The Korean National Tax Service will soon start investigating celebrities on charges of evading tax on their real estate properties. Many of the celebrities are reportedly taking advantage of the loopholes in the system and are evading paying of the tax. Currently, 27 corporations used to list properties are under the scanner of the National Tax Service and investigations into these real estate bodies are on.
Allkpop reported that celebrities including Lee Byung Hun of Mr Sunshine fame, Kwon Sang Woo known for Stairway to Heaven, Han Hyo Joo of Spring Waltz fame, Kim Tae Hee of Hi Bye Mama fame along with other celebrities are under scanner as they have purchased buildings under corporations.
It is said that celebrities avoid purchasing a property in their names. Instead, they register their buildings under a real estate corporation and list it as a gift to their children. This method is used by many celebrities as under real estate corporation, they are liable for privileges like they do not have to pay comprehensive real estate taxes. In addition, they can reduce acquisition, capital gains, and rental income tax.
But those owning property in their names (private owners) have to pay real estate taxes. The method of registering under real estate corporations is not illegal but is considered as taking advantage of the loopholes in the system to evade tax.
Registration outside Seoul for tax cut
Celebrities also make it a point not to register their properties in Seoul as they can get more tax cuts. Usually, real estate corporations are located in the outskirts of Seoul. According to MBC's PD Note, actor Lee Byung Hyun owns a building worth 26 billion KRW (21.2 million USD) at Yeongeungpo in Seoul. But he registered this building under family corporation listed in Gyeonggi-do.
Likewise, actress Kim Tae Hee has a 13.2 billion KRW (10.7 million USD) building at Gangnam in Seoul. But she also chose to list it under the corporation that is situated in Gyeonggi-do. Reports claim that this method helped Kim Tae Hee save 920 million KRW (750 thousand USD) in terms of a tax cut.
As it is not an illegal method, it is not sure how the National Tax Service plans to take action against the celebrities and others who have evaded tax so far.