Intensified tax probes into private supercar use may freeze luxury market

South Korea's luxury car market faces renewed pressure as the National Tax Service (NTS) launches a stringent investigation into the private use of corporate-owned supercars. This intensified scrutiny, coupled with the recent introduction of a green license plate system for corporate vehicles, is poised to further depress demand in an already sensitive market.

NTS Commissioner Im Kwang-hyun stated that using corporate supercars for personal activities such as family trips, golf, or visits to entertainment venues, while expensing them as company costs, constitutes clear tax evasion. "Purchasing high-end corporate vehicles with company money and expensing them is, in effect, partially borne by the public's taxes," he asserted, adding that the NTS is thoroughly analyzing acquisition, operation, and expense details of such vehicles and will conduct strict tax audits if private use is confirmed.

“

Using corporate supercars for family outings, golf, or visits to entertainment venues, while expensing them as company costs, constitutes clear tax evasion.

President Yoon Suk-yeol had previously pointed out the problematic practice of private use of luxury imported cars and called for improved systems and stricter management. The industry observes that this regulatory tightening is rapidly chilling purchasing sentiment for corporate-owned supercars. A key driver of past market growth, the tax-saving benefits from corporate leases, is now effectively blocked. Previously, companies could reduce corporate tax burdens by expensing depreciation and maintenance costs for leased vehicles, offering significant tax savings.

“

Purchasing high-end corporate vehicles with company money and expensing them is, in effect, partially borne by the public's taxes.

The impact is already visible in sales figures. Sales of imported cars priced over 100 million won (approximately $72,000 USD) for corporate use dropped from 51,083 units in 2023 to 35,320 in 2024, with a partial recovery to 41,155 last year still below previous levels. Brands like Lamborghini saw a 37% decrease in domestic sales in the first four months of 2024 compared to the same period last year, while Ferrari sales fell by 42.3% and Rolls-Royce by 13.8%. Porsche sales also declined by 20.7%.

This regulatory shift is also reshaping the market's customer base. The focus is shifting towards wealthy individuals who purchase vehicles under their own names to avoid tax investigation burdens. Supercar brands are responding by strengthening experience-focused marketing, including custom services, track driving events, and private memberships, to attract individual buyers. An industry insider noted that while corporate leases fueled market growth in the past, pure individual purchases are now increasing, leading to a qualitative restructuring of the high-end vehicle market, even if it contracts quantitatively due to increased tax risks.

“

In the past, corporate leases fueled market growth, but pure individual purchases are now increasing. Tax risks are growing, leading to a qualitative restructuring of the high-end vehicle market, even if it contracts quantitatively.