Tax Investigation on 24 Major Asset Holders Using Company Funds to Drive 'Supercars'

High Salaries Paid to Non-Working Family Members
Thorough Verification of Families' Wealth Formation Process

[Asia Economy Reporter Kwangho Lee] #Case 1= Mr. ㄱ, who operates a famous franchise company A, continuously expanded the company's scale by supplying materials to franchise stores at high prices. He falsely registered his parents in their late 80s, spouse, and children as executives and employees, paying approximately 4.5 billion KRW in salaries over five years. Additionally, he established a local corporation B near the overseas study area of his children and nominally appointed his children as executives, remitting foreign exchange to the local corporation to cover his children's study expenses and luxury housing rental costs abroad. Notably, even after his children returned to Korea, he paid about 400 million KRW in false salaries and service fees through affiliate company C for two years. Multiple tax evasion suspicions were detected, including stock name-trust, inserting shell companies during transactions to illicitly divert company funds, and more. The tax authorities plan to conduct a thorough investigation into the appropriateness of the labor and service provision by the family, the flow of funds including foreign exchange remittances, and stock name-trust allegations.

#Case 2= Mr. ㄴ, the owner, inherited a leading domestic profitable company A from his founder father despite having no significant career experience. He acquired six high-end supercars (worth about 1.6 billion KRW) under the company’s name and used them as private vehicles for himself, his spouse (a full-time homemaker), and two university student children. He also purchased a luxury condo (worth about 2.7 billion KRW) under the company’s name for use as a family-exclusive villa and led a lavish lifestyle by purchasing luxury goods and traveling abroad using the corporate card. Furthermore, he established disguised affiliate companies under executive names to provide and receive kickbacks, causing illicit outflow of company funds. Multiple tax evasion suspicions were detected. The tax authorities plan to thoroughly verify the appropriateness of private use of company assets, related expense expenditures, and illicit outflow of company funds through disguised affiliates.

On the 8th, the National Tax Service announced it would launch tax investigations into 24 wealthy individuals who evaded taxes by paying "high salaries" to family members who did not work and privately using high-priced "supercars" registered under corporate names.

Investigation Director Kwanghyun Lim explained the background of the tax investigation, stating, "During the economic crisis caused by the novel coronavirus infection (COVID-19), many companies and workers have shared hardships through unpaid leave and salary cuts. However, some owners have falsely registered family members who did not actually work as employees and paid them high salaries amounting to hundreds of millions of KRW."

The subjects of this tax investigation hold an average wealth of 150 billion KRW (including 5.2 billion KRW in financial assets, 6.6 billion KRW in real estate, and 134.4 billion KRW in stocks). Despite this, they fabricated that family members such as full-time homemaker spouses, children studying abroad, and elderly mothers actually worked, paying an average of 2.1 billion KRW per person (total amount) in high salaries.

Moreover, owners interested in supercars registered six vehicles as company business cars and used them privately. Two ultra-high-end sports cars worth a total of 1.3 billion KRW were used as private vehicles by full-time homemaker spouses and university student children unrelated to work, with the corporation bearing the costs. During this process, suspicions of illicit fund creation through disguised affiliates, company fund outflow through sales omission, and covert gifting using paper companies were detected. These schemes were used to embezzle corporate profits and increase the owners’ family wealth.

It was found that nine individuals owned 41 high-priced supercars (worth about 10.2 billion KRW) under corporate names (one person owning 7 cars, three owning 6 cars, one owning 5 cars, three owning 3 cars, and one owning 2 cars).

This tax investigation plans to thoroughly verify the entire process of wealth formation of the owners and their families who received benefits, as well as related companies suspected of tax evasion.

If intentional tax evasion acts such as document forgery or use of nominee accounts are confirmed during the investigation, strict measures including prosecution under the Tax Offense Punishment Act will be taken.

Director Lim emphasized, "Going forward, the National Tax Service will significantly reduce the number of tax investigations this year so as not to hinder overcoming the COVID-19 crisis and economic recovery. However, it will strictly respond to antisocial tax evasion acts such as embezzlement of company profits."

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