Gyeonggi-do Cracks Down on 7 Agricultural Corporations Abusing Real Estate Acquisition Tax Exemptions

[Asia Economy (Suwon) = Reporter Lee Young-gyu] Gyeonggi Province has uncovered seven agricultural corporations that exploited the acquisition tax reduction system for agricultural real estate, received tax reductions, and then resold the properties without adhering to the mandatory usage period, thereby gaining unfair profits.

In February, Gyeonggi Province conducted a comprehensive investigation into the acquisition tax reduction status over the past five years targeting a total of 27,493 agricultural corporations in the province. As a result, 184 corporations were found to have sold land without observing the mandatory three-year usage period after receiving acquisition tax reductions. Among these, 37 corporations suspected of local tax evasion were investigated, and illegal activities were ultimately confirmed in seven cases.

For example, Agricultural Corporation A, located in Seoul, was established in 2015 with the intention of cultivating rice. That same year, it acquired farmland in Pyeongtaek, Gyeonggi Province. Despite the mandatory three-year usage period, the corporation divided and resold the land to 109 individuals starting the day after acquisition, earning a sales profit of 3.5 billion KRW. It was also found to have submitted a false agricultural management plan to receive the acquisition tax reduction, pretending to actually farm rice.

Agricultural Corporation B in Anseong purchased six forest land parcels totaling 307,437㎡ in Anseong City for 3.7 billion KRW over three transactions from 2018 to last year. It then divided and sold shares to 33 individuals, making a profit of 3.1 billion KRW. Furthermore, it falsely reported that it would farm the already disposed land and unjustly received an acquisition tax reduction of 74 million KRW.

The province has filed criminal charges against Corporations A and B with the prosecution.

Gangwon Province’s Agricultural Cooperative Corporation C acquired forest land in Pyeongtaek, Gyeonggi Province in 2015 but resold the land within the mandatory three-year usage period, evading taxes. After being caught in this investigation, it paid off 11 million KRW in overdue taxes that had been unpaid for over four years.

Under the current 'Local Tax Basic Act' (Article 102), evading local taxes is punishable by imprisonment of up to two years or a fine of up to twice the evaded tax amount.

Agricultural Corporation D, located in Gimpo, sold its only property to its related party, the son’s Corporation E, without paying acquisition tax, thereby avoiding tax collection measures. Investigation of the representatives of both corporations revealed that after setting up a provisional registration on the property, they transferred the property free of charge in collusion to avoid D Agricultural Corporation from paying taxes.

Article 103 of the Local Tax Basic Act stipulates that evading the execution of tax collection measures is punishable by imprisonment of up to three years or a fine of up to 30 million KRW.

Lee Eui-hwan, Director of the Tax Justice Division of the province, stated, "This investigation is significant as a metropolitan government’s punitive investigation targeting agricultural corporations that evade local taxes by abusing the 'Local Tax Special Cases Restriction Act.' We will continue to conduct thorough investigations to prevent agricultural corporations from abusing tax evasion and strive to eradicate tax-related fraudulent activities in Gyeonggi Province."