NTS Urges Filings as Capital Gains Tax Burden Mounts for Multiple Homeowners

With the suspension of heavy capital gains tax for multiple homeowners ending, the National Tax Service announced that approximately 220,000 individuals who sold real estate or stocks last year and did not file tax returns must complete their tax reporting and payment by the 1st. Those subject to the final capital gains tax declaration are taxpayers who sold real estate or stocks last year and did not file an advance declaration, or who made two or more transfers and did not report the combined income. Taxpayers who incurred capital gains from overseas stocks or derivatives, for which there is no obligation to file an advance declaration, are also subject to final declaration. The National Tax Service has sent filing notices to approximately 220,000 individuals subject to final declaration, warning that failure to file by the 1st of next month will result in a surcharge of 20% of the unpaid tax, and a daily late payment penalty of 0.022% for delayed payment.

The National Tax Service stated that ahead of the resumption of heavy capital gains tax for multiple homeowners, cases of tax evasion are being detected, such as reporting reduced gains by transferring properties to children at below-market prices, or by falsifying contracts when reselling apartment pre-sale rights to reduce the transfer price. There were also cases where taxpayers falsely claimed inflated interior construction costs as necessary expenses to reduce capital gains, or applied the 1-household 1-home tax exemption when transferring an apartment while holding both an apartment and a residential officetel, or by artificially separating households of parents and children who actually lived together to claim the 1-household 1-home tax exemption. The National Tax Service announced that it will pursue and collect taxes on transactions where evasion is suspected by analyzing real estate transaction data and cash flows.

Cases of attempting to reduce taxes by gifting housing, particularly in the Seoul and Gyeonggi regions, have increased. The number of applications for property gifting in the Seoul metropolitan area in April was 2,018, a 157.1% increase compared to 785 in January. In the Gyeonggi region, the number of applications for property gifting was 1,439 in April, an increase of 90.8% from 754 in January. The majority of donors were elderly individuals aged 60 and over. In April, there were 894 donors aged 70 and over in Seoul, and 779 donors aged between 60 and under 70.