Woman used title trust scheme to slash nearly W10m tax bill to under 100,000 won

A woman in her 40s has been caught by police for placing company-owned property under a nominee's name to avoid nearly 10 million won ($7,550) in annual comprehensive real estate tax. After the arrangement was made, the company's annual tax bill fell to under 100,000 won.

Seoul's Dongdaemun Police Station said Friday it had referred the woman, identified only as A, and the real estate rental company she heads, referred to as Corporation B, to prosecutors on Sept. 2 on charges of violating the Act on Registration of Real Estate under Actual Titleholder's Name, commonly known as the Real Estate Nominee Ownership Prohibition Act.

According to police, A searched the internet around 2022 to find ways to reduce the comprehensive real estate tax burden on her company and discovered a method involving nominee ownership — an arrangement in which the registered title of a property is held in another person's name while the actual owner retains control.

Police determined that the company continued to manage the property while A nominally held the title. A then transferred her status as trustor to an acquaintance, identified as C, who carried a lower tax liability — exploiting the fact that the comprehensive real estate tax is calculated and levied based on the trustor. A police official said C agreed to the request without knowing A intended to avoid the tax.

As a result of the scheme, Corporation B had paid nearly 10 million won in comprehensive real estate tax annually through 2022, but from the following year the amount fell to under 100,000 won.

The case came to light through a targeted audit the National Tax Service conducted last year. The Changwon Uichang District Office in South Gyeongsang Province filed a complaint, which the Changwon West Police Station received in late July, and the case was later transferred to the Dongdaemun station, where the suspect resides.

Police also referred Corporation B on the grounds that it had failed to exercise the duty of care and supervision required to prevent its representative from engaging in nominee ownership, applying the dual-punishment provision under the Real Estate Nominee Ownership Prohibition Act.

Tax evasion charges were not included in this referral, however. A Dongdaemun Police Station official said the complaint had been filed from the outset on charges of violating the Real Estate Nominee Ownership Prohibition Act, and that tax crimes such as tax evasion can only be investigated upon a separate complaint from the National Tax Service.