"Earned Over 1 Billion Won but Paid Zero Taxes?"... Finally Took Action Against Tax Evasion Tricks

Strict Response to Tax Evasion Such as 'Juso Setak'
Plan to Recover All Tax Reductions Received

Tax authorities have taken strong measures against tax evasion activities involving so-called 'address laundering.'

Recently, the National Tax Service (NTS) announced that it will strictly respond to tax evasion activities abusing deduction and exemption systems. After post-management of tax credits such as tax reductions and employment increase tax credits, the NTS revealed that last year, 2,900 corporations and 649 individuals improperly received deductions and exemptions. Accordingly, the NTS collected a total of 174.9 billion KRW in additional taxes, including 162.4 billion KRW from corporations and 12.5 billion KRW from individuals. The scale of collection has significantly increased from 54.4 billion KRW in 2021 and 71.2 billion KRW in 2022.

For example, YouTuber A earned over 1 billion KRW in income over several years but did not pay any income tax. After hearing that starting a business outside the Seoul Metropolitan Area Overcrowding Control Zone grants a 100% income tax exemption for five years, A registered the business at a shared office in Yongin-si, Gyeonggi Province, even though the actual business location was in Seoul. A suspicious acquaintance reported to the tax authorities that despite earning tens of billions of KRW, A paid no tax due to the startup exemption. Upon verification by the local tax office, it was found that the shared office where A registered had over 1,000 businesses registered, and it was a location only capable of receiving mail without separate office spaces, used for address laundering. The tax office confirmed that A did not use the office and revoked the business registration ex officio, planning to collect all exempted income tax and penalties.

Recently, cases of 'address laundering' have been discovered, where some YouTubers and online sellers falsely register their businesses at shared offices in areas outside the Seoul Metropolitan Area Overcrowding Control Zone, such as Yongin in Gyeonggi Province and Songdo in Incheon, to apply for high startup SME tax reduction rates. The NTS has formed a Shared Office Tax Source Management Task Force (TF) to conduct detailed verification. However, there is criticism that fundamentally, YouTubers or one-person broadcasters (BJs) earning tens of billions of KRW should be scrutinized as to whether they qualify for the ‘Youth Startup Tax Reduction’ aimed at dispersing the metropolitan population and revitalizing youth entrepreneurship.

Additionally, there were cases targeting the research and manpower development tax credit. Four dental prosthetics companies applied for the research and manpower development tax credit for labor costs spent on research and development (R&D) activities. However, all four companies dealt with the same consulting firm suspected of being an illegal R&D broker, and it was found that they submitted false supporting documents by simply citing and copying other companies’ papers and patents.

Moreover, there were cases where ▲ hospitals and clinics ▲ academies ▲ pubs ▲ taxi companies were recognized as research institutes by authorized institutions and attempted to receive tax credits without conducting R&D activities. An NTS official stated, "We confirmed that industries with little relation to R&D, including pubs pointed out in the recent National Assembly audit and beauty salons, have registered as research institutes," emphasizing, "We will inspect whether actual R&D was conducted when these businesses applied for tax credits." The official also warned, "Some academy operators applied for R&D tax credits for costs related to video lecture production or marketing activities," and added that similar cases will be inspected in the future.