Buying a 3 billion won luxury apartment entirely in cash? The National Tax Service targets real estate tax evasion

[The Financial News]
\r\n\r#. Mr. A, who works for a major conglomerate, bought a luxury apartment worth more than 3 billion won without taking out a loan. Just before the purchase, his father, a wealthy asset holder, sold overseas stocks worth about 3 billion won, but the use of the funds was unclear. The National Tax Service (NTS) concluded that Mr. A had effectively received illicit support from his father to buy the apartment in full cash without borrowing.\r\n
According to the NTS on the 19th, cash-rich transactions like Mr. A's are being confirmed as market instability grows amid a decline in listings that had risen after the reinstatement of the heavier capital gains tax on multi-home owners and a broader expectation of price increases. So-called "parent power" deals, in which buyers borrow large sums from their parents to bypass lending restrictions, are also on the rise.
In response, the NTS selected 127 suspected tax evaders for investigation after screening transaction types that require tax-evasion verification, taking into account recent changes in market conditions. The total value of the homes acquired by those under review is estimated at about 360 billion won, with the suspected evaded amount reaching 170 billion won.
First, the agency has identified cases in which buyers used large amounts of cash to purchase high-end apartments, but no clear reported income could be found, making the source of funds uncertain. The NTS plans to trace and verify whether business income was concealed during the process of accumulating the funds or whether the money was illegally gifted by parents.
There are also cases in which buyers took out large loans from parents or other relatives, or borrowed money from related companies, to purchase homes after bank lending became difficult under tighter loan rules. The NTS plans to apply a stricter standard to determine whether such cases were effectively disguised gifts, especially when large sums were borrowed despite limited repayment capacity and only a formal promissory note was drawn up.
Oh Sang-hoon, Director-General of the Asset Taxation Bureau at the NTS, explained, "Even when a debt is recognized, we will manage it through post-review of liabilities to check whether the borrower repaid it personally and whether interest and other items were properly reported until the repayment date."
The NTS also selected as investigation targets suspected tax evaders who acquired and held multiple homes not for actual residence but for capital gains, using funds excessive relative to their income and assets. In addition, it is monitoring tax evasion cases involving home purchases in areas where prices have surged sharply over a short period, such as Seongbuk District and Gangseo District in Seoul's non-Gangnam areas, as well as parts of Gyeonggi Province including Gwangmyeong City and Guri.
For ultra-high-end apartments worth more than 3 billion won in the three Gangnam districts and Mayongseong, the agency is conducting a full review by closely examining the source of acquisition funds and the process of asset accumulation. Based on this, it plans to continue additional tax audits following the first round of investigations in October last year.
Oh said, "Until the market firmly internalizes the idea that tax evasion will inevitably be uncovered and punished accordingly, we plan to respond forcefully to tax evasion in real estate transactions using every available measure." He added, "We will uncover without exception attempts to avoid taxes through irregular gifts, roundabout transactions and other illegal methods that have raised concerns following the end of the grace period for heavier capital gains taxes on multi-home owners, and we will impose greater tax burdens, including unfair penalties, to eliminate incentives for tax evasion at the source."
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syj@fnnews.com Seo Young-joon Reporter