Tax Benefits for Real Estate Investors in South Korea

Published on January 15, 2026 and written by Cyril Jarnias

South Korea has built a reputation for a sophisticated real estate market, governed by a complex tax system, yet filled with favorable niches for investors, both domestic and foreign. Behind sometimes high rates and a robust anti-speculation arsenal, the system actually harbors numerous optimization levers: choice of status (individual or corporate), balancing rental income and capital gains, favorable schemes for registered rental housing, incentives for foreign investors, and tax benefits for green and energy-efficient buildings.

Understanding the Basic Tax Framework

The starting point is the distinction between a tax resident and a non‑resident. An individual is considered a resident if they have a domicile in South Korea or reside there for at least 183 days in the tax year. Residents are taxed on their worldwide income, while non‑residents are taxed only on their Korean-source income.

For corporations, the rule is similar: a resident corporation (including a stock company created by a foreign investor) is taxed on its worldwide profits, whereas a non‑resident corporation is taxed only on its Korean-source profits.

This generally strict framework does not prevent the existence of numerous niches. It is in the details – type of income, holding period, owner’s status, location, and nature of the property – where the main tax advantages are found.

Rental Income: Where the First Trade-Offs Occur

In South Korea, rental income received by an individual is treated as individual business income and integrated into total income subject to a progressive scale ranging from 6% to 45% (excluding local surtaxes). At first glance, this may seem disadvantageous, but the calculation system offers notable optimization margins.

Two Calculation Methods for Individuals

For individuals receiving rental income, two methods are possible, depending on the annual amount of rental income.

Above 24 million won in annual rents, the tax authorities require a calculation based on actual expenses. The taxpayer then deducts documented expenses from their rental income – such as potential salaries, management fees, maintenance costs, rents they pay themselves, etc. – with effective expense rates that, in practice, are generally between about 15% and 48% of income. This method requires rigorous record-keeping but can be very attractive for heavily indebted investors or those with high costs.

In both cases, rental losses can be carried forward for five years and offset against future rental income, allowing for the amortization of difficult years or major renovations.

The “Corporate” Option: 22% Flat Tax for Non‑Residents

For non‑resident investors, a particularly used tool is the YooHan hoesa-type limited liability company. This structure has two major attractions.

Concretely, a foreign investor holding an apartment through a YooHan hoesa would see their rental income taxed at this single rate, and could then repatriate the after‑tax income to their home country. For investors subject, in their country of residence, to systems recognizing foreign tax credits, this scheme can be highly competitive from a tax perspective.

Deductible Expenses and Corporate Structure

For resident corporations, all expenses incurred in the normal course of business (interest, salaries, insurance, management fees, advertising, etc.) are deductible, provided adequate supporting documents (invoices, receipts) can be produced. The deductibility rules are relatively specific: expenses must be necessary for business operations, assets not used for business purposes are excluded, and certain items (depreciation, provisions, entertainment expenses) are capped or regulated.

From a real estate investor’s perspective, these depreciation rules, combined with deductible financial expenses, can significantly reduce taxable profit, especially during the build-up phase of a portfolio.

Real Estate Capital Gains: Where the Holding Period Makes the Difference

The taxation of capital gains in South Korea is both dissuasive for short-term speculation and surprisingly generous for long‑term investors. This is where some of the most marked tax advantages for patient landlords lie.

Calculation of Taxable Gain and Deductions

The real estate capital gain is calculated in the classic way: sale price minus acquisition price, improvement costs (renovations, extensions), transfer costs (agent, notary, taxes), then applying deductions.

A basic deduction of 2.5 million won per year of ownership is granted to all taxpayers. This amount, which reduces the taxable base, is added to a specific reduction mechanism for long‑term ownership.

For some owners qualifying under the “one household – one primary residence” regime, the taxation is even more favorable: under conditions of holding period and residence (at least two years) and as long as the sale price does not exceed 1.2 billion won, the capital gain can be completely exempt; only the portion of the price exceeding this threshold remains taxable.

Penalizing Short-Term Speculation

Conversely, very short-term transactions are heavily taxed. For a property held for one year or less, the overall capital gains tax rate (central tax + local surtaxes) can climb to about 77%. Between one and two years of ownership, it remains around 60%. This anti‑speculation measure clearly aims to discourage rapid “flipping” in hot markets.

Treatment of Non‑Residents

Non‑residents benefit from a simplified regime: the capital gains tax is calculated as the lower of 11% of the gross sale price (including local surtax) or 22% of the net capital gain. This mechanism effectively caps the taxation at a reasonable level, particularly for investors realizing a large gain on a high sale price. It also offers appreciable predictability: the investor knows their tax liability will not exceed a determined fraction of the transaction.

In broad terms, this regime often allows foreigners to pay an effective tax on capital gains that is lower than what it would be if they were subject to the full progressive scale.

