National Tax Service Targets Tax Evasion in 'Hangang Belt' Super High-Priced Homes... 104 Investigated for Indirect Gifting via 'Parental Assistance'

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Mr. A acquired a super high-priced apartment in Seoul, which is scheduled for reconstruction, for several billion won, a property that would have been difficult to purchase solely with his own means. Mr. A's parents, who are high-income professionals, earn several hundred million won annually from business and rental income, and possess assets worth tens of billions of won in deposits and commercial properties while residing in the same apartment complex. The National Tax Service has analyzed that Mr. A received several billion won in insufficient funds from his cash-rich parents when purchasing the apartment, but there was no record of a gift tax declaration. Accordingly, the National Tax Service plans to thoroughly verify whether Mr. A received the funds for the apartment from his parents and whether he is repaying the principal and interest on the large loan with his own income and assets, in order to determine if there was any indirect gifting.

On October 1, the National Tax Service announced that it will conduct a full-scale investigation into transactions involving super high-priced housing and into foreigners and young individuals, launching tax audits on a total of 104 individuals suspected of tax evasion, including those suspected of indirect gifting.

Paek Jonghee, Director of the Asset Taxation Bureau at the National Tax Service, is briefing on the 'Commencement of Tax Investigation on Real Estate Tax Evasion Suspects' at the Government Sejong Complex on the 1st. National Tax Service

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Paek Jonghee, Director of the Asset Taxation Bureau at the National Tax Service, stated, "We have confirmed cases where individuals receive housing acquisition funds as gifts from their cash-rich parents to circumvent loan regulations and fail to properly report taxes. Methods of tax evasion are also becoming more sophisticated, such as creating fake transactions to receive tax exemptions." He added, "This tax investigation is intended to support the new administration's top priority of 'stabilizing the housing market' and to respond firmly to real estate tax evasion, which disrupts market order."

The National Tax Service is currently conducting a comprehensive review of all transactions involving super high-priced housing (over 3 billion won) in overheated market areas such as the four districts of Gangnam (Gangnam, Seocho, Songpa, and Gangdong) and the Mapo, Yongsan, and Seongdong districts, which have recently seen record-high transaction prices. Through this process, the agency has initially selected suspects for tax evasion whose sources of funds are questionable. The National Tax Service plans to conduct a thorough investigation into the sources of funds to determine whether individuals lacking financial capacity relative to their income, assets, or occupation received indirect gifts or underreported their income.

Foreigners and young individuals who have acquired high-priced homes but lack sufficient sources of funds are also subject to this tax investigation. The National Tax Service has selected as investigation targets those foreigners who have acquired high-priced homes and are suspected of insufficient acquisition funds, after conducting a detailed analysis of their domestic income, loans, and overseas remittances, amid concerns about reverse discrimination against domestic residents and market disruption. In addition, the agency plans to closely scrutinize the sources of funds for individuals in their 30s or younger who, due to stricter lending regulations, may have used parental support to indirectly acquire funds for purchasing expensive homes.

Additionally, the National Tax Service will closely examine the sources of funds for individuals suspected of receiving large lump-sum rental deposits as indirect gifts-deposits that are relatively less regulated and are often used as seed money to acquire expensive homes-as well as those who pay high monthly rents and reside in luxury homes without any clear source of income, in order to determine whether tax evasion has occurred.

There are also cases of individuals who have improperly received the single-home capital gains tax exemption. The National Tax Service has identified multiple cases of sham transactions, where owners of two homes transfer one property to a relative or acquaintance on paper only, and then report the capital gains from the other property as exempt under the single-home rule. The agency will conduct a rigorous investigation into these cases. Among those under investigation are not only individuals who transferred properties to relatives or acquaintances, but also those who used special-purpose companies to orchestrate sham transactions and improperly receive tax exemptions.

Director Paek stated, "The National Tax Service will mobilize all available resources to thoroughly track down any tax evasion in real estate transactions where proper taxes have not been paid, and will collect all evaded taxes without exception. Going forward, we will continue comprehensive reviews of super high-priced housing transactions and those involving foreigners and young individuals, and will sequentially expand investigations as additional analyses are completed."

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