In a case where a successor has reported as inherited property but a tax base is less reported, whether it does not constitute an exception to the imposition of penalty taxes for underreporting under Article 27-2(2)2(c) of the former Enforcement Decree of the Framework Act on National Taxes (negative)

Since additional tax under the tax law is a kind of administrative sanction imposed when a taxpayer neglects his/her duty to file a faithful tax base, etc. in order to ensure the propriety of taxation, the taxpayer’s intentional or negligent act is not considered, and the site or mistake of the law does not constitute justifiable grounds for exempting additional tax. However, Article 27-2(2)2(c)(c) of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 23592, Feb. 2, 2012) of the former Enforcement Decree of the Framework Act on National Taxes (hereinafter “Enforcement Decree provision”) permits the grounds for exception in light of the fact that it is practically difficult to accurately determine the value of inherited property due to the difference or difficulty in the method of assessment at the time of filing an inheritance tax, even if the tax base if the heir filed a return as inherited property once, it cannot be readily concluded that it does not constitute an exception under the Enforcement Decree provision

Article 47-3(1) of the former Framework Act on National Taxes (Amended by Act No. 11124, Dec. 31, 2011); Article 27-2(2)2(c) (current deleted) of the former Enforcement Decree of the Framework Act on National Taxes (Amended by Presidential Decree No. 23592, Feb. 2, 2012)

Plaintiff 1 and one other (Attorney Lee Jae-soo, Counsel for the plaintiff-appellant)

The Director of Gangnam District Office

Seoul High Court Decision 2015Nu30175 decided November 11, 2015

The part of the judgment of the court below concerning the imposition of additional tax on underreporting inheritance tax is reversed, and that part of the case is remanded to the Seoul High Court

The grounds of appeal are examined (to the extent of supplement in case of any statement in the supplemental appellate brief not timely filed).

1. Article 47-3(1) of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 2011) provides that where the reported tax base falls short of the tax base to be reported under the tax-related Acts, penalty tax shall be added to the under-reported amount to be paid; however, the same shall not apply to “cases prescribed by Presidential Decree.” However, Article 27-2(2)2(c) of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 23592, Feb. 2, 2012) of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 23592, Feb. 2, 2012) provides that “Where the reported tax base is less than the tax base to be reported by the deadline for filing a return under Article 67 or 68 of the Inheritance Tax and Gift Tax Act on inherited property” as one of them.

In order to ensure the propriety of taxation, additional tax under-reported under tax law is a kind of administrative sanction imposed when a taxpayer neglects his/her duty to file a return on tax base, etc. with the intent of having the taxpayer faithfully fulfill his/her duty, and thus, the taxpayer’s intent or negligence is not considered, and the site or mistake of statutes does not constitute justifiable grounds for exempting from additional tax. However, in light of the fact that it is practically difficult to accurately determine the value of inherited property due to the difference or difficulty in the method of assessment at the time of filing an inheritance tax return, it is difficult to readily conclude that the instant provision does not constitute an exception under the Enforcement Decree of the instant case even if the heir filed a return on an inherited property once

2. According to the reasoning of the lower judgment and the record, ① (a) the deceased Nonparty (hereinafter “the deceased”) established a △△△△△△△△△△△△△ Company (hereinafter “Nonindicted Company”), an unlisted corporation, on July 12, 2010, and acquired 50% of the shares of the non-party company. ② On August 2, 2010, the deceased assessed the value of business rights, including the trademark right lost (hereinafter “the trademark right of this case”) of this case, as KRW 1,053,85,163, and transferred the right of business of this case to the non-party company. ③ The deceased died on August 12, 2010, by deeming that the deceased’s prior notification of the loss of business rights, including the inheritance tax and the gift tax, were transferred to the non-party company with the title of “the loss of ○○○○○○○○” (hereinafter “the loss of business rights”). The Plaintiffs, the heir of this case, on the ground that the Plaintiff transferred the title of this case’s inheritance tax and the inheritance tax claim No.

Examining these facts in accordance with the provisions and legal principles as seen earlier, the Plaintiffs reported the transfer of the trademark right of this case to the non-party company by filing a report on the transfer of the trademark right of this case to the non-party company by including the claim for transfer price, such as goodwill, in accordance with the supplementary evaluation method, the Defendant assessed the value of the trademark right of this case by applying the supplementary evaluation method, and added the difference to the taxable value of inherited property. Thus, even if the inheritance tax base originally reported by the Plaintiffs became insufficient to the tax base to be reported pursuant to the Inheritance Tax and Gift Tax Act, it constitutes a case of underreporting the inheritance tax due to the difference in the evaluation method, as prescribed by the Enforcement Decree of this case, and the fact that the Plaintiffs reported the trademark

Nevertheless, the lower court determined that the provision of the Enforcement Decree of this case cannot be applied solely for the reasons indicated in its holding. In so doing, the lower court erred by misapprehending the legal doctrine on the exceptional grounds for underreporting additional taxes, thereby adversely affecting the conclusion

3. Therefore, the part of the judgment of the court below regarding the imposition of additional tax on underreporting of inheritance tax is reversed, and that part of the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices

Justices Lee Sang-hoon (Presiding Justice)