NTS recovers W31.8b from 80-plus real estate tax evaders

The National Tax Service said Tuesday it had uncovered 73.1 billion won ($47.7 million) in hidden income from more than 80 suspected real estate tax evaders and recovered 31.8 billion won in back taxes.

Where tax evasion through fraud or other illicit means was confirmed, the NTS imposed a 40 percent penalty surcharge for fraudulent underreporting. Under the Tax Offense Punishment Act, six individuals were referred to prosecutors, while four others received penalty notices requiring them to pay a combined 700 million won in lieu of criminal charges.

Person A, who owned two homes, sold the cheaper of the two to a friend of his mother, then reported the sale of the more expensive apartment — sold for 2 billion won — as exempt from capital gains tax under the one-household, one-home rule. The sale to the mother's friend was fictitious: A continued living in the property after the purported transfer under a sham jeonse contract and paid the accomplice hundreds of thousands of won each month as compensation for the arrangement. The NTS caught the scheme and levied 1 billion won in capital gains tax at the heavy-tax rate. A, his mother — who orchestrated the fraudulent transaction — and the mother's friend now face criminal investigation by prosecutors on tax evasion charges.

Person B acquired multiple properties, including a 4 billion won apartment in Seoul's Gangnam area slated for reconstruction, on a scale that raised NTS suspicions given B's reported income. An investigation found that funds had flowed in from a livestock wholesale company operated by B's spouse. Widening the probe, investigators traced roughly 3 billion won in off-the-books cash — generated through unreported sales — to B. The NTS recovered 3.1 billion won covering corporate tax on the unreported sales and gift tax on the funds B used to acquire the properties.

Person C, also a two-home owner, staged a sham sale through her husband's friend to qualify for a tax exemption, and was assessed 600 million won in capital gains tax and referred to prosecutors.

Before selling a standalone house worth 1.5 billion won, C routed funds through another acquaintance to her husband's friend to create the appearance of a legitimate sale, fabricating financial records in the process, investigators found.

Person D, in his 30s, acquired a large apartment in northern Seoul valued at 4 billion won and spent hundreds of millions of won on interior renovations alone.

D listed the entire purchase price as coming from personal savings in a funding disclosure form but was flagged for investigation because he had no apparent income source to support the claim.

Investigators found that D had been running an unregistered travel agency catering to foreign visitors — arranging accommodation, restaurant bookings, duty-free shopping and tourism services — and had failed to report 6 billion won in cash income. He was assessed 2.5 billion won in value-added tax and comprehensive income tax.

The NTS also caught gift tax evasion by foreign nationals — sometimes referred to colloquially as "black-haired foreigners," a term for ethnic Koreans holding foreign citizenship.

Person E, together with a foreign-national spouse, jointly purchased two high-priced apartments in the Mapo, Yongsan and Seongdong-gu corridor for 3 billion won, with no intention of actually living there.

E, a homemaker with no income, received the full purchase price and renovation costs as gifts from her spouse without filing a gift tax return. She was ordered to pay 400 million won in unpaid taxes.

The NTS also uncovered cases of what is commonly called "parent privilege" — undisclosed financial support from parents.

Person F, in his 40s, paid 7 million won a month in rent for a high-end apartment along the Han River in Gangnam, had acquired shares worth tens of billions of won and was spending hundreds of millions of won annually on living expenses.

Investigators confirmed that F had received about 2 billion won in gifts from his parents without reporting them and was assessed a total of 1.3 billion won in gift tax.

The NTS also notified relevant local governments of 20 individuals found to have violated the Real Estate Registration Act — including through title-trust arrangements — so that penalty surcharges and criminal sanctions could be pursued.

The NTS said it would continue to identify tax evasion risks at every stage of real estate transactions — acquisition, ownership and transfer — and respond forcefully, including through tax audits, whenever evasion is confirmed.

The agency said it would pay particular attention to improper gift arrangements — such as undervaluing gifted assets or having gift taxes paid by a third party — given concerns that gift transactions may increase following the reintroduction of the heavy tax rate on multi-home owners.

The NTS said it would thoroughly verify tip-offs received through its real estate tax evasion reporting center, recover unpaid taxes and promptly pay rewards to informants.

Oh Sang-hun, director of the NTS asset taxation bureau, said blocking real estate tax evasion "is both an act of restoring tax justice and a starting point for rebuilding stability and trust in the housing market," adding that the agency would uphold the principle that "tax evasion will always be caught."