There is a familiar line in Korea: “gift the property with the tenant’s deposit attached and the tax drops.” The statute does support it — debt is subtracted from the gift tax base, and the Enforcement Decree names the rental deposit as one of those debts. Then, for families, the same Act turns it back around.
1. The rule does subtract. Article 47(1) of the Inheritance and Gift Tax Act deducts “the debt secured on the gifted property that the donee has assumed”, and Decree article 36(1) puts “the rental deposit where the donor has leased the property to another” inside that definition.
2. Whatever is subtracted becomes a transfer. Article 88(1) of the Income Tax Act says “the portion corresponding to the debt the donee assumes on a gift with an assumed obligation shall be regarded as a transfer” — which brings capital gains tax on the donor.
3. But between family members the default is reversed. Article 47(3) of the same Act states that for a gift with an assumed obligation between spouses or between lineal ascendants and descendants, the debt is “presumed not to have been assumed by the donee” even where it was.
First, the provision that subtracts
Inheritance and Gift Tax Act, article 47 (gift tax base) (1) The gift tax base shall be the total value of the gifted property as at the date of the gift […] less the debt secured on that property (including debts related to the gifted property as prescribed by Presidential Decree) that the donee has assumed. <Amended … 21 Dec 2021>
What that “debt prescribed by Presidential Decree” covers is settled by the Decree in a single sentence.
Enforcement Decree, article 36 (debts deductible from the gift tax base) (1) “Debts related to the gifted property and prescribed by Presidential Decree” in article 47(1) of the Act means the rental deposit where the donor has leased the property to another. <Amended 18 Feb 2010>
The rental deposit is named in the text. Which means “gifting with the jeonse attached” is not a practitioner’s trick but a structure the Decree wrote down.
What is subtracted does not vanish — it becomes a transfer
Income Tax Act, article 88 (definitions) 1. “Transfer” means the actual transfer of an asset for value through sale, exchange, contribution in kind to a corporation and the like, regardless of registration. In this case, the portion corresponding to the debt the donee assumes on a gift with an assumed obligation prescribed by Presidential Decree shall be regarded as a transfer, … <Amended … 31 Dec 2024>
The tax does not shrink; it splits in two. The part net of debt draws gift tax, the part equal to the debt draws capital gains tax. And the payers differ — gift tax falls on the recipient, capital gains tax on the giver.
| 500m won home · 300m deposit | Treated as gift | Treated as transfer |
|---|---|---|
| General rule (assumption recognised) | 200m won | 300m won |
| Spouse or lineal relative — default | 500m won | nil |
| └ if objectively proven | 200m won | 300m won |
The base swings between 200m and 500m won. This piece stops at the base — the tax on top of it needs deductions and rates. Gift tax allowances are in our Korean gift tax allowance piece, and the capital gains calculation is in Korean capital gains tax.
Between family, the provision stands the other way round
Same Act, article 47 (3) In applying paragraph (1), for a gift with an assumed obligation between spouses or between lineal ascendants and descendants (…), even where the donee has assumed the donor’s debt, that debt shall be presumed not to have been assumed by the donee. Provided that this shall not apply where the debt is objectively recognised, as prescribed by Presidential Decree, such as a debt owed to the State or a local government.
The verb is “presumed”, not “deemed”. A deeming provision admits no rebuttal; a presumption can be rebutted. But the party who has to rebut it is the taxpayer.
Note also that it opens with “in applying paragraph (1)” — it attaches to the very calculation that subtracts the debt. And it names the counterparties: spouses, lineal ascendants and descendants. Siblings and unrelated parties are not within this paragraph — that is what the structure says.
What it takes to rebut it
Same Decree, article 36 (2) “Objectively recognised, as prescribed by Presidential Decree, such as a debt owed to the State or a local government” in the proviso to article 47(3) of the Act means a case proven under any item of article 10(1).
Which sends it on to article 10.
Same Decree, article 10 (methods of proving debt) (1) … means one proven under any of the following.
1. For debts owed to the State, a local government or a financial institution, documents confirming the debt is owed to that body
2. For debts owed to anyone else, documents confirming the fact by way of a debt contract, a creditor’s confirmation, or evidence of security granted and interest paid, and the like
| Debt | What is needed | Provision |
|---|---|---|
| Bank mortgage | Documents confirming the debt is owed to it | art. 10(1)1 |
| State or local government | Same | art. 10(1)1 |
| Rental deposit (tenant, not a bank) | Debt contract, creditor’s confirmation, evidence of security and interest paid, etc. | art. 10(1)2 |
One thing in that list stands out. Item 2 asks for “evidence of interest paid” — and no interest is paid on a jeonse deposit.
Read again, the subject of the sentence is “documents”: “documents confirming the fact by way of a debt contract, a creditor’s confirmation, or evidence of security granted and interest paid, and the like”. What is required is documents that confirm the fact; the three named items sit before “and the like” as examples. It does not read as a provision demanding all three.
That, though, is where the text stops. Whether a lease contract is actually accepted, and what else may be asked for, the provision does not settle and neither did we.
How the deposit itself is taxed runs in another direction — from the landlord’s side it is in Korean rental income tax, and the tenant’s position is in tenant rights in Korea.
