Tax service focuses on buyers of property
In total, the NTS has been looking into 531 such cases since Oct. 11, in cooperation with 32 other government ministries, agencies and departments, including the Ministry of Land, Infrastructure and Transport, the Financial Services Commission and the Korea Appraisal Board.
In its preliminary findings, 512.4 billion won ($440 million) was used by 531 people to purchase the apartments. Of that, 69 percent was debt, or 355.3 billion won, while 157.1 billion won was equity.
Among the apartments that were investigated, nearly 40 percent had a market value exceeding 900 million won, while 29 percent were valued between 600 and 900 million won.
The tax agency looked into the sources of funding, including whether they received financing from their parents and the terms and conditions of loans.
The preliminary investigation was conducted on apartments valued above 300 million in Seoul and purchased since August. The study was based on the buyers’ income, spending and total assets.
The NTS found that 101 people were suspected of inheriting the payment used for buying the apartment from either their parents or relatives, as the buyer had no clear sources of income or the ability to pay the debt.
In one of the cases, the NTS found that a 23-year-old college student purchased a 1.8-billion-won apartment in the Gangnam area in June. The college student, only identified as Kim, told the tax agency that their parents lent them 1.5 billion won for buying the apartment. The NTS said Kim has no income and no additional sources for paying off the loan from the parents. It considered the “loan” to be inheritance.
The NTS suspected 156 of those dodging their income taxes as the source of funding for the apartment purchases were unclear.
In total, the service has investigated 2,452 homebuyers since August 2017 and recovered 439.8 billion won of unpaid taxes.
“As apartment prices in several areas including Seoul continued to rise, the possibility of illegal transactions on apartments has increased,” said a property taxation bureau official at the NTS. “We plan on conducting an audit on anyone suspected of dodging taxes in analyzing the financial sources in buying high-end apartment.”
The NTS also signaled additional investigations. It said it plans on cracking down on real estate-related companies opened by owners of multiple properties that were created for the sole purpose of tax dodging.
This year as of Dec. 6, the number of real estate companies surged 90.7 percent compared to the previous year, according to the NTS.
Creating a real estate company allows those who own multiple apartments to reduce the number of apartments that are registered under the name of an individual by registering the rest under the company. As such, the actual owner of the apartment can cut taxes, including the comprehensive real estate tax and the capital gains tax.
Korea’s top financial regulator on Monday asked financial institutions to divert loans from mortgages to innovative companies.
“Until now the financial market has been heavily concentrated on household loans with mortgages at the center,” Financial Service Chairman (FSC) Eun Sung-soo said Monday. “We are at a point where we need to change the course of capital flow for the healthy development of the financial industry and our economy’s innovative growth.”
He said instead of lending for housing, funds should be diverted to promising companies.
“More capitals should be given to companies that have the technologies and future potential,” Eun said.
The FSC chairman was the first top government official to announce that he was selling one of his two apartments.
BY LEE HO JEONG [firstname.lastname@example.org]