[Seoul High Court Decision 2007Nu5846 ( October 05, 2007)]

2. The costs of appeal shall be borne by the Plaintiff (Appointed Party).

Therefore, the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed as it is without merit, and it is so decided as per Disposition.

[Seoul Administrative Court 2006Guhap3071, October 25, 2007]

2. The costs of lawsuit shall be borne by the plaintiff (appointed party).

A. The plaintiff (appointed party, hereinafter the plaintiff) received each donation around February 2000 from the father ○ and the mother ○○○, each of which was KRW 25 million from the son ○ and the mother ○○, and the son ○○, each of which was KRW 50 million from the father ○○ and the mother ○○.

B. On May 1, 2006, the Defendant imposed 2,80,000,000 won on the portion of the donation from the Plaintiff ○○○○, including 40,000,000 won, for each of the following items: (a) the penalty tax for failing to report, and the penalty tax for failing to report, as to the portion of the donation from ○○○○○; (b) 2,80,000 won, including the penalty tax for failing to report, the penalty tax for failing to report, and the penalty tax for failing to pay (hereinafter each of the instant dispositions).

(A) Evidence Nos. 1, 1 to 3, and the purport of the whole pleadings

2. The legality of disposition.

A. The plaintiffs' assertion

Each of the instant dispositions is based on Article 53(1)2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6301, Dec. 29, 2000; hereinafter the same), and the aforementioned provisions of the former Inheritance Tax and Gift Tax Act shall be deemed null and void against the constitutional right to equality, the principle of protecting marital life, and the guarantee of property rights, etc. As such, each of the instant dispositions and dispositions based on the unconstitutional law as seen above are unlawful.

(1) Violation of the rules of the Commission for the protection of marital life, including gender equality and marital separation system

Article 53 (1) 2 of the former Inheritance Tax and Gift Tax Act provides that "if the sum of the amount to be deducted within 10 years before the relevant donation and the amount to be deducted from the relevant donation exceeds 30 million won, the excess portion shall not be deducted", and that "if the donor is a lineal ascendant, the spouse of such lineal ascendant shall be included."

Therefore, in a case where a donation is received from a parent who maintains a normal marital life, only 30 million won should be deducted pursuant to the above spouse's provisions, and in a case where a separate donation is received from a divorced parent, it would be excluded from the subject of the above provision, thereby allowing a deduction of 60 million won in total, each of which would result in a discrimination without reasonable grounds, compared to a donation made from a divorced parent who maintains a normal marital life.

Therefore, Article 53(1)2 of the former Inheritance Tax and Gift Tax Act violates the principle of gender equality, the principle of protection of marital life, and the marital separation system adopted by the Constitution.

(2) Whether the provision on gift tax deduction is unreasonable

In light of the fact that a parent’s donation of money to a married child is a general social phenomenon and that there is a need for considerable money to establish a minimum living space in Seoul, etc., Article 53(1)2 of the former Inheritance Tax and Gift Tax Act, which recognizes only the deduction of 3.0 million Won from the lineal ascendant for a gift from the lineal ascendant, is not only an out-of-social reality, but also an excessive restriction on the property rights of the donee and donor by deviating from the purpose of the gift tax.

(3) Violation of the principle of equality or equity.

Article 53(1)2 of the former Inheritance Tax and Gift Tax Act violates the principle of equality under the Constitution by infringing the rights to equality of the plaintiffs as follows.

(A) Discrimination with donations between spouses

The former Inheritance Tax and Gift Tax Act discriminates against the spouse without reasonable cause by deducting only KRW 30 million for a gift between lineal ascendants and descendants, compared to the deduction of KRW 300 million for a gift between the spouse.

(b) Discrimination with inheritance tax

Inheritance tax and gift tax are the same purpose of taxation in that they are taxes imposed on free transfer between households of economic value.

However, in the case of inheritance, through the basic deduction of KRW 200 million (Article 18 of the former Inheritance Tax and Gift Tax Act), personal deduction (Article 20), and lump sum deduction (Article 21). On the other hand, in the case of gift, the deduction of KRW 30 million is made only under Article 53(1)2 of the same Act.

Therefore, Article 53 (1) 2 of the former Inheritance Tax and Gift Tax Act discriminates against the donee without reasonable grounds.

