Cho Jae-2017-west-4073 ( October 20, 2017)

Whether the disposition of this case where there was a defect based on Article 31(6) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act which was null and void is null and void.

Since the legal principle that Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act cannot be applied at the time of the instant disposition is clearly revealed, and there was room for dispute over interpretation, it cannot be said that the instant disposition cannot be deemed null and void even if the Defendant erroneously interpreted it and issued a tax disposition.

Seoul Administrative Court-2017-Gu Partnership-8260 Invalidity, etc. of a disposition imposing gift tax

Kim****

Macknock et al.

on January 14, 2018

November 2, 2018

1. The plaintiff Park Jong-A's primary claims and ancillary claims are all dismissed.

2. All of the claims of plaintiffs Kim* and Kim Kim are dismissed.

3. Of the costs of the lawsuit, the part arising between the plaintiff ParkA and the defendant Lee BB shall be borne by the director of the tax office, and the part arising between the plaintiff Kim*, Kim* and the defendants shall be borne by the plaintiff Kim*, and Kim.

Cheong-gu Office

[Plaintiff**, Kim*, Kim ] The imposition of gift tax (including additional tax) of KRW 1,789,421,420 in the attached Table 1 [list of Imposition of Gift Tax on Plaintiff Kim**] written by the head of Defendant BB Tax Office against Plaintiff Kim**, and the imposition of gift tax (including additional tax) of KRW 1,731,96,630 in the attached Table 1 [List of Imposition of Gift Tax on Plaintiff Kim Kim *] written by the head of Defendant DD Tax Office against the Plaintiff Kim Kim.

[Defendant BB Tax Office’s disposition of imposition of KRW 37,804,560 on December 31, 2015, imposed on Plaintiff BB on Plaintiff BA on May 1, 2017, and confirmed that the disposition of imposition of KRW 37,804,560 on December 31, 2015 (including additional taxes) is primarily null and void, and sought a revocation in preliminary

1. Details of the disposition;

A. ○○ Construction Co., Ltd. (hereinafter referred to as “○○ Construction”) is a corporation that runs housing construction sales business, rental business, etc. The ○○ Construction Co., Ltd. (hereinafter referred to as “○○○ Construction”). The ○○ Construction Stocks hold 15% of Kim Q, 15% of the Plaintiff Park Q, the wife of Kim Q, and Plaintiff Kim*, their children, and 35% of them, respectively.

B. The amount of ○○ Construction’s carried-over losses was KRW 4,139,160,560 in the business year 201, KRW 2,991,274,40 in the business year 201, KRW 1,048,969,072 in the business year 2012, and there was no amount of losses in the business year 2013, 2014, and KRW 2015 in the business year.

C. From 2010 to 2015, Kim Q and Plaintiff LA lent money free of charge to ○○ Construction. The balance of loans listed in the Customer Director of ○○ Construction from 2010 to 2015 are as follows as of December 31, 2015.

D. The Defendants considered the amount equivalent to the Plaintiffs’ share in the interest accrued from ○○ Construction’s gratuitous loan as the value of donated property to the Plaintiffs. ① On December 6, 2016, Defendant BB director of the tax office imposed KRW 1,789,421,420 in aggregate of the gift tax (including additional tax) as shown in attached Table 1 [Attachment 1] on Plaintiff Kim** on December 6, 2016; ② on December 6, 2016, Defendant DD director of the tax office imposed KRW 1,731,96,630 in aggregate of the gift tax (including additional tax) as shown in Attached Table 1 [Attachment 1] on the Plaintiff Kim 6, 2016, and ③ Defendant BB director of the tax office imposed KRW 1 [Attachment 202,421,630 in aggregate on May 1, 2017].

E. On July 24, 2017, Plaintiff Park Jong-A requested the Tax Tribunal for adjudication, and the Tax Tribunal rendered a decision on October 20, 2017 that "the assessment base and the amount of tax shall be corrected after re-auditing the value of donated property." Accordingly, the head of Defendant BB tax office revoked both the disposition of imposition on December 30, 2014 and December 31, 2014 on the date of donation, and revoked the 34,403,870 of the disposition of imposition on December 31, 2015, which was imposed on December 31, 2015.

