"Focused Investigation on Dormant Corporation Utilization for Tax Avoidance"... Seoul Jung-gu Strengthens Corporate Tax Audits

Full Investigation of Corporate Tax Evasion to the End

Jung-gu, Seoul (District Mayor Kim Gil-seong) announced on the 25th that it will strengthen tax audits against increasingly sophisticated corporate tax evasion methods and systematically promote the discovery of tax sources by introducing new investigation techniques.

Last year, the district secured an additional 5.8 billion KRW in tax revenue by thoroughly inspecting non-taxable and exemption items through on-site investigations and conducting tax audits. This year, the district plans to conduct more precise and thorough investigations by applying investigation techniques developed in-house and benchmarking best practices.

They will conduct a full investigation into the appropriateness of tax exemptions on real estate acquired under the condition of donation in return. When a corporation acquires real estate from the state or public institutions under the condition of donation without compensation, acquisition tax is exempted. However, cases have been found where tax exemption was reported despite actual compensation being involved. Accordingly, a full investigation of donation-based real estate from the past five years will be conducted to thoroughly detect illegal cases.

The district is focusing on investigating cases where corporations avoid heavy taxation by acquiring dormant corporations and then purchasing real estate, a first among local governments nationwide. To curb population concentration in the metropolitan area, corporations established in large cities are subject to heavy taxation if they acquire real estate within five years. However, corporations that acquire existing dormant corporations to apply general tax rates and evade taxes are targets for detection. Since February, the district has been intensively tracking such corporations in cooperation with tax offices.

Corporations headquartered in large cities but falsely registered as having their headquarters in suburban areas to avoid acquisition tax surcharges are also subject to crackdown. Corporations established in large cities are subject to acquisition tax surcharges if they acquire real estate within five years of establishment. Cases have been found where corporations falsely report their headquarters as being in suburban areas to avoid this, and the district plans to thoroughly block such tricks through detailed investigations.

The district will also thoroughly check whether corporations acquiring high-value real estate have omitted acquisition tax. Corporations established within five years that acquire real estate in large cities are subject to acquisition tax surcharges, but cases of evasion by reporting at general tax rates continue to occur. The district plans to closely investigate such corporations and take strong action if tax laws are violated.

This year, the district expanded its dedicated tax audit team from one to three teams to strengthen investigation capabilities. It will select corporations suspected of evasion or omission among those acquiring real estate worth over 1 billion KRW or with tax exemption amounts exceeding 10 million KRW, and conduct both regular and planned audits.

In March, the district plans to actively discover omitted tax sources by collaborating with Seoul City to uncover joint tax sources between the city and district, and by enhancing the job capabilities of tax officials through training and sharing of best practices.

District Mayor Kim Gil-seong emphasized, “Given the difficult economic situation, we will minimize the burden on taxpayers but take strict measures against corporations maliciously evading taxes. We will thoroughly respond to establish fair tax principles so that honest taxpayers do not suffer losses.”

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