Trading 'Luxury Goods and Gold Bars' on Secondhand Platforms, Tax Evasion Tactics?... National Tax Service "Reviewing Taxation Standards"

National Assembly Planning and Finance Committee National Audit

On the 8th, at the National Assembly's Planning and Finance Committee's audit of the National Tax Service, Kim Dae-ji, Commissioner of the National Tax Service, is responding to a lawmaker's question. October 8, 2021.
[Photo by Yonhap News]

[Sejong=Asia Economy Reporter Son Seon-hee] Recently, cases of repeatedly trading high-value items through secondhand trading platforms have been confirmed, prompting tax authorities to take a closer look. While peer-to-peer secondhand transactions are not subject to taxation, concerns have been raised that if businesses continuously sell high-value items through secondhand trading platforms to generate profits, it could become a 'tax evasion blind spot.'

On the 8th, Park Hong-geun, a member of the National Assembly's Planning and Finance Committee from the Democratic Party, revealed that luxury watches worth around 10 million KRW and gold bars worth about 7 million KRW have been traded on secondhand trading platforms such as Danggeun Market, Junggonara, and Bungaejangter, where the number of users has recently surged. However, the current tax status of these transactions has not been identified at all.

All businesses that sell goods or provide services for commercial purposes are obligated to report and pay a 10% value-added tax (VAT). If there is business income, they must also report and pay comprehensive income tax (6?45%) imposed on interest, dividends, business, labor, and other income.

However, it has been pointed out that when high-value items are repeatedly sold through secondhand trading platforms, no sanctions are imposed even if taxes are not paid, effectively turning these platforms into 'tax evasion channels.' In response to inquiries about the taxation status of income earned through secondhand trading platforms, the National Tax Service stated, "Secondhand goods sellers do not separate sales amounts made through 'secondhand trading platforms' when reporting VAT and comprehensive income tax." In other words, businesses selling various secondhand goods both online and offline report their income, but income earned specifically through secondhand trading platforms is not separately reported, and thus no separate tax status data is managed.

When asked about tax criteria for users who repeatedly sell items through secondhand trading platforms and effectively earn 'business income,' the National Tax Service responded, "Whether it is business income or not should be judged by considering the number of transactions, frequency, circumstances before and after transactions, and social norms," adding, "There are no legal provisions regarding the number of transactions and amount criteria." Ultimately, without relevant standards, there is no way to prevent 'clever' tax evasion by businesses using secondhand trading platforms.

Lawmaker Park pointed out, "As transactions through secondhand trading platforms are rapidly increasing, appropriate tax criteria regarding transaction frequency and price should be established to prevent illegal activities such as tax evasion."

In response, Kim Dae-ji, Commissioner of the National Tax Service, said, "I fully agree with (Lawmaker Park's remarks) and will consult with the Ministry of Economy and Finance to present specific tax criteria," adding, "If the nature of the business involves continuous transactions, it should be reflected in taxation. We will conduct an in-depth review."

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