[Reasons for Recognition] Facts without dispute, Gap 1 to 24 evidence, Eul 1 to 9 evidence, the purport of the whole pleadings

2. Relevant statutes;

Attached Form 2 shall be as listed in attached Table 2.

3. Determination as to the defense prior to the merits (Plaintiff Park Jong-A part)

According to the purport of Gap evidence No. 10 and the whole pleadings, the head of defendant BB tax office may recognize the fact that he/she ex officio revokes the disposition of imposition of gift tax (including additional tax) on September 11, 2018 on the date of gift remaining after the revocation of the above 1.e., the date of gift on December 31, 2015 (=7,804,560 won (=72,208,430 won - 34,4034,870 won).

Therefore, since a disposition seeking invalidation or revocation by the Plaintiff Park Jong-A does not exist because its validity has already ceased, the Plaintiff’s primary claim and preliminary claim by the Plaintiff Park Jong-A are unlawful as it does not have any interest in the lawsuit (hereinafter referred to as “instant disposition, excluding the disposition against the Plaintiff Park Jong-A, among the dispositions stated on January 4, 199).

4. The assertion and judgment

A. Summary of the plaintiffs' assertion

1) Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 18177, Dec. 30, 2003; hereinafter “Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 18177, Dec. 30, 200) was determined as null and void on March 19, 2009 by the Supreme Court. Article 31(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (hereinafter “amended by Presidential Decree”) was added to the phrase “where a person gets benefits” under Article 41(1) of the Inheritance Tax and Gift Tax Act as amended on January 1, 2010, the former Enforcement Decree of the Inheritance Tax and Gift Tax Act still becomes null and void under Article 31(6)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 2010, Apr. 20, 2017).

2) Article 31(6) of the Enforcement Decree of the 2010 2010 Amended by Presidential Decree is unconstitutional because, by viewing the profits earned by a specific corporation as the profits earned by a shareholder, it is deemed unconstitutional by imposing a gift tax liability even in a case where a shareholder of a specific corporation fails to obtain any economic and financial benefits. As such, the subsequent disposition in accordance with the unconstitutional Enforcement Decree should be null and void.

3) Of the instant disposition, Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 25195, Feb. 21, 2014) (hereinafter referred to as “Article 31(6) of the Enforcement Decree of the amended Enforcement Decree of 2014”; together with Article 31(6) of the Enforcement Decree of the amended Enforcement Decree of the amended in 2003 and 2010, Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (hereinafter referred to as “Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act”) that served as the basis for the portion of donation after February 2014 among the instant disposition is invalid for the same reason as Article 31(6) of the Enforcement Decree of the amended in 203 and 2010.

B. Whether Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act is invalid: null and void

1) Article 41(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter "the Inheritance Tax and Gift Tax Act amended by Act No. 9916, Jan. 1, 2010; hereinafter "the Inheritance Tax and Gift Tax Act amended by Act No. 2003") provides that "in case where a person who has a special relationship with a shareholder or investor of a corporation that has losses, or has suspended or closed its business, obtains profits from the shareholder or investor of the specified corporation through a specific transaction with the specified corporation, the amount equivalent to such profits shall be deemed the value of donated property of the shareholder or investor of the specified corporation." Article 31(6) of the Enforcement Decree of the amended by Presidential Decree No. 2003 delegated the method of calculating such profits to the Presidential Decree."

Article 41 of the Inheritance Tax and Gift Tax Act of 2003 delegates only "the calculation of the profit" to the Enforcement Decree on the premise that the shareholder, etc. has obtained the profit through a certain transaction with a specific corporation. However, Article 31 (6) of the Enforcement Decree of the amended Act of 2003 stipulates that the profit acquired by a specific corporation shall be deemed to be "the profit acquired by the shareholder, etc." and the calculation of the value of donated property shall be made. In addition, under Article 41 (1) of the amended Inheritance Tax and Gift Tax Act of 2003, if the shareholder, etc. has not actually obtained the profit even if the property was provided to the specific corporation without compensation, it may be excluded from the subject of gift tax, but Article 31 (6) of the amended Enforcement Decree of 203 shall be deemed to have obtained the profit by deeming that the shareholder, etc. has actually received the profit. Ultimately, Article 31 (6) of the amended Enforcement Decree of the Inheritance Tax and Gift Tax Act of 203 shall be null and void as it goes beyond the scope of delegation (see Supreme Court en banc Decision 2009Do.

