Apartment valued at 3.1 billion KRW sold to son for 2.2 billion KRW... Ministry of Land intensifies inspection on suspicious direct transactions

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[Asia Economy Reporter Kim Min-young] The Ministry of Land, Infrastructure and Transport announced on the 17th that it will launch a nationwide intensive planned investigation into apartment direct transactions conducted at prices lower or higher than market value. This is to focus on cracking down on illegal transactions suspected of being disguised gifts or name trusts.

Amid a sharp decline in apartment sales due to the real estate market downturn, direct transactions accounted for 17.8% of nationwide apartment transactions in September. This is more than double compared to a year ago (8.4%).

The Ministry particularly stated that abnormal trends of direct transactions at prices significantly lower than market value between special related parties such as parents and children or corporations and representatives, aimed at evading taxes such as gift tax, have been continuously confirmed.

In actual suspected cases of gift tax and capital gains tax evasion, Mr. A sold an apartment valued at 3.1 billion KRW to his son for 2.2 billion KRW through a direct transaction, receiving 100 million KRW as an advance payment. Afterwards, he signed a lease contract with his son for 2.1 billion KRW and returned the 100 million KRW advance payment. There was also a case where a corporate representative purchased an apartment worth 2.4 billion KRW from the corporation through a direct transaction at 1.6 billion KRW, 800 million KRW lower than market value, raising suspicions of income tax evasion.

This planned investigation will be conducted three times by October next year, targeting nationwide apartment transactions reported from January 2021 to June 2023. Special focus will be placed on abnormal high- and low-priced direct transactions between special related parties.

Even if the transaction was made through a licensed real estate agent, if the brokerage office is not located in the area where the apartment is situated and excessive high- or low-priced contracts were made, it will be included in the investigation. The Ministry plans to notify relevant agencies such as the National Tax Service, the National Police Agency, and local governments of suspected illegal activities as soon as the investigation results are available and take strict measures.

Nam Young-woo, Director of Land Policy, said, “Not all high- or low-priced direct transactions can be classified as illegal, but if transactions occur at prices significantly lower than market value, they may have been used as means of disguised gifts or name trusts. Given concerns about market instability caused by price distortion amid the transaction slump, we will take strict action against illegal activities detected through this investigation to establish transparent transaction order.”

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