Seoul Administrative Court-2016-Gu Partnership-80595 ( August 25, 2017)

The shares subject to deduction for family business should be determined only by whether they are directly related to business activities.

(1) In determining shares subject to the deduction for inheritance of a family business, the shares held without direct connection with the business activity should be determined as they are, as they are, whether they are directly related to the business activity. It is reasonable to view that the shares in this case are directly related to the business activity.

Article 15 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act

2017Nu71125 Revocation of Disposition of Imposing Inheritance Tax

AA, BB,CC

The director of the tax office

on October 27, 2018

on October 13, 2018

1. The defendant's appeal is all dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

On September 2, 2015, the imposition of the inheritance tax ○○○, ○○○○○ (including additional tax ○○○○) by the Defendant on September 2, 2015 is revoked.

2. Purport of appeal

The judgment of the first instance is revoked, and all plaintiffs' claims are dismissed.

1. Quotation of judgment of the first instance;

The reasoning for the court’s explanation concerning this case is as stated in the reasoning for the judgment of the court of first instance, except in the following cases: Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act, citing the reasoning for the judgment of the court of first instance pursuant to Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

2. Parts to be dried;

3) Whether Plaintiff AA was engaged directly in the family business for at least two years before the commencement date of the inheritance

A) Facts of recognition

① Plaintiff AA completed a major course of economics and business administration at ○○ University and majored in studying abroad to the U.S. ○○○○○○○○○○, and was married with her husbandD while studying abroad, and returned to the Republic of Korea on August 2009 after having given birth to the first child in the U.S. on January 2009. After that, Plaintiff AA began to engage in FFF’s work since around the spring of 2012 when her child was born to a kindergarten.

② From April 2012, 2012, “Plaintiff AA had worked in FFF and had worked in FF and had engaged in product development and publicity activities. At the time, Plaintiff AA was a chief development officer. At the time, Plaintiff AA was working in FF’s position, but the first few months were paid with regular salary during the training period, but only basic actual expenses were paid. Plaintiff AA was interested in the development of new products and promotional activities. Plaintiff AA had participated in the head office of ○○○○○○○○○○○○○, and was working in FF’s calculation unit. From around April 2012, Plaintiff AA made a statement from around 2012 that Plaintiff AF’s representative among the products that were developed by Plaintiff AF and was sold through ○ HomeF’s broadcast, Plaintiff AF’s product sales period was 2,500,000 won, but Plaintiff AFF’s product sales period was 10,700,000,000.

③ 주식회사 ★★홈쇼핑(방송채널명 '○○홈쇼핑') 직원이었던 ○○○은 "2012. 7. 내지 8.경 FFF 제품의 홈쇼핑 방송과 관련하여 원고 AAA을 처음 만났다. 원고 AAA과 GGG은 홈쇼핑 방송에 상당히 적극적이었던 것으로 기억한다. 2012. 8. 중순경 FFF로부터 여러 가지 제품을 제안받았고, 그 중 저희가 고른 제품이 FFF의 자체브랜드인 미니 아이템 제품이었다. 홈쇼핑 방송 중간에 들어가는 요리 촬영을 위한 미팅 자리에서도 원고 AAA과 GGG을 만났다. 2012. 11.경 1차 방송을 하였는데, 원고 AAA은 FFF 직원들과 함께 소품들을 가지고 방문하여 방송준비를 도왔다. 당시 원고 AAA이 FFF 직원들과 함께 장갑을 끼고 세팅용 냄비를 하나하나 닦던 기억이 난다."는 내용의 진술서(갑28호증의 1)를 제출하였다.

④ In fact, Plaintiff AA had an official title called FF’s “Chief Development Secretary” (Evidence No. 27). On June 21, 2012, Plaintiff AA prepared an English e-mail (Evidence No. 8) sent by the decedent to the Do and FF’s trading business entity ( Plaintiff AA appears to have performed the duties of counter-party to foreign languages in English and foreign language). On July 31, 2012, Plaintiff AA took office as FF’s auditor and participated in the board of directors (the minutes of the board of directors evidence No. 12) while taking charge of the duties of FF’s financial relations (the minutes of the board of directors).

