Young Adults in Their 20s Purchasing High-End Homes... Tax Investigation on 413 Suspected Tax Evaders

Focused Investigation on Corporate Multi-Home Acquirers and Up-Down Contract Suspects

Kim Tae-ho, Director of the Asset Taxation Bureau at the National Tax Service, is giving a briefing on the commencement of tax investigations involving 413 multi-home buyers and others on the 28th.

[Asia Economy Reporter Kwangho Lee] Clothing retailer Mr. A smuggled clothing purchased without documentation to China and acquired high-priced real estate using the sales proceeds through so-called 'hwan-chigi' (informal money transfer). The National Tax Service (NTS) imposed additional taxes amounting to several hundred million won for income tax and related levies due to undeclared business income.

Twenty-year-old Mr. B, who had no special income, acquired high-priced real estate using funds received as a disguised gift from his father Mr. C, who runs a hospital, through fabricated salary payments without actual work and false borrowing from his great-uncle (including forged loan agreements). The NTS imposed several hundred million won in gift tax on the illicitly gifted cash.

Office worker Mr. D established a single-shareholder corporation in a provincial area and acquired a high-priced apartment in Seoul using shareholder loans. Subsequently, he obtained loans secured by the apartment to acquire multiple pre-sale rights and apartments. However, due to unclear sources of funds for the apartment acquisition and shareholder loans, he was selected for a tax investigation.

Four hundred thirteen individuals suspected of tax evasion related to real estate transactions, including multiple homeowners, will undergo tax audits by the tax authorities.

On the 28th, the National Tax Service announced that it has initiated tax investigations after discovering numerous suspicions of tax evasion related to real estate transactions, taking advantage of the recent overheating in the housing markets of the metropolitan area and some provincial cities.

The investigation targets include 56 multiple homeowners who established single-shareholder corporations and acquired multiple houses and pre-sale rights with unclear sources of funds; nine corporations suspected of tax evasion in the process of diverting corporate funds to acquire high-priced apartments and small buildings; 213 individuals including young high-net-worth asset holders, those who acquired high-priced homes or high-value jeonse (long-term lease) through disguised gifts and undeclared business income.

Additionally, based on joint investigations with related agencies, 100 suspects of tax evasion were identified from unanalyzed data previously notified in three rounds, along with 35 others including those suspected of up/down contract violations, real estate brokers who failed to report multiple brokerage fees, and planned real estate businesses suspected of underreporting income.

The NTS plans to thoroughly trace the origin and flow of funds using financial institution account information and data from the Financial Intelligence Unit (FIU), and conduct linked analyses of income, assets, financial data, and consumption details such as credit card usage to verify whether disguised borrowing or illicit gifting occurred during real estate acquisitions.

In particular, the NTS will verify the funding capacity of relatives or related corporations who lent money by checking reported details, and if there is suspicion of inadequate funding capacity or improper outflow of funds from related companies, the investigation scope will be expanded to include related parties to meticulously examine the appropriateness of fund formation, accounting treatment, underreported income, and corporate fund diversion.

If the funds for acquisition are confirmed to be legitimate loans, the NTS will conduct ongoing post-management to ensure that principal and interest repayments are made independently, and if proxy repayments are detected during the repayment process, the case will be converted into an investigation to recover evaded taxes.

Furthermore, if violations of real estate transaction laws such as name trusts are confirmed during the investigation, the NTS will promptly notify relevant agencies, and if tax evasion through fraud or other illicit means is identified, strict measures will be taken under the 'Tax Crime Punishment Act.'

At a recent executive meeting, NTS Commissioner Hyunjoon Kim instructed, "Thoroughly track and tax all cases where individuals or corporations accumulate or transfer wealth through multiple home acquisitions, ownership, leasing, or transfers without proper taxation throughout the entire real estate transaction process."

Director Taeho Kim of the Asset Taxation Bureau stated, "We will continue to closely monitor the real estate market and strictly respond to tax evasion related to unearned income from housing through various channels and methods. Honest reporting is the best tax-saving strategy, so we urge taxpayers to fulfill their tax obligations faithfully."

Meanwhile, since August 2017, the NTS has recovered 510.5 billion won in evaded taxes from 3,587 suspects of covert tax evasion through real estate transactions and financial assets.

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