Embezzling Export Proceeds to Purchase 27 Houses Abroad... National Tax Service Conducts Tax Audit on Offshore Tax Evaders

Multinational Platform Companies Transferring 'Trillions of Won' Abroad Domestically
Also Paying Offshore Insurance Premiums of 2 Billion Won to Illegally Gift to Children
National Tax Service Estimates This Offshore Tax Evasion at 2 Trillion Won

The National Tax Service (NTS) has launched a high-intensity tax investigation into exporters who diverted export volumes through paper companies established overseas under their children's names and purchased 27 overseas houses with the funds accumulated through this. Multinational platform companies that disguised trillions of won in profits earned at domestic business sites as overseas subsidiaries to evade taxes were also included in the investigation.

On the 31st, the NTS announced that it would track and tax 52 offshore tax evaders who caused capital outflow through unfair international transactions, undermined fair competition, and negatively impacted the balance of payments.

Oh Hoseon, Director of the NTS Investigation Bureau, explained, "The offshore tax evaders under investigation this time disguised the appearance of transactions, businesses, and entities as normal while artificially altering export-import prices, diverting export volumes controlled by the owner, and transferring domestic source income abroad, thereby leaking economic resources without tax burden." He added, "The total scale of tax evasion is estimated to reach 2 trillion won."

The scale of this tax investigation by type includes ▲19 exporters who manipulated export transactions using local corporations ▲12 private equity funds and wealthy individuals who illegally transferred investment profits and made offshore disguised gifts ▲21 multinational corporations that disguised business structures to transfer domestic income abroad.

According to the NTS, one exporter diverted export volumes through a paper company controlled by the owner's family or conducted trade transactions with a local corporation controlled by the owner, exporting at prices lower than the market price and transferring income to the local corporation. The owner's children inserted paper companies they owned into export transactions to distribute profits or embezzled export payments. The owner's family purchased a total of 27 overseas houses with funds accumulated by diverting export volumes. The NTS believes that the owner failed to report the acquisition of these houses to domestic foreign exchange and tax authorities, thereby evading rental income tax.

There was also a multinational platform company that disguised thousands of billions of won in profits earned in Korea as overseas subsidiaries to evade taxation. This platform company distributed essential business, sales, promotion, marketing, and research and development functions necessary for providing online services to domestic customers among domestic subsidiaries.

The NTS judges that since the subsidiaries collectively perform essential and important business activities of Company A, Company A should register a domestic business place and report income. However, by splitting subsidiaries and disguising each as a simple service provider, they failed to report taxes. As a result, Company A earned enormous profits but transferred income abroad without paying taxes, while domestic subsidiaries reported and paid only minimal profits at the cost-recovery level. The NTS plans to tax the portion of profits earned by the platform company attributable to the domestic business place.

Additionally, a wealthy individual who paid 2 billion won in offshore insurance premiums under their child's name to disguise the proceeds from the sale of company shares as gifts, hid dividends of 6-7% annually overseas, and failed to report them domestically was also included in this tax investigation.

The NTS continuously monitors international trade, finance, and capital transactions and collects offshore tax evasion information by utilizing international cooperation networks among tax authorities. Over the past three years, it has collected a total of 4.0149 trillion won in taxes, with an average annual collection exceeding 1.3 trillion won.

Director Oh stated, "Offshore tax evasion is an antisocial illegal act that causes capital outflow without tax burden, and public interest and demand for the NTS's response to offshore tax evasion are high." He added, "In this nationwide simultaneous offshore tax evasion investigation, we will mobilize all available enforcement measures such as temporary custody, digital forensics, financial tracking investigations, and information exchange among tax authorities according to tax laws and tax treaties to track and tax offenders to the end."

Oh Hoseon, Director of the National Tax Service Investigation Bureau, is giving a briefing on the 'Tax Investigation of Offshore Tax Evaders' at the Government Sejong Complex on the 31st.

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