National Tax Service Review Inheritance 2011-0021 ( December 16, 2011)

Joint and several tax liabilities of co-inheritors do not infringe constitutional equality rights.

The object of taxation of inheritance tax is not the property acquired by the heir, but the gratuitous transfer of the property of the inheritee due to the death of the inheritee, and the joint and several tax liability of co-inheritors cannot be deemed to infringe the constitutional right of equality, or to violate the principle of substantial taxation

2012Guhap10406 Nullification, etc. of the imposition of inheritance tax

XX Kim

Head of Sungnam Tax Office

October 9, 2012

November 8, 2012

1. All of the plaintiff's claims are dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

On August 17, 201, the Defendant confirmed that the imposition of KRW 000 on the Plaintiff on August 17, 201 is null and void.

Preliminaryly, the Defendant’s imposition of KRW 000 on August 17, 201 is revoked.

1. Details of the disposition;

A. On November 6, 2009, the Plaintiff’s mother-friendly deceased Lee (hereinafter “the deceased”) died. The detailed details of the property and inherited property that the deceased donated before the death are as follows.

B. The Plaintiff, KimCC, and KimB, who are legal successors of the Deceased, reported and paid inheritance tax to the Defendant as follows:

C. After that, KimB filed an application for refund of inheritance tax with the Defendant by asserting that he was not a person liable to pay inheritance tax because he had no property inherited from the deceased, including the pre-donation property. As the Defendant confirmed on May 201 that KimB had no property inherited, the Defendant accepted the application for refund of KimB and refunded in full the amount of KRW 000 of inheritance tax paid in the name of KimB. On the other hand, on August 1, 2011, the Plaintiff, KimCC, and KimB corrected the tax base and tax amount of inheritance tax for KRW 00 of inheritance tax already reported, and decided and notified that 00 of inheritance tax should be paid jointly and severally within the limits of inherited property received or to be received by the Plaintiff and KimCC (hereinafter “instant disposition”).

D. The Plaintiff dissatisfied with the instant disposition and filed a request for examination with the Commissioner of the National Tax Service on November 11, 201, but was dismissed on December 16, 201, and filed the instant lawsuit on March 26, 2012.

[Reasons for Recognition] Facts without dispute, Gap 1, 2, 3, 4, 5, 6 evidence, Eul 1, 2, 3, 4, 10, 11, 12, 13, 14, 15 (including the number of pages), and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Articles 13(1)2, 3(1), and 3(4) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter referred to as the “Act”) which are the basis of the instant disposition, are in violation of the Constitution for the following reasons, and thus, the instant disposition shall be null and void or revoked.

① Under Article 13(1)2 of the Act, where the value of property donated by an ancestor to a person other than an heir is added to the taxable value of inherited property within five years before the date inheritance commences, the amount of inheritance tax calculated is increased due to the increase in the taxable value of inherited property. Although the law adopts the same tax rate as inheritance tax, the increased amount of inheritance tax exceeds the deductible amount of gift tax, and accordingly, the heir, etc. is liable to pay the inheritance tax according to the proportion of the property that he/she received pursuant to Article 3(1) of the Act. Ultimately, the heir, etc. is obliged to deduct only the assessed amount of gift tax so that the donee, who is not an heir, is liable to pay inheritance tax on the property donated in excess of the inheritance tax amount. Accordingly, Article 28(1) of the Act imposing inheritance tax on the inherited property is unconstitutional as it excessively infringes on the property rights of the public in violation of the excessive prohibition principle, and thus, Article 13(1)2 of the Act is unconstitutional as it violates the principle of excessive taxation of inheritance tax.

