National Tax Service Targets Real Estate Illicit Gift Transfers... Tax Audits on 517 Individuals

Targets such as high-priced home buyers, multi-home owners, and luxury spenders
Tracking financial investigations to identify sources and flows of funds... including relatives and acquaintances checked

[Asia Economy Reporter Kwangho Lee] A total of 517 individuals with unclear sources of funds in high-priced real estate transactions are undergoing tax investigations. Targets include high-priced home buyers, young multi-homeowners, luxury spenders, and real estate corporations.

On the 7th, the National Tax Service announced that it has launched tax investigations on 517 suspects, including those suspected of illicit gifting with unclear sources of funds.

The investigation targets include 279 suspects of tax evasion through irregular transactions identified from joint investigations by related agencies, 146 high-priced home buyers with unclear sources of funds suspected of illicit gifting, 60 young multi-homeowners and luxury spenders suspected of tax evasion, and 32 small real estate corporations and planned real estate operators with unclear establishment and asset management processes.

This investigation will trace financial transactions to identify the origin and flow of funds used for asset acquisition. If the source of funds is suspected to be business fund leakage or involves large loans from relatives, the scope of investigation will be expanded to include not only the operating business but also the relatives who borrowed the funds and related corporations. The plan is to thoroughly examine the appropriateness of fund formation and accounting treatment, omission of income, and leakage of corporate funds.

In fact, a review of the financing plans from joint investigation notifications showed that the proportion of borrowed funds remains high. Among 835 cases in the recently notified third batch of data, 186 transactions (22.3%) had a self-funding ratio of 10% or less relative to the acquisition amount. There were also 91 transactions with zero self-funding (total acquisition amount of 57.6 billion KRW, averaging 630 million KRW per case), which included amounts appearing to be loans from parents or other relatives.

The National Tax Service will thoroughly verify whether acquiring high-priced apartments through loans from special relations without small or any self-funding, or moving in via jeonse (long-term lease deposit), constitutes disguised gifting. They will also conduct post-management of the entire debt repayment process to check whether principal and interest are repaid independently in the future.

In particular, the repayment details of loans and large jeonse deposits by young multi-homeowners will be scrutinized more strictly, and if tax evasion suspicions are found, the case will be escalated to an investigation for strict management.

Additionally, cases have been found where apartments are transferred to children or other special relations not as gifts but as sales at prices lower than market value, or sold at high prices to corporations where the individual is a shareholder or representative (executive). The National Tax Service plans to carefully examine whether these involve up/down contracts, illicit gifting, or denial of unfair transactions between special relations, and tax accordingly.

Kim Tae-ho, Director of the Asset Taxation Bureau, stated, "The National Tax Service will further advance the fund source analysis system to block increasingly sophisticated irregular tax evasion and will relentlessly track and tax related suspicions through meticulous analysis."

Meanwhile, since August 2017, the National Tax Service has intensively conducted source of funds investigations on 3,070 suspects of irregular tax evasion through real estate transactions and financial assets, recovering 487.7 billion KRW in evaded taxes.

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