Tax authorities going after more rental income

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Tax authorities going after more rental income

People owning more than one home may have to pay taxes on the lease of the second property, even if the rent totals less than 20 million won ($17,000), as the government ratchets up its attacks on what it perceives to be speculative activity.

The National Tax Service (NTS) Tuesday announced that any income made from leasing housing units has to be reported to the tax authority by May. Until last year, those who made less than 20 million won from rentals were exempted from the income tax.

In addition to those with more than one property, people with a single apartment worth more than 900 million won will have to report income made through rent on the property. Owners of three or more properties will have to file if the total rent deposit on the properties exceeds 300 million won.

The only exceptions are for properties smaller than 40 square meters (430 square feet) and with a market value of less than 200 million won.

For those making less than 20 million won from their properties, the government is giving them the option of filing the earnings together with personal income or separately at a 14 percent rate.

If the income is combined with other earnings, the rate could be higher, as the rates are progressive and range from 6 percent to 42 percent. Annual income of 12 million won or less attracts the 6 percent rate, while a 15 percent tax is applied to income exceeding 12 million won and less than 46 million won.

The landlord could face an additional tax of 0.2 percent on the leasing income if failing to register as a business.

The registration has to be made within 20 days of renting the apartment. The NTS warned that this year it will further increase its investigation into possible tax evasion by landlords.

“We are verifying whether those who own high-end housing or multiple homes are reporting their income honestly,” an NTS official said.

In one case, a landlord with multiple high-end apartments profited from renting the properties to foreign embassy and corporate employees. While failing to report the income generated from the monthly rents, the landlord spent the rental income overseas. The landlord was fined.

In another case, a landlord who owned several one-room studios only leased them to young people who did not require documentation. The landlord was found to have registered the studio leases under the names of family members and relatives in an effort to lower the tax. The landlord was fined.

“The NTS will continue to work on finding those who try to dodge taxes by strictly investigating tax filings of high-income housing-lease entrepreneurs,” the NTS official said.

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