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Korea`s 3 million households to get one-month rent back

Posted February. 27, 2014 05:10,   


The eligibility of tax support for people living in homes via monthly rent will expand from total annual wage of 50 million won (46,882 U.S. dollars) to 70 million won (65,635 dollars). Tax deduction methods will shift from income tax deduction to tax deduction. Since the shift allows cuts in tax payment equivalent to monthly rent price, about 3.63 million middle and low-income households will benefit from such deduction.

Meanwhile, the criteria for lending jeonse money will be strengthened. Jeonse is Korea`s unique house rental system by which a tenant pays a lump-sum money to the landlord instead of a monthly rent. From April, government guarantee on jeonse lending that surpasses 400 million won (375,058 dollars) in jeonse deposit, which applies to the Seoul metropolitan area and 200 million won (187,529 dollars) for regional areas, will be suspended.

An economic ministers` meeting was held Wednesday at the Sejong Government Complex presided by Deputy Prime Minister and Strategy and Finance Minister Hyun Oh-seok, where plans to upgrade house rental market were finalized.

The core of the plan is to strengthen benefits for people living in homes via monthly rent in line with housing market that is rapidly shifting from jeonse to monthly rent. When monthly rent tax support shifts from income deduction to tax deduction, wage earners will pay 10 percent, and up to 7.5 million won (7,032 dollars) less than annual monthly rent. At least 3.52 million households, including 1.327 million households living in monthly rent with deposit in advance or pure monthly rent, who are people earning total monthly average income of 2.2 million won - 4.1 million won (2,063 dollars - 3,844 dollars) and low-income households earning 700,000 won - 2.2 million won (656 dollars - 2,063 dollars) will benefit.

Tax burden of landlords getting small amount of monthly will also be lessened. For earners of below 20 million won (18,752 dollars) in house rent income, obligation to register business license will be lifted and single tax rates will be applied for separated taxation. For example, if a person who earns 50 million won (46,882 dollars) in wage income a year puts his or house on monthly rent and earns additional 10 million won (9,376 dollars) a year, currently he or she has to pay taxes for 60 million won (56,259 dollars), but going forward will have to pay tax just for 10 million won (9,376 dollars) with single tax of 14 percent.

Plans to attract REITs and private capital to public lease house market will also be implemented. The government will supply up to 80,000 public homes by 2017.