How to get tax benefits as a win-win renter

The most drastic change in the government’s recently announced June 21 real estate measures is the ‘win-win rental’ system. This is because, by December 31, 2024, if you raise your rent to 5% or less based on the previous lease agreement, you will not have to meet the two-year residency requirement to receive capital gains tax exemption.

However, as the benefits are large, there are many things to be aware of. Regarding the reform of the win-win rental system, tax accountant Park Jeong-soo of Bntax Tax Accounting said, “In order to meet the tax exemption requirements, a lessor can use an expedient such as renting to children or filling out documents. This is because the government is likely to manage it fairly conservatively because it is a system with increased benefits. It is better to make the calculations clearly.”

The win-win rental system came out with the purpose of stabilizing tenants’ housing and increasing the number of monthly rentals. However, the application requirements are rather complicated, so there are constant questions from the online real estate community and the like about whether the system is eligible. Based on the data released by the Ministry of Strategy and Finance on the 27th, we have compiled the most frequently asked questions regarding the win-win rental system in Q&A.

▲ Win-win rental system

When transferring a house acquired in Seoul or other areas subject to adjustment after August 2017, in order to receive tax exemption, the residence requirement must be met for at least two years. Depending on the period of holding and residence, up to 80% of the gains on transfer are deducted from the long-term holding special deduction for two years of real residence obligation. However, the house must be owned for at least two years, and this is only applicable to the case of one house per household at the time of transfer.

▲Can I get recognition even if I rent an expensive house?

Yes. Currently, only houses with a standard market price of 900 million won or less are recognized as win-win rental housing, but the government will soon amend the enforcement ordinance to remove the price requirement. This means that once the amendment goes into effect, it can be recognized regardless of the price of the house.

▲ Can multi-family residents receive benefits?

Multi-household owners can also sign a win-win rental agreement, but they can receive tax-free benefits only when the last house with the win-win lease contract is sold.

For example, let’s assume that a multi-family owner who owns 3 houses A, B, and C raises the rent for house C to within 5%. When you dispose of house A and house B first and then house C later, you can receive transfer tax exemption without the real residence requirement. The transfer tax exemption is not given to the A and B houses sold first, even if the rent has been raised to 5% or less.

▲I am renting a multi-family house, can I receive benefits as a win-win rental?

If you plan to transfer the entire multi-family house, you must enter into a win-win rental agreement with all the households of the house.

▲ What is the mandatory rental period?

The mandatory rental period according to the previous lease agreement is one year and six months. After that, the mandatory lease period under the new win-win lease contract is two years. In other words, in order to become a win-win tenant, you must not move out the tenant or renew the contract before the previous lease period has reached 1 year and 6 months. After signing a win-win rental agreement, you must complete at least two years. Even if it is less than one day in two years, it is not covered by the benefit.

▲ What is the standard for determining the mandatory rental period for a win-win rental contract?

It is determined based on the actual rental period. Even if the contract period is one year, if the lease is made for two years due to implicit renewal, etc., it is recognized that the mandatory lease period has been fulfilled. Conversely, even if the contract period is two years, if the actual lease period is one year, the mandatory lease period is not recognized. The problem is that in 2 years, 1-2 days are not enough. In this case, as the actual rental period of 2 years has not been completed, the win-win rental benefits are not provided.

▲ What is the criteria for determining the mandatory rental period of the previous contract?

Likewise, judgment is based on the actual rental period. Even if you signed a 2 year contract, it will not be recognized if the actual rental period is less than 1 year and 6 months.

▲ What happens if the lessee exercises the right to request a contract renewal?

If the contract is renewed due to the exercise of the right to request a contract renewal by the lessee, it is recognized as a win-win lessor.

▲ What happens when the previous tenant moves out and signs a contract with a new tenant?

Even if the tenant changes, if the rent is raised to 5% or less, it is recognized as a win-win tenant.

▲I am a first-generation, one-family homeowner who purchased a house on the basis of jeonse, can I receive the benefits of a win-win renter if I raise the rent to 5% or less while signing a new rental contract?

I can’t get it. Assume that A purchases a house and inherits the contract signed between the previous lessor B and the lessee C. Even if Mr. A raises the rent to 5% or less in the next contract, it is not recognized as a win-win rental. This is because the win-win rental agreement is judged by comparing cases in which the same lessor directly signed a jeonse contract. This is a case of so-called gap investment, but the government judges that tax support for gap investment is inappropriate considering that it is a system aimed at increasing the number of rental housing.

▲If I change from Jeonse to monthly rent or from monthly rental to Jeonse, is it recognized as a win-win rental contract?

Yes. In this case, the amount of rent increase is calculated using the calculation rate (the rent to cheonsei ratio) prescribed by law. For example, it is calculated that the monthly rent must be set at 828,125 won or less to satisfy the 5% or less rent increase while converting a house with a deposit of 300 million won to a monthly rental deposit of 50 million won. If you are converting a house with a monthly rent of 500,000 won and a 20 million won monthly rent deposit, you must set the Jeonse deposit to 189 million won or less.