'Transfer of Trust Property Settlor Status to Avoid Taxes'... Gyeonggi-do Recovers 4.6 Billion KRW

Gyeonggi Provincial Government

Gyeonggi Province announced on the 9th that it conducted a full-scale investigation into taxpayers who transferred the settlor status of trust property to avoid acquisition tax or property tax surcharges, resulting in the collection of 4.6 billion KRW in taxes.

A trust involves entrusting one's money or property to another person. When the settlor entrusts their property to a trustee, the trustee manages and operates the property and returns the profits to the settlor.

In this process, cases have occurred where the settlor status is changed by transferring the ownership of a house to another person to avoid property tax and comprehensive real estate tax surcharges on multi-homeowners, or where significantly low corporate book values are used to reduce acquisition tax arising from this.

Accordingly, Gyeonggi Province conducted a full investigation of 16,334 cases of real estate acquisition tax filings and payments over the past five years where the applied tax base was lower than the standard market price.

As a result of the investigation, 130 cases were detected where the settlor status of trust property was transferred (changing the ownership of a house to another person) and the acquisition tax was underreported or underpaid using a corporate book value as low as 1% of the usual transaction price, or where the settlor status was transferred but acquisition tax was not reported at all. A total of 4.6 billion KRW in acquisition tax and other taxes were collected.

In a major collection case, Mr. A signed a contract to transfer the settlor status of a house worth approximately 1 billion KRW in standard market price located in Seongnam City to Mr. B, reporting the sale price as 600,000 KRW. Gyeonggi Province and Seongnam City applied the standard market price of 1 billion KRW as the tax base and collected 100 million KRW in acquisition tax.

Mr. C transferred the settlor status of a house worth 500 million KRW in standard market price located in Gwangmyeong City to a corporation and completed the trust registration, but failed to report the acquisition tax. As a result, an additional penalty tax for non-reporting (20% of the unpaid tax) was applied, and 90 million KRW in acquisition tax was collected.

Gyeonggi Province plans to deliver operational guidelines to 31 cities and counties to prevent underreporting and other issues when reporting acquisition tax for settlor status transfers.

Choi Won-sam, head of the Taxation Division of Gyeonggi Province, stated, "Recently, the transfer of settlor status is carried out with the purpose of making existing multi-homeowner settlors appear as single-homeowners for tax purposes to avoid multi-homeowner surcharges." He added, "Such attempts to evade taxes may constitute illegal tax evasion beyond mere tax saving, and Gyeonggi Province will conduct more thorough investigations and follow-up management."

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