By Yoon Ja-young
Staff Reporter
Investment in overseas real estate has steadily risen over the years due to the relaxation of foreign exchange rules, however many investors were found to have not faithfully reported and paid due property-related taxes, mainly because the government can't thoroughly track transactions made abroad.
According to the National Tax Service (NTS), the number of tax filings on gains from overseas real estate transaction totaled 41 from 2002 to 2006, with taxes paid amounting to 1.1 billion won. There was only one tax filing in 2002, none in 2003, 12 each in 2004 and 2006, and 16 in 2005.
The figure is quite small when considering there were 1,286 overseas real estate investments last year alone. The number of investments grew to 1,387 in the first half of this year amid the government's promotion of overseas investment. The government has been lifting regulations to ease the glut of dollars as the weakening greenback hurts exports. Currently, Korean individuals can purchase overseas real estate worth up to $3 million, but the ceiling will be scrapped next year.
According to the Foreign Exchange Transaction Act, those purchasing over $300,000 worth overseas real estate should file the acquisition with the NTS via banks, and report it again when selling it. However, there has been no filing of the selling via banks.
The Finance and Economy Committee at the National Assembly urged the government to seek measures to keep track of transactions, signing tax treaties or exchanging information with countries where Koreans buy real estate.
An increasing number of Koreans are sending their fortunes abroad on the strong Korean currency and soaring real estate prices here.
According to the Bank of Korea, Korean emigrants had taken $2.1 billion out of the country by September of this year. The figure, which surpassed the $1 billion in 2002, grew to $1.8 billion in 2004, and totaled $3.1 billion last year, as selling real estate here or exchanging their assets in Korean won to a foreign currency increases their net worth.