Down Contract with a 50 Million Won Car to Drive a BMW Over 200 Million Won... Avoided Light Green License Plate [2024 National Audit]

People Power Party Rep. Kim Eun-hye
"Green License Plate Evasion Tactic" Criticized
Under-the-Table Contracts and Insurance Switching
Tax Evasion Suspicions Spread

Various loopholes to avoid corporate cars with light green license plates and suspicious signs of tax evasion resulting from this have been discovered.

According to Kim Eun-hye, a member of the National Assembly Land, Infrastructure and Transport Committee from the People Power Party, the number of imported corporate cars registered in the first half of this year (January to June) was counted at 47,242 units. Among them, passenger and van cars priced over 80 million KRW for general consumers totaled 18,898 units. Of these, 6,290 vehicles were reported with a vehicle price below 80 million KRW, lower than the general consumer price, and thus did not carry the light green license plates. All vehicles registered in the first half of this year were new cars, and the corporations reported the initial acquisition price.

At the Ministry of Land, Infrastructure and Transport’s audit held at the Government Sejong Complex on the 7th, Representative Kim pointed out, “The scale of tax evasion involving acquisition tax, registration tax, and individual consumption tax due to underreporting of purchase prices is likely to be significant.”

BMW New M8 Competition Coupe. Not directly related to the article.

For example, a BMW ‘M8 Coupe Competition’ reported by Corporation A with an acquisition price of 56,909,091 KRW is listed at 249,400,000 KRW on a vehicle sales website (as of the 6th). The estimated taxes (acquisition tax, registration tax, individual consumption tax, and Seoul city bond discount) payable if purchased at the base price amount to 30,083,000 KRW, but Corporation A’s estimated tax based on the underreported purchase price is 7,625,817 KRW. It is estimated that about 22 million KRW in taxes were underpaid.

Representative Kim said, “Under current law, automobile registration is based on a ‘reporting system,’ which allows such crafty registrations and tax evasion. Vehicle buyers (including corporations) simply ‘report’ the ‘vehicle ex-factory price’ stated on the vehicle production certificate issued by the manufacturer when registering the car, and it is reflected as is.”

He pointed out, “Especially, methods to avoid the light green license plates are evolving further.” Some imported car companies even change the ‘vehicle identification number (VIN),’ which acts like a resident registration card for the vehicle, to create grounds for discounted sales through under-the-table contracts.

The VIN contains information such as the country of manufacture, manufacturer, vehicle type, engine displacement, model year, and production plant. It consists of 17 characters including alphabets and unique numbers. While the country of manufacture and manufacturer follow international standards, the vehicle type, engine displacement, model year, production plant, and unique number are assigned by the manufacturer. The model year, indicating the vehicle production period, is recorded in the 10th character.

The problem is that according to the ‘Regulations on the Operation of Vehicle Identification Numbers,’ the production year can be arbitrarily indicated. Regardless of the actual production time, the model year can be increased or decreased within 24 months. Additionally, if the vehicle is corroded, the VIN can be reassigned.

In the case of Corporation A’s ‘M8 Coupe Competition,’ although it is a newly registered vehicle, the model year registered with the Ministry of Land, Infrastructure and Transport is 2020. Representative Kim pointed out, “Under the current system, the manufacturer assigns the VIN including the model year,” and “imported car companies exploit the loophole in VIN assignment to make the actual production year and the model year on the VIN different, and the Ministry of Land, Infrastructure and Transport and related agencies cannot verify this.”

Recently, a method of swapping automobile insurance subscribers has also appeared. When registering a vehicle, submitting a personal insurance certificate registered under the VIN deceives the system into issuing a general license plate as if it were a personal vehicle, then changing it to corporate ownership.

In the case of dealer B, when the vehicle price is too high to use an under-the-table contract, they recommended registering the vehicle as a personal vehicle to receive a general license plate and then changing the insurance to corporate insurance upon delivery. This exploits the fact that only insurance subscription is checked during vehicle registration.

The attachment of ‘light green license plates’ to high-priced corporate vehicles was a campaign promise of President Yoon Suk-yeol. As private use of corporate vehicles increased, if the light green license plate was not attached, operating expenses and depreciation costs would not be recognized.

In fact, after the implementation of this system, sales of high-priced imported cars decreased. According to the Korea Imported Automobile Association, the number of imported vehicles registered to corporations in the first half of this year was 42,200 units, down by 8,029 units compared to the same period last year (50,229 units).

However, Representative Kim pointed out that cases exploiting the system’s loopholes are emerging, undermining the original purpose. He said, “New types of crimes exploiting the loophole of accepting vehicle prices as reported are rampant,” and “It is urgent to reorganize the vehicle registration system to prevent crafty registrations based on objective vehicle prices and to transparently manage the tax base.”