KIPF Report Recommends Tougher Taxes On Landlords

by Mary Swire, Asia-Pacific stories, Hong Kong

24 July 2009

Following the publication of a government-commissioned report by the Korea Institute of Public Finance, is has emerged that the authorities in South Korea are mulling the introduction of tougher taxes for certain categories of landlords who have previously benefitted from tax advantages, in addition to increases in tax on alcohol and tobacco products.

Landlords operating under the country's 'jeonse' system collect a large lump sum deposit from their tenants which they can use in any manner, but which must be returned at the end of the tenancy.

The government had provided tax benefits for jeonse landlords in order to encourage greater adoption of the system as against monthly rent collection when falling interest rates made the latter a more attractive option for landlords (thereby increasing costs for tenants).

The proposal to impose rental income tax on an owner of three or more homes rented under the jeonse system (over a KRW300mn threshold) is expected to cause controversy, however, and the Finance Ministry has reportedly pledged to solicit public opinion before any definitive action is taken.

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