② According to Article 13(1) of the Act, taxes imposed on the person who acquired inherited property from an ancestor depending on the social status of his/her heir and donee are different, which is contrary to the principle of equality. Furthermore, according to Article 3(1) and (4) of the Act recognizing a joint and several tax liability on inheritance tax, taxes on the acquisition of another person’s property are also liable based on the status of his/her heir, which is also contrary to the principle of equality.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether Article 13(1)2 of the Act is unconstitutional

A) The legislative purpose of Article 13(1) of the Act, which provides that the value of inherited property shall be added to the value of inherited property for a certain period prior to the commencement of inheritance, is to maintain the equity of inheritance tax and gift tax in tax burden by including, as far as possible, the value of the property that an ancestor donated before the commencement of inheritance, in the taxable value of inherited property, as well as to maintain the equity of inheritance tax and gift tax in tax burden, and at the stage where the ancestor’s death may be anticipated, the legislative purpose of the above provision is to further ensure the legitimacy in that it is to prevent the act of avoiding inheritance burden by dividing and transferring the property subject to taxation of inherited property to a person other than the heir before the commencement of inheritance, in the form of gift which is similar to that of inheritance, and to promote the fairness of tax burden. In particular, by imposing inheritance tax by adding the value of the donated property to the value of inherited property, the effect of taxation by cumulative tax rate is maintained, and the

Furthermore, in order to achieve the legislative purpose of preventing inheritance tax evasion by means of a pre-donation donation, it is appropriate to place the value of the donated property within a certain period to be subject to lawful progressive tax rate by adding the value of the inherited property to the value of the inherited property. In addition, in cases where the death of the inheritee is predicted, there are many donations for the purpose of evading inheritance tax liability, while in cases where death is unexpected, the value of the donated property would be added to the value of the inherited property as a matter of course, so it would be unreasonable in substantial aspect. In reality, inasmuch as each individual’s specific circumstance, purpose and circumstance of each donation are examined in a daily manner, and in order to determine and distinguish a genuine meaning, it is very difficult to prove that it is close to tax administration impossible, and in cases where a donee recognizes an exception in addition, it is argued that most of the inheritors are true donations, and in particular, even if a donee is related to the value of the inheritee or the heir, and it is expected that there is a large amount of collusion in relation to the value of the inherited property, and thus, it is difficult to prevent and realize the gift tax amount within a certain period.

B) Article 28(1) of the Act simply requires that the amount of inheritance tax to be increased exceeds the amount of inheritance tax to be deducted by simply deducting the amount of inheritance tax calculated, and eventually, the heir, etc. bears the inheritance tax in excess of the amount of inheritance tax corresponding to his/her inherited property, as seen earlier, is due to the fact that the inheritance tax assessment method in Korea is the method of inheritance tax, as follows. In light of the fact that the method of inheritance tax focuses on whether each heir has a substantial acquisition, not on whether the amount of inheritance tax should be applied to the total amount of inheritance of a decedent, it is due to a specific type of inheritance tax assessment method in Korea to apply the cumulative tax rate, even if individual inheritors bear the inheritance tax exceeding the amount of inheritance tax corresponding to the substantial acquisition through inheritance.

Furthermore, the method of deducting the amount of inheritance tax to be borne by a donee, who is not a heir, etc., is not consistent with the legislative intent of Article 13(1) of the Act, which aims at maintaining the equity of inheritance tax and gift tax in tax burden by including the value of the donated property in the taxable value of the inherited property as far as possible, and preventing the act of unfairly reducing the burden of inheritance by relocating the property to be subject to the imposition of inheritance tax in the form of donation and by avoiding the application of high-rate inheritance tax by concealing and concealing the inherited property in advance. In other words, rather than deducting only the calculated amount of gift tax from the inheritance tax, if the amount of gift tax is deducted from the value of the donated property in advance from the inheritance tax, the legislative purpose of Article 13(1) of the Act, which merely imposes only gift tax on the inherited property to be subject to the application of high-rate inheritance tax, may be damaged (see, e.g., Constitutional Court en banc Decision 2005Hun-Ga4, Jul. 27, 2006).

In fact, in light of the fact that both the person who received a donation in advance is the legal heir and the children of the Plaintiff and KimB (the deceased’s grandchildren), it is sufficiently anticipated that the method of deduction is unreasonable. Therefore, Article 13(1)2 of the Act cannot be deemed to excessively infringe the property rights of the heir or to violate the principle of substantial taxation. Therefore, the Plaintiff’s above assertion is groundless.

