South Korea's National Tax Service (NTS) said Wednesday it will conduct tax audits on 127 suspected real estate tax evaders, including those engaging in so-called "parent-funded" deals that borrow large sums from parents to circumvent loan regulations.
The NTS judged that workaround transactions evading loan regulations are increasing as expectations for property price gains spread following the resumption of heavier capital gains taxes on multi-home owners on the 9th.
The agency selected transaction types requiring tax verification and identified 127 suspected evaders as audit targets. Their housing acquisitions total 360 billion won, with tax evasion amounting to 170 billion won.
About 30 cash-rich individuals who circumvented loan regulations and those carrying excessive private-party debts are among the audit targets. A 30-something employee at a major conglomerate, identified as A, and his spouse B jointly purchased an apartment worth 3 billion won in Seoul's Gangnam district — an area with strong educational infrastructure — entirely in cash without any loans. The issue is that A's father sold 3 billion won worth of overseas stocks just before the apartment purchase. The NTS plans to thoroughly verify whether an irregular gift took place by tracing the source of the couple's acquisition funds and the use of the father's overseas stock sale proceeds.
C, a young professional in his early 30s, purchased an apartment worth around 2 billion won in a new town in the Gangnam area but took out only a small mortgage. He borrowed the remaining 1 billion won or so from his father, a building owner, and drew up a loan agreement setting his father's death as the repayment deadline, with interest also to be paid in a lump sum at that time. The NTS suspects the son, lacking repayment ability, received a large irregular gift through a fictitious debt contract and has launched an investigation.
About 30 multi-home owners who purchased additional high-end apartments seeking capital gains were also included in the audit. D, who already owned two homes, bought a high-end Han River-view apartment in Seoul's "Ma-Yong-Seong" area (Mapo, Yongsan, and Seongdong districts) for around 3 billion won without any loans, but the source of funds was unclear. An NTS analysis found that D received irregular support from his parents, who run a mid-sized company, not only for the apartment acquisition funds but also for incidental costs such as acquisition taxes and fees.
The NTS said it will identify without exception any tax avoidance attempts using irregular gifts, indirect transactions, or other workarounds, and impose a 40% punitive surtax. The agency will also conduct full-scale verification starting in the second half of the year on those who acquired high-end apartments by abusing business loans.
