Foreign homeowners face scrutiny for suspected tax evasion in purchasing high-priced homes

Min Ju-weon, deputy commissioner of the National Tax Service (NTS) Investigation Bureau, gives a briefing on the crackdown against foreign homeowners who are suspected of evading taxes at NTS headquarters in Sejong, Thursday. Yonhap

The National Tax Service (NTS) has launched a crackdown on foreign homeowners who are suspected of evading taxes in purchasing and owning high-priced homes in Korea, the NTS announced Thursday.

The tax agency said a total of 49 foreign nationals from 12 countries — with about two-thirds from the United States and China — are under investigation for allegedly exploiting loopholes in Korean housing regulations to avoid paying taxes.

The amount suspected to have been evaded totals between 200 billion won ($144.86 million) and 300 billion won.

More than 70 percent of the roughly 230 properties purchased by these individuals are concentrated in three affluent districts in southern Seoul — Gangnam, Seocho and Songpa.

All of the properties involved were apartments, which remain the most popular form of housing in Korea. Some of these apartments are currently valued at over 10 billion won.

The crackdown comes amid growing public anger and controversy over the fairness of home ownership between Korean citizens and foreign nationals.

Korean home buyers face increasingly strict lending regulations, including a new cap on mortgages exceeding 600 million won announced on June 27.

But foreign nationals are able to obtain financing freely through foreign banks, resulting in a debate over “reverse discrimination” against Korean citizens.

The NTS said that out of the 49 individuals, 16 acquired assets through illegal gift transfers, 20 bought homes using undeclared income, and the remaining 13 are suspected of evading taxes on rental income.

“Foreigners who can secure funding from their home countries are effectively exempt from various domestic loan regulations, raising concerns that this could negatively impact real estate policies,” said Min Ju-weon, deputy commissioner of the NTS Investigation Bureau.

“Therefore, the NTS has conducted a detailed analysis of the entire process by which foreigners acquire and hold high-priced apartments in the three districts in southern Seoul. We are now carrying out investigations into their suspected tax evasion.”

To prevent the so-called reverse discrimination on home ownership, the agency said it is considering an overhaul of the current system for foreign homeowners.

Currently, nonpermanent residents are taxed only on rental income from a single home in Korea if the property's value exceeds 1.2 billion won.

Permanent residents receive benefits such as tax exemption for owning one home per household and special deductions for long-term ownership at high rates.

“We plan to actively review any unreasonable or insufficient parts of the system and propose improvements to authorities in the relevant ministries,” Min said.

Recent real estate data showed foreign nationals purchasing a total of 26,244 apartments in Korea from 2022 to April this year, with a total transaction value of 7.97 trillion won.

These homeowners have especially been buying high-priced apartments in Gangnam, Seocho and Songpa, along with three other districts in Seoul — Mapo, Yongsan and Seongdong.