"We trusted the government"... Renters told to pay more tax, landlords outraged, tenants anxious

[Financial News] The sweeping reduction of benefits for registered rental business operators included in the tax reform plan is drawing controversy. The measures include cuts and abolition of benefits for purchase-based rental housing, changes to the win-win lease system, and an expansion of the taxable scope for rental income.
On the 10th, the government said it plans to phase out capital gains tax benefits for purchase-based rental apartments in areas subject to adjustment under the tax reform. These include exemptions from the heavier capital gains tax and preferential long-term holding deductions.
For purchase-based rental housing that has already been deregistered, owners must sell by Dec. 31, 2027, to receive all existing benefits. If sold in 2028, the benefits will be cut in half, with only a 50% reduction in the heavier tax burden and the long-term holding deduction lowered to 30%. From 2029, the full heavier tax rate will apply, and the preferential deduction for registered rental homes will also be abolished. The reform will take effect on Oct. 1, 2026.
For operators still under mandatory rental obligations as of Jan. 1, 2027, a separate deadline will apply. If they sell within one year after the obligation ends, they will retain the exemption from the heavier tax and a 50% long-term holding deduction. If they sell between one and two years after the end of the obligation, they will face half the heavier tax rate and a 30% deduction. After two years, all benefits will be removed.
Once the mandatory rental period ends, ownership-stage benefits such as property tax reductions and exclusion from the comprehensive real estate tax base will disappear. However, there had been no separate deadline for the capital gains tax benefits received when selling rental homes. The new plan sets a specific deadline for the first time.
The government is also revising the win-win lease housing system. Under the system, a single-home owner who signs a contract limiting rent increases to 5% for two years is exempt from the one-home, one-household capital gains tax rule and from the two-year residency requirement for the long-term holding deduction. It has been widely used as a tax-saving tool.
Under the reform plan, if a win-win lease contract ends by the end of this year, sellers will keep the existing benefits if they sell between Oct. 1 and the end of December 2027. If such a contract ends on or after Jan. 1, 2027, sellers will be recognized as having met the two-year residency requirement if they sell before the earlier of two dates: one year after the lease ends or Dec. 31, 2029.
The scope of the tax exemption for rental income from housing will also change. Currently, the exemption applies to rental income from a home owned by a single-home owner with a standard market price of 1.2 billion won or less. Under the reform, it will apply only to resident single-home owners. In other words, nonresidents will be excluded from the exemption even if the home is worth 1.2 billion won or less.
In the market, there is growing dissatisfaction with the government’s decision to change the system overnight. Above all, many are worried that the move will inevitably have a significant impact on the jeonse and monthly rental markets.
[email protected] Lee Jong-bae Reporter