When We Opened the Lid on New Town Land Transactions... Embezzlement of Company Funds to Buy Land and Even Illegal Gift Transfers

National Tax Service Initiates Tax Audits on 165 Individuals for Tax Evasion

[Sejong=Asia Economy Reporter Kim Hyunjung] A, the CEO of a corporation operating in the construction industry, was found to have an unclear source of funds during the acquisition of high-priced land in a planned development area in Goyang-si, Gyeonggi-do. The investigation revealed that the company disguised payments as labor costs to employees who never worked or to relatives, accounting for fictitious labor costs and embezzling corporate funds for personal use.

Developer B, engaged in real estate development projects, established a sales agency C under the name of the owner’s relatives and embezzled corporate funds by paying excessive sales agency commissions. They are also suspected of falsely paying sales agency commissions to corporation D, which is 100% owned by their minor children, without providing any services.

On the 1st, the National Tax Service announced that it has begun tax investigations after identifying a total of 165 tax evasion suspects, including those with insufficient sources of funds for land acquisition, by analyzing real estate transaction details exceeding a certain amount in large-scale planned development areas. This was confirmed during the National Tax Service’s analysis of transaction details in six areas designated as 3rd New Town sites: Namyangju Wangsuk, Hanam Gyosan, Incheon Gyeyang, Goyang Changneung, Bucheon Daejang, and Gwangmyeong Siheung.

The investigation targets include ▲115 suspects with insufficient sources of funds or suspected of illicit gifting of acquisition funds during land acquisition ▲30 owners and their families suspected of using corporate funds for private purposes such as acquiring land ▲4 planned real estate companies suspected of tax evasion by splitting shares and omitting sales after land acquisition ▲3 agricultural corporations suspected of sales omission during leasing or transfer of farmland acquired without farming ▲13 real estate brokers suspected of omitting brokerage commissions while mediating high-priced or multiple land transactions.

The National Tax Service plans to track the flow of funds further by verifying financial transaction details to identify the origin of acquisition funds. This process will involve tracing cash flows through transaction records between financial accounts as well as information from the Financial Intelligence Unit (FIU) to verify illicit gifting.

If there is suspicion of income concealment due to questionable financing ability or improper outflow of funds from related companies, the investigation scope will be expanded to include relatives who lent the funds and related corporations as necessary.

In cases where acquisition funds such as loans from financial institutions are confirmed to be proper borrowings, the National Tax Service will conduct thorough post-management of the entire debt repayment process to ensure principal and interest are repaid independently. If proxy repayment is detected, the case will be converted into an investigation to recover evaded taxes, and any illegal acts discovered during the investigation will be prosecuted under the Tax Crime Punishment Act. If violations of real estate transaction laws such as acquisition of land under another person’s name are confirmed, related agencies will be notified.

A National Tax Service official explained, "We will fully activate the special real estate tax evasion investigation team to strengthen analysis of real estate transactions in large-scale development areas, and expand the scope of analysis including tips received at the tax evasion reporting center to select additional targets for tax investigations."

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