C) Furthermore, the principle of equality, tax equality, or tax equality, as the principle of equality under Article 11(1) of the Constitution is realized in the territory of tax law, and the imposition and collection of taxes must be conducted fairly and equally commensurate with the taxpayer’s ability to pay taxes, and it is not allowed to discriminate or give unfavorable treatment to a specific taxpayer without reasonable grounds (see, e.g., Constitutional Court Order 95Hun-Ba41, Aug. 29, 1996). However, if there are reasonable grounds, the principle of taxation based on the capacity to pay taxes should not be absolutely implemented without exception, and discrimination among taxpayers should be exceptionally permitted. This is because it is recognized to recognize the legislative freedom to form a broad range of ways to determine the content of tax law and more today’s tax legislators may consider various perspectives for purposes other than securing the financial revenue through the imposition of taxes (see, e.g., Constitutional Court Order 95Hun-Ba41, Nov. 25, 199).

In this case, even if the value of the gift is added to the value of the inherited property by adding the value of the inherited property to the value of the inherited property by the decedent who is not an heir within five years before the commencement date of inheritance, which leads to a difference in the amount of tax to be borne by the donee and the heir, this is a discrimination based on reasonable grounds in light of the legislative purpose, etc. under Article 13(1) of the Act, and there is no circumstance to recognize it as a remarkably unreasonable and unfair measure or discriminatory taxation. Thus, the above provision

2) Whether Article 3(1) and (4) of the Act are unconstitutional

A) The method of taxation of inheritance tax is largely divided into the method of miscarriage tax and the method of miscarriage acquisition tax. The former is a method of imposing taxes on his entire miscarriage on the basis of his predecessor in proportion to his amount, and the latter is a method of imposing taxes on his acquired property based on the person who acquired the legacy. Therefore, when the method of miscarriage tax is taken, the object of taxation of inheritance tax can be deemed to be the "free transfer of property due to inheritance", while the object of taxation in cases of taking the method of miscarriage acquisition tax may be deemed to be the "property acquired from the decedent by inheritance".

Article 1(1)1 of the Act provides that the inheritance tax shall be imposed on all inherited property of a resident in cases where a resident dies, and on all inherited property of a nonresident in cases where a nonresident dies, and Articles 13 and 14 of the Act provide that the value of the inherited property shall be the amount calculated by subtracting public charges, funeral expenses, etc. related to the inherited property as of the date of commencing inheritance from the amount calculated by adding the value of the inherited property within a specific period prior to the commencement of inheritance to the value of the inherited property, which is the value of the inherited property, shall be the amount obtained by deducting the taxable value of the inherited property from the value of the inherited property, which is the value of the inherited property, as of the date of commencing inheritance.

is currently being in progress.

Article 25(1) of the Framework Act on National Taxes provides that the inheritance tax payable by each heir is a tax payable by each heir for the inheritance of an ancestor. Our Civil Act provides that the inherited property belongs to co-ownership of the heir. Since Article 25(1) of the Framework Act on National Taxes provides that the joint-owned property, joint-owned property, or property belonging to the joint-owned business, additional dues, and expenses for disposition on default are jointly and severally liable for such taxes, the inheritance tax payable by each heir is deemed as a tax payable for the inheritance of an ancestor due to its nature as a tax payable for the inheritance of an ancestor. In principle, the co-inheritors should bear joint and several liability for the total amount of the inherited property. Meanwhile, Article 3(1) and (4) of the Act provides that the heir or testamentary donee is jointly and severally liable to pay the inheritance tax calculated at the rate prescribed by Presidential Decree based on the inherited property received or to be received by each heir or testamentary donee with respect to the inheritance tax imposed by each co-inheritors within the limits of his/her ability to jointly and severally liable tax burden on each co-inheritors’s and co-inheritors’s.

B) Ultimately, the object of taxation of inheritance tax is not the property acquired by the heir, but the transfer of property without compensation due to the death of the decedent. Article 3(4) of the Act expands the tax liability to a person who does not have the inherent tax liability under the purpose of securing tax collection, even though Article 3(4) of the Act, the joint and several tax liability of co-inheritors cannot be deemed to infringe the constitutional right to equality, or to violate the principle of substantial taxation or the principle of proportionality, and thus, the Plaintiff’

3. Conclusion

The plaintiff's claim is dismissed as it is without merit.