Middle-sized Rental Houses Exempted from Heavy Capital Gains Taxes

Starting next month, middle-sized rental houses of over 25.7 pyong and under 45 pyong will not be subject to the heavy taxation system of the one household, three houses capital gains tax. Additionally, even in case of the purchase of more than 20 houses of 45 pyong in size for rental purposes, the owner will be exempted from acquisition and registration taxes.

According to the Ministry of Finance and Economy (MFE) and the Ministry of Government Administration and Home Affairs on January 16, the government has decided to expand tax reductions of rental houses starting next month to ease the burden of housing expenses of the middle class by invigorating the market for rental houses.

The government has extended the bounds of exemption from the heavy taxation system of capital gains taxes, which levy heavy capital gains taxes on single households with three houses, to include rental houses of over 25.7 pyong and under 45 pyong.

To receive such benefits, "purchase renters," who purchase existing houses and rent them, must have over five houses for over 10 years, and "construction renters," who construct new houses and rent them, must have over five houses for over five years.

A related person from the MFE explained, “A revised income tax and corporate tax enforcement ordinance with such content will soon be announced,” and that, “It will be enforced by the middle of February, after passing through such procedures as a cabinet meeting.”

Chi-Young Shin higgledy@donga.com