▲ Case 1: Sham Transaction
The National Tax Service (NTS) announced today that it has uncovered 73.1 billion won in tax evasion by approximately 80 individuals following a simultaneous investigation into 104 suspected real estate tax evaders that began in October last year. The agency has collected 31.8 billion won in back taxes.
For cases where tax evasion was confirmed through fraud or other illicit means, the NTS imposed a 40 percent penalty for unfair underreporting of taxes.
Furthermore, in accordance with the Punishment of Tax Evaders Act, six individuals were referred to the prosecution, and four others were issued notification of penalty charges, requiring them to pay a total of 700 million won in fines.
The agency took action against not only the primary offenders but also their accomplices.
In one instance, an individual identified as A, who owned two homes, sold the less expensive apartment to a friend of their mother.
A then sold the more expensive apartment for 2 billion won and reported the capital gains tax by claiming a tax exemption for a single-household, single-home owner.
However, the transaction with the mother's friend was a sham. After selling the property, A signed a fake lease agreement to continue living in the same house and even paid the friend hundreds of thousands of won in monthly gratuities in exchange for their cooperation in the tax evasion.
The NTS collected 1 billion won in capital gains tax from A by applying a heavy tax rate and took disciplinary action against accomplices, including A's mother.
The NTS also uncovered gift tax evasion by foreign nationals, often referred to as "black-haired foreigners" (foreign citizens of Korean descent).
An individual identified as A jointly purchased two high-priced apartments in the "Ma-Yong-Seong" area (Mapo, Yongsan, and Seongdong districts) with their foreign spouse for 3 billion won, despite having no intention of residing there.
It was confirmed that B, a housewife with no source of income, had received the full amount for the housing purchase and interior renovation costs from her spouse as a gift, without reporting it for gift tax purposes.
As a result, she was required to pay 400 million won in unpaid taxes.
Cases of "parental assistance" were also uncovered.
A person in their 40s, identified as C, who pays 7 million won in monthly rent for a high-priced apartment along the Han River in Gangnam, Seoul, was found to have acquired billions of won worth of stocks and was spending hundreds of millions of won on living expenses annually.
The investigation revealed that C had received approximately 2 billion won in funds from their parents as a gift, leading to the collection of 1.3 billion won in gift taxes.
The NTS also notified the relevant local governments about 20 individuals found to have violated the Real Estate Real Name Act, such as through title trusts, to ensure that fines and criminal penalties are imposed.
The NTS plans to continue its strong response by identifying tax evasion risks early throughout the entire process of real estate transactions, including acquisition, ownership, and disposal, and by conducting tax audits whenever tax evasion is confirmed.
In particular, as there are concerns that gift transactions may increase following the resumption of heavy taxation on multi-home owners, the agency intends to verify whether there are any illicit gifts, such as undervaluing gifted assets or having gift taxes paid by others.
The agency plans to thoroughly verify tips received through the "Real Estate Tax Evasion Reporting Center" to collect evaded taxes while also promptly paying rewards to whistleblowers.
(Photo courtesy of National Tax Service, Yonhap News)
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