87 Cases of Deposit Evasion and Gift Tax Violations Detected... Unregistered Transactions Decrease by 66.9%

#. Daughter-in-law A purchased an apartment owned by her parents-in-law for 2.8 billion KRW and signed a jeonse lease contract with a deposit of 1.5 billion KRW on the day of the transaction. More than half of the purchase price was financed through the deposit. The Ministry of Land, Infrastructure and Transport reported the case to the National Tax Service, suspecting disguised gifting.

#. B borrowed a total of 6.8 billion KRW from his father and used 5 billion KRW of it to help buy a super-luxury apartment priced at 6.4 billion KRW. The Ministry of Land, Infrastructure and Transport also regarded this as disguised gifting and referred it to the National Tax Service.

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On the 18th, the Ministry of Land, Infrastructure and Transport announced that it had investigated 316 apartment transactions between related parties conducted from February to June last year and detected 103 suspected illegal activities. Among these, 87 cases were reported to related agencies such as the Financial Services Commission and the National Tax Service, requesting measures such as tax evasion recovery and illegal loan recalls.

By type, the most common suspected illegal activity was 'up/down contracts and false contract date reporting' (57 cases). Local governments in charge impose fines of up to 5% of the acquisition price for these cases. Next, there were 32 cases of 'disguised gifting or related-party borrowings,' for which the National Tax Service plans to collect unpaid taxes based on tax evasion analysis. There were a total of 14 cases of 'misuse of loans for purposes other than intended' and 'violations of loan-to-value (LTV) ratios.' The Financial Services Commission intends to order banks to recall loans once the facts are confirmed.

The Ministry also reported that since last year, after disclosing registration information to prevent false transaction reports aimed at inflating housing prices, unregistered apartments after reporting have decreased by more than half. A full analysis of nationwide apartment transactions reported in the first half of last year (about 190,000 cases) showed that unregistered transactions totaled 995 cases (0.52% of all), a decrease of approximately 66.9% compared to the same period the previous year.

In particular, the unregistered rate was 2.3 times higher in direct transactions (1.05%) than in brokerage transactions (0.45%). The Ministry explained that direct transactions have a higher possibility of disguised gifting and other illegal activities as well as market distortion amid transaction stagnation, and thus it continues to conduct planned investigations.

Nam Young-woo, Director of Land Policy at the Ministry of Land, Infrastructure and Transport, said, "We will continue to regularly investigate unregistered and direct transactions after reporting and notify related agencies." He added, "If a contract is canceled after reporting due to economic circumstances, please be sure to report the cancellation within 30 days according to the Real Estate Transaction Reporting Act to prevent market distortion and disadvantages caused by administrative sanctions."

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