Bevy of benefits for responsible landlordsLandlords who rent out multiple properties will receive more benefits from the government if they register as businesses in a plan unveiled by the Ministry of Land, Transport and Infrastructure on Wednesday to improve transparency in the rental market.
Incentives for landlords include significant tax deductions as well as discounts on government health insurance. The move is aimed at owners of three or more properties.
“The goal is to private a wide range of tax cuts for those who register their rental properties,” said Park Sun-ho, head of the ministry’s housing and land division, “while protecting tenants from rent hikes for four to eight years.”
After landlords register as businesses, they are required to keep annual rent increases under 5 percent or sign lump-sum contracts of a minimum four years instead of the usual two.
The idea is to increase stability for tenants.
The government estimates only 13 percent of homeowners with multiple properties are registered as businesses.
The benefits for landlords include tax deductions that were due to expire next year. The government has extended them to 2021.
Landlords with an apartment of 40 to 60 square meters (430 to 645 square feet) can expect to exempt up to 2 million won ($1840) in acquisition taxes. After 2 million won, the tax is cut by 85 percent. The property tax is also cut 75 percent.
However, these only apply to landlords that rent their apartment for at least eight years.
Landlords that rent out smaller apartments of 40 square meters and below on leases of a minimum eight years will receive property tax cuts starting in 2019.
The government also plans to cut the tax on income made from leases.
For landlords that make less than 20 million won a year from leases, the government will recognize 70 percent of the income as necessary expenses and therefore exclude it from taxable income for those who register as businesses.
This is up from the current 60 percent. The new deductions will be implemented in 2019.
Those who don’t register can expect 50 percent of their lease income to be taxed.
Another tax, the comprehensive income tax, will also go down.
Under current rules, landlords that register as businesses pay 140,000 won from 20 million won income. Those who don’t register have to pay 560,000 won.
Under the new incentives, registered landlords will only have to pay half the amount, about 70,000 won, while the tax burden on unregistered landlords will go up to 840,000 won.
In addition, there will be cuts on the capital gains tax when selling a property. If a landlord rents an apartment for more than eight years, the government will reduce the tax on profit from the apartment sale to 30 percent from the current 50 percent starting 2019.
For health insurance benefits, landlords that register their businesses between 2019 and 2020 can expect a discount of 80 percent when their health insurance payments rise.
BY LEE HO-JEONG [firstname.lastname@example.org]