National Tax Service Administrator Lim Gwang-hyeon said the agency will identify whether other income from earnest money received when canceling real estate contracts was reported and will impose taxes when filing comprehensive income taxes next year.
Administrator Lim answered at a National Assembly Strategy and Finance Committee audit held on the 16th at the National Tax Service building in the annex of the Government Complex Sejong, responding to Democratic Party of Korea lawmaker Kim Young-hwan's point that "the number of canceled Seoul apartment contracts in the first half of this year was 4,240, a threefold increase from a year earlier, and it was concentrated especially in areas with many high-priced homes such as Gangnam. Real estate price manipulation by contracting and then canceling is suspected," by saying, "We will obtain the data when comprehensive income taxes are filed in May next year and strictly tax any omissions."
Kim said, "When a contract is canceled, if the buyer forfeits the earnest money or the seller returns double the amount, that money is subject to other income tax, but reporting is not being done properly," adding, "Because the National Tax Service does not manage cancellation statistics by type and region, there is a blind spot in monitoring tax evasion."
Administrator Lim said, "Compensation received due to contract cancellation is subject to other income tax," and noted, "The taxpayer must file on their own."
He went on to say, "As the number of cancellations has surged recently, we will obtain the data when comprehensive income taxes are filed in May next year and strictly tax any unreported amounts." He added, "We will correct statistics that are not currently managed separately and establish a type-by-type management system for cancellation cases."