Special Transfer Tax Exemption for One Jointly Rented House by Married Couples... Up to 70% Long-Term Holding Deduction

Ministry of Economy and Finance, National Tax Service to Reexamine and Finalize Conclusion Following Interpretation Controversy

Seoul Seocho A3 Block Rental Housing Apartment Exterior View

[Asia Economy Reporter Kwangho Lee] The Ministry of Economy and Finance has concluded that couples who register a rental housing unit under joint ownership can apply for capital gains tax benefits.

Previously, the National Tax Service interpreted the law to deny capital gains tax benefits for one rental housing unit registered under joint ownership by a couple, stating that each person owning 0.5 units did not meet the criteria. This sparked controversy, and the higher authority, the Ministry of Economy and Finance, reinterpreted the law through proper procedures.

According to the government on the 4th, the Ministry of Economy and Finance responded on the 3rd to an inquiry asking whether rental housing registered under joint ownership by a couple and rented for more than 8 years could apply for capital gains tax benefits under the Restriction of Special Taxation Act (RSTA), stating that it is possible.

The RSTA stipulates that if a long-term general rental housing is rented for 8 years, a 50% reduction in capital gains tax is granted, and if rented for 10 years, a 70% long-term holding special deduction (LTSD) is applied. The Ministry has made a final ruling that this regulation also applies to one rental housing unit jointly registered by a couple.

This issue was raised by an inquiry to the National Tax Service in February. At that time, the National Tax Service strictly interpreted the preferential regulations, calculating the number of houses based on the share ratio in the case of joint business operators, and replied that capital gains tax benefits such as the 70% LTSD apply only to operators renting "one or more" houses.

When this became known, criticism grew that the interpretation was "not in line with reality," and the inquirer opposed the National Tax Service’s interpretation and requested a reinterpretation from the Ministry of Economy and Finance at the end of June.

The Ministry of Economy and Finance overturned the National Tax Service’s interpretation and reached this conclusion, mainly considering that the Private Rental Housing Special Act recognizes each joint business operator as a rental business operator even when two or more people jointly own and rent one house.

The Enforcement Decree of the Private Rental Housing Act requires joint business operators to register as business operators jointly when renting a jointly owned house, thus recognizing joint business operators as rental business operators.

Additionally, the Ministry of Economy and Finance took into account that the RSTA allows tax benefits if a rental business operator under the Private Rental Housing Special Act rents for a certain period without any separate requirements regarding the number of rental housing units.

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