⑤ From September 2012 to June 1, 2013, Plaintiff AA had received benefits from FFF, and transferred to ○○○○ on or around June 2013, and had not received benefits from the time when the registration of resignation was made on or around June 1, 2013. Around that time, Plaintiff AA retired from a company accompanying Plaintiff ADD’s husband and was appointed as FF auditor, and had worked at the factory of FF0○○○○○, together with Plaintiff AA, and Plaintiff AA returned to ○○○ factory for childbirth from July 26, 2013 to November 11, 2013.

④ The FF○○○ employee submitted a statement (Evidence A) that “The Plaintiff’s work performed at FF○○○ from June 2013. The work division of the Plaintiff’s Plaintiff included the development of new products, the review of financial status of the company, the drid and review of functional aspects of the existing product, and the employment of general employees.” The ○○○○, an employee of FF’s customer, also attended the meetings held at FF○○○○ in the second half of the year 2013, and the meetings held at FFF in the first half of the year 2014, and Plaintiff AA was present at the meetings held at FFF in the first half of the year 2014. At the same time, Plaintiff AA presented a statement (Evidence A29-1) stating matters concerning the development and project in the English and Japanese language.”

7) On June 1, 2014, Plaintiff AA provided nursing services to the inheritee in Korea, and performed the FF’s work, including consulting with Bisher. Meanwhile, on March 15, 2013, Plaintiff AA filed a tax withholding report on earned income tax with the effect that Plaintiff AA served in FF from September 1, 2012, but, on August 29, 2014, Plaintiff AA filed a revised return on August 1, 2012, after the decedent’s death, Plaintiff AA filed a revised return with the FF from July 1, 2012 to May 31, 2014, Plaintiff AF filed a revised return on the acquisition of earned income tax from FF from the FF to the FFF, but Plaintiff AF filed a revised return on the acquisition of earned income tax from the FF on March 11, 2014, on the ground that Plaintiff AA had completed Plaintiff AF’s work on September 31, 2014.

[Ground of recognition] Facts without dispute, Gap, 9, 11 through 18, 27 through 31, 34, 35, Eul, 8 through 10 (including provisional numbers), testimony of the witness GG of the first instance court and the purport of the whole pleadings

B) Relevant legal principles

Article 18(4) of the former Inheritance Tax and Gift Tax Act and Article 15(4)2(b) of the Enforcement Decree of the same Act provide that an heir shall be engaged in a family business for at least two years before the date inheritance commences, as the requirement for the deduction for family business succession. The existence of a fact that constitutes an indefinite concept, such as a "direct family business" under the aforementioned provision shall be determined individually and reasonably within the scope of the literal meaning, based on specific issues, in consideration of the legislative intent, etc. (see, e.g., Supreme Court Decision 2011Du24651, Jan. 16, 2014). The burden of proving the requirements for the deduction from property subject to taxation shall be borne by the person liable for tax payment who asserts it in principle (see, e.g., Supreme Court Decision 2012Du20618, Dec. 11, 2014).

In addition, in light of the language of the above provision and the legislative intent of the deduction for family business succession, only the simple circumstance that some of the members participated in the business within the house cannot be deemed to have engaged in the family business directly. On the other hand, it is not always connected with the payment of benefits to the family business, but it is not excluded from the family business period on the ground that the successor's management class was given.

C) Determination

Examining the following circumstances acknowledged by the above facts of recognition, etc. in light of the legal principles as seen earlier, it is reasonable to view that Plaintiff AA was directly engaged in the FF’s work, a family business, from two years before the date of commencing the inheritance to the date of commencing the inheritance.

① Plaintiff AA majored in economics and business administration at a domestic university, and majored in U.S. study, and this is a field directly related to FF management, both of which are family business, and the decision in this major field appears to have been made in mind of Plaintiff AA’s succession to the family business. Indeed, Plaintiff AA began to engage in FF’s business immediately after Plaintiff A sent his/her child to a kindergarten, and Plaintiff BB, among the two children of the inheritee, did not entirely take part in FFF’s business affairs, such as FF or FF0.

② FF officers and employees made a statement to the effect that Plaintiff AA had been working in the FF as the FF’s staff member prior to July 2012, 2012, and that Plaintiff A had been working in the position of FF, and the employee of the business entity stated to the same effect. As seen earlier, there exist objective circumstances, such as ordering the said person as well as e-mail, etc. ( although the Defendant asserted the credibility of the said statement on the grounds that the said person is an FF’s officer or employee or employee of the business entity, the Defendant cannot reject the credibility of said statement solely on the grounds that the said person stated it through a specific case, not an abstract content, or an objective circumstance corresponding thereto.)

