Going forward, the National Tax Service will conduct full-scale verification of transactions of high-priced apartments worth 3 billion won or more located in the Han River belt. The aim is to thoroughly verify the sources of funds for dwellings transactions and block illegal or expedient flows of money at the source.
Donation transactions of high-priced apartments will also be fully investigated. The tax authorities plan to closely examine irregular donations, such as reporting gift tax at prices lower than market value or disguising transactions as low-price transfers to avoid appraisal.
According to the real estate market stabilization measures announced on the 15th, the maximum limit on mortgage loans for dwellings worth 3 billion won or more within the Seoul metropolitan area and regulated areas will be capped at 200 million won. If purchasing an apartment with a market price of 3 billion won or more, the buyer can raise 200 million won through financing and must directly procure the remaining funds of at least 2.8 billion won.
The National Tax Service plans to rigorously verify the sources of funds raised by individuals. For funds whose sources are not clearly identified as earned income and the like, it will determine whether there were unreported inheritances or donations, or whether corporate funds are being diverted for private use.
Im Gwang-hyeon, National Tax Service Commissioner, said, "We will comprehensively expand the number and scope of investigations into sources of funds until market conditions stabilize," adding, "If verification finds that business income was omitted or corporate funds were improperly siphoned off to make the purchase, we will expand the investigation to the related enterprise." The National Tax Service also plans to identify the income sources of parents when high-priced dwellings are purchased using the so-called "parental chance."
The National Tax Service is closely watching "tax evasion acts that abuse donations." Common tax evasion methods exploiting donation transactions reportedly include: ▲ reporting donations at far below market value ▲ splitting donations to avoid appraisal ▲ roundabout donations using corporations ▲ cases where parents pay the interest on mortgages set on donated dwellings. The National Tax Service is said to be conducting full verification first on 1,500 donation transactions of high-priced apartments reported in the first half of this year in the four Gangnam districts and the Mapo, Yongsan, and Seongdong areas.
As a result of prior verification, the National Tax Service said it has detected numerous suspected cases of tax evasion through donations with assumed liabilities. Tax evasion via such donations works as follows. Parents donate a dwelling with a market price of 1 billion won along with 500 million won in debt, and report the donated property as 500 million won. The parents move in as tenants of the dwelling and repay the 500 million won housing loan on behalf of the child. As the parents repay the loan, the debt relationship between the child and the bank is extinguished, resulting in a donation benefit of 500 million won to the child. Because the repayment and debt extinguishment occur over a long period, this expedient donation method exploits the difficulty for the National Tax Service to continuously monitor it.
Commissioner Im said, "We will closely check whether the child who received the donation is actually repaying the collateralized loan and the jeonse deposit, or even if the debt is being repaid, whether the child is receiving separate living expenses from the parents, and we will strictly collect any evaded taxes."
Verification will also be strengthened for brokerages suspected of disrupting the market and pocketing illegal revenue through methods such as canceling reported transactions. The authorities also plan to determine through tax audits whether real estate YouTubers and bloggers who promote speculation via YouTube broadcasts and the like are earning unjust revenue.
The collection of information on tax evasion activities in overheated areas will also be strengthened. The National Tax Service will set up a "real estate tax evasion reporting center" on Hometax and at local tax offices to receive tips. The seven regional offices will operate separate information collection teams.
Information sharing with the Ministry of Land, Infrastructure and Transport will also be strengthened. By checking the source of funds statements and related supporting documents submitted by dwellings buyers, the authorities intend to determine where the funds came from and whether the funds were properly taxed. They also plan to check whether interest is being paid accurately on loans among family members.
An official at the National Tax Service said, "In relation to real estate transactions, speculative transactions aimed at capital gains and expedient fundraising for the transfer of wealth are rampant," adding, "We aim to thoroughly block illegal flows of money to calm excessive demand and speculative demand. In particular, we will rigorously verify irregular donations that have been carried out covertly."