Tax Evasion on Gift Tax by Buying Expensive Apartments Using 'Parent Chance'... National Tax Service Conducts Real Estate Transaction Tax Investigation

156 Individuals Targeted for Illicit Gift Transfers and Low-Price Direct Transactions
NTS Vows Strict Response Including Thorough Verification of Fund Sources

The National Tax Service (NTS) has launched a tax investigation into real estate transactions suspected of involving high-priced property acquisitions through illicit gift transfers, low-price direct transactions with related parties, and under-the-table contract deals, primarily focusing on preferred apartment areas.

On the 17th, the NTS announced that it will conduct tax audits on a total of 156 individuals suspected of engaging in irregular and sophisticated tax evasion during high-value real estate transactions.

The subjects of this tax investigation include ▲35 individuals suspected of acquiring high-priced apartments through illicit gift transfers or unreported funds ▲37 individuals suspected of sophisticated tax evasion such as fictitious sales and inserting shell corporations ▲37 individuals suspected of underreporting capital gains through under-the-table contract deals ▲29 individuals suspected of tax evasion through low-price direct transactions between related parties ▲and 18 individuals involved in planned real estate fractionation schemes.

An NTS official explained, "Although the overall real estate market is weak, polarization between Seoul and other regions is intensifying due to preferences such as Eoljuksin (newly built properties preferred even in a downturn) and the preference for a single well-located home. Even within Seoul, apartments in the Gangnam area show concentration trends, surpassing the peak prices of the rapid price surge period." The official added, "In these preferred areas, attempts to evade taxes through illicit gift transfers for acquiring high-priced homes, low-price direct transactions with related parties, and under-the-table contract deals have not been eradicated. Moreover, tax evasion methods using fictitious sales are becoming increasingly sophisticated," explaining the purpose of this tax investigation.

According to the NTS, a child, Mr. A, acquired a high-priced apartment in Seoul worth several billion won, which is tens of times his income, making it difficult to purchase independently. It was confirmed that his father, Mr. B, received a large dividend payment shortly before Mr. A acquired the apartment and also sold a commercial building he owned, but the use of these funds remains unclear. Considering Mr. A’s income and assets and Mr. B’s financial capacity, the NTS analyzes that Mr. A acquired the apartment with support from his father. However, there is no record of gift tax filing. Accordingly, the NTS plans to conduct a detailed verification of the sources of funds used for the apartment purchase to investigate whether there was illicit gift transfer from the father and any unreported income.

An NTS official stated, "Going forward, the NTS will closely verify whether tax reporting has been properly conducted during real estate transactions by collecting on-site information and utilizing various taxation infrastructures, focusing on areas where transactions are concentrated due to development prospects." The official added, "If any irregular and sophisticated tax evasion is confirmed, we will thoroughly investigate and strive to implement fair taxation."