Holding Taxation: Juggling Property Tax and Real Estate Wealth Tax

Owning real estate in South Korea involves two main levels of recurrent taxation: the local property tax and the national tax called the Comprehensive Real Estate Holding Tax (CRET), which resembles a real estate wealth tax.

Property Tax: Moderate for Ordinary Housing

The annual property tax applies to the assessed value (often below market price) of each property. For most housing, the rates remain moderate: between about 0.15% and 0.50%. Land is generally taxed around 0.20%, buildings around 0.25%, with a wide theoretical range from 0.07% to 5% depending on the nature of the assets (factories, special structures, etc.).

Certain categories are treated more severely: for example, newly built or expanded factories in designated metropolitan areas may see their property tax multiplied by five during the first five years, reflecting a desire to discourage industrial concentration in already saturated areas.

CRET: The Tax on Significant Holdings

The Comprehensive Real Estate Holding Tax applies when the total value of a single owner’s properties exceeds set thresholds. For housing, the basic threshold</strong is around 600 million won (higher for some single owners of one primary residence, who benefit from a deduction of 1.2 billion won).

For a well-structured individual investor, several advantages still exist: the “one household – one dwelling” regime entitles one to a specific deduction of 1.2 billion won from the CRET base, and a capping mechanism limits the overall increase in property tax burden (property tax + CRET) to 150% of the previous year’s burden. Furthermore, several types of properties can be excluded from the CRET base, including some long-term rental housing meeting criteria related to size, price, lease term, and rent increase moderation.

Advantages for Primary Residence and Certain Areas

The government regularly adjusts thresholds and definitions to account for market changes. For example, the public price ceiling to consider a residence as a “low-value local housing” was raised to protect more households from CRET. Certain acquisitions in areas of demographic decline or struggling regions may be considered as not increasing the number of residences held under the law, allowing an owner to remain in the tax-favored “one household – one dwelling” category despite acquiring a second property.

For a strategic investor, these rules open angles for optimization: targeting areas where holding taxation remains moderate, structuring acquisitions to avoid unnecessarily falling into the heavily taxed multi‑property owner category, or using certain purchases (e.g., unsold housing in struggling regions) to benefit from relaxations.

Investing via a Corporation: Progressive Scale, Surtaxes but Powerful Tools

Creating a Korean corporation to invest in real estate opens another field of tax possibilities. On one hand, profits are taxed according to a progressive scale from 9% to 24% (to which a 10% local surtax is added, resulting in effective rates of about 9.9% to 26.4%). On the other hand, the corporation benefits from full deductibility of expenses, flexible depreciation rules, and sometimes specific credits and exemptions.

However, there is a downside: gains from the sale of certain land or housing not used for the main business activity may be subject to an additional capital gains tax (10% for registered land, 20% for housing, 40% for unregistered assets), in addition to the ordinary corporate income tax. Similarly, the sale of housing by real estate holding companies is now taxed at 22% (surtax included), compared to 11% previously.

In other words, the “corporate” tool is powerful, but it is particularly suited to real economic projects (development, organized rental, operation) rather than simple wealth accumulation strategies.

Tax Benefits for Registered Rental Housing and New Regimes

Historically, landlords who registered their properties as “private rental housing” benefited from a very generous arsenal: partial exemptions from acquisition tax, reductions in property tax, exemption from CRET. A reform effective January 1, 2021, significantly reduced these benefits to contain speculation and adverse effects on prices.

That said, the government has introduced and adjusted new regimes favorable to landlords who commit for the long term and contribute to the rental supply.

The New Short-Term Private Rental Regime

In June 2024, a tax support scheme was established for “short-term private rental housing“, coupled with a minimum rental period of six years. Eligible properties can benefit from exclusions from capital gains surtaxes, corporate tax, and CRET. In short, an investor who registers in this regime and complies with its rental commitments avoids some of the penalization applicable to multi‑property owners or real estate holding companies.

Another notable evolution: for long-term private rental housing (minimum 10-year lease) built by an investor, the value limit for exemption from capital gains surtaxes was raised from 600 to 900 million won, thus expanding the range of properties eligible for this preferential treatment.

Transaction Taxes: Paying Today to Save Tomorrow

Acquiring real estate in South Korea comes with substantial transaction taxes, but here again, certain investors can benefit from reductions or even exemptions.

The acquisition tax applies upon purchase, with ordinary rates ranging from 1% to 7% (including local surtaxes) depending on the type of asset and the buyer’s situation. For individuals purchasing a home, rates generally range between 1% and 3% depending on price and area. For most other properties (offices, retail, non-agricultural land), a standard rate close to 4% (in practice often 4.6% including education and rural development surtaxes) applies.

Other transaction costs – registration fees, lawyer fees, real estate agent commissions, potential VAT on the building portion – bring the total round-trip cost (purchase + resale) to a fairly wide range, estimated between about 2.2% and 14.1% of the price.

For a long-term investor, these initial costs can be absorbed by savings realized later on income tax, capital gains tax, and recurrent taxes, provided they fully utilize the available deductions and special regimes.

