The Jung-gu district of Seoul announced on the 21st that it uncovered 38 corporations attempting to reduce property acquisition tax using tricks while purchasing high-priced real estate, recovering 11.2 billion won (84 cases) in taxes.
Since the beginning of this year, the Jung-gu district conducted intensive investigations targeting corporations suspected of tax evasion to discover hidden tax sources. One of these involved investigating corporations that evaded excessive acquisition tax by acquiring dormant corporations, which were effectively no different from being out of business.
According to current law, corporations in large cities are subject to higher acquisition tax rates if they acquire real estate within five years of establishment. Some corporations used the ‘trick’ of acquiring dormant corporations to extend the actual establishment period and receive a lower acquisition tax rate.
Jung-gu was the first local government in the country to analyze stock fluctuation data held by the National Tax Service to catch corporations using such methods. Construction company A acquired a dormant corporation located in Seoul and falsely reported that more than five years had passed since its establishment while purchasing real estate in Jung-gu. Jung-gu recovered 1.3 billion won in acquisition tax from company A.
There is also a method of falsely registering the headquarters as being in a non-metropolitan area to avoid excess acquisition tax. Corporation B conducts all operations and decision-making at an office in Jung-gu, but its incorporation registration lists the headquarters as the residence owned by a relative of the representative located in Gyeonggi Province. Jung-gu conducted an on-site investigation proving that the actual headquarters of the corporation is in Jung-gu, resulting in an excess acquisition tax of 900 million won on the real estate purchased by corporation B.
The district also investigated corporations that received exemptions from property acquisition tax on the condition of contributed acceptance. Corporation C was granted a 100% exemption from acquisition tax after making a contributed acceptance, but an investigation by Jung-gu revealed that it received public land for free instead of a contributed acceptance. If benefits are received while making a contributed acceptance, it is subject to acquisition tax. Jung-gu announced that it would impose 2.8 billion won in taxes on this corporation, applying a 50% reduction on the acquisition tax.
In the first quarter of this year (January to March), Jung-gu collected 102.2 billion won in property acquisition tax. Due to active tax source discovery efforts, this is the highest amount collected in the past three years. Jung-gu Mayor Kim Gil-seong said, “We will continue to respond firmly to malicious tax evasion so that honest taxpayers do not suffer.”