Contract Reference Date for Good Landlord Tax Credit Eased to End of June This Year

Even if the tenant closes the business early, rent reduction can be deducted if the contract period remains
If rent or deposit increases are confirmed, the deducted amount will be reclaimed later

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] The contract date requirement for the Good Landlord Tax Credit will be relaxed to contracts signed before the end of June this year. Additionally, even if the tenant closes the business early, if the lease contract period remains, the reduced rent can be deducted.

On the 25th, the National Tax Service announced that the requirements for the tax credit on commercial rent reductions have been eased following the revision of the Enforcement Decree of the Restriction of Special Taxation Act, expanding the number of beneficiaries. The deductible rent applies from reductions made after January 1 of this year.

Before the revision of the Enforcement Decree, tenants had to have signed contracts before January 31, 2020, to qualify for the credit, but after the revision, this cutoff date is extended to before June 30 of this year. Also, the previous requirement that tenants must be ongoing businesses has been relaxed so that even if the tenant closes the business midway, the reduced rent can be deducted if the lease contract period remains.

If the commercial landlord raises the rent or deposit during the year the rent was reduced and until June of the following year to an amount higher than before the reduction, or renews the contract exceeding 5%, the tax credit cannot be claimed. If it is later confirmed that the rent or deposit was increased beyond the pre-reduction amount or renewed over 5% during the rent increase restriction period, the deducted tax credit will be reclaimed.

The National Tax Service has prepared a 'Commercial Building Rent Reduction Agreement' form to assist taxpayers who have difficulty preparing documents proving the rent reduction agreement in non-standard formats. They also posted a ‘Tax Credit Calculation’ program on their website that automatically calculates how much tax credit a commercial landlord can receive when reducing rent.

Meanwhile, for last year’s tax year, a total of 103,956 beneficiaries reduced rent by 473.4 billion KRW and received tax credits amounting to 236.7 billion KRW under the Good Landlord Tax Credit program.