Supreme Court-2016-Du-1110 ( November 29, 2018)

The gift tax should be deducted if the gift tax is added to the property received or to be received by the recipient who sets the limit of joint and several tax liability.

Joint and several tax liability within the scope of the property received or to be received by the plaintiff should be added to the pre-donation property, and corresponding tax amount to be paid by the plaintiff should also be deducted.

Inheritance Tax Payment Liability under Article 2-2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act

2018Nu236 Revocation of Disposition of Levying Inheritance Tax

LAA

○ Head of tax office

July 3, 2019

August 21, 2019

1.The judgment of the first instance shall be modified as follows:

x.x.x.x. the Defendant’s imposition disposition of KRW 600,000,000 on the Plaintiff shall be revoked in excess of KRW 300,00,000.

2. All costs of the lawsuit shall be borne by the defendant.

The decision is as follows (the plaintiff reduced the purport of the claim before the second return).

1. Details of the disposition;

A. The maximum BB (hereinafter referred to as the “the decedent”) died 20*.*.*. his heir, the Plaintiff, the Plaintiff, the largestCC, the largestD, the EE, and the largest F, did not report the taxable value and tax base of the inheritance.

B. As a result of the inheritance tax investigation conducted from x.x.x.x.x.x.x. to 20x.x.x.x., the Defendant notified the Plaintiff of KRW 1,00,000,000 of inheritance tax calculated as indicated in the following table, along with the list of the inheritance tax and the joint and several tax obligors to pay to the Plaintiff, on the ground that the Defendant did not file a prior report on the sales price of the land and buildings on 00, Seoul, 000 YY and the land and buildings on 00, Seoul, 2008, 00, and the sales price of the land and buildings on 2008, 000, and buildings on 2000,000 xx. x. x. x.) of the amount of tax payable by the Plaintiff among them:

* It is the formula under Article 2-2(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22042, Feb. 18, 2010).

List of votes

(unit: Won)

No.

Classification

Decisions

1

Taxable Value of Inheritance

4,000,000,000**

2

Limit of Amount to be deducted

1,000,000,000

3

Tax Base (1-2)

3,000,000,000

4

Tax Rate

50

5

calculated tax amount

1,000,000,000

6

Amount of gift tax deducted

400,000,000

7

Amount of final tax (5-6)

700,000,000

8

Additional Tax for Insincere Report

100,000,000

9

Additional Tax for Insincere Payment

100,000,000

10

Amount of final tax

1,000,000,000

** The value of inherited property + KRW 700,000,000 + The value of inherited property to be included in the disposal property prior to the commencement of inheritance + KRW 3,000,000,000 + the aggregate of donated property + KRW 2,xx,00,000 for heirs + those of KRW 5x,000 for those of heirs other than inheritors) - Public imposts KRW 200,000,000 for funeral expenses – KRW 5,000,000 for public imposts

C. The Plaintiff appealed and filed a request for a trial to the Tax Tribunal on x.x.x.x.x. The Tax Tribunal dismissed the Plaintiff’s request on x.x.x. x. x. x. x.

D. Since then, the defendant notified the plaintiff of the tax amount to be paid by the plaintiff 20 million x.x. x. 200 x. 200 million x. x. x. 600 million x00 x00 x.*** (the disposition in this case, referred to as the "disposition"), and the plaintiff received the tax amount to be paid by the plaintiff 20 x x. x. x. x. x. x. x. 20 x. x. x. 20 x. x. 20 x. x.

**** in the first instance court, the Defendant claimed that the Plaintiff’s limit of joint and several tax liability is KRW 600,036,610 (=total amount of KRW 900,000 - total amount of KRW 30,000,000 - total amount of KRW 200,000,000 on inheritance tax imposed by the Plaintiff), but thereafter, the amount of total liability was reduced to KRW 30,000,x amount of inheritance tax imposed by the Plaintiff, and KRW 200,00,x amount of inheritance tax imposed by the Plaintiff was determined to be KRW 36,610,00 (=60,036,610-60,00,000).

