2020 Gohap79691 Revocation of Disposition of Imposing capital gains tax, etc.

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on March 23, 2021

on April 6, 2021

1. The Defendant’s imposition of capital gains tax of KRW 632,949,580 (including additional tax) for the year 2016 against the Plaintiffs on December 5, 2018 that exceeds KRW 545,448,176, respectively, shall be revoked.

2. The plaintiffs' respective remaining claims are dismissed.

3. Of the costs of lawsuit, 90% is assessed against the Plaintiffs, and the remainder is assessed against the Defendant.

The Defendant’s imposition of KRW 237,029,010 (including additional taxes) and capital gains tax of KRW 632,949,580 (including additional taxes) for the year 2016, each of which exceeds 744,974, shall be revoked on December 5, 2018.

1. Details of the disposition;

A. From the 1970s to 1970s, the deceased D (hereinafter referred to as “the deceased”) acquired the △△ nationality in around 201 while residing and living in the △▽▽▽△△△ weeks, and died on July 14, 2016.

Plaintiff B’s spouse and Plaintiff A are co-inheritors as the deceased’s children. The Plaintiffs did not report the inheritance tax, amount and tax base to the Korean tax authority within the statutory due date of return.

B. At the time of the deceased’s death, the deceased held 744,974 won as a deposit in Korea, and one house (2 E, MD 20878) in △△△. The value of the above house at the time of the deceased’s death is USD 693,80, and is KRW 781,732,212 ($ 1,126.74 per USD 1,126.74) upon conversion into won. The sum of the above two properties is KRW 782,47,186 (=74,974 + + KRW 781,732,212).

C. From August 1, 2018 to October 31, 2018, the Defendant conducted an investigation of inheritance tax and capital gains tax on the deceased. The Defendant, from February 1, 2016 to June 2016, notified the Plaintiffs to jointly pay the amount of inheritance tax (including additional tax) on the aggregate of KRW 1,427,795,974, and the sum of KRW 1,427,05,000,000,000, which was donated by the deceased, to persons in Korea other than inheritors, from February 2016 to June 2016 (hereinafter “instant notification of inheritance”). On December 5, 2018, the Defendant notified the Plaintiffs to jointly pay the amount of inheritance tax (hereinafter “instant notification of inheritance tax”).

In addition, the Defendant: (a) determined that the deceased’s 2,200 square meters of the 3,2201 square meters in Seoul Special Self-Governing City, Seoul Special Metropolitan City, which was transferred to a third party in KRW 2.2 billion on February 22, 2016, did not meet the requirements for reduction or exemption of capital gains tax on his/her own farmland; and (b) corrected the amount of capital gains tax (including additional tax) accrued for the deceased’s 2016 as KRW 632,949,580 (including additional tax); and (c) notified the deceased’s 24(1) and (3) of the former Framework Act on National Taxes (amended by Act No. 16097, Dec. 31, 2018; hereinafter the same) that the Plaintiffs, co-inheritors, succeeded to his/her duty to pay capital gains tax on December 5, 2018, notified the Plaintiffs to jointly pay the amount of capital gains tax (hereinafter “instant transfer tax notification”).

D. The Plaintiffs appealed to the Defendant, and received a decision of dismissal on April 19, 2019, and filed an appeal with the Tax Tribunal. On June 25, 2020, the Tax Tribunal rendered a decision of re-audit to the effect that the amount of tax should be corrected according to the results of re-audit of whether there are other inherited property of the deceased, other than the above domestic deposit and Dol Housing. The Defendant did not make any decision of correction.

[Ground of recognition] Facts without dispute, entry of Gap evidence 1 to 6, and purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiffs' assertion

1) First, pursuant to Article 3 subparag. 2 of the Inheritance Tax and Gift Tax Act (hereinafter “Inheritance Tax Act”), where an ancestor is a non-resident, only "property in the Republic of Korea" shall be subject to inheritance tax. Therefore, in such a case, the inheritor shall be deemed to be liable to pay inheritance tax or joint and several liability pursuant to Article 3-2(1) and (3) of the Inheritance Tax and Gift Tax Act to the extent of inherited property in Korea. However, since inherited property in the Republic of Korea at the time of the deceased's death was entirely KRW 74,974, it is unlawful that the Defendant notified the Plaintiffs that the amount of inheritance tax exceeding

2) Second, according to Article 24(1) of the former Framework Act on National Taxes, an inheritor succeeds to his/her duty to pay national taxes within the scope of inherited property. In full view of the contents of this provision in light of the above provisions of the Inheritance Tax and Gift Tax Act, inherited property ought to be deemed as an inherited property in Korea. Therefore, it is illegal for the Defendant to notify the Plaintiffs that they should jointly pay capital gains tax exceeding the deposit

B. Determination

1) As to the plaintiffs' assertion on the instant notice of inheritance tax

In light of the principle of no taxation without law, or the requirements for tax exemption or tax exemption, the interpretation of tax laws and regulations must be strict, and it is not allowed to expand or analogically interpret without reasonable grounds (see, e.g., Supreme Court Decision 2002Du595, Mar. 12, 2004).

