Scions cannot use company money for cars
Children from wealthy families will no longer be able to drive luxury cars purchased by their parent’s corporations as company vehicles.
Rep. Lee Hyung-seok of ruling Democratic Party of Korea has proposed a revised bill to prevent the personal use of sports cars purchased with company money.
The proposed revision includes obligating firms to submit documentary evidence that company cars are being used for business purposes only. If needed, the National Tax Service will carry out random site checks.
According data from the Korea Automobile Importers & Distributors Association (KAIDA), Friday, of 128,236 imported sedans sold between January and June this year, 48,041 (37.4 percent) were purchased by companies.
Italian carmaker Lamborghini had the highest portion of sales of its supercars to companies compared to individual customers — of the 136 sold in the first half of the year, 125 (91.9 percent) were registered as company cars.
German brand Porsche sold 2,812 (64.3 percent) out of 4,373 sports cars to companies.
When a company purchases a luxury car, it receives tax breaks on the price, insurance and fuel, and so providing false information on the use of the car is a violation of tax laws.
In the U.S. and the U.K., commuting with a company car is considered personal use, while buying a company car in Singapore is highly regulated.
Last June, the National Tax Service (NTS) began an investigation targeting 24 millionaires suspected of tax evasion.
One businessman was found to have registered six supercars as company vehicles, of which two were used personally by his wife and child. His company also paid maintenance expenses. The spouse and child were seen showing off their luxury cars on social media writing that the husband – and father – had purchased them with company money.
Depending on the circumstances, purchasing a luxury company car for non-business use may be classified as embezzlement or malfeasance.
Those driving the cars for personal use can be fined up to 15 million won or be sentenced to five years behind bars.
However, not many cases here involving millionaires purchasing luxury car through their companies to evade taxes have been investigated, and those that have come under scrutiny have managed to avoid any possible repercussions.
One example is former SPC Group Vice President Hur Hee-soo.
In April, local news network KBS reported that a Cadillac Escalade (priced at 700 million won) was seen in the parking lot of Hur’s apartment building in Hannam-dong, Seoul.
The report stated that Hur had put in a special order for the luxury car, which he bought through BR Korea.
BR Korea is a subsidiary of SPC Group that operates market-leading franchise brands Dunkin’ (formerly Dunkin’ Donuts) and Baskin-Robbins in Korea.
SPC Group said the luxury vehicle was only operated for business purposes, not for personal use.
In an interview with another local media outlet, an SPC official said: “Just because the car was parked at Hur’s apartment does not mean he drove it. It was used for VIPs visiting from America related to BR Korea. It is also not true that Hur had personally ordered the car.”
However, the official admitted that Hur’s mother, who is a corporate adviser at BR Korea, uses the vehicle from time to time for business activities.
The NTS did not conduct an investigation into the case saying it did not want to target any specific company.
“We are facing difficulty with investigations due to COVID-19 as we don’t have enough people to cover other cases too,” an NTS official said.
“However, we can investigate further if significant suspicions are raised.”