Preventing Nominee Transactions and Managing Real-Name System Risks

What Is the Real-Name Property System?

The Real-Name Property System, established under the “Act on Registration of Actual Property Owners,”. ictates that the registered owner must be the “actual owner.” The actual owner is the person who provides the funds and exercises ownership, management, and income rights. For example, if parents purchase an apartment under their child’s name but fund and manage it themselves, this violates the system. It applies to all property types—land, apartments, retail, offices, and factories—and requires alignment between registered and true ownership for valid transactions. 부동산 실명제

Why Was It Introduced? The Real-Name Property System

The system was introduced in 1995 to prevent speculation, tax evasion, and illicit gifting via nominee transactions. Previously, high-net-worth individuals borrowed corporate or family names to dodge taxes or distort markets. Such as purchasing luxury homes under a spouse’s name to reduce inheritance and gift taxes or acquiring land via pretend divorce and child registration. These practices fueled price surges and undermined tax fairness, prompting the establishment of the. Real-Name Property System to ensure transaction transparency and equitable taxation. 강남 사무실 임대

What Are the Penalties for Violations?

Violating the system voids the transaction and incurs fines and criminal charges. Nominee contracts are invalid under civil law, and the Ministry of Land. Infrastructure and Transport may impose fines up to 30% of the acquisition cost. The National Tax Service can conduct in-depth audits and levy additional penalties on evaded taxes. Criminal penalties include up to two years’ imprisonment or a fine of up to KRW 50 million. Officials or companies caught face reputational damage, credit issues, and operational constraints as secondary risks.

Exceptions and Legitimate Nominee Transactions

Not all nominee transactions violate the system; legitimate exceptions exist. Exceptions include co-ownership registration between spouses, clearly defined corporate acquisitions with proper accounting, and documented joint investment agreements. However, each case requires comprehensive evidence—proof of funds, contracts, and accounting records. Failure to substantiate these during tax audits may still lead to violations. Since exceptions are strictly limited, legal and tax advice is essential before proceeding.