one residential officetel can receive capital gains tax exemption benefits.
Officetels Without Confirmed Use Are Classified as ‘Unclassified’ Housing
However, when an officetel is purchased before its use is confirmed as residential or commercial, multi-homeowner tax surcharges do not apply. Until the use is confirmed and the officetel is actually used, it is not counted as housing for acquisition tax and capital gains tax calculations.
Similarly, at the time of subscription, residential officetels are not considered housing. Therefore, even if you already own a residential officetel, there are no particular restrictions on subscription requirements or qualifications when applying for a newly built apartment.
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