The provisions hand off five times
| What it settles | Provision | Hands off to |
|---|---|---|
| Debt is subtracted | Gift Tax Act art. 47(1) | → Decree art. 36(1) |
| That debt includes the rental deposit | Decree art. 36(1) | ends |
| Family: presumed not assumed | Gift Tax Act art. 47(3) | → Decree art. 36(2) |
| What “objectively recognised” means | Decree art. 36(2) | → Decree art. 10(1) |
| The debt portion is a transfer | Income Tax Act art. 88(1) | → Income Tax Decree art. 151(3) |
| A presumed debt is excluded | Income Tax Decree art. 151(3), proviso | → Gift Tax Act art. 47(3) |
The bottom row was the empty slot. We have now followed it — and the provision it leads to ties the chain back on itself.
Income Tax Act Enforcement Decree, article 151 (scope of transfer) (3) “The portion corresponding to the debt assumed by the donee in a gift with an assumed obligation prescribed by Presidential Decree” in the latter part of article 88(1) of the Act means the portion of the gift value corresponding to the donor’s debt where the donee assumes it. Provided that, for a gift with an assumed obligation between spouses or between lineal ascendants and descendants (including a gift presumed under article 44 of the Inheritance and Gift Tax Act), a debt presumed under the main text of article 47(3) of that Act not to have been assumed by the donee shall be excluded. <Inserted 3 Feb 2017; amended 28 Feb 2023>
The proviso imports the gift-tax presumption whole. So where a family cannot prove the debt, not only is it not deducted for gift tax — it is also not treated as a transfer for income tax. The two taxes move together on a single presumption.
The “0 won transferred” row in the table above was, until now, something we inferred from the structure. There is a provision in that slot.
Where readers usually go wrong
So is gifting with jeonse attached a bad idea?
This piece does not say which is better. What it settles is how the base divides; the actual tax depends on acquisition cost, holding period, deductions and rates. What is in the text is simply that between family members the starting point is “debt not subtracted”.
If it is only a presumption, can I not rebut it?
You can. The proviso is open, and Decree article 36(2) routes to the items of article 10(1), which ask for documents confirming the fact, the three named items being examples. But the burden sits with the taxpayer, and which documents are accepted in practice sits outside the text, so this piece does not cover it.
Does it work the same for a sibling?
Article 47(3) says “between spouses or between lineal ascendants and descendants”. Siblings are not in that phrase — a gift with debt made directly to a sibling is outside this paragraph.
But the parenthesis in that same paragraph calls somewhere else: “(including a gift presumed under article 44)”. We opened article 44.
Inheritance and Gift Tax Act, article 44 (presumption of gift on property transferred to a spouse etc.) (2) Where property transferred to a related party is re-transferred by that party within three years of acquisition to the spouse or lineal ascendant or descendant of the original transferor, the value of the property at the time of that re-transfer is presumed to have been received as a gift by that spouse etc. Provided that this does not apply where the income tax already assessed on the original transferor and the acquirer exceeds the gift tax that would otherwise arise.
(4) Where gift tax is imposed under the main text of paragraph (2), no income tax shall be imposed on the original transferor or the acquirer for that transfer, notwithstanding the Income Tax Act.
So it is not the sibling that is caught, but the route back — through a related party and home to a spouse or lineal relative. The period is three years, and the statute sets it.
How does this differ from passing it on by inheritance?
It is a different tax entirely, with its own deduction structure — see Korean inheritance tax, and for how the one-home exemption bites on a later sale, the one-household one-home exemption.
The Act says the debt comes off, and one paragraph later says that between family members the debt is presumed not to be there. The distance between those two sentences is the whole of this rule.
Sources
- Korean Law Information Center, Ministry of Government Legislation — statutory text — Inheritance and Gift Tax Act, article 47. Paragraph (1)’s “less the debt secured on that property that the donee has assumed”, paragraph (3)’s “presumed not to have been assumed” and its proviso are transcribed from the text. In force from 1 October 2025, Act No. 21065.
- Korean Law Information Center — statutory text — Enforcement Decree of the same Act, article 36 and article 10(1). The “rental deposit” in article 36(1), the routing in article 36(2) and the two proof routes in article 10(1) are all from there. In force from 27 February 2026, Presidential Decree No. 36131.
- Korean Law Information Center — statutory text — Income Tax Act, article 88(1), for the sentence treating the assumed-debt portion as a transfer.
- Korean Law Information Center — statutory text — Income Tax Act Enforcement Decree, article 151. The main text of paragraph (3) and its proviso — which imports the article 47(3) presumption and excludes the debt — are transcribed from the text. In force from 1 July 2026, Presidential Decree No. 36343.
- Korean Law Information Center — statutory text — Inheritance and Gift Tax Act, article 44. The three years in paragraph (2), its proviso, and paragraph (4)’s “no income tax shall be imposed” are here. The parenthesis in article 47(3) calls this article.
Where to check further
- How a jeonse deposit is actually proven. The text asks for documents confirming the fact, the three named items being examples — whether a lease contract is accepted, ask the National Tax Service or a tax professional.
- Three years after giving to a sibling. Article 44(2) speaks of property “transferred” — how the debt portion of a gift with an assumed obligation is handled under that paragraph we have not settled from the text.
- The actual tax. This piece stops at how the base divides — rates, deductions and acquisition cost are on Hometax.
Written in August 2026 and revisited in September. The quoted provisions are the text as published by the Korean Law Information Center, and the 500m / 300m example is the statute applied as written — it is a tax base, not a tax bill. The Income Tax Decree we first left unread is now filled in at article 151(3), and “whether some other provision reaches them” is filled in at article 44. Proof in practice and the actual tax remain outside the text. Our other everyday tools are in the calculator index.
