South Korea Rental Income Tax Guide

Types of Rental Income

• Actual rent (월세): The monthly rental fee received from the tenant is the actual rental income (월세 소득). The actual rent is included in the global income (종합소득) and taxed at the progressive income tax rates (6% to 45%) plus the local income tax (10% of the income tax).
• Key money deposit (보증금): The lump-sum deposit (전세 보증금 or the 월세 보증금) is NOT taxable as the rental income at the time of receipt. However, if the deposit exceeds a certain threshold, a deemed rental income (간주임대료) is calculated.
• Deemed rent (간주임대료) — 2%: If the key money deposit (보증금) exceeds KRW 300,000,000 for a single property (the combined threshold for all properties), the portion above KRW 300,000,000 is deemed to generate an investment income at the rate of 2.0% per year (the 2026 rate set by the Ministry of Economy and Finance). The formula: (Total deposits − KRW 300,000,000) × 2.0% × (Number of days leased / 365).

For example: a landlord with a 전세 deposit of KRW 500,000,000 on a single apartment pays deemed rent tax on KRW 200,000,000 (KRW 500,000,000 − KRW 300,000,000) × 2.0% = KRW 4,000,000 in deemed rental income per year.

Tax Rates — Progressive IIT (6% to 45%)

• Rental income in the global income: The net rental income (the gross rental income minus the allowable deductions) is added to the other global income (the employment income, the business income, the investment income) and taxed at the progressive rates.
• 2026 rates: KRW 0–14,000,000 — 6%; KRW 14,000,001–50,000,000 — 15%; KRW 50,000,001–88,000,000 — 24%; KRW 88,000,001–150,000,000 — 35%; KRW 150,000,001–500,000,000 — 38%; KRW 500,000,001–1,000,000,000 — 42%; over KRW 1,000,000,000 — 45%. Plus the local income tax at 10% of the income tax.
• Allowable deductions: The landlord may deduct: the property management fees (관리비), the insurance premiums (보험료), the interest on the mortgage loan (주택담보대출 이자), the depreciation (감가상각비), the local property tax (재산세), and the maintenance and the repair expenses (수리비).
• Simplified deduction (60%): The individual landlord may choose the simplified deduction of 60% of the gross rental income instead of claiming the actual expenses. This is the "estimated expense deduction" (기준경비율) method. The remaining 40% of the gross rental income is taxable.

For example: a landlord with KRW 30,000,000 in gross rental income who elects the simplified deduction has KRW 12,000,000 of the taxable rental income (KRW 30,000,000 × 40%). At the 15% rate, the income tax is KRW 1,800,000 plus the local income tax of KRW 180,000 = total KRW 1,980,000.

Special Deductions for Small Landlords

• Small landlord exemption: If the landlord owns a single rental property with a lease deposit (보증금) of KRW 700,000,000 or less and the annual rental income does not exceed KRW 20,000,000, the rental income is fully exempt (소액주택 임대소득 비과세). This exemption applies to the small landlords (소규모 임대주택 소유자) as of 2026.
• Reduced rate for the registered landlords: If the landlord registers the rental business (사업자등록) as a "rental housing business" (임대주택사업), the rental income tax rate is reduced to 1.4% (the withholding tax rate on the rental income) instead of the progressive rates. This benefit is available for the landlords who own 2 or more rental properties and meet the registration requirements.
• Newly built rental housing: The rental income from the newly built rental housing may be eligible for the 50% tax reduction (소득세 50% 감면) for the first 10 years under the Rental Housing Act (민간임대주택법).
• Long-term rental discount: The landlords who rent the property for 8 years or more at the below-market rates may qualify for the additional tax credits and the capital gains tax exemptions under the long-term rental housing program (장기임대주택).

For example: a landlord with a single apartment with a KRW 500,000,000 deposit and the monthly rent of KRW 1,500,000/year (KRW 18,000,000 annually) qualifies for the small landlord exemption — the rental income is fully exempt from the income tax.

Reporting and Filing

• Global income tax return: The rental income must be reported in the global income tax return (종합소득세 신고) by 31 May of the following year. The landlord must file the simplified rental income schedule (임대소득 명세서) together with the tax return.
• Business registration requirement: If the landlord owns 2 or more rental properties, the landlord must register a rental business (임대사업자 등록) with the tax office. The landlord with a single rental property may still register voluntarily to claim the VAT input tax credits on the property expenses.
• VAT and rental income: The residential rental income is generally exempt from VAT (부가가치세 면제). The commercial rental income (the office, the retail) is subject to VAT at 10%.
• Penalties: The failure to report the rental income may result in the penalties of up to 40% of the unreported tax. The NTS actively cross-references the lease contracts registered with the local government (임대차 신고) against the tax returns.

For example: a landlord with 3 rental apartments must register as a 임대사업자, file the annual rental income report by 31 May, and may claim the input VAT on the property management and the maintenance expenses.

FAQs

What is the 전세 deposit and how is it taxed?

The 전세 (jeonse) is a unique Korean lease system where the tenant pays a large lump-sum deposit (typically 50–80% of the property value) instead of the monthly rent. The deposit is returned to the tenant at the end of the lease. For the tax purposes, the deposit is NOT taxable rental income. However, if the deposit exceeds KRW 300,000,000 per property, the excess is deemed to generate the rental income at 2.0% per year (the deemed rent — 간주임대료).

Can I deduct the mortgage interest on the rental property?

Yes. The mortgage interest (주택담보대출 이자) on the rental property is deductible from the rental income. The deductible interest is limited to the interest on the loan used to acquire the rental property. The interest on the personal residence or the other personal loans is NOT deductible against the rental income.

Do I need to register as a rental business if I own only one rental property?

No. The landlord with a single rental property is NOT required to register as a rental business (임대사업자). However, the voluntary registration is recommended to claim the input VAT on the property expenses and to apply the reduced 1.4% withholding tax rate. The single-property landlord must still report the rental income in the global income tax return (종합소득세 신고) if the income exceeds the exemption threshold.