(4) unconstitutionality of penalty provision

Article 78 of the former Inheritance Tax and Gift Tax Act, which imposes penalty tax on a lump sum high rate of tax without prescribing exceptions such as the expectation of a bona fide tax payment, the possibility of expectation of a bona fide tax payment, or the intention of a bona fide tax payment, is not easy in light of the fact that the tax return is almost rarely filed and that it is not easy to expect or facilitate.

B. Relevant legislation

Inheritance Tax and Gift Tax Act (amended by Act No. 6301 of Dec. 29, 2000)

Article 53 (Gift Property Deductions)

(1) If a resident receives a donation from a person falling under any of the following subparagraphs, the amount according to the classification of the following subparagraphs shall be deducted from the taxable value of donated property. In this case, if the sum of the amount to be deducted within 10 years before the relevant donation and the amount to be deducted from the value of the relevant donation exceeds the amount

1. 50 million won, where a donation is received from the spouse;

2. Three million won, in case where the donor receives a donation from his lineal ascendants and descendants (if the donor is a lineal ascendant, including the spouse of such lineal ascendant): Provided, That in case where the donor has received a donation from his lineal ascendant, fifteen million won, in case where the minor has received the donation

3. 5 million won where a donation is received from a relative who is not a spouse, or lineal ascendant or descendant.

(2) The scope of relatives under paragraph (1) shall be prescribed by Presidential Decree.

Article 78 (Additional Tax, etc.)

(1) When, with respect to inherited property or donated property, a report is not made by the due date for report under Article 67 or 68, or a report is made short of the tax base to be reported, the director of the tax office, etc. shall add to each calculated tax amount an amount equivalent to 20/100 of an amount calculated by multiplying the sum of the unreported tax base or the ratio occupied by the insufficient amount (excluding the amount short of the tax base to be reported due to the difference of appraised values as prescribed by the Presidential Decree, of the property reported) to the tax base to be reported, and the amount added under Article 27 or 57, by the aggregate of the assessed tax amount of inheritance tax

(2) In case where the tax amount to be paid under the provisions of Article 70 is not paid by the due date for return, or is paid under the tax base determined under the provisions of Article 76, the total sum of the amounts under the following subparagraphs shall be added to the calculated tax amount on the tax amount not paid or paid in kind (in case where an application for payment in annual installments or in kind is made under the provisions of Article 71 or 73, it shall include the tax amount not permitted for payment in annual installments or in kind; hereafter in this paragraph, referred to as “unpaid tax amount”). In this case, the amount to be added

1. Where there exists any unpaid tax amount during the period from the day following the due date of return to the date of one year: An amount calculated by multiplying the unpaid tax amount by 10/100; and

2. Where there is any unpaid tax amount even after a period under subparagraph 1 expires: An amount calculated by multiplying the unpaid tax amount (where there is any tax amount paid during the period under subparagraph 1, referring to the balance remaining after deducting it), by the rate prescribed by the Presidential Decree in consideration of the period from the date of voluntary payment or notice

Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17459 of December 31, 2001)

Article 46 (Method, etc. of Donated Property Deductions)

(1) In applying the provisions of Article 53 (1) of the Act, the calculation of the amount to be deducted from the taxable value of donated property shall be made by one of the following methods:

1. Where two or more donations differ in the time of donation, the method of deducting in sequence from the taxable value of the first gift among two or more donations;

2. Where two or more donations are made simultaneously, a method of deducting in proportion to the taxable value of each gift tax.

(2) The provisions of Article 13 (4) 1 shall apply mutatis mutandis to the scope of relatives under the provisions of Article 53 (1) 3 of the Act.

C. Determination

(1) Violation of the principle of protection of marital life, including gender equality and marital separation system

In full view of the following circumstances, Article 53(1)2 of the former Inheritance Tax and Gift Tax Act does not violate the gender equality, the principle of protection of marital life, and the marital separation system adopted by the Constitution, and thus, the Plaintiffs’ assertion on this part is without merit.