Article 2 subparagraph 3 of the Inheritance Tax and Gift Tax Act provides that "property" means all property that belongs to an ancestor," and Article 3 of the Inheritance Tax and Gift Tax Act provides that "All inherited property shall be levied by an ancestor in cases where the ancestor is a resident as of the commencement date of inheritance (Article 1) and inheritance tax shall be levied on all inherited property in cases where the ancestor is a non-resident (Article 2 subparagraph 2). Meanwhile, Article 3-2 (1) of the Inheritance Tax and Gift Tax Act provides that "the heir shall be liable to pay an amount calculated according to the ratio prescribed by Presidential Decree on the basis of the property that he/she received or is to receive from among inherited property as inheritance." Article 3-2 (1) of the Inheritance Tax and Gift Tax Act provides that "The heir shall be jointly and severally liable to pay the amount of inheritance tax under paragraph

In light of the above legal principles and the language and purport of the provisions of the Inheritance Tax and Gift Tax Act, even in cases where an ancestor is a non-resident as well as a resident, his heir shall be deemed to be jointly and severally liable for inheritance tax under Article 3-2(1) and (3) of the Inheritance Tax and Gift Tax Act within the scope of "property within the Republic of Korea". The specific reasons are as follows: ① clearly distinguishing the meaning of Article 2 subparag. 3 of the Inheritance Tax and Gift Tax Act and Article 3 subparag. 1 and subparag. 2 of the Inheritance Tax and Gift Tax Act from "property within the Republic of Korea" and Article 2 subparag. 3 of the Inheritance Tax and Gift Tax Act provides that "property within the territory of the Republic of Korea is attributed to the ancestor," so that the heir may not be deemed to have been subject to inheritance regardless of whether it is a non-resident or a non-resident." However, Article 3-2(1) of the Inheritance Tax and Gift Tax Act provides that the heir shall be subject to taxation on all inherited property within the territory of the Republic of Korea.

Therefore, this part of the plaintiffs' assertion on different premise is not acceptable.

2) As to the plaintiffs' assertion on the notice of transfer tax of this case

A) Article 24(1) of the former Framework Act on National Taxes provides that "if there are two or more heirs, each heir shall be jointly and severally liable to pay national taxes, etc. that are imposed on or are to be paid by the predecessor within the scope of the inherited property when the inheritance commences." Article 24(1) and (3) of the former Framework Act on National Taxes provides that "if there are two or more heirs, each heir shall be jointly and severally liable to pay national taxes, etc. that are calculated by dividing national taxes, etc. that are imposed on or to be paid by the predecessor according to the inherited property to the extent of the inherited property." As such, Article 24(1) and (3) of the former Framework Act on National Taxes provides that "the limit of the inherited property that an heir succeeds to the scope of the predecessor's national tax liability by inheritance" does not separately stipulate that a heir shall succeed to the extent of domestic inherited property by distinguishing whether the decedent is a resident or a non-resident. The scope of succession to national tax liability due to inheritance does not appear to be within the scope of the heir's inherited property within the scope of inheritance.

B) Meanwhile, the purport of Article 24(1) of the former Framework Act on National Taxes is that an inheritor succeeds to tax liability of the inheritee, such as national taxes, to the extent of inherited property. The inheritor does not mean that the inheritor succeeds to the entire amount of tax liability of the inheritee, such as national taxes, but is able to collect from an inheritor within the extent of inherited property (see, e.g., Supreme Court Decision 90Nu7395, Apr. 23,

Furthermore, Article 11(1) of the Enforcement Decree of the Framework Act on National Taxes provides that "the value of property acquired by inheritance pursuant to Article 24(1) of the Act shall be calculated according to the following formula." This provision provides that "the total amount of assets acquired by inheritance - (the total amount of liabilities acquired by inheritance + inheritance tax imposed or payable due to inheritance)" is "the total amount of taxes of inheritance tax and other national taxes that are to be paid by inheritance from the decedent due to the death of the decedent does not exceed the value of the net assets inherited," and the method of application is specified in accordance with the purport of Article 2

However, at KRW 782,477,186, the aggregate inheritance tax amount of KRW 237,029,010, the aggregate inheritance tax amount of KRW 545,448,176, which is the aggregate inherited property value of the above plaintiffs, remains more than 545,448,176, and according to the above provision, the plaintiffs shall succeed to the duty to pay capital gains tax of the deceased on the road with the amount of capital gains tax of KRW 632,949,580 for the year 2016. Nevertheless, the defendant's notification to the plaintiffs to pay all capital gains tax of KRW 632,949,580 for the deceased's total amount of capital gains tax was unlawful as it violates Article 24 (1) of the former Framework Act on National Taxes.

C) Therefore, the part exceeding KRW 545,448,176 of the transfer tax notice against the plaintiffs should be revoked in an unlawful manner. Ultimately, the plaintiffs' allegation in this part is with merit.

3. Conclusion

Therefore, the plaintiffs' claims are justified within the scope of the above recognition, and each remaining claims are dismissed as they are without merit. It is so decided as per Disposition.