③ Plaintiff AA appears to have actively participated in the business activities, such as home shopping broadcasting, while participating in the development of FF’s products, public relations and financial affairs, and consultation with foreign language. This is a premise for continuous efforts and understanding of FF’s various products and business affairs. Moreover, Plaintiff AA’s involvement in FF’s work without pay and takes the position of the head of the Development Office after taking the position of the head of the Development Office after taking the position as an officer (auditor) can be seen as a successor.

④ AA’s relocation to ○○○ on or around June 2013 can be deemed to have been aimed at carrying out FF’s FF’s FF’s work with her husband (the Defendant asserted that Plaintiff AA’s relocation to ○○○○ was a child education problem; however, in light of the fact that Plaintiff AA’s child was over 4 years old at that time, or that the decedent was living to ○○○○○, and that the decedent had to carry out the factory work while staying to ○○○○, it is difficult to explain that Plaintiff AA’s relocation to ○○○○○ with her husband for any purpose other than the purpose of carrying out the ○○ factory work).

⑤ An employee of the F○○○ and a trader stated that Plaintiff AA performed the work of developing products, examining financial status, hiring employees, and attending meetings in ○○○○○○. Such statements also support the credibility of the statements given that: (a) Plaintiff AA did not receive benefits after moving to ○○○; (b) Plaintiff AA did not understand the following: (c) Plaintiff AA was not paid for only one household; (d) Plaintiff AA went to ○○○ without withdrawing FF; and (e) Plaintiff AA was actually moving to her company without withdrawing FF; and (e) around that time, Plaintiff AA retired from the company accompanying Plaintiff AD’s husband DD and was appointed as an auditor of FF to receive benefits while engaging in the work of ○○○○ factory.

④ In light of the fact that Plaintiff AA performs the work of FF for FF FF as well as for FFFF’s actual production plant, Plaintiff AA’s performance of the work of FFF. Therefore, it cannot be said that Plaintiff AA is not directly engaged in FF’s work, on the ground that Plaintiff AA performed the work of FF at ○○○○○. Moreover, Plaintiff AA may be deemed to have performed the work of FFF’s ○○○○○○○ with her husband DD, regardless of the percentage of the work performed by each of the parties, insofar as Plaintiff AA was deemed to have performed the work of FF’s ○○○○○○ with her husband DD.

(7) Article 15 (4) 2 (b) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "where a heir is unable to engage in a family business due to any reason under Article 15 (6) 2 (c), the period shall be deemed the period during which he/she is engaged in the family business." Paragraph (6) 2 (c) provides that "where the heir falls under inevitable reasons prescribed by Ordinance of the Ministry of Strategy and Finance, such as performance of the duty of military service under the Act and medical care for illness, etc." The main sentence of Article 6 of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 557, Mar. 21, 2016; hereinafter the same shall apply) provides that "where a heir is unable to directly engage in a family business due to the performance of the duty of military service under the Act, medical care for illness, school attendance circumstances, etc." Article 74 (1) of the Labor Standards Act provides that "an employer shall grant a 90-day maternity leave after childbirth to a pregnant woman," under Article 60 (1).

Comprehensively taking account of these provisions, the period from July 26, 2013 to November 11, 2013, which Plaintiff AA had been multilateral in the U.S. for childbirth (the maximum of about 100 days, and does not exceed the appropriate scope for childbirth and postnatal care) may be deemed to constitute an inevitable reason under Article 15(6)2(c) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, and Article 6(4)2(b) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act. Thus, such period shall be included in the period of a type of business under Article 15(4)2(b) of the former Enforcement Decree of

④ It is reasonable to deem that the FF revised the details of the tax withholding report on the earned income of Plaintiff AA and the period of audit and inspection as above after the death of the decedent was the requirement for the deduction for inheritance of a family business to have the period of service of Plaintiff AA for at least two years. However, insofar as the actual period of service of Plaintiff AA can be deemed as at least two years as above, the deduction for inheritance of a family business itself is not denied on the ground that such an act was committed.

3. Conclusion

Therefore, the plaintiffs' claims are justified, and the judgment of the court of first instance is just in conclusion, and all appeals against the plaintiffs are dismissed.