Illegal 'Real Estate Tax Evasion' Cases After Moving into National Industrial Complex... 228 Cases in 5 Years

Unable to even identify tax evasion amounts... Only 47 fines issued
Only 2 cases of information sharing between National Tax Service and businesses in 5 years
Kang Hoon-sik "Poor management by responsible departments... Illegal activities must be strictly punished"

Seoul Digital Industrial Complex panorama.

[Asia Economy Reporter Kim Bo-kyung] Over the past five years, 228 cases of illegal activities involving the misuse of industrial complexes?such as IT companies moving into national industrial complexes but actually engaging in real estate leasing to receive tax benefits?have been detected.

According to the "Status of Illegal Activities in Industrial Complexes over the Past Five Years" submitted on the 5th by the Korea Industrial Complex Corporation to Kang Hoon-sik, a member of the National Assembly's Industry, Trade, Energy, Small and Medium Enterprises Committee from the Democratic Party, 228 illegal cases were uncovered in 23 out of 65 industrial complexes managed by the corporation from 2015 to August 2020.

Company A moved into the Seoul Digital Industrial Complex as a women's clothing manufacturer. Afterwards, it subdivided its office into 83 units and subleased them to shell companies. These shell companies then brokered the purchase of apartments in restricted dense areas such as Gangnam, enabling buyers to receive acquisition and registration tax reductions.

The corporations within the industrial complex exploited the acquisition tax exemption for employee residential real estate purchases and operated as "real estate tax evasion brokers."

Company B registered as a management consulting business and moved into the Seoul Digital Industrial Complex. It was caught while publicly advertising that registering as a corporate business entity in its own office could facilitate tax evasion.

Company C registered as a software development business operating in a factory within a knowledge industry center but was caught leasing the space to an officetel sales office operator, contrary to its registration.

Industrial complexes provide benefits such as tax and financial support, as well as assistance with permits and administrative procedures, to promote industrial development and regional economic revitalization. However, Kang pointed out that due to the lack of capacity of the Ministry of Trade, Industry and Energy?the competent ministry?and the Korea Industrial Complex Corporation?the managing body?these complexes have become hotbeds of illegal activities.

The Korea Industrial Complex Corporation detected 228 illegal cases, reported 110 to investigative agencies, and notified local governments to impose fines on 118 cases. Of the 110 reported cases, 47 received penalties of fines or higher. Among those subject to fines, 94 were properly fined, but 24 cases could not be fined due to reasons such as insufficient personal information.

Kang inquired with the Ministry of Trade, Industry and Energy and the Korea Industrial Complex Corporation about the status of real estate purchases by corporations within industrial complexes in restricted dense areas and related local tax evasion, but both agencies reportedly responded that "they do not have information on this status."

To efficiently detect such illegal activities, the Ministry and the Korea Industrial Complex Corporation have been working to enable sharing of business registration and business suspension/closure information with the National Tax Service.

However, over the past five years, there have been only two cases of actual information sharing. Considering that among the 65 industrial complexes, only the Seoul Digital Industrial Complex houses 13,946 tenant companies, effective management is practically impossible.

Kang stated, "Industrial complexes were given various benefits to function as incubators for small-scale manufacturing factories, IT, and knowledge industry ventures, but due to poor management by the responsible ministry, they have turned into hotbeds of illegal activities."

He added, "The Ministry of Trade, Industry and Energy should not remain passive under the responsibility of its affiliated agencies but must actively share information with the National Tax Service and establish a close cooperative system with the police, prosecution, and local governments after detection to strictly punish illegal activities."

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