"Repayment upon father's death" promissory notes are considered gifts; National Tax Service tracks principal and interest repayments

The fund procurement plans and promissory notes prepared during real estate transactions are becoming targets of intensive post-management by the National Tax Service. As the National Tax Service has established a system to analyze fund procurement plans in real-time by linking them with income and asset records, warnings have been issued that if deficiencies are found during the process of explaining the source of funds, it could expand into business audits.

A single promissory note cannot avoid gift tax... Actual repayment history is the key

Even if a promissory note is written when borrowing money from parents, there is a high risk of it being considered a gift if there is no evidence that the principal and interest are actually being repaid. According to the video, promissory notes with conditions such as "repayment upon the father's death" or methods such as paying all interest at once upon maturity are highly likely to be judged by the National Tax Service as gifts rather than actual borrowed money. The National Tax Service strictly verifies the borrower's repayment ability and the actual transfer history of interest and principal, rather than the format of the promissory note.

To prepare for this, it is important to accumulate transfer records showing that interest and principal are being repaid regularly every month. In particular, it is recommended to set up automatic transfers and leave clear evidence by specifying "repayment of principal and interest" in the transfer memo. If a child with low income repays money borrowed from parents, and then the parents return that money to the child under the guise of living expenses, this may be recognized as a workaround gift to avoid taxes.

4 types to be careful of when writing a fund procurement plan

The four types that can cause problems when writing a fund procurement plan are: ▲unreported income (cash, etc.) ▲money that exists only on paper ▲money borrowed from someone without repayment ability ▲cases where funds are split and circulated among family members. The National Tax Service verifies the source of funds based on reported income, taxed income, and tax-exempt or reduced income. Not all money in a bank account is recognized; it must be income that can be verified through reported details.

Recently, as loan regulations have tightened, cases are increasing where people hide gifts through fake lease contracts or falsely record cash received from parents as having other sources. In such cases, there are many instances where it leads directly to a tax audit without going through the explanation procedures of the Korea Real Estate Board or local governments. The National Tax Service continues post-management based on the contents submitted in the fund procurement plan and continues tracking through documents such as "Notice for Submission of Explanatory Materials Regarding Debt Repayment."

Recommendation to organize fund flow and use dedicated accounts before real estate transactions

For safe real estate transactions, it is necessary to organize in advance which accounts the down payment, intermediate payment, and balance will be paid from before signing the contract. This is because if a general account used for personal purposes is used, business-related funds or minor details that one does not wish to disclose may be exposed during the process of explaining the source of funds. Therefore, creating a separate account solely for the real estate transaction and managing everything from the down payment to the balance cleanly has been presented as a practical response.

It should be noted that the numbers entered in the fund procurement plan become analysis data for the National Tax Service. In particular, for the loan items, mortgage loans and credit loans have been subdivided, and cases where the name of the financial institution must be entered and evidence must be submitted are increasing. For money borrowed from family members, verification procedures are also trending toward becoming stronger, such as requiring the submission of documents that can confirm the fact of borrowing and the amount.