House Renting Businesses Keep Their Tax Benefits

Even after the introduction of the government’s new composite real estate tax system to be done in 2005, the current holding tax reduction rates for the existing house renting providers will be maintained.

For the house transfer tax, the existing house renting providers will be able to receive a reduction benefit if they rent more than five houses for more than five years.

According to the Ministry of Finance and Economy and the Ministry of Construction and Transportation, the government plans to keep the current tax debasement laws for the existing house renting providers while imposing heavy taxes for others.

The government decided not to get rid of the tax benefits for the existing house renting businesses even after its composite real estate tax system is implemented. The new tax system launched in 2005 will levy a heavy burden on the houses not resided by their owners. So, the basic rule is that tax rates for the houses not resided by their owners would increase significantly while tax deduction rates for regular house owners including house renting providers would not go through any changes.

An authority from the Ministry of Finance and Economy said, “We decided to keep the deduction rates since many people pointed out that the new plan would be a severe blow to the existing house renting businesses. But heavy tax burdens for people who own more than one house will be implemented as they were planned.”

Currently, house renting businesses are receiving tax deduction benefits: the composite land tax, property tax and city planning tax are totally exempted for land of less than 40 square meters (12.1 pyong) and a separate composite land tax and 50 percent deduction for the property tax and city planning tax will be levied for the land of less than 85 square meters (25.7 pyong).

This stipulation applies to the house renting providers who own less than five houses. The government also decided to reduce house transfer tax for them if they own houses over five years even though its original stipulation was more strict (owning more than five years and renting over 10 years) in its October 29 Housing Market Stability Package.

Ki-Jeong Ko koh@donga.com