South Korea Uncovers $53 Million in Tax Evasion from High-Value Real Estate Deals

South Korea's National Tax Service (NTS) has identified 73.1 billion won in tax evasion linked to high-value real estate transactions, uncovering sophisticated schemes designed to circumvent property taxes. The NTS launched a simultaneous investigation into 104 individuals suspected of real estate tax evasion on October 1, 2023, and has so far recovered 31.8 billion won.

One case detailed involves an individual who owned two homes. To claim the single-home capital gains tax exemption, the owner formally transferred ownership of a lower-priced apartment to an acquaintance of their mother. Subsequently, the owner sold a more expensive property to a third party for 2 billion won, reporting it as a single-home transaction. The original owner continued to reside in the less expensive apartment, even covering the acquaintance's acquisition and property taxes, and paid monthly fees for the temporary name transfer. The NTS deemed this a sham transaction using fraudulent name-lending and pursued 1 billion won in capital gains tax, also referring the individuals involved to prosecutors for tax evasion.

Investigations revealed approximately 40 similar cases where individuals improperly benefited from the single-home tax exemption through sham transactions. The NTS also uncovered various other evasion tactics, including deceptive property gifting, embezzlement of corporate funds, and tax evasion using foreign nationals' names.

Of the individuals investigated, six have been reported to the prosecution for violations of the tax evasion penalty act, while four received summary dispositions totaling 700 million won in fines. Additionally, 20 individuals were reported to local governments for violating the Real Estate Registration Act through name-lending schemes.

An official from the NTS's Asset Taxation Bureau stated, "In preparation for the potential increase in gift transactions due to the reintroduction of heavy taxes on multiple homeowners, we will intensively scrutinize for deceptive gifting and continuously monitor low-price transfers and sham sales among family members."

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In preparation for the potential increase in gift transactions due to the reintroduction of heavy taxes on multiple homeowners, we will intensively scrutinize for deceptive gifting and continuously monitor low-price transfers and sham sales among family members.