Exemption from Comprehensive Real Estate Tax for Lessors

The tax burdens of those who lease housing as a business are to decrease.

Lessors who purchase over five existing houses of under 25.7 pyong (85m²) in exclusive space and rent them for over 10 years will be exempted from comprehensive real estate tax.

Additionally, those who construct over two houses of under 45.2 pyong (149m²) in exclusive space and rent them for over five years will also be exempted from comprehensive real estate tax and further excluded from the heavy transfer income taxes levied on households owning over three houses.

On March 31, Deputy Prime Minister and Minister of Finance and Economy Han Duck-soo announced as a guest speaker at the Gwanhun Club forum, held at the Korea Press Center in Taepyeongno, Jung-gu Seoul, “We are aiming to give tax benefits to purchased or constructed rental houses.”

Accordingly, among the 25,105 purchased-housing lessors and 6,632 constructed-housing businesses (as of the end of 2004), a majority will receive comprehensive real estate tax exemption benefits.

Deputy Prime Minister Han said, “To revive the economy we need to increase our investment in housing” and added, “It is desirable to grant more benefits to those constructing rental homes than those purchasing them.”

The explanation is that there are few builders that use constructed rental homes as a means of speculation and that this tax benefit will help draw large-scale capital to the construction of homes. Individuals who construct over two houses and rent for over five years are also approved as constructors of rental homes and can receive tax benefits.

The Ministry of Finance and Economy is planning to revise the enforcement ordinance of the comprehensive real estate tax law and the income tax law after discussions between the government and the ruling party are completed in the beginning of April.

legman@donga.com