Initiation of Full Verification on Real Estate Corporations Acquiring High-End Apartments... Tax Investigations on 27 Suspected Tax Evaders

Real Estate Corporation CEO and Family Under Intense Investigation... Prosecution for Deliberate Tax Evasion

[Asia Economy Reporter Kwangho Lee] #Case 1= Mr. A, a hospital director in a provincial area, established an advertising agency and real estate corporation under the name of his child in their early 20s, and is suspected of paying a total of ○○ billion KRW in false advertising fees to the child's real estate corporation every month under the pretext of advertising fees for his hospital. The child's real estate corporation, which has no advertising activities, accounts for 96% of the total sales revenue from the parent's hospital advertising income. The child used funds effectively gifted through a loophole by the father to acquire a high-priced representative apartment in Gangnam worth around 2 billion KRW under the real estate corporation's name and currently resides there. The National Tax Service plans to conduct a strict investigation into the hospital's tax evasion suspicions, including false advertising fee payments and unreported non-insurance cash income, in addition to the real estate corporation.

#Case 2= Mr. B, engaged in the real estate business, failed to report business income and purchased dozens of apartments in the Gangnam area under the names of his spouse and children. When the government announced housing market stabilization measures, Mr. B established multiple family real estate corporations to evade multi-homeowner real estate regulations such as increased capital gains tax and transferred all high-priced apartments he held to these real estate corporations in the form of in-kind contributions. The real estate corporations are suspected of engaging in continuous gap investments and real estate speculation worth around 30 billion KRW by securing additional loans using the in-kind contributed assets as collateral. The National Tax Service is investigating the source of funds and possible illicit gifting for the unreported business income and all real estate acquisition transactions by the spouse and children.

Recently, the establishment of real estate corporations has surged. From January to March this year, the number of apartment transactions transferred from individuals to corporations reached 13,142, already 73% of last year's total. In some transactions, these corporations are misused as means to illicitly gift to children or evade regulations on multi-homeowners. Accordingly, the National Tax Service has begun a full-scale verification of real estate corporations purchasing apartments and plans to immediately select and conduct tax audits on those suspected of tax evasion.

According to the National Tax Service on the 23rd, the full verification targets are single-shareholder real estate corporations (2,969) established to evade government regulations on multi-homeowners and family real estate corporations (3,785).

The main verification points include ▲whether illicit gifting to children or others occurred during the corporation establishment process ▲the source of funds for purchasing high-priced apartments and whether proper taxes were paid during the formation of these funds ▲whether the real estate corporation properly paid related taxes such as corporate tax and shareholder dividend income tax when selling owned apartments, with strict measures planned against tax evasion.

The National Tax Service has already initiated tax audits on representatives of 27 real estate corporations where intentional tax evasion was found during the verification process. Most of these real estate corporations are single-shareholder or family corporations with four or fewer members. These include 9 real estate corporations established to gift high-priced apartments to children, 5 established to evade speculation regulations on multi-homeowners, 4 established to avoid source of funds investigations, and 9 planned real estate corporations established for property sales.

This tax audit is being conducted intensively, expanding the investigation to the businesses involved if company funds were illicitly used for real estate purchases, including the representatives and families of the real estate corporations. Cases of deliberate tax evasion such as using nominee accounts or drafting side agreements will be strictly handled, including reporting to investigative agencies.

Additionally, the National Tax Service plans to propose institutional improvements to relevant ministries to ensure fairness in tax burdens for individual multi-homeowners, such as applying higher tax rates on capital gains from apartment transfers even when real estate corporations are established to evade multi-homeowner regulations.

Investigation Bureau Chief Kwanghyun Lim stated, "The National Tax Service will continue to thoroughly verify all illicit transactions and tax evasion attempts disguised as real estate corporations to evade real estate speculation regulations."

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