2) The Inheritance Tax and Gift Tax Act was amended by Act No. 9916 on January 1, 2010 (hereinafter “the Inheritance Tax and Gift Tax Act amended by Act No. 2010), and the part “where a shareholder, etc. of a specific corporation obtains the benefit” under Article 41(1) of the Inheritance Tax and Gift Tax Act amended by Act No. 1003, “where a shareholder, etc. of a specific corporation obtains the benefit as prescribed by Presidential Decree” was amended to “where a shareholder, etc. of a specific corporation obtains the benefit.” However, the language and text of Article 31(6) of the Enforcement Decree of the amended by Presidential Decree No. 25195, Feb. 2

A gift tax shall be levied on the basis of the value of the donated property reasonably calculated on the basis of the value of the donated property, and if a taxpayer fails to obtain any economic and property benefits due to the donation, the gift tax may not be levied in principle.

In light of the taxation system of gift tax and the concept of gift and gift tax, Article 41(1) of the Inheritance Tax and Gift Tax Act amended in 2010 ought to be seen as a provision premised on the premise that shareholders, etc. have gained profits corresponding to donated property under the Inheritance Tax and Gift Tax Act by providing property to a specific corporation without compensation. Therefore, notwithstanding the partial amendment of the text, Article 41(1) of the Inheritance Tax and Gift Tax Act amended in 2010 on the premise that the shareholders, etc. of the specific corporation have obtained profits through transactions with the specific corporation, such as provision of property without compensation, etc., as before the amendment, only the matters concerning the legitimate calculation method of such profits shall be deemed as delegation

However, Article 31(6) of the Enforcement Decree of the amended Act in 2010 stipulates that a shareholder shall be liable to pay gift tax, regardless of whether the shareholder actually gains profit or not, as well as the purport of Article 41(1) of the Inheritance Tax and Gift Tax Act amended in 2010 is still null and void as it goes beyond the scope of delegation (see Supreme Court en banc Decision 2015Du45700, Apr. 20, 201).

3) Article 41 of the former Inheritance Tax and Gift Tax Act amended by Act No. 12168, Jan. 1, 2014 (hereinafter “the Inheritance Tax and Gift Tax Act amended by Act No. 12168”) expanded the scope of a legal entity to which the said provision applies by including a controlling shareholder and a part of his/her relatives into a specific legal entity. Article 31(6) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act amended by Act No. 2014, “The amount calculated by multiplying the amount calculated by subtracting the amount calculated by subtracting the profit from the amount calculated on the basis of the amount of income from the business year’s business year’s income by the ratio of stocks, etc.” However, Article 41 of the former Inheritance Tax and Gift Tax Act amended by Act No. 12168, Jan. 1, 2014 only expands the scope of a specific legal entity, and Article 41 of the former Inheritance Tax and Gift Tax Act amended by Act No. 1014, Apr. 20, 2014>

Article 31(6) of the Enforcement Decree of the amended Act in 2014 provides that a donee shall be liable to pay gift tax regardless of whether the shareholder, etc. actually accrued or not, by taking into account the double taxation issues arising from the expansion of a specific corporation under Article 41 of the Inheritance Tax and Gift Tax Act in 2014 and the double taxation issues arising from the calculation of the donee’s gift profits. However, if a donee’s gift is provided to a specific corporation without compensation, it shall be deemed that the shareholder, etc. gains profit by itself. This is not different from Article 31(6) of the Enforcement Decree of the amended Act in 203 and 2010. As such, Article 31(6) of the Enforcement Decree of the amended Act in 2014 is contrary to the purport of Article 41 of the Inheritance Tax and Gift Tax Act amended in 2014, and is null and void as it goes beyond the scope of delegation.

