National Tax Service Review Inheritance 2015-0010 (No. 27, 2015)

Where only the next-order successors exist due to the renunciation of senior successors, whether to apply inheritance tax deduction.

In the case of succession of subordinate heir due to the renunciation of succession of senior heir, it is unconstitutional that the value of the inherited property should be deducted from the taxable value of inherited property when calculating the limit of the application of deduction of inheritance tax is within the scope of reasonable legislative discretion, so it is difficult to view that the principle of tax equality is violated or that the property rights of subordinate heir are infringed

Article 24 of the Inheritance Tax and Gift Tax Act shall apply ceiling

2015Guhap68802 Revocation of disposition, such as inheritance tax,

EAA 3

The Director of the sericultural Tax Office

February 25, 2016

March 24, 2016

1. All of the plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

Cheong-gu Office

Inheritance Tax (including additional tax) imposed by the Defendant on the Plaintiffs on January 7, 2015, KRW 373,606,170.

Sector shall be revoked.

1. Details of the disposition;

The following facts are not disputed between the parties, or may be recognized by comprehensively taking into account the respective descriptions of Gap evidence of Nos. 1 through 8 (including serial numbers), Eul evidence of No. 1 to 3, and the whole purport of pleadings:

A. The deceased ○○○○ (hereinafter referred to as “the decedent”) died on July 12, 2012, as at the time of death.

Any lineal descendant (child) who is a deceased person or a first-class inheritor under the Civil Act, and who is a second-class inheritor, is a lineal descendant.

As the mother was living by ○○, but reported the renunciation of inheritance on August 27, 2012 and the report was accepted on November 2, 2012, the Plaintiffs, who are the third-class heir and sibling, are the deceased’s property.

was succeeded to the property.

B. The Plaintiffs: (a) around January 2013 and around March 2013, 4,517,238,246 won of the value of inherited property of real estate, deposits, etc.

In addition, 3,610,934,806 won remaining after deducting 900,000,000 won as property contributed to a public-service corporation and 6,303,440 won as public charges, shall be the taxable value of inherited property, and 500,000,000 won and 200,000,000,000 won for inheritance deduction of financial property (hereinafter referred to as "the deduction amount in this case") were deducted, and reported and paid to the defendant.

C. Accordingly, on November 26, 2013, the Defendant calculated the amount of deduction without deducting the amount of deduction from the taxable value of inherited property, and determined and notified the Plaintiffs of KRW 373,606,170 (hereinafter “the first disposition”) on the ground that Article 24 subparag. 2 of the Inheritance Tax and Gift Tax Act (hereinafter “Inheritance Tax and Gift Tax Act”) is applicable to the case where subordinate inheritors inherit due to the renunciation of inheritance by senior inheritors.

D. The Plaintiffs were dissatisfied with the initial disposition and filed a request for review with the Commissioner of the National Tax Service on February 13, 2014, but received a decision of dismissal, and accordingly revoked revocation of disposition imposing inheritance tax on April 25, 2014 by Seoul Administrative Court 2014Guhap78555.

The lawsuit (hereinafter referred to as "the prior suit of this case") was filed.

E. On October 13, 2014, the Defendant confirmed that there was a procedural defect in the process of omitting the tax base and the calculation statement of the amount of tax in the initial tax payment notice, while continuing the instant lawsuit, and again determined and notified the Plaintiffs of inheritance tax (including additional tax) KRW 373,606,170 on January 7, 2015 (hereinafter “instant disposition”).

F. On March 13, 2015, the Plaintiffs appealed and received a request for examination from the Commissioner of the National Tax Service on March 13, 2015, but was dismissed on April 27, 2015.

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

The instant disposition is unlawful for the following reasons.

1) Article 24 subparag. 2 of the Inheritance Tax and Gift Tax Act provides that the amount to be deducted pursuant to the various mutual aid provisions under the Inheritance Tax and Gift Tax Act shall be limited to “the amount obtained by deducting the value of the inherited property from the taxable value of the inherited property by the inheritor’s renunciation of inheritance.” This is against the principle of tax equality derived from Article 11(1) of the Constitution, because the inheritor’s prior succession and the subordinate inheritor’s succession are unfavorable and unfavorable without reasonable grounds. In addition, Article 24 subparag. 1 and 3 of the Inheritance Tax and Gift Tax Act provides that where the inheritance deduction is granted with respect to the value of the bequeathed property added to the inherited property and the value of the donated property, the amount obtained by subtracting the value of donated property from the taxable value of the inherited property is contrary to the legislative purpose of Article 13 of the Inheritance Tax and Gift Tax Act, which provides that the inheritance tax amount shall be deducted from the taxable value of the inherited property, and thus, Article 24 subparag. 24 of the Inheritance Tax and Gift Tax Act provides that the inheritance tax amount shall be deducted even if the inheritor’s property right is excessively invalid.

2) The instant disposition was conducted according to a reinvestigation of the same tax item as inheritance tax imposed on the Plaintiffs by the initial disposition, and in the same taxable period, it violates the principle of prohibition of duplicate investigation prescribed in Article 81-4(2) of the Framework Act on National Taxes.

