Gov't to retain basic deduction for single-home owners not living in their homes

South Korea will maintain most components of the recently proposed tax code revision, excluding a plan to decrease the basic deduction for single-home owners who do not reside in their properties due to public opposition, according to the finance ministry. The government finalized the revision package during a Cabinet meeting earlier in the week.

The proposed reduction of the basic deduction for single-home owners not living in their homes has been kept at the existing 1.2 billion won (US$873,000), while it will be increased from 1.2 billion won to 1.4 billion won for owners who live in their homes. The government's primary concern is promoting owner occupancy in the housing market, as rental properties may contribute to speculative trading.

However, critics argue that the suggested deduction decrease could impose an undue tax burden, considering the widespread use of the jeonse lease system in the country. This lease system allows tenants to pay landlords a substantial upfront deposit, which is returned at the end of a lease lasting at least two years. Buyers can purchase homes by paying the difference between the purchase price and the jeonse deposit, making such purchases particularly appealing during housing market surges, as landlords can find new tenants to repay deposits while property values continue to rise.