National Tax Service Cracks Down on Home Purchases with Business Loans: "Repay Loans by Mid-Year"

Comprehensive Audits of Suspected Individuals to Begin in the Second Half of the Year

Voluntary Repayment of Misused Loans Will Exclude Borrowers from Audits

Failure to Self-Rectify May Lead to Reports to Investigative Authorities

The National Tax Service has announced that it will conduct rigorous verification of individuals who acquire residential properties using business loans. The agency warned that if voluntary correction, such as loan repayment, does not take place in the first half of this year, it will not only conduct comprehensive verification but also take strict measures, including referring cases to investigative authorities.

On March 26, the National Tax Service stated that it plans to carry out comprehensive verification of individuals suspected of acquiring residential properties with business loan funds. This announcement comes about a week after National Tax Service Commissioner Lim Gwanghyun declared on his X (formerly Twitter) account on March 19 that “acquiring residential properties through business loans is a clear case of tax evasion,” signaling an intent to conduct a full-scale review and now following up with detailed implementation plans.

A panoramic view of apartment complexes in downtown Seoul as seen from Namsan, Seoul. Photo by Dongju Yoon

A National Tax Service official commented, “Recently, cases of individuals misusing business loans to illegitimately purchase residential properties have sparked public outrage,” and noted, “Although business loans are intended for operational funding, some have been diverting these funds for home purchases to circumvent lending regulations, conceal the source of funds, or claim loan interest as business expenses—thereby exploiting them as a means of tax evasion.”

According to the National Tax Service, a high-income professional, referred to as ‘A,’ acquired a super high-priced apartment in Seoul’s Gangnam district for several billion won, submitting a funding plan that included loans as the source of funds. An investigation found that ‘A’ diverted tens of billions of won in business loans for unauthorized purposes and falsely claimed several hundred million won in related interest expenses as business costs. In addition, ‘A’ failed to report business-related income amounting to several billion won. As a result, the National Tax Service imposed additional income tax totaling several hundred million won for both the improperly claimed interest expenses and the unreported income.

Cases of tax evasion related to the misuse of business loan funds. National Tax Service

The National Tax Service plans to identify suspected cases of business loan misuse by cross-referencing various loan documents listed in funding plans with data collected from relevant agencies, including the Ministry of Land, Infrastructure and Transport. They will conduct a comprehensive analysis of loan types, uses, and reported business activities. If tax evasion is identified, the relevant individual will be selected for investigation and subject to strict scrutiny. The agency will examine whether a residential property was purchased with a business loan and whether there was any form of disguised gifting. The investigation scope will also be expanded to cover the associated businesses, thoroughly verifying not only tax evasion related to loan interest but also overall income omission by the business entity.

If violations of the Act on the Punishment of Tax Offenses, such as tax evasion, are confirmed through this process, the National Tax Service will take strong action in line with the principle of zero tolerance, including filing complaints with investigative agencies. It will also conduct post-management to determine whether loan repayments identified during the investigation were properly recorded as expenses and whether repayments were made by the individual or by third parties such as parents, to detect any further tax evasion.

The National Tax Service plans to begin full-scale comprehensive verification of business loans starting from the second half of this year, after the 2025 comprehensive income tax filing deadline at the end of June. The review will cover not only residential property acquisitions made last year but also earlier transactions for which relevant data is available.

A National Tax Service official added, “Those who voluntarily repay improperly used loans and submit amended tax filings prior to the start of comprehensive verification will be exempted from the review. Please keep in mind that this is an opportunity to correct any issues on your own. If voluntary correction is not made, strict verification and measures such as referral to investigative agencies will follow.”

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