C. Whether the instant disposition is null and void: effective

1) In order for a tax disposition to be deemed null and void as a matter of course, the mere fact that there is an illegal ground for the disposition is insufficient. The defect must be objectively obvious as it seriously violates the important part of the law. In determining whether there is a significant and apparent defect, the purpose, significance, function, etc. of the laws and regulations, which serve as the basis for the taxation disposition, should be examined from a teleological perspective as well as reasonable consideration on the specificity of the specific case itself. In addition, in a case where a tax disposition was made by applying a certain provision of an Act and subordinate statute to a certain legal relation or factual relationship, the legal principle that the relevant provision cannot be applied to the legal relation or factual relationship is clearly stated and there is no possibility of dispute over interpretation, if the tax authority imposed a tax disposition by applying the provision of the relevant Act and subordinate statutes, it shall be deemed that the defect is significant and obvious. However, even if there is room for dispute over interpretation because the legal principle that the relevant provision cannot be applied to the legal relation or factual relations is not clearly revealed, it is merely a mistake in the fact of taxation requirements (see, etc.).

2) Since the instant disposition was made based on Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act that was null and void, there is a defect.

However, in full view of the facts and circumstances as seen earlier and the purport of the entire pleadings, it appears that there is room for dispute over interpretation since the legal principles that Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act cannot be applied at the time of the instant disposition are not clearly revealed. Therefore, even if the Defendant issued a tax disposition by erroneous interpretation, it cannot be deemed that the instant disposition is null and void because it is difficult to view that the defect is obvious.

A) Article 41 of the Inheritance Tax and Gift Tax Act amended in 2003 aims at preventing a specific corporation from bearing corporate tax on the amount of donation by offsetting the amount of donation as deficit, while Article 31(6) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act amended in March 19, 2009 declared that it goes against the purport of Article 41 of the Inheritance Tax and Gift Tax Act amended in 2003 as the mother corporation and was null and void beyond the scope of delegation. After the amendment of the Inheritance Tax and Gift Tax Act amended on January 1, 2010, only "the case where a certain corporation obtains profits under Article 41(1) of the Inheritance Tax and Gift Tax Act amended in 2003" was amended to "the case where a certain corporation obtains profits under the Presidential Decree."

In light of the process and contents of the amendment of the text and text of the law, the legislative intent can be inferred to the effect that Article 31(6) of the Enforcement Decree of the amended 2003, which was null and void by amending the law in accordance with the purport of the judgment of the Supreme Court (generally, even if a statutory order, which has the effect upon delegation of the law, was null and void due to lack of grounds for delegation of the law, then if the basis for delegation of the law is granted by amending the law, it can be deemed effective

B) After the amendment of the Inheritance Tax and Gift Tax Act on January 1, 2010, a number of administrative litigation was filed regarding whether Article 31(6) of the Enforcement Decree of the amended 2010 was unconstitutional or unlawful. The lower court’s judgment did not take the same view and presented each other’s opinions (see, e.g., Supreme Court Decision 2014Nu68715, May 19, 2015; Supreme Court Decision 2014Guhap7206, Oct. 8, 2014; Seoul High Court Decision 2015Nu49377, Jan. 13, 2016; Supreme Court Decision 2014Guhap7480, Jun. 11, 2015; and the Enforcement Decree of the amended 2003 did not have any reasonable ground for unconstitutionality of the Administrative Court.

Despite the Supreme Court’s amendment of the Inheritance Tax and Gift Tax Act on April 20, 2017, Article 31(6) of the Enforcement Decree of the 2010 Amended by Act No. 10148, Apr. 20, 2010 still declared invalid. However, there was room for dispute as to whether Article 31(6) of the 2010 Amended by Presidential Decree No. 2010 was unconstitutional or unlawful. The instant disposition was

C) Article 31(6) of the Enforcement Decree of the amended Act in 2003 and 2010 declared as null and void on March 19, 2009 and April 20, 2017 by the Supreme Court. However, Article 41(1) of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 2003 and Article 41(1) of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 2010), which provides for the donation of profits through a transaction with a specific corporation, is not declared as unconstitutional. In other words, only the provision of the Enforcement Decree prescribing the method of calculating is null and void, and the provision of the law

5. Conclusion

The plaintiff Park Jong-A's primary and conjunctive claims are all dismissed as unlawful and all of them are dismissed, and the plaintiff Kim Jong-A and Kim are all dismissed as it is without merit. It is so decided as per Disposition.