A Korean tax accountant, Gong Chan-gyo, explains that bank transfers between family members can be presumed to be gifts by the National Tax Service, which may lead to gift tax liabilities. However, transfers between spouses are exempt from this presumption.
Gong notes that there are three situations where the National Tax Service may investigate account transfers: when acquiring real estate or stocks, during a workplace tax audit, and during an inheritance tax audit. Inheritance tax audits can investigate up to 10 years of history and may reveal unreported gifts.
To avoid potential issues, Gong advises individuals to report gifts from their parents, especially if the parents' assets exceed 1 billion won. He also recommends keeping records of account transfers, including the purpose of the transfer, to prove that they are not gifts. Additionally, Gong mentions that gifts to children are exempt from taxation up to 50 million won for 10 years.
Here are the key facts extracted from the text:
1. The National Tax Service presumes that a transfer between family accounts is a gift.
2. The taxpayer must prove that the transfer is not a gift if they cannot provide evidence.
3. Account transfers between spouses are not presumed to be gifts.
4. The Supreme Court has ruled that account transfers between spouses cannot be presumed to be gifts.
5. When acquiring real estate, a source of funds investigation is conducted by the National Tax Service.
6. An account transfer of tens of millions of won per day is not automatically reported to the National Tax Service.
7. The National Tax Service can investigate account transfers up to 10 years after they were made.
8. Inheritance tax audits can investigate up to 10 years of history from the past.
9. If the inheritance tax is more than KRW 1 billion, there is a high possibility that an inheritance tax audit will occur.
10. If the general inheritance tax is less than KRW 1 billion, the possibility of a tax audit related to inheritance tax is quite low.
11. The total sum of all cash and real estate is considered when determining the possibility of an inheritance tax audit.
12. The National Tax Service can investigate account transfers made by parents to their children for up to 10 years.
13. Gifts to children are exempted from taxation up to 50 million won for 10 years.
14. Living expenses provided by children to their parents are not subject to gift tax if the parents do not have an income.
15. Taxpayers must keep records of account transfers to prove that they are not gifts.