In addition to the “stocks of a corporation that reported the securities” prescribed by the parent law, the effect of the provision of Article 57(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which expands the scope of the stocks subject to evaluation to include the stocks during the period from six months before the report of securities is made to the date of report (negative)

Article 63(2)1 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6048 of Dec. 28, 199) provides that the Financial Supervisory Commission shall assess the stocks of a corporation whose securities declaration was made for the purpose of corporate disclosure by the method prescribed by the Presidential Decree in consideration of its business feasibility, transaction status, etc., notwithstanding the provisions of Article 63(1)1 of the Act, the scope of its application is limited to “stocks of a corporation which filed a securities declaration with the Financial Supervisory Commission” and only the method of appraisal is delegated to the Presidential Decree. However, Article 57(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by the Presidential Decree No. 1660 of Dec. 31, 199; hereinafter “Enforcement Decree”) provides that the scope of stocks subject to appraisal including those subject to securities declaration from the date of appraisal to the first time prior to the date of appraisal is invalid by prescribing the scope of stocks subject to the reporting under Article 63(2)1 of the Enforcement Decree of the same Act.

Article 63(2)1 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6048 of Dec. 28, 1999); Article 57(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1660 of Dec. 31, 199)

[Judgment of the court below]

Head of Seocho Tax Office

Seoul High Court Decision 2005Nu11038 delivered on March 23, 2006

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

Article 38 of the Constitution provides that "All citizens shall have the duty to pay taxes under the conditions as prescribed by Act." Article 59 of the Constitution provides that "types and rates of taxes shall be determined by Act." This principle of no taxation without the law adopts the principle of no taxation without the law. Such principle of no taxation without the law means that taxation requirements, etc. shall be prescribed by the law enacted by the National Assembly, which is the representative body of the people, and the law should be strictly interpreted and applied in its enforcement, and the expansion or analogical application of administrative convenience is not allowed. Therefore, without the delegation of the law, the provision of matters concerning taxation requirements, etc. by administrative legislation such as orders or rules, or the provision of interpretation of the contents that can be inferred and expanded without the permission of the law violates the principle of no taxation without the law (see Supreme Court en banc Decision 86Nu694 delivered on September 22, 198, Supreme Court Decision 98Du1731 delivered on March 16, 200).

Article 63(2)1 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6048, Dec. 28, 1999; hereinafter “the Act”) provides that the stocks of a corporation whose securities are reported to the Financial Supervisory Commission for the purpose of corporate disclosure shall be appraised by the method prescribed by the Presidential Decree in consideration of its business feasibility, transaction circumstances, etc., notwithstanding Article 63(1)1 of the Act, the scope of its application is limited to “stocks of a corporation whose securities are reported to the Financial Supervisory Commission” and only the method of evaluation is delegated to the Presidential Decree. On the other hand, Article 57(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1660, Dec. 31, 199; hereinafter “Enforcement Decree”) provides that the stocks under Article 63(2)1 of the former Enforcement Decree of the Act include the first method of appraisal of stocks from 6 months prior to the date of appraisal to 3 months prior to the date of stock declaration (in cases where gift tax is levied on stocks).

However, it is not consistent with the provisions of Article 63 (2) 1 of the Act, which is the mother corporation, to expand the scope of stocks subject to evaluation in the direction unfavorable to taxpayers, and there is no provision that delegates such extension. Thus, the part that expands the scope of stocks subject to evaluation under Article 57 (1) of the Enforcement Decree by expanding the scope of stocks to include the stocks during the period from six months before the report on securities to the date of report is made, other than the “stocks of a corporation that reported on securities” under Article 57 (1) of the Enforcement Decree.

In the same purport, the court below held that the disposition of this case based on the value assessed by the method under Article 63 (2) 1 of the Act and Article 57 (1) of the Enforcement Decree of the Act shall be illegal, notwithstanding that the appraisal of the value of the stock of this case, which was reported to the Financial Supervisory Commission after the date of stock transfer, should be based on not Article 63 (2) 1 of the Act but Article 63 (1) 1 (c) of the Act, after the date of stock transfer, is presumed null and void, and there is no error in the misapprehension of legal principles as argued in the Grounds for Appeal.

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

Chief Justice Lee Yong-chul (Presiding Justice)