The Ministry of Land, Infrastructure and Transport asked the Ministry of Finance and Economy to apply the same tax benefits to landlords who apply first, even if the tax support plan is finalized late, ahead of recruiting participants for the "jeonse-wolse safe trust" at the end of this month. The level of tax support for rental income, the key incentive to draw landlord participation, has not yet been decided. There are concerns that initial participation could be weak if recruitment begins without clarity on the tax benefits.
On the 10th, according to the Ministry of Land, Infrastructure and Transport (MOLIT) and the Korea Housing & Urban Guarantee Corporation (HUG), MOLIT and the Ministry of Finance and Economy are discussing the scope of tax support on rental income ahead of the recruitment notice for the jeonse-wolse safe trust at the end of this month. The two ministries agreed on the direction that the tax burden on landlords participating in the safe trust should be lowered, but were said to be continuing to coordinate specific support levels, such as applicable tax rates and necessary expense ratios.
MOLIT, anticipating the possibility that the tax plan could be finalized after the recruitment notice, asked the Ministry of Finance and Economy to include landlords who applied before the final announcement in the pool of those eligible for support.
A MOLIT official said, "The Ministry of Finance and Economy is reviewing the level of tax support, so it is not yet known when it will be finalized," and added, "We are asking to ensure that even if the tax plan is finalized after the recruitment notice, landlords who apply first will not miss out on the benefits." The official continued, "The Ministry of Finance and Economy has not accepted the request, so further consultations are needed."
The jeonse-wolse safe trust is a system in which HUG and the landlord and tenant sign a three-party agreement, and HUG deposits and manages the tenant's jeonse deposit. HUG pays the revenue generated from managing the jeonse deposit to the landlord every month and returns the deposit to the tenant when the contract ends.
Tenants can live under the jeonse system without a monthly rent burden while reducing the risk of deposit nonrefunding. Landlords, instead of receiving the jeonse deposit directly, receive regular management returns from HUG to secure cash flow similar to monthly rent. The management return rate currently mentioned in the program design process is in the 4% range per year.
The success or failure of the program depends on the scale of landlord participation. Because it operates based on voluntary applications from landlords and tenants, the system will be hard to activate if it fails to provide landlords with sufficient revenue and tax benefits.
Inside and outside the government, a plan is being discussed to lower the separate income tax rate on dwelling rental income for safe trust participants from the current 14% to around 9%. Another option under review is to raise the necessary expense ratio, which is deducted from receipts when calculating rental income, by 10 percentage points from the current 50%–60% to around 60%–70%. The aim is to both lower the tax rate and reduce taxable income to ease landlords' effective tax burden.
The problem is that the tax plan might not be finalized before the recruitment notice. In that case, landlords would have to decide whether to participate without knowing exactly what tax benefits they will receive. The longer the tax plan is delayed, the weaker the incentive for landlords to join in the initial recruitment.
An industry official said, "It is unclear whether the Ministry of Finance and Economy will make a final decision before the recruitment notice," adding, "There is also a possibility that a de facto 'blind recruitment' will begin without details of tax support."
HUG's position is that even if the tax plan is finalized somewhat late, there is leeway in the timing of actual benefit application. After recruitment at the end of this month, actual move-ins and rental returns are scheduled to begin in 2027. Rental income for 2027 will be reported and paid in 2028.
A HUG official said, "Considering the timing of the relevant taxation, even if the tax law revision is completed by the second half of 2027, there should be no problem with safe trust participants receiving tax benefits."