Government Wields 'Real Estate Blade'...Massive Crackdown on 923 Cases of Illegal Gift Transfers and Loan Violations

Announcement of the Results of the 3rd Joint Real Transaction Investigation
1,608 Cases Investigated... 835 Tax Evasion Cases
Increasing Trend in Corporate Housing Purchases
Ministry of Land, Infrastructure and Transport Closely Monitoring Housing Transaction Trends

The government announced the "Housing Market Stabilization Plan," which includes strengthening the comprehensive real estate tax on high-priced housing and regulating mortgage loans for apartments priced over 1.5 billion KRW in speculative and overheated speculation areas. On the 17th, a price list was posted at a real estate agency office in Songpa-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Moon Jiwon] # Couple A and B recently purchased an apartment in Seocho-gu, Seoul, jointly owned, with a market value of approximately 3.2 billion KRW. The husband holds a 1/10 share (about 320 million KRW), and the wife holds 9/10 (about 2.88 billion KRW). However, the husband paid more than half of the purchase price, 1.63 billion KRW, while the wife paid 1.57 billion KRW. The Ministry of Land, Infrastructure and Transport reported to the National Tax Service that the husband illegally gifted 1.31 billion KRW to the wife.

# Couple C and D purchased an apartment in Seocho-gu, Seoul, valued at about 1.6 billion KRW last November, with a jeonse deposit of 1.2 billion KRW and a purchase price of 400 million KRW. When the tenant's lease contract ended in February this year, the couple withdrew 1.2 billion KRW from the corporation's account, where the husband is the representative, to repay the tenant's deposit. The Ministry of Land, Infrastructure and Transport reported to the National Tax Service that the couple misappropriated corporate funds for personal use.

On the 21st, the Ministry of Land, Infrastructure and Transport announced the results of the '3rd Joint Investigation on Real Estate Actual Transactions' containing these details. They investigated 1,694 cases of 'abnormal transactions,' reported 835 cases suspected of tax evasion to the National Tax Service, and notified the Financial Services Commission and others of 75 cases suspected of illegal loans. Additionally, two cases suspected of illegal name trust were handed over to the National Police Agency.

Previously, the joint investigation team, including the Ministry of Land, Infrastructure and Transport, Ministry of the Interior and Safety, Financial Services Commission, National Tax Service, Seoul City, Financial Supervisory Service, and Korea Appraisal Board, announced the results of the 1st and 2nd investigations targeting 25 districts in Seoul in November last year and February this year.

This announcement covers investigations conducted from January to April across all speculative overheated zones. Besides the existing investigation team, the newly launched Real Estate Market Illegal Activities Response Team in February and the Korea Appraisal Board's permanent real transaction investigation team were deployed.

[Image source=Yonhap News]

First, among the 1,608 cases investigated so far, 835 cases suspected of tax evasion due to illegal gifting among relatives and misappropriation of corporate funds were reported to the National Tax Service. Transactions involving family or special relations numbered 678, the highest, and corporate transactions were 57 cases.

Looking at major cases, minor E purchased a 3.5 billion KRW apartment in Gangnam-gu jointly with parents, financing it by selling a house worth about 1.5 billion KRW previously co-owned with grandmother. The Ministry of Land, Infrastructure and Transport suspected that the minor E was illegally gifted real estate by relatives and reported it to the National Tax Service.

Seventy-five cases suspected of violating loan regulations were reported to the Financial Services Commission, Financial Supervisory Service, and the Ministry of the Interior and Safety, which oversees Saemaeul Geumgo, to inspect whether financial institutions handling loans violated regulations. Fifty-eight cases involved personal business owners misusing loans for purposes other than intended, and 15 cases involved corporate business owners misusing loans.

According to the investigation, manufacturing company F borrowed about 1.5 billion KRW in corporate funds for purchasing business land but used the money to buy a house worth about 2.2 billion KRW in Mapo-gu under the corporation's name. Also, sole proprietor G borrowed 1.2 billion KRW from a mutual finance cooperative as operating funds for employee salaries but used the money to purchase a house worth about 4.6 billion KRW in Yongsan-gu. Both cases are highly likely to violate loan regulations and have been included for further investigation.

Furthermore, two cases suspected of illegal name trust agreements, prohibited under the 'Real Estate Actual Owner Registration Act,' were reported to the National Police Agency, and 11 cases involving false contract date reports were fined.

H, the younger sibling, purchased an apartment worth 400 million KRW in 2016 under his name, receiving 90% of the purchase funds from his older sister I. When selling the apartment last year, H transferred 550 million KRW out of the 580 million KRW sale price, including the price increase, to his sister. The investigation team judged this as suspected name trust.

In particular, sister I separately purchased a 1 billion KRW house in Bundang, Seongnam, explaining that she repaid the money borrowed from their parents to supplement the purchase funds, but since no records of interest payments to the parents were found, she was also included in the investigation for illegal gifting.

[Image source=Yonhap News]

The National Tax Service plans to start tax audits on suspects with unclear sources of funds and repayment ability among the reported cases.

The Financial Services Commission, Ministry of the Interior and Safety, and Financial Supervisory Service will verify violations of loan regulations through inspections of financial institutions, and if confirmed that loans were misused for purposes other than intended, they will recover the loan amounts.

The Ministry of Land, Infrastructure and Transport emphasized, "Analysis of actual transaction reports shows that the proportion of housing purchases by real estate trading corporations and other corporations is continuously increasing, especially in non-regulated areas of the metropolitan area," adding, "We are closely monitoring transaction trends of real estate trading corporations suspected of evading loan and tax regulations applied to individuals."

This content was produced with the assistance of AI translation services.