Faked Transfers to Avoid Multiple-Home Tax Result in Capital Gains Tax Bomb... "60 Million Won to 600 Million Won," a Tenfold Increase

National Tax Service Investigates 104 Suspects Since October, Recovers 31.8 Billion Won

Real Estate Tax Evasion Totals 73.1 Billion Won

Six Referred for Prosecution, Four Fined for Tax Evasion

‘Gap’, who owns Apartment A worth approximately 300 million won in a metropolitan city and Single-Family House B valued at about 1.5 billion won, transferred Apartment A under false pretenses to 'Eul', a friend of her husband, before selling Single-Family House B, which had significant capital gains. This was a sham transaction conducted to reduce capital gains tax by claiming the one-homeowner tax exemption when selling Single-Family House B for 1.5 billion won. At that time, Gap paid 60 million won in capital gains tax.

According to the National Tax Service’s investigation of the transaction-related flow of funds, Gap manipulated financial records to make it appear that Eul had actually acquired Apartment A. She secretly funneled the necessary funds for the transaction to her husband’s friend through other friends and colleagues. The National Tax Service confirmed that Gap, a multiple-homeowner, conducted a sham transaction of Apartment A to falsely present herself as a single-homeowner at the time of selling Single-Family House B and improperly benefited from the tax exemption. As a result, an additional 600 million won in capital gains tax was imposed—ten times the original amount. Furthermore, the National Tax Service reported both Gap, who evaded taxes through fraudulent means, and her husband’s friend, who assisted in the tax evasion, to the prosecution as tax offenders. The authorities also notified the relevant local government of a violation of the Real Name Real Estate Act regarding the title trust of Apartment A.

The National Tax Service announced on the 7th that it launched a simultaneous investigation into 104 suspected cases of real estate tax evasion involving ultra-high-priced homes last October and has so far collected a total of 31.8 billion won in taxes. The total amount of tax evasion identified in these cases reached 73.1 billion won.

The investigation uncovered cases where individuals acquired expensive apartments using funds secretly gifted from parents, thereby evading gift tax. Numerous cases were also detected where multiple-homeowners transferred ownership of low-priced homes to relatives or acquaintances under false names and then sold high-value properties with large capital gains, thereby improperly applying the one-homeowner tax exemption or avoiding higher tax rates through sham transactions.

In one case, an unemployed individual in their 40s, referred to as C, lived in a high-end apartment along the Han River in Gangnam with a monthly rent exceeding 7 million won. C received about 2 billion won from parents to cover rent, stock investments, and living expenses without reporting the gifts and was subsequently ordered to pay 1.3 billion won in additional gift tax.

There was also a case where a spouse purchased a high-priced apartment using corporate funds and was caught. D, a person in their 50s, acquired multiple properties, including a planned redevelopment ultra-high-priced apartment in the Gangnam area worth around 4 billion won. The National Tax Service traced the flow of funds and found that D received 2 billion won as a gift from a spouse, who was the CEO of a livestock company. The spouse had secretly gifted 2 billion won to D out of approximately 3 billion won in slush funds generated from unreported sales to clients. Consequently, the National Tax Service imposed an additional 3.1 billion won in taxes, including corporate tax for the livestock wholesaling company’s unreported sales and gift tax on D’s real estate acquisition funds.

A case where corporate funds, which were omitted from sales, were embezzled and used as funds to purchase a high-priced apartment for the spouse. National Tax Service

Sanghoon Oh, Director of the Asset Taxation Bureau at the National Tax Service, stated, "The National Tax Service not only thoroughly collected omitted taxes such as capital gains tax and gift tax uncovered during real estate transactions, but also expanded its investigations to businesses if the source of funds was related to omitted business income or corporate fund leakage, ensuring that all omitted corporate and income taxes were recovered. In cases where tax evasion was confirmed to have taken place through fraud or other unlawful means, a penalty tax for underreporting—amounting to 40%—was imposed."

He added that, in accordance with the Act on the Aggravated Punishment of Tax Offenses, in addition to collecting taxes, six individuals were reported to the prosecution and four were subject to notifications imposing fines totaling 700 million won. Not only the subjects of the investigation but also those found to have participated in fraudulent acts were subject to prosecution and other penalties. Those who evade taxes through fraud or other unlawful acts may face up to two years in prison or a fine of up to twice the amount of tax evaded. Additionally, for 20 individuals found to have violated the Real Name Real Estate Act, including title trusts, the relevant local governments were notified so that fines and criminal penalties could be imposed.

Director Oh also remarked, "Since there is concern that gift transactions among multiple-homeowners may increase after the reinstatement of heavier taxation, we plan to closely examine whether there are any schemes such as undervaluing gifted assets or paying gift taxes on behalf of others, with a focus on gift transactions by multiple-homeowners." He continued, "We will also thoroughly monitor family transactions aimed at tax avoidance, such as parents transferring apartments to children at prices significantly below market value or disguising gifts as sales."

This content was produced with the assistance of AI translation services.