South Korea’s tax agency said Tuesday that it has launched probes into 98 individuals for alleged property tax evasion as part of its ongoing efforts to strengthen a crackdown on tax dodgers and those who fall behind on large sums in taxes.
Among the tax evasion schemes identified by the National Tax Service were 22 Koreans who purchased multiple homes here by establishing corporations or investing in private equity funds and 76 people aged 39 or younger who bought luxury apartments.
Of those 76 were 30 foreigners, most of whom are relatively young ethnic Koreans, who purchased pricey homes allegedly without paying due taxes. One foreign national, for example, has owned a luxury apartment here for years. The person rented the home to another foreigner but both failed to register as a rental business operator and report the rental income to the tax agency. The owner of the luxury apartment in question also has a high-end car. As the tax agency uncovered allegations that the foreign national has received large amounts of money from family members, it plans to further probe into whether the person has paid due gift taxes.
During the ongoing COVID-19 economic crisis, a number of means of unconventional real estate tax evasion have allegedly taken place, according to the NPS. Amid tighter mortgage rules in areas that are subject to special restrictions and tough scrutiny on the sources of capital, the tax agency has expressed concerns about the increasing number of tax evasion cases.
NTS recently monitored some cases involving a “gap investment,” a widely popular investment method, which allows a homebuyer to purchase a house with a relatively small amount of their own money by leveraging a tenant’s two-year lump-sum rent deposit.
The homebuying method has been blamed for aggravating the housing price bubble in the Seoul area by pushing speculative buyers to financial extremes on the back of low interest rates.
In addition, five Seoul residents living in nearby neighbors chipped in to create a fund worth 10 trillion won ($8.6 billion) to buy multiple homes. They registered and purchased apartments through people’s names with no home to avoid paying transfer income taxes.
The tax agency fined them and reported them to a self-governing body for allegedly breaching the act on the registration of real estate. Violators of the rule can be slapped with a penalty of up to 30 percent of the property price.
“We will continuously monitor regional real estate transaction trends to close real estate tax loopholes via local tax offices. We further vow to make our best efforts to probe unconventional tax evasion by carefully inspecting transaction processes from acquiring assets to debt redemption.”
By Jie Ye-eun (firstname.lastname@example.org