The National Tax Service (NTS) of South Korea is intensifying its inspection of tax evasion practices by public service corporations. It identified 324 such corporations involved in illegal activities and imposed fines amounting to 25 billion KRW. Some of these corporations engaged in “gift card becoming cash” schemes using corporate cards and used donated funds to purchase luxury apartments for personal use.
Among the cases highlighted by the NTS, a public service corporation (referred to as Company A) purchased tens of billions of KRW worth of gift cards using corporate cards and converted them into cash via discounted sales. The resulting cash was transferred to the chairman’s personal account for private use. The NTS imposed several billion KRW as gift tax for the misuse of corporate cards by the chairman.
Another corporation (referred to as Company B) used donated funds to purchase a high-end residential apartment complex. According to the NTS, if a public service corporation purchases real estate, it must be used for revenue-generating activities, and the income must be spent on public purposes. However, Company B provided free housing for the donor and their family, leading to the imposition of several million KRW in gift tax.
Furthermore, a third corporation (referred to as Company C), which maintained a lineage of chairman succession, paid non-working descendants of the donor significant monthly salaries and failed to report large capital gains from unsold land. The NTS imposed substantial corporate taxes on these salaries and capital gains.
The NTS emphasized the importance of public service corporations adhering to tax law obligations to prevent misuse of donations and promote a transparent donation culture. It plans to strictly respond to corporations using donations for private purposes or supporting affiliated companies and will conduct three-year follow-up management for corporations found to engage in accounting fraud or misuse of funds. Additionally, it aims to provide tax education and support to ensure compliance with tax obligations and encourage voluntary adherence among corporations. The NTS urged for interest and cooperation in the annual disclosure of settlement documents by public service corporations to enhance transparency in the donation culture.