More than 1,000 high-value homes that should have been corporate assets were used like personal residences by controlling shareholders and their families, South Korea's tax authority found. The National Tax Service views this as a broad signal of tax-evasion risk across businesses and plans to launch tax audits of companies where suspicions are confirmed.
The NTS said on the 23rd that it had conducted its first full review of 2,639 corporate-owned homes subject to the comprehensive real estate tax — properties larger than the standard national housing size with an assessed value exceeding 900 million won. After excluding 1,157 rental units and 385 work-related properties such as employee dormitories, 1,097 units, or 42%, were occupied or privately used by controlling shareholders and their families.
NTS Commissioner Lim Kwang-hyun said through his account on X, formerly Twitter, that the findings were more serious than expected. The companies that privately used the high-value homes ranged from small and midsize firms with annual sales in the tens of billions of won to large corporations with sales in the tens of trillions of won.
The homes were far from typical company residences. The average assessed value of the properties reviewed exceeded 2 billion won. There were 453 homes assessed above 3 billion won and 12 homes above 10 billion won. The most expensive had an assessed value alone of more than 20 billion won ($14.4 billion), with a market price approaching 30 billion won.
The forms of private use varied. Some companies held ultra-high-end apartments with Han River views or located in Seoul's Gangnam and Yongsan districts under the corporate name, then provided them to the controlling shareholder or their children effectively free of charge. Within the companies, these arrangements were maintained as open secrets known even to rank-and-file employees.
In some cases, high-value homes previously held by individuals were transferred to a company. To evade rules on owning multiple homes, the title was changed to the company while the controlling shareholder's family continued to live there. The company bore the purchase and management costs, while the owner family reaped the actual benefits of use.
Cases that used employee welfare as a front were also confirmed. After acquiring a luxury condominium worth more than 10 billion won under the corporate name, one company gave ordinary employees no chance to use it. Instead, only the owner family or select executives used it privately. It was dressed up as an employee welfare facility, but was in practice run like a resort reserved for the owner.
Holding a home under a corporate name is not itself a problem. Employee dormitories or company residences needed for business purposes can be recognized as legitimate corporate expenses. The same applies to company housing provided for work purposes to executives or employees who are not shareholders.
But it is a different matter when investing executives or their relatives use corporate homes privately. Under the current enforcement decree of the Corporate Tax Act, the maintenance, management and usage costs of company residences used by such individuals are classified as spending unrelated to business. Those costs are not recognized as deductible expenses for the company. According to the NTS, the benefit gained from living rent-free is also subject to taxation.
In the coming tax audits, key issues are expected to include whether the residences were actually used for business purposes and whether the owner families paid appropriate rent. Also to be examined is whether companies treated home purchase and management costs as expenses, and whether they paid costs that individuals should have borne.
The tax audits will not stop at home-related costs. The NTS plans to review the tax filings and cash flows of the companies as a whole.
The scope of the review is not limited to lavish company residences in South Korea. The NTS plans to examine acts such as providing overseas housing free of charge to a chairman's children or paying their overseas tuition. It is broadening its focus to the owner families' luxury lifestyles funded by corporate money as a whole, including high-end condominiums, overseas homes and tuition paid on their behalf.
"We will conduct rigorous tax audits into the overall compliance of companies where suspicions are confirmed," Lim said. "We will make this review an occasion to set clear principles for companies where the boundary between the company's public domain and the owner's pursuit of private gain is blurred."
