In recent years, a lot of landlords have been renting apartments and houses with monthly rent method instead of “Jeonse” method because the monthly rent is considered to be more profitable. Jeonse is one of rental housing method in Korea and it had been the most popular method throughout the country. In just brief explanation about “Jeonse”, a tenant pays a big amount of key deposit without monthly payment and the tenant is reimbursed upon the termination of “Jeonse” lease agreement. According to recent news, a lot of landlords are complaining about higher tax payment after renting their properties to locals. Since monthly rent is tax-deductible, tenants naturally file for tax returns. Moreover, since they paid big amounts of key money, they receive definite dates from dong office (local government office) to protect their preferential payment right. If those things are practiced, landlords’ lease income can be easily figured out and they can be taxed as part of lease incomes.
On the other hand, if the properties are rented to expats (foreigners), they usually do not file for tax returns since the rents are paid by their company and they also do not have to receive definite dates to protect their preferential payment right since they use 12 or 24 months advanced payment system (standard expats rent method in Korea). They can just set “Keun mortgage” that is explained in Livinko Guide, A Keun Mortgage is often registered against the property for security reasons. Therefore, it is not easy to figure out landlord’s lease income and the chance to be taxed by government is very low. If a company is paying the rent on behalf of its employee, the company may ask for tax invoice to the landlord due to company policy. Then the landlord may be taxed for his/her lease income, but very limited numbers of landlords have been taxed so far because of this issue.
For this reason many home owners (landlords) prefer to rent out their properties to foreign expats these days. About five years ago, based on our experience, it was difficult to find landlords who knew or interested about renting out their properties to foreign expats in South Korea. Only some landlords who owned properties in popular areas for many expats from the past such as Hannam-dong, Itaewon, Seorae village, Yonhee-dong, Seongbuk-dong and Pyeonchang-dong knew about the foreign rental market. However in recent years, there are substantially increased numbers of landlords who are aware of the market and interested to rent their properties to expats in Korea as we discovered.
For more housing information, please see our other posts here: Standard Lease Term in Seoul Korea & Housing Market in Seoul Korea: Brand New Apartment.