As the government has significantly strengthened the tax burden on multi-homed people, the number of gifts that hand over homes to children in advance is increasing rapidly. The number of donations per year remained at 893,312 in 2017, when the Moon Jae-in administration was launched, but rose to 15,2427 last year after surpassing 110,000 annually in 2018-2019.
Among asset owners, there is a particularly high interest in “pay-as-you-go” for tax saving purposes. It is a method of giving a house to a child and passing a loan or a security deposit. Through this, gift tax and acquisition tax can be reduced. However, if it is a high-priced house that exceeds 2 billion won, a burdened gift can cost you tax more than just selling the house. In addition, it should be noted that giving a gift to a child who cannot afford to pay off the loan may be caught by the National Tax Service’s’microscopic verification’.
○ The donation method should be decided in consideration of the housing price.
Kim Mo, a second-owner living in Seoul, is considering whether to sell an apartment with a current market price of 1 billion won and a publicly announced price of 700 million won for 500 million won, or to pass it on to her child. This apartment has been rented for a deposit of 600 million won.
When a house is sold at the current market, the capital gains tax is 246 million won (including local income tax). However, if you just donate a house to a child, you will incur more tax (total of 350 million won). This is because not only the gift tax must be paid 218 million won, but also 87 million won is imposed when the name is handed over to a child. This is because the government raised the gift-acquisition tax rate from 3.5% to 12% from last year to prevent donation to multi-homed people.
At this time, if you choose to pay the gift, the tax will be reduced. This is because only 400 million won is recognized as the donated amount minus the deposit deposit from the current housing price. For this reason, the gift tax is also drastically reduced to 58 million won.
However, it should be noted that capital gains tax is additionally charged when donating with a burden. This is because from the parents’ point of view, the debt (deposit) disappeared and was considered to have benefited. The transfer tax at the time of donation with a burden is calculated by taking into account the proportion of the jeonse deposit in the housing market price, in which case it is 136 million won.
The effect of reducing acquisition tax is also great. This is because the acquisition tax on the deposit of 600 million won is not the gift acquisition tax, but the acquisition tax for general trading. In the case of children who are homeless, the tax rate is as low as 1-3%. The acquisition tax is 26 million won.
In conclusion, the total tax for a gift with a burden is 220 million won, which is less than that of a third-party transfer (246 million won) or general gift (35 million won).
However, pay-as-you-go donations are not always a tax advantage. In particular, it can be disadvantageous if the donation house is extremely expensive. Even if the deposit is removed, a high gift tax rate of 40-50% is applied if the gift value exceeds 1 billion won. For example, if the donation house is 2.5 billion won and the security deposit (or loan) is 1 billion won, the gift tax alone will be 470 million won. On the other hand, if this house is sold with a gain of 700 million won, the transfer tax is 360 million won (in the case of two houses). The gift is a loss.
○“You must pass it on to children who have income conditions”
There are other things to be aware of when giving a payable gift. First of all, the child must pay off the debts that the parents hand over with the house. You can see frustration when you think,’Once you donate a house for a fee and pay the deposit later, you will have to pay it back.’ This is because the tax authorities are thoroughly verifying these areas.
Experts advised that it is also important to keep in mind that a gift with a loan or a security deposit must be given before the gift is accepted. Shinhan Bank’s real estate investment advisory center manager Woo Byung-tak said, “If you sign a lease contract at the same time on the day you receive the gift, the gift with a burden is not recognized.”
○ As if you are using a loan between family members with a third party
The National Tax Service is also reinforcing verification of cases where parents subsidize home purchase expenses for their children. For this reason, the practice of giving large amounts of money without a gift tax report has recently decreased, and the number of cases of lending money by writing a monetary loan contract (borrowing card) is increasing. However, don’t be assured that “if you write down the borrowing card, there will be no problem.”
First of all, the contents of the contract must be detailed and reasonable. In the same way as in a monetary loan agreement with a third party, the period and method of repaying the debt, and the interest rate must be accurately stated. It is recommended that the interest rate be set at an annual rate of 4.6% or more. This is because the tax law stipulates that 4.6% interest must be paid if money is borrowed from the family. If the interest rate is less than 4.6%, gift tax may be imposed on the insufficient portion.
Even if the amount of borrowing is large, the principal and interest may be temporarily repaid, or if the repayment period is too long, there may be problems in the future. “There is no’official’ for how to use a borrowing card other than the interest rate,” said Woo. said.
It is also important to properly implement the contents of the IOU. Since the second half of last year, the National Tax Service has been reinforcing post-mortem verification of whether the repayment of principal and interest has been properly made since the family’s loan card was created. The National Tax Service also increased the number of debt repayment management checks from once a year to twice a year.
Reporter Seo Min-joon [email protected]