[Q&A] Will Landlord Taxes Increase with the Implementation of the Lease Reporting System? ... Government Says "No Relation"

Not only in-person reports but also online reporting available
Can report with proof documents even without a contract
Rental volume and rent change rates disclosed from November
Reported information will not be used for tax purposes

[Image source=Yonhap News]

[Asia Economy Reporter Moon Jiwon] Starting June 1, the last piece of the "Lease 3 Acts," the "Housing Lease Reporting System," will be fully implemented.

The Ministry of Land, Infrastructure and Transport announced on the 15th that it will publicly notify the amendment to the subordinate legislation of the "Real Estate Transaction Reporting Act," which contains detailed information such as the reporting targets, reporting contents, and procedures ahead of the implementation of the lease reporting system.

According to the amendment, the areas subject to the lease reporting system include the entire Seoul metropolitan area such as Seoul, Gyeonggi-do, and Incheon, as well as metropolitan cities, Sejong City, and city (si) areas of provinces (do). County (gun) areas in provinces with low lease transaction volumes and a high proportion of small-value lease contracts are excluded.

Lease contracts with a deposit exceeding 60 million KRW or a monthly rent exceeding 300,000 KRW are subject to reporting. If a lease contract that should be reported is not reported or is falsely reported, a fine of up to 1 million KRW will be imposed; however, the government plans to operate an educational period without fines until May 31 of next year.

Regarding concerns that information secured through the lease reporting system could be used for lessor taxation, the Ministry of Land, Infrastructure and Transport explained that it is "completely unrelated." It also stated that there has been "no consideration" of introducing new regulations such as standard rent after the introduction of the lease reporting system.

Below are the key Q&As from the Ministry of Land, Infrastructure and Transport regarding the lease reporting system.

- What types of housing are subject to the lease reporting system?

▲ Residential buildings under lease contracts, including apartments, multi-family houses classified as "housing," as well as "quasi-housing" such as goshiwon (small rooms for rent) and dormitories, and "non-housing" such as housing within factories or commercial buildings and shanties, are all included.

- How should one report?

▲ Applications can be made at existing integrated civil service centers such as the local eup/myeon/dong (township/neighborhood) or community service centers of the leased housing’s jurisdiction. Reporting can also be done online without visiting the local community center. You can search for "Lease Reporting" on search portals or access the Real Estate Transaction Management System website.

Both the lessor and lessee must complete and jointly sign the report form, but if the lease contract is submitted, reporting is possible without filling out the report form. Lease contracts with deposits exceeding 60 million KRW or monthly rent exceeding 300,000 KRW are subject to reporting, and all county areas in provinces except Gyeonggi-do are excluded.

- Is a lease contract document absolutely necessary to report?

▲ Even if it is not a standard lease contract form, reporting is possible if there are documents that can verify the contract details, such as bank deposit records. However, contract preparation is recommended to protect the lessee’s rights, such as granting a fixed date.

- Why was the imposition of fines deferred for one year?

▲ Considering the adaptation period for the general public due to the introduction of a new system and the fact that lease contracts are usually made on a two-year basis, a one-year grace period was decided.

- When will the reported data be made public?

▲ A certain period is needed to verify the reliability of the reported data and its consistency with existing data. Based on data accumulated for at least 4 to 5 months, a pilot public release is planned around November.

- What information will the disclosed data include?

▲ Currently, contract amount, contract date, and floor number are disclosed based on fixed date information, but through the reporting system, additional data such as contract period, whether the contract is new or renewed, and rent increase or decrease compared to the previous contract can be secured. Based on this, it is expected that estimated rental property volumes by region and time, regional contract renewal rates, and rent change rates can be disclosed.

- Is the promotion of the lease reporting system a preparatory step for introducing rent regulations such as standard rent?

▲ The lease reporting system was not introduced for rent regulation purposes. It is a system introduced to provide transparent market information and strengthen lessee deposit protection through linkage with fixed dates. The introduction of new rent regulations such as standard rent has not been considered.

- Will lease reporting information be used for rental income taxation?

▲ The lease reporting system is completely unrelated to rental income taxation. There are no plans to use the reporting information as tax data.

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