Brokerage Fees Also Deductible in Year-End Tax Settlement... Cash Receipt Required [Practical Financial Techniques]

Report and Reward for Issuance Refusal

On the 17th, ahead of the real estate brokerage commission reform, property listings are posted at a real estate agency in Songpa-gu, Seoul. Photo by Mun Ho-nam munonam@

Since the current administration, due to the surge in real estate prices, consumers in the housing market who want to buy, sell, or lease homes have had to bear considerable burdens from brokerage fees. Fortunately, brokerage fees can also be deducted through year-end tax settlements.

The most important thing is the cash receipt. Most transactions are conducted in cash or bank transfer. If you keep the brokerage fee cash receipt at this time, you can receive a 30% income deduction during the year-end tax settlement. When buying or selling a house, having this receipt also reflects the brokerage fee amount and can reduce capital gains tax as a bonus.

If you did not receive a cash receipt at the time of the transaction, you should visit the broker and request the issuance of a cash receipt. Real estate brokerage is a business required to issue cash receipts. If the fee is 100,000 KRW or more, a cash receipt must be issued.

However, in practice, there are many cases where brokers are reluctant or displeased to issue cash receipts. When you ask for a cash receipt, they may say, "You have to pay an additional 10% value-added tax (VAT)."

If the brokerage office is a ‘general taxpayer’ rather than a ‘simplified taxpayer,’ it is correct to pay VAT. However, if it is a simplified taxpayer, the situation is different. For simplified taxpayers, VAT is already included in the existing brokerage fee. They are effectively blocking the issuance of receipts by asking you to pay an unnecessary amount.

You can ask the broker for their business registration number and check on the National Tax Service Hometax website whether the brokerage office is a simplified taxpayer or a general taxpayer.

If the brokerage office refuses to issue a cash receipt until the end, you can also report it. The reporter should prepare proof of cash payment and report the non-issuance of a cash receipt on the National Tax Service Hometax website. If the violation is confirmed, a reward of 20% of the unissued amount will be paid.

After verification of evidence and tax investigation by the authorities, the cash receipt will be issued, and the violating real estate brokerage office may be subject to a penalty tax of 20% of the unissued amount.