(A) Article 53(1)2 of the former Inheritance Tax and Gift Tax Act provides that “if the donor is a lineal ascendant, the donor’s spouse includes the lineal ascendant’s lineal ascendant’s spouse.” The donor’s lineal ascendant’s spouse includes the scope of lineal ascendant and descendant even if the donor’s spouse is not a lineal ascendant of the donee. The donor’s parents naturally fall under the lineal ascendant of the same provision without any relationship with the provisions of divorce or universal protection, and 30 million won including the donation from the spouse of the lineal ascendant and the lineal ascendant’s spouse, as alleged by the Plaintiffs

(B) Article 53(1)2 of the former Inheritance Tax and Gift Tax Act provides that where the sum of the amount of deduction within 10 years prior to the relevant donation as a basis for the donee and the amount of deduction from the relevant donation exceeds the amount of donated property according to the classification of lineal ascendants, such excess portion shall not be deducted, and the amount of deduction shall not be added up on the basis of each donor (Therefore, where a donation is made from a lineal ascendant in the name of a female donor, the deduction shall not be made in 30 million won for each donor, but only 30 million won among the value of donated property from the entire lineal ascendant shall not be deducted).

(C) Article 53(1)2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 53(1)2) aims to prevent avoidance of gift tax by bypassing gift via other lineal ascendants, and to correct the uncertainty of the amount of gift tax by the number of lineal ascendants

(2) Whether the provision on gift tax deduction is unreasonable

In principle, the subject of taxation, the limit of deduction, tax rate, etc. is a matter of the legislative policy that is determined based on the taxation purpose of the pertinent tax. Since the donation is made throughout the country without being related to the age, it cannot be determined as a basis for a person residing in Seoul or married in the Seoul. In light of the fact that the person who actually pays gift tax despite the above limit of deduction is a small number of persons, etc., the above provision of the gift tax deduction cannot be excessively limited to the property rights of the donee and donor by deviating from the purpose of the gift tax, because the above provision of the gift tax deduction provision goes beyond the social reality.

(3) Violation of the principle of equality or equity.

(A) Discrimination between the donor and his spouse

In full view of the following circumstances, in the case of a donation between spouse, the mere fact that only the amount of KRW 30 million in the case of a donation between lineal ascendants and descendants is deducted from the deduction of KRW 300 million in the case of a donation between spouse does not appear to have infringed upon the property rights of lineal ascendants and descendants by unfairly discriminatinging the donation between their spouses compared to the donation between their spouses

1) The fact that the donation between the spouse is not the transfer of the father between households, unlike the donation between lineal ascendants and descendants, and that it is general that the donee’s spouse, as the donee, contributes to the formation of the donor’s

2) The establishment of standards for imposing taxes, such as how to set a ceiling on the amount of gift tax deduction, is a matter of legislative policy-making determination according to the purpose of taxation of the pertinent tax.

(b) Discrimination with inheritance tax

Although it is a tax imposed on the transfer of property between inheritance and gift tax for the same purpose, it shows a significant difference in the limit of deduction. However, in full view of the following circumstances, it cannot be seen that the gift tax deduction system is significantly unreasonable compared to the inheritance tax deduction system, and thus, the Plaintiffs’ assertion on this part is without merit.

1) The establishment of the criteria for imposing taxes, such as how to set a credit limit for the amount of taxes, is a matter of legislative policy decision according to the purpose of taxation of the relevant tax.

2) Whether or not to inherit property shall not be decided at will by the donor against the fact that the donor could not choose the property at will, the time, the subject and the value of the gift can be decided at will by the donor, and since the gift does not necessarily belong to the lineal descendant, inheritance and gift do not coincide with the cause of the gift or the beneficiary from the gift, it does not necessarily mean that taxes should be imposed at the same level.

3) It is more consistent with the legislative purpose of the Inheritance Tax and Gift Tax Act that limits rather than encouraging the donation between lineal ascendants and descendants, to prevent the concentration by negative behavior of the father, and to realize the redistribution of division by inducing the re-distribution of properties to society

(4) unconstitutionality of penalty provision

The evidence submitted by the plaintiffs or the grounds presented by the plaintiffs alone are that it is difficult to expect the donee to voluntarily report the gift tax on the gift from a lineal ascendant as alleged by the plaintiffs, or that there is no possibility to expect the donee to faithfully pay the gift tax, and that the person who has reported or paid the tax faithfully by voluntary report cannot equally treat the person who has returned or paid the tax, and thus, the additional tax provision of the former Inheritance Tax and Gift Tax Act does not violate the purpose of taxation, and

3. Conclusion

Therefore, since the provisions related to the former Inheritance Tax and Gift Tax Act cannot be deemed to be unconstitutional, the defendant's disposition of this case is legitimate, and all claims filed by the plaintiffs are dismissed.