"No Special Capital Gains Tax Exemption for Jointly Owned Rental Housing by Couples"… Ministry of Economy and Finance to Reconsider

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[Asia Economy Reporter Jang Sehee] Controversy continues even after the government announced supplementary tax measures for rental housing managed by existing private rental business operators on the 7th.

A representative case is the National Tax Service's interpretation of the law that "in the case where a rental house is registered under joint ownership by a married couple," each owning 0.5 units, which falls short of the standard, so they cannot receive capital gains tax benefits (such as a maximum 70% long-term holding special deduction).

Additionally, the controversy also arises from the fact that the benefit promising a 100% exemption of capital gains tax if the rental business operator maintains a 10-year lease was abolished altogether without any transitional provisions.

According to the government and real estate industry on the 9th, the National Tax Service recently issued an authoritative interpretation that capital gains tax benefits such as the 70% long-term holding special deduction cannot be applied when a married couple registers a rental business with one house acquired under joint ownership.

According to the National Tax Service's response to an individual's inquiry, the NTS explained, "The capital gains tax special case for long-term general private rental housing applies when a resident who acquires one or more private rental houses for the purpose of leasing for more than 8 years under the Private Rental Housing Special Act registers as a rental business operator and meets all the requirements under the Restriction of Special Taxation Act."

It added, "In the case of co-owners who own rental housing in the form of shares, the capital gains tax special case applies only if the number of houses multiplied by the share ratio per resident is one or more."

The National Tax Service considered that when a married couple jointly owns one rental house, the requirement for a full single unit is not met, and each owns 0.5 units, which falls short of the standard.

Regarding this, multiple tax experts pointed out, "The Restriction of Special Taxation Act does not explicitly define the standard for one unit, and this interpretation forcibly draws on provisions from other articles of the Private Rental Housing Special Act, which could be problematic."

There is also criticism that this measure does not consider the increasing trend of couples acquiring houses under joint ownership.

In response to the controversy, the National Tax Service additionally stated, "In the case of couples, we need to submit an additional authoritative interpretation request to the Ministry of Economy and Finance," and no conclusion has been reached yet.

In this regard, the individual who received the response re-inquired the Ministry of Economy and Finance, the higher authority of the National Tax Service, regarding the legal interpretation, and the Ministry is currently reviewing the interpretation of the relevant law.

Yoon Seongho, head of the Legal Interpretation Division at the National Tax Service, said, "The taxpayer re-inquired the Ministry of Economy and Finance about the NTS interpretation, and the relevant department at the Ministry is currently reviewing it."

This content was produced with the assistance of AI translation services.