For revenue from lease deposits and similar amounts, a portion known as "deemed rent" is included in the gross revenue. However, there are exceptions for housing leases with certain conditions. If a taxpayer owns three or more houses with the sum of their deposits exceeding 300 million won, the deemed rental income is included in the gross revenue.
Deemed rental income where income is calculated based on bookkeeping
1. Lease of houses and their annexed land (excl. leasing only land annexed to a house):
Deemed rental income = {(Deposit, etc. ‒ 300 million won) x no. of accumulated days} x 60% x 1/365 (366 for leap year) x Interest rate of time deposit ‒ Interest income, discounted amount and dividends accrued from financial assets acquired with deposit, etc.
* Interest rate of time deposit: The interest rate prescribed by Article 23 of the Enforcement Rules of the Income Tax Act
2. Deemed Rental Income for Lease of Real Estate Other Than Housing:
Deemed rental income = {(Deposit, etc. x no. of accumulated days) ‒ (Construction costs for leased real estate at the time of acquisition x No. of leased days)} x 1/365 (366 for leap year) x Interest rate of time deposit ‒ Interest income, discounted amount and dividends accrued from financial assets acquired with deposit, etc.
Deemed Rental Income Based on Estimation
1. Lease of houses and their annexed land (excl. leasing only land attached to a house) :
Deemed rental income = {(Deposit ‒ 300 million won) x no. of accumulated days} x 60% x 1/365 (366 for leap year) x Interest rate of time deposit
2. Lease of real estate other than housing
Deemed rental income = (Deposit x no. of accumulated days) x 1/365 (366 for leap year) x Interest rate of time deposit
Conclusion
Income tax in Korea is calculated based on various sources of income, including deemed rental income from real estate leasing. Understanding the calculation methods for deemed rental income is essential for taxpayers to comply with tax regulations effectively.