520 Buildings Detected for Evading Acquisition Tax Through False Construction Cost Reports...3.5 Billion Won Recovered

[Suwon Ilbo=Park No-hun Reporter] Individual building owners who illegally omitted local taxes by exploiting a system based on construction costs to determine acquisition tax—reporting construction costs lower than the actual amounts contracted with construction companies to reduce acquisition tax payments—have been uncovered one after another in Gyeonggi Province's planned tax investigation.

Gyeonggi Province announced on the 20th that from May to July, it conducted a planned local tax investigation into 4,139 privately-built structures over the past two years, detected 520 violations of regulations, and recovered 3.5 billion won in local taxes.

Types of violations include ▲reporting acquisition tax less than the construction contract amount ▲omitting acquisition tax reporting for construction contract modifications (increases) ▲unreported acquisition-related expenses such as design, supervision fees, and various burden charges, and others.

In detected cases, Building Owner A contracted construction work at 3 billion won with a construction company while building a structure in Siheung City, but under-reported it as 2.2 billion won and paid less acquisition tax, which was detected and resulted in 30 million won in total recovery.
Building Owner B contracted construction work at 511 million won with a construction company while building a structure in Yongin City, then separately executed an additional construction contract to increase the amount by 100 million won. Subsequently, the owner reported acquisition tax based only on the initial construction contract amount, which was detected in this investigation, resulting in an additional collection of 4 million won in acquisition tax.
Building Owner C contracted construction work at 800 million won with a construction company and built a structure in Gwangju City, but reported acquisition tax based on construction costs of 470 million won. Additionally, 4 million won in acquisition-related expenses (such as water supply burden charges) was intentionally omitted, which was detected, resulting in a total of 12 million won in tax recovery.

Under the current system, when an individual contracts construction work with a construction company and builds a structure, the construction amount is recognized as the acquisition value, and acquisition tax is paid based on that amount. If this is violated and a taxpayer reports an amount less than the tax due by the legal reporting deadline, a penalty surcharge equivalent to 10 percent of the under-reported tax amount is imposed. Additionally, if local taxes are not paid by the payment deadline or an amount less than the required tax is paid, an additional penalty surcharge of 0.025 percent per day of payment delay is imposed.

Choi Won-sam, Director of the Tax Justice Division of Gyeonggi Province, stated, "The purpose of this investigation is to properly inform regulations on acquisition tax reporting for newly built structures and prevent cases of under-reporting and improper omissions," and added, "Going forward, we will continue to investigate real estate with omitted construction payments, and when under-reporting due to fraud or wrongful conduct is detected, we will conduct violation case investigations on suspicion of local tax evasion to further realize tax justice."
Meanwhile, the province discovered and additionally recovered 4 billion won in omitted taxes through planned local tax investigations in two fields, including "omission of taxable standard for acquisition tax on privately-built structures," in the first half of this year.