There is a tax called window tax. It is a tax that triggered the French Revolution and led to Louis XVI being executed by the guillotine. In France, people tried to avoid the window tax by reducing the width of their windows, creating the narrow and tall window culture of France. In the Netherlands, there was a building tax, and the narrow width of Dutch buildings facing the road and long inward were the result of trying to avoid it.
During the Joseon Dynasty, there were cases where taxes were collected from unborn children, or where neighbors who were unable to pay their taxes were forced to pay their own taxes. This eventually led to civil unrest, which is why the 19th century is called the era of civil unrest. Looking at government legislation over the past 4-5 years, it is strange that civil unrest has not occurred. They are creating all sorts of taxes under the pretext of financial insufficiencies, and they are being legislated without much resistance through a complex legislative system and public opinion hearing procedures that the general public cannot understand.
The biggest change in this tax law revision bill for real estate is the exclusion of rental businesses from the scope of small and medium-sized enterprises under the Special Tax Exceptions and Restrictions Act. As a result, rental businesses can no longer be subject to capital gains tax carryover when converting to a corporation. In the case of acquisition tax reduction, it will also be blocked sequentially starting from 2020, so acquisition tax reduction is not applied when converting to a corporation for rental businesses at present. If this continues, the transfer tax carryover will not be applied to rental businesses starting next year, so the conversion to a corporation itself will be blocked.
This is what real estate owners and brokerage firms need to know. In addition to the above, it is difficult to find all the benefits that are not received due to being excluded from the scope of small and medium-sized businesses. The important thing is that the government no longer considers rental business as a business. The tax law revision bill is also part of this effort to eliminate the 10% tax bracket for rental corporations.
The impact of these policies has been felt for some time. Not only are loans for rental businesses not what they used to be, but the feeling of loans is different every year. Real estate professionals and rental business owners should pay attention to these legislations and post their opinions on the government’s legislative website. Otherwise, we will not know how the people who are subject to them feel. If the Special Tax Exceptions and Restrictions Act is legislated at the Citizens’ Participation Legislative Center and legislation is submitted to exclude rental businesses from small and medium-sized businesses, there is a period of about two weeks to listen to opinions. It is a short period, but it is necessary to show the power of many to bring about change.
Continued in next issue
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