Intensive Tax Investigation into Speculation in the Choongchung Areas

The tax investigation of large scale will be launched into 27,095 persons charged with the speculations in the Chungchung Province which is being referred as a location for the relocated capital city for the public administration.

On the 13th, the National Tax Service(NTS) announced a measure for the tax administration of real estate speculators to stabilize the real estate market in the areas of Daejon Municipal City and the Chungchung Province where the price of real estate had hiked rapidly and substantially.

Mr. Shin Hyun-woo, Chief of Property Tax Section of the National Tax Service explained, “The measure has been prepared in line with the pointing out by President-elect, Mr. Noh Mu-hyun that the real estate price in the 6 cities and 5 guns of Chungchong areas including Daejon and Asan in the Choongnam Province, promising candidate for the relocated capital city for the public administration, was hiking due to the congestion of speculators after his pubic promise in October last year for the relocation of capital city for the public administration in the election.

For this, the National Tax Service selected 27,095 persons charged with the speculation including non-resident purchasers by analyzing 100,653 persons (58,761 persons for the lands, 25,339 persons for the apartments, 14,026 persons for other buildings and 27,095persons for the distribution rights), who had made real estate transactions in these areas from the 1st of October last year till the 31st of January this year, in terms of types of transactions.

They are composed of △6,426 non-resident purchasers residing in Seoul and the satellite cities of Seoul △5,209 young purchasers at the ages of less than 30 △2,699 short-term holders who sold the real estates within one year from the time when they purchased △6,585 persons who purchased the real estates more than twice △6,176 persons who sold the real estates more than twice.

The National Tax Service has a plan to select about 1,500 persons from these persons charged with the speculation as an object for the first phase of investigation and to start a detailed investigation of them within a time limit of about 80 days from the second half of next month.

It decided to charge even the surtax in addition to charging of the tax evaded in case the fact would be exposed during this process that the capital gain tax or the gift tax has not been paid properly. In particular, it decided to apply the maximum tax rate of 36% to the short-term holders. In addition, it decided to conduct an investigation of the source of funds of people, who had invested excessive money compared to the level of their income, including the search for the bank accounts. The investigation in search for the bank accounts will also be conducted for the real estates purchased by the speculators in the areas other than the Choongchung Province.

Mr. Kim Chul-min, Chief of Investigation Section III of the National Tax Service said, “We will continue to conduct a tax investigation of other persons charged with the speculations if the real estate market would not be stabilized even after the completion of our investigation of the 1st phase.”

Jin-Hup Song Ji-Wan Cha jinhup@donga.com cha@donga.com