In a case where Eul et al., a person with a special relationship of Gap corporation, agreed to pay interest on the loan funds in accordance with the weighted average loan interest rate under Article 89(3) of the former Enforcement Decree of the Corporate Tax Act while borrowing money from Gap corporation, and the tax authorities imposed gift tax on Eul et al. on Eul et al. by borrowing money from Gap corporation at an interest rate lower than the pertinent interest rate under Article 41-4(1) of the former Inheritance Tax and Gift Tax Act, the case affirming the judgment below which held that it is reasonable for the tax authorities to apply the adequate interest rate under Article 41-4(1) of the former Inheritance Tax

Article 41-4(1) of the former Inheritance Tax and Gift Tax Act (Amended by Act No. 1000, Feb. 4, 2010); Article 31-7(3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (Amended by Presidential Decree No. 22042, Feb. 18, 2010); Article 52(1) of the former Corporate Tax Act (Amended by Act No. 10423, Dec. 30, 2010); Article 89(3) of the former Enforcement Decree of the Corporate Tax Act (Amended by Presidential Decree No. 22626, Jan. 17, 201); Article 43 of the Enforcement Rule of the Corporate Tax Act

Plaintiff 1 and one other (Law Firm LLC, Attorneys So-young et al., Counsel for the plaintiff-appellant)

The superintendent of the tax office

Seoul High Court Decision 2013Nu5250 decided July 25, 2013

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

The grounds of appeal are examined.

1. As to the grounds of appeal Nos. 1, 2, and 3

(4) According to the reasoning of the lower judgment, the lower court determined that: (a) an individual’s act of trading money between a juristic person and a specially related person constitutes donation pursuant to Article 41-4(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 1000; hereinafter “instant provision”); (b) an individual’s act of lending money at a reasonable interest rate under the former Enforcement Decree of the Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010); (c) an individual’s act of lending money at a reasonable interest rate under Article 31-7(3) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22042, Feb. 18, 2010) is not subject to the reasonable interest rate under the same statutory provision, which provides that the pertinent provision on lending money at a reasonable interest rate under the same statutory interest rate should not be applied to the respective separate interest rate under the same statutory provision on lending money between the juristic person and the pertinent provision on lending interest rate.

In light of relevant laws and legal principles and records, the above judgment of the court below is just and acceptable, and contrary to the allegations in the grounds of appeal, there were no errors of misapprehending the legal principles on the scope of application of the provisions of this case

2. As to the fourth ground for appeal

Under the tax law, penalty taxes are administrative sanctions imposed, as prescribed by the individual tax law, in cases where a taxpayer violates various obligations, such as a return and payment of taxes, without justifiable grounds, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim. The taxpayer’s intention or negligence is not considered and does not constitute justifiable grounds that do not cause the taxpayer’s breach of the duty (see Supreme Court Decision 2002Du10780, Jun. 24, 2004, etc.).

In light of the above legal principles and records, even if the court below erred by finding that the plaintiffs did not impose gift tax on the monetary transaction of this case on the basis of the interpretation of their names, it is just to determine that there was no justifiable ground for not imposing additional tax on the plaintiffs just because the tax authorities did not have any problem of denial of wrongful calculation under the Corporate Tax Act, which is the issue of monetary transaction below the appropriate interest rate under the provision of this case, once, unless there was no problem of denial of wrongful calculation under the Corporate Tax Act, and there was no error of law such as misunderstanding of legal principles

3. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Shin (Presiding Justice)