[Reasons for Recognition] Facts without dispute, Gap evidence 1, Gap evidence 2-1, Gap evidence 2-2, Gap evidence 5, Eul evidence 1, 3, 4, and 5, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

In calculating the "property received or to be received by a blind party who determines the limit of joint and several tax liability of an heir" under Article 3 (3) of the Inheritance Tax and Gift Tax Act and Article 2-2 (2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, the donated property included in the calculation of the "property received or to be received by a deceased party who determines the limit of joint and several tax liability of an heir" shall be the maximum amount of joint and several tax liability for deducting the gift tax from

As above, the Plaintiff’s inherited property value of 200,000,000 won in relation to joint and several tax liability and 729,000,000 won in donated property and 200,000,000 won in pure donated property which deducts 200,000,000 won in donated property. As such, the Plaintiff’s total amount of inherited property is 700,000,000 won in + 200,000,000 won in + 300,000,000 won in total, and individual inheritance tax against the Plaintiff is 200,000,000,000 in total amount of property, the Plaintiff’s joint and several tax liability limit is 300,000,000,000 won in total amount of property (i.e., 700,000,000 won in total amount of tax liability).

B. Relevant statutes

It is as shown in the attached Form.

C. Facts of recognition

The Plaintiff was donated from the decedent prior to the death of the decedent, KRW 20x.x. 450,000,000, and KRW 150,000,000 on thex.x. 150,000,000 on thex.x.x. x. 20x.x.x. 80,000, and KRW 39,000,000 on thex. 39,000 on thex. 20x.x. 10,000,000 on the aggregate of KRW 10,000,000 on the part of the decedent prior to the death of the decedent, but did not pay the gift tax.

이에 ◆◆세무서장은 원고에게, 20xx. xx. xx.경 아래 <표> 순번 1, 2 기재와 같이, 20xx. xx. xx.경 아래 <표> 순번 3, 4, 5 기재와 같이 증여세(가산세 포함) 부과처분을 하였다(이하 통틀어 '이 사건 증여세 부과처분'이라 한다).****

****** The plaintiff argued to the effect that the imposition of the gift tax in this case was imposed and collected without distinguishing between the principal tax and the additional tax, and that all the imposition of the gift tax should be deemed to have been imposed as the principal tax. However, in light of each description of 1-5 of the evidence No. 7, the evidence No. 1 of the evidence No. 7 is not divided into the principal tax and the additional tax after having issued a tax payment notice again, and No. 1 of the evidence No. 7 is merely the receipt, and No. 2 of the evidence No. 9-2 of the evidence No. 3, No. 7-3, No. 4, and No. 3 are specified, and there is no evidence to acknowledge the plaintiff's assertion otherwise.

List of votes

(unit: Won)

Date of donation;

Value of donation

Gift Tax

Additional Tax

Amount of imposition

X.x.x.x.

450,000,000

70,000,000

20,000,000

90,000,000

X.x.x.x.

150,000,000

30,000,000

10,000,000

40,000,000

X.x.x.x.

80,000,000

20,000,000

10,000,000

30,000,000

X.x.x.x.

39,000,000

10,000,000

5,000,000

15,000,000

X.x.x.x.

10,000,000

3,000,000

1,000,000

4,000,000

Total

729,000,000

133,000,000

46,000,000

179,000,000

[Ground of recognition] Facts without dispute, Gap5 evidence, Gap 7-1, 2, Gap 9-1, 2, 3, 7-2

Each entry from 1 to 5, the purport of the whole pleadings

D. Determination

1) Article 3(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “former Inheritance Tax and Gift Tax Act”) provides that an inheritor has received or is to receive either of the inherited property.

As such, each co-inheritors are jointly and severally liable to pay the inheritance tax according to their proportion of the inheritance tax. Paragraph (4) provides that the inheritance tax under paragraph (1) shall be jointly and severally liable to pay it within the limit of the property each inheritor received or is to receive. Therefore, each co-inheritors is jointly and severally liable to pay the inheritance tax according to their respective ratio of property received or to be received by the inheritor among the total value of the inheritance tax calculated by setting the total value of the inherited property of the inheritee as the taxable value

As above, setting the duty to pay and jointly pay the inheritor’s own inheritance tax on the basis of the property received or to be received by the inheritor is intended to impose tax on the person who acquired the property gratuitously transferred due to the death of the inheritee by taking into account the actual ability to pay the inheritance tax. Thus, Article 3(3) of the former Inheritance Tax and Gift Tax Act provides that “The inherited property under Article 13(1) of the former Inheritance Tax and Gift Tax Act includes the donated property received by the inheritor or testamentary donee who is added to the inherited property under Article 13 of the former Inheritance Tax and Gift Tax Act.” As such, prior donated property included in the inherited property constitutes “property received or to be received by the inheritor” under paragraph (4) of