Key Schemes for Foreign Investors

South Korea has long placed particular importance on foreign investment, especially when accompanied by technology transfer, job creation, or infrastructure development. Several aspects of real estate taxation benefit international investors directly or indirectly.

Foreign-Invested Company and Local Exemptions

Foreign-invested companies that acquire and hold real estate as part of a registered business activity (e.g., a headquarters, factory, logistics center, tourist complex) may, under certain conditions, benefit from substantial reductions in local taxes.

For companies located in designated areas – foreign investment zones, free economic zones, Jeju investment promotion zones, new town business zones, free trade zones – or operating in high‑tech and high‑value‑added service sectors, the standard preferential regime offers a 100% exemption from acquisition tax and property tax for the first five years after business commencement, followed by a 50% reduction for the next two years. Local governments can, through their own ordinances, extend this regime up to a maximum of fifteen years.

For an international group looking to establish a regional headquarters or an industrial center in South Korea, these reliefs can represent savings of several tens of millions of won on the acquisition and construction phase alone.

YooHan Hoesa Structure: Simplicity and Facilitated Cash Outflow

For non‑resident individual investors targeting purely wealth‑based investments (apartments, small rental buildings, commercial premises), the limited liability company structure YooHan hoesa plays a central role: in addition to the 22% flat tax on passive rental income, it provides a clear framework for repatriating profits once Korean taxes are paid. The absence of heavy corporate formation requirements (a simple tax registration suffices) makes this option relatively easy to set up, while giving the landlord a single point of contact with the authorities.

Withholding Rules on Dispositions

For dispositions of real estate by non‑residents or foreign corporations without a permanent establishment, the system provides for a withholding mechanism. If the buyer is a corporation, it must withhold the tax on the capital gain and remit it to the authorities; if the buyer is an individual, no withholding obligation falls on them. In all cases, the non‑resident seller must file a capital gains declaration and the amount withheld is credited against the final tax.

The base for this withholding is calibrated so as not to exceed the caps of 11% of the sale price or 22% of the net capital gain (surtax included), guaranteeing the seller relatively predictable treatment.

Jeonse, Wolse, and Taxation: A Still-Evolving Landscape

The Korean rental system is unique, particularly with the jeonse scheme, where the tenant provides a massive deposit (often 50% to 80% of the property’s value) to the owner, instead of monthly rent. This deposit, refunded at the end of the lease, functions economically as an interest-free loan from the tenant to the landlord.

Reform paths have been discussed, including the idea of explicitly taxing the economic value of the deposit, to encourage landlords to shift towards hybrid models (banjeonse: small deposit + monthly rent) or towards classic rentals (wolse). Other recommendations involve granting tax advantages (property tax reductions, capital gains bonuses) to owners who partially give up jeonse in favor of more transparent monthly rents.

Green Buildings and Sustainable Real Estate: Tax Bonuses in Sight

The national “low‑carbon green growth” strategy and the path towards carbon neutrality by 2050 have concrete implications for real estate. Buildings account for nearly 60% of the country’s greenhouse gas emissions and about 20% of energy consumption. To meet its targets, the government has implemented a set of standards and incentives strongly favoring energy‑efficient buildings.

Environmental Certifications and Tax Reductions

The Korean green building certification system (G‑SEED, Korea Green Building Certification, Zero Energy Building) is not just symbolic. Several tax incentives are provided for buildings achieving certain performance levels: reduction in acquisition tax, property tax relief, relaxation of floor area ratios, and even access to low‑interest loans for energy renovation works.

For private investors, these policies translate into a double benefit: on one hand, a decrease in energy costs in a context of sharp electricity price increases (nearly +46% between 2022 and 2023); on the other, a direct tax advantage at purchase and during ownership, as well as a “green premium” on rents and resale value, increasingly sought by large companies looking for offices aligned with their ESG goals.

A Rapidly Growing Market

The green building market in South Korea is expanding rapidly: it is estimated to grow from about $11.18 billion in 2024 to nearly $25 billion in 2032, with a compound annual growth rate exceeding 10%. In Seoul, the share of prime office space certified “green” has nearly doubled in five years, from just over 20% to nearly 45%.

Summary: Where the Real Tax Advantages Are

Behind the complexity of the system, several clear optimization axes emerge for real estate investors in South Korea.

The holding period is decisive: in the short term, capital gains taxation is punitive and discourages speculation. In the long term, successive deductions (2.5 million won per year of ownership, then up to 30% for long‑term holding, and even more for the primary residence) transform South Korea into very favorable ground for patient investors.

Finally, alignment with the energy transition and green construction is not just a symbolic gesture: it is a real fiscal and wealth lever, supported by tax reductions, subsidies, and growing rental demand for certified buildings.

By intelligently combining these different levers – status, duration, location, type of lease, energy performance – a real estate investor in South Korea can, despite a tax environment known for its severity, build a solid optimization strategy that reconciles yield, legal security, and contribution to the country’s economic and environmental priorities.