The National Tax Service (NTS) of South Korea has announced a tax investigation into 156 individuals suspected of illegal real estate transactions and tax evasion. This crackdown comes as the real estate market experiences a widening gap between Seoul and other regions, with tax evasion attempts becoming more sophisticated.

Key Findings

Prevalence of Illegal Activities: Despite efforts to curb tax evasion in real estate transactions, illegal activities persist, particularly in popular areas.
Sophisticated Methods: Tax evasion methods are becoming increasingly complex, including:Illegal Inheritance: High-priced home acquisitions through illegal inheritance in desirable locations.
Low-Price Transactions: Direct transactions with related parties at below-market prices.
Under-the-Table Deals: Transactions with unreported or falsified values to evade taxes.
Targeted Investigation: The NTS investigation focuses on individuals suspected of:Illegal Inheritance: 35 individuals who acquired expensive apartments through illegal inheritance or unreported funds.
Falsified Transactions: Individuals who manipulated transactions to evade taxes, such as fictitious sales or exploiting bankrupt entities.
Under-Reported Transactions: Individuals who failed to report or under-reported transactions to minimize tax liabilities.

Case Examples

Case A: An individual acquired a high-priced apartment in Seoul, despite having insufficient income. The individual's father had received substantial dividends and sold a commercial building, but the funds' whereabouts were unclear. The NTS suspects illegal inheritance and will investigate the source of funds.
Fictitious Sales: Multiple cases were found where individuals falsely transferred ownership of a property to a relative to avoid taxes on another property that significantly increased in value.
Exploiting Bankrupt Entities: Individuals transferred real estate to a failing company at a low price, then had the company quickly resell it at a higher price, shifting the tax burden to the company.

NTS Commitment

The NTS emphasizes its commitment to combating real estate tax evasion, citing its negative impact on tax fairness and public morale. The agency plans to enhance monitoring in high-demand areas, utilize data analysis to detect suspicious activities, and thoroughly investigate those suspected of tax evasion.

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