A rented shop is valued at a hundred times the monthly rent
Property under a lease is valued at the greater of the official price and the rent-converted figure. The formula divides the annual rent by 12%, so a hundred times the monthly rent lands on top of the deposit.
Conditions used in the video
- The property
- a commercial unit under lease
- Official price
- ₩500M
- Lease deposit
- ₩100M
- Monthly rent
- ₩5M
- Conversion rate
- 12% a year
Results
- Rent-converted value
- ₩600M
- Official price
- ₩500M
- Value to file
- ₩600M (the greater)
- From the rent alone
- ₩500M
- Difference
- ₩100M
At a glance
A shop with an official price of ₩500M, a ₩100M deposit and ₩5M in monthly rent.
- Rent-converted value₩600M
this becomes the valuation
- Official price₩500M
Why it works this way
Many people believe that filing an inherited shop simply means writing down the official price. That is only half right.
There is an order to it. 상증세법 제60조제1항 makes the market price the rule. If a sale, appraisal, auction or public sale falls inside the valuation window, that figure is the market price, and a comparable sale of the same size in the same complex counts too. The official price is the exception, used only where a market price is hard to establish.
And where the property is let, one more step attaches.
상증세법 제61조제5항.
- Supplementary valuethe official price or the published building value
- Rent-converted value(annual rent ÷ 12%) + the lease deposit
- The valuationthe greater of the two
The two are compared, not chosen between. Where the converted figure is larger, that is the valuation.
The divisor in that formula is 12%. Dividing by 12 hundredths, after multiplying the monthly rent by twelve months, comes to the same thing as multiplying the rent by a hundred.
Following it through on a shop with ₩5M in monthly rent.
- Annual rent₩5M × 12 = ₩60M
- Divided by 12%₩60M ÷ 0.12 = ₩500M
- Plus the deposit₩500M + ₩100M = ₩600M
₩1M a month becomes ₩100M and ₩5M a month becomes ₩500M. The smaller the deposit and the larger the rent, the more easily it clears the official price.
The official price here is ₩500M and the converted figure is ₩600M. Filing on the official price alone leaves ₩100M out of the return.
And what is left out is not merely tax underpaid. An under-reporting penalty is charged on top.
The valuation window differs too. Inheritance and gift are not the same.
시행령 제49조제1항.
- Inheritance6 months before the valuation date to 6 months after
- Gift6 months before to 3 months after
The gift window is half as long on the far side. A price fetched more than three months after a gift is, as a rule, not the market price. Treating a gift like an inheritance gets it wrong.
If you are considering an appraisal, one firm suffices where the published value is ₩1B or less; above that, two or more must be instructed.
So: for a shop or an officetel under lease, do not stop at the official price. Multiply the monthly rent by a hundred, add the deposit, and file on whichever figure is larger.
The legal basis
Drawn from government announcements and the statutes themselves as primary sources, covering only the relevant part.
상속세 및 증여세법 제61조제5항 (property under a lease)
In force in force
Where a lease has in fact been concluded or a leasehold has been registered over the property, its value is the greater of the value assessed on the basis of the rent as prescribed by Presidential Decree and the value assessed under paragraphs 1 through 4.
What this means
The official price and the rent-converted figure are compared and the greater is the valuation. It is not a choice.
상증세법 시행령 제50조제7항 · 시행규칙 제15조의2 (the formula)
In force in force
One year's rent is divided by the rate prescribed by Ordinance of the Ministry of Economy and Finance and the lease deposit is added. That rate is 12 hundredths.
What this means
Dividing by 12% puts a hundred times the monthly rent on top of the deposit. ₩5M a month is ₩500M on its own.
상증세법 제60조제1항·제3항 (the order of valuation)
In force in force
The value of inherited property follows the market price as at the valuation date. Only where a market price is hard to establish is it assessed by the methods in 제61조 through 제65조.
What this means
The market price is the rule and the official price the exception. A sale or appraisal inside the window is the market price.
상증세법 시행령 제49조제1항 (the valuation window)
In force in force
Where a sale, appraisal, expropriation, auction or public sale occurs within six months either side of the valuation date for an inheritance, or from six months before to three months after for a gift, that value is taken as the market price.
What this means
The gift window is half as long on the far side. A price fetched more than three months after a gift is, as a rule, not the market price.
Run it on your own numbers
The calculator opens with these conditions already filled in. Change the figures and your own case comes straight out.
Open the Inheritance and Gift Property Valuation
Frequently asked
Why a hundred times the rent?
Because the formula divides one year's rent by 12 hundredths. Multiplying the monthly rent by twelve and then dividing by 0.12 comes to the same as multiplying by a hundred. ₩1M a month adds ₩100M and ₩5M a month adds ₩500M on top of the deposit.
What if the official price is the larger one?
Then the official price is the valuation. 제61조제5항 takes the greater of the two, so on a property with a large deposit and small rent the converted figure falls short and nothing is overturned.
Does a deposit-only lease count?
Yes. With no monthly rent the annual rent is zero, so the converted figure is simply the deposit. Where the deposit exceeds the official price, that becomes the valuation.
Where do I look the official price up?
Individual land, house and collective house prices are on the Real Estate Public Price Notice service (realtyprice.kr); the published values for officetels and commercial buildings are on Hometax. They differ property by property, so look yours up rather than estimating.
Is a transaction outside the window useless?
Not entirely. The proviso to 시행령 제49조제1항 allows sales within two years before the valuation date to be taken into the market price through the valuation review committee, where there is no special circumstance of price change. The taxpayer may apply as well.
Must an appraisal go to two firms?
One firm suffices for property with a published value of ₩1B or less; above that, two or more must be instructed. It is in 상증세법 제60조제5항 and 시행령 제49조제6항.
Results are estimates based on the inputs and on the rules as at the stated date. They may differ from a lender's actual assessment, and the rules change often. Take professional advice before any decision that matters.