Meanwhile, in order to maintain the equity of inheritance tax and gift tax and prevent an unfair reduction of the burden of inheritance tax by progressive tax rate, the former Inheritance Tax and Gift Tax Act removes unreasonable points by having the provisions of Article 28, which provides for the deduction of a certain amount of gift tax on donated property from the calculated amount of inheritance tax in order to adjust it. As such, the difference in the time of donation in the case of a pre-donation donated property to an heir is only the same as the substance that the property is transferred without compensation among the parties concerned is treated equally with the general inherited property in order to achieve the purpose of taxation special inheritance tax, it is reasonable to view that Article 2-2 (2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22579, Dec. 30, 2010) should also be subject to the deduction of the amount of gift tax imposed or to be paid in accordance with the total amount of inheritance tax imposed or to be imposed upon the heir by stipulating that the heir is liable to pay the amount of total amount of inheritance tax calculated by deducting the total amount of inheritance tax imposed or to be paid by inheritance tax.

2) According to the above legal principle, the Plaintiff is liable to jointly pay the amount of gift tax to the extent of its property received or to be received, and the amount of gift tax to be paid by the Plaintiff should also be deducted accordingly, although the Plaintiff’s prior donated property should be added thereto, and accordingly, the amount of gift tax to be paid by the Plaintiff should also be deducted. x. x. x. 20x. x. x. x. the Defendant corrected the amount of tax to be paid by the Plaintiff at KRW 200,000 and notified the Plaintiff of the amount of tax to be paid at KRW 600,000,000. In calculating the above limit, while calculating the amount of tax, the value of the property donated by the Plaintiff was added to KRW 729,00,000,000 which was donated by the Plaintiff, the fact that the Plaintiff did not deduct the gift tax amount of KRW 20,00,00

In regard to this, the Defendant alleged that additional tax amount of KRW 00,00,000, which is included in the disposition imposing the gift tax of this case, should not be deducted from the obligation to jointly pay, since it was imposed as administrative sanctions on the Plaintiff’s failure to return and pay the gift tax. However, in calculating the limit of obligation to jointly pay, the inheritance tax that is deducted in calculating the limit of obligation to jointly pay is the amount of tax payable, and the purport of the obligation to jointly pay is to impose the liability to jointly pay the gift tax on the basis of the property actually remaining after deducting the amount of tax paid by inheritance from the inherited property. Therefore, it

Ultimately, the limits of the Plaintiff’s joint and several liability for payment are 300,000,000*** as follows.

******* as above** as above, the total amount of liabilities and the amount of inheritance tax imposed on the Plaintiff has been determined as property, resulting in the difference between KRW 300,000,00x won claimed by the Plaintiff.

(**** The Defendant alleged in the first instance that the Plaintiff’s limit of joint and several tax liability is KRW 600,000,000 (=total amount of KRW 900,000 - total amount of KRW 30,000,000 as a result of the Plaintiff’s inheritance - total amount of KRW 200,000,000 as a result of the Plaintiff’s inheritance - total amount of total amount of liability is KRW 30,000,xx, and inheritance tax imposed on the Plaintiff was determined as 20,00,00x, the amount of total tax liability was reduced to KRW 36,610 (=60,036,610-60,000) as the amount of inheritance tax imposed on the Plaintiff was determined as x.).

Total amount of KRW 929,00,000,000 (=property 200,000,000) acquired by the Plaintiff due to inheritance +

Giftable property 729,00,000 - Total liabilities 30,000,000 - Inheritance Tax levied on the Plaintiff

200,000,000 won - Tax amount of 200,000,000 won = 300,000,000 won

3. Conclusion

If so, the plaintiff's claim is reasonable,******** as the plaintiff's claim is sought. The judgment of the court of first instance is unfair with different conclusions, and it is so decided as per Disposition by changing the judgment of the court of first instance.

****** The plaintiff has sought revocation of the instant disposition only for the portion exceeding 300,000,000 won.