3) The Defendant revoked the initial disposition ex officio on the ground that the procedural defect, which is the ground for objection alleged by the Plaintiffs, exists in the appeal procedure regarding the initial disposition, and without any modification to any circumstances, made the instant disposition with the same content as the initial disposition against the Plaintiffs. This is in violation of the legal principle regarding the prohibition of re-disposition following the revocation of the tax disposition in the appeal procedure

4) The Plaintiffs, which are merely general persons who have little knowledge and experience in the tax law, filed a tax return in good faith through a tax accountant at the time of filing an inheritance tax return, and calculated and paid the tax by reflecting various deductions under the Inheritance Tax and Gift Tax Act due to misunderstanding of laws and regulations. As such, the justifiable grounds under Article 48(1) of the Framework Act on National Taxes are recognized. Therefore

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether Article 24 subparagraph 2 of the Inheritance Tax and Gift Tax Act is unconstitutional

Article 24 of the Inheritance Tax and Gift Tax Act provides for the deduction of various taxable value of inheritance, such as basic deduction, spouse deduction, and lump sum deduction, in order to stabilize the livelihood of the heir or maintain the livelihood of the heir by relaxing the inheritance burden due to the death of the heir. However, when calculating the limit of the application of inheritance tax, Article 24 of the Inheritance Tax and Gift Tax Act is newly established as of December 18, 2002, and the inheritance tax is to be deducted from the value of inherited property to the value of the next heir due to the renunciation of inheritance. This is justifiable in order to maintain the equity of tax burden by comparing the deduction amount between the heir and the heir who is not the heir (e.g., where the heir is bequeathed to a grandchild who is not the heir, the inheritance deduction amount cannot be applied because the inheritance deduction amount is 0 won) and the heir who is not the heir's heir is not the heir's heir's heir's heir's first priority or second priority before the heir's inheritance is not the heir's first priority.

Furthermore, in some cases, whether or not to impose the limit or limitation on the amount of deduction may be determined by the legislators based on the legislative discretion, taking into account the legislative intent of the provisions on the inheritance deduction and the purpose of the provisions on the limit of deduction. In particular, it is reasonable to determine that the value of inherited property should be deducted from the taxable value of inherited property when calculating the limit of the inheritance deduction in cases where a subordinate heir succeeds to inheritance due to the renunciation of inheritance by a successor within the scope of the legislative discretion as seen above, including whether or not the value of inherited property is included in the limit of the limit of deduction due to the renunciation of inheritance by a successor. In light of the legislative purpose of the above provisions on the limit of deduction of inheritance, it is within the scope of the legislative discretion.

Therefore, Article 24 subparagraph 2 of the Inheritance Tax and Gift Tax Act does not constitute unconstitutional because it is difficult to deem that the prior inheritor and subordinate inheritor are in violation of the principle of tax equality or that the property rights of subordinate inheritor are inherently infringed on, by discriminating against them without any reasonable reason. Therefore, this part of

2) Whether the principle of prohibition of duplicate investigation is violated

Article 81-2 (2) 1 of the Framework Act on National Taxes provides that "in cases where questions are made in order to determine or correct the tax base and amount of national taxes, or the relevant books, documents or other things are inspected, investigated, or order the submission thereof," and Article 81-4 (2) of the same Act provides that no re-audit of the same items and the same taxable periods shall be conducted except in certain cases.However, in this case, there is no evidence to acknowledge that the defendant made inquiries to the plaintiffs while rendering the disposition of this case, or conducted a tax investigation such as inspection and investigation of the documents, articles, etc. possessed by the plaintiffs. Accordingly, the plaintiffs' assertion on this part is without merit.

3) Whether the legal principle on the prohibition of re-disposition has been violated

In a case where the tax authority finds that there was a procedural defect in the process of a tax disposition while the litigation on the tax disposition is underway, it may revoke the tax disposition and supplement the procedural defect and impose the same taxation as at the time. As such, such new disposition does not conflict with the principle of the prohibition of re-disposition (see, e.g., Supreme Court Decision 84Nu406, Oct. 23, 1984). Therefore, the Plaintiffs’ assertion on this part is without merit.

4) Whether the disposition of this case was lawful

Under the tax law, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, where a taxpayer violates various obligations, such as a return and tax payment, under the law without justifiable grounds, the taxpayer’s intentional or gross negligence is not considered, and the statutory site, etc. does not constitute justifiable grounds that do not constitute a violation of the duty (see, e.g., Supreme Court Decision 2001Du4689, Nov. 13, 2002). In addition, the circumstances asserted by the Plaintiffs are merely the sites or mistake under the tax law and do not constitute justifiable grounds for the exemption of additional tax. Therefore, this part of the Plaintiffs’ assertion is without merit.

5) Sub-committee

The instant disposition is lawful because there is no illegality or procedural defect alleged by the Plaintiffs.

3. Conclusion

If so, all of the plaintiffs' claims are without merit, they are dismissed. It is so decided as per Disposition.

A