2017Du62716 Revocation of Disposition of Imposition of Inheritance Tax, etc.

Plaintiff 1 and three others

Attorney Jeong Byung-chul et al., Counsel for the defendant-appellant

Head of Gangnam District Tax Office and one other

Law Firm LLC et al., Counsel for defendant-appellant

Attorneys Kim Jong-ho et al.

Seoul High Court Decision 2017Nu30360 Decided August 11, 2017

December 30, 2020

All appeals are dismissed.

The costs of appeal are assessed against the plaintiffs.

The grounds of appeal are examined.

1. Case summary

A. On April 20, 193, the deceased non-party 1 (hereinafter referred to as "the decedent") established and operated the FT for the purpose of complete business in Hong Kong (hereinafter referred to as "FT"). On October 15, 2003, the plaintiff 1 and his non-party 2 acquired two shares issued by the plaintiff 1 and his non-party 2 (hereinafter referred to as "the Hong Kong corporation"). Meanwhile, on April 30, 2004, the FT transferred both the business and assets to GFT.

B. On March 15, 2005, the decedent died, and at the time, three banks, including ○○○, △△△△△△△△△K, △△△△△△ NorthernK, were opened in the name of the decedent and their siblings 3, each of which was held in the joint names of the decedent and their siblings 12,858,689 (hereinafter “instant overseas assets”). However, each account was kept in the aggregate of USD 12,858,689 (hereinafter “instant overseas assets”).

C. The Plaintiffs, as co-inheritors of the inheritee, reported and paid inheritance tax, did not include the unlisted stocks of the Hong Kong corporations of this case and the foreign assets of this case in the inherited property.

D. Accordingly, on March 10, 2014, the head of Gangnam District Tax Office imposed and notified the Plaintiffs of KRW 10,121,885,90 of inheritance tax by including the instant overseas assets in the inherited property. Thereafter, the Hong Kong corporation’s non-listed stocks are also included in the inherited property, and on July 1, 2014, imposed and notified the Plaintiffs of KRW 16,632,980,40 (including additional tax) on the aggregate of the inheritance tax (hereinafter referred to as “assessment disposition of inheritance tax” as of July 1, 2014; KRW 26,754,86,300; KRW 300,000,000,000 in the total amount of KRW 30,000,000,000,000 won and KRW 30,000,0000,0000,0000,0000).

E. On April 10, 2014 and July 1, 2012 of the same year, Plaintiff 1 transferred a considerable portion of the overseas assets of this case to the Bank Account of Singapore ○○○○ (hereinafter referred to as the “CMF account”) established under the name of the Republic of Korea, which is a tax haven place, and received dividend income by investing the fund, the head of the tax office omitted a global income tax return even if having received interest income. The head of the tax office imposed and imposed on Plaintiff 1 the total amount of KRW 957,422,010 (including additional tax) of each global income tax for the year 205 through 2012 (hereinafter referred to as the “instant global income tax imposition disposition”, and the “each disposition of this case” and “each disposition of this case shall not be referred to as the “each disposition of this case”).

2. Determination on the assertion regarding the shares of the Hong Kong corporation of this case among the disposition imposing inheritance tax of this case

A. As to the fourth ground for appeal

The lower court determined that the GFT shares were merely a nominal trust with Plaintiff 1, etc. as a beneficial shareholder, and that the GFT shares were included in inherited property.

Examining the reasoning of the lower judgment in light of the record, the lower court did not err in its judgment by violating the rules of evidence.

B. Regarding ground of appeal No. 3

The lower court determined that the Defendant Gangnam-gu Tax Office did not err by denying the relevant private loan debt included in the balance sheet as the processing debt in calculating the value of the GFT stocks.

Examining the reasoning of the lower judgment in light of the record, the lower court did not err in its judgment by violating the rules of evidence.

C. As to the grounds of appeal Nos. 2 and 6

1) In the event that it is inappropriate to apply the market price under Article 60 of the former Inheritance and Gift Tax Act or the supplementary evaluation method under Articles 61 through 65 of the latter Inheritance and Gift Tax Act, the valuation shall be based on the value assessed by the country in which the property is located in consideration of the value assessed for taxation purposes

(Article 58-3 of the former Enforcement Decree of the Inheritance and Gift Tax Act, Article 63(1)1 (c) of the former Inheritance and Gift Tax Act, and Article 54 of the Enforcement Decree of the same Act, in the case of shares of an unlisted corporation located in a foreign country, the burden of proving that the supplementary evaluation method can only be applied, and that "the application of the supplementary evaluation method is not inappropriate," and that "the application of the supplementary evaluation method is not inappropriate (see, e.g., Supreme Court Decision 2007Du5646, Jan. 14, 2010)."

2) Examining the following facts and circumstances revealed through the reasoning of the lower judgment and the record in light of the legal doctrine as seen earlier, it is reasonable and appropriate to assess the value of the shares of the Hong Kong corporations, which are the shares of the non-listed corporations overseas, by applying the supplementary evaluation method based on the net asset value under Article 63(1)1(c) of the former Inheritance and Gift Tax Act and Article 54(4)2 of the Enforcement Decree of the same Act. The tax authority’s assessment of the shares of the Hong Kong corporations is reasonable and appropriate.

It is not appropriate to apply the supplementary assessment method based on the net asset value as such.

It is reasonable to see that it is “.”

A) In evaluating the value of the shares of the Hong Kong corporation, which is the property located in a foreign country, the head of Gangnam Tax Office applied the supplementary valuation method based on the net asset value that does not consider the net profit value pursuant to Article 63(1)1(c) of the former Inheritance and Gift Tax Act and Article 54(4)2 of the Enforcement Decree of the same Act on the ground that the FT as of March 15, 2005, was a corporation under temporary or permanent closure as of March 15, 2005, and GFT was a corporation less than three years after the commencement of the business. This is an objective and reasonable valuation method reflecting the special characteristics of the corporation under temporary or permanent closure or permanent closure.

B) In addition, the head of Gangnam-gu Tax Office deemed USD 31,026,364 to FT as net asset value for the transfer of business acquired by GFT, and the book value of GFT as of March 31, 2005, which was prepared as of March 31, 2005, the end of the Hong Kong tax law after the evaluation base date, and appropriated as net asset value for the balance sheet in which the Hong Kong certified public accountant was audited (the relationship between them).

G. The debt was denied as seen earlier) calculated the net asset value of the Hong Kong corporations of this case. The method of calculating the net asset value of the Hong Kong corporations of this case seems reasonable and appropriate to assess the net asset value of the corporations.

3) Although the reasoning of the lower judgment on this part is partly inappropriate, the lower court’s conclusion is justifiable to have rejected the Plaintiffs’ assertion that the tax authority failed to prove that it was inappropriate to apply the supplementary evaluation method under the Inheritance and Gift Tax Act to the shares of the Hong Kong corporations of this case, and that the method was erroneous. In so doing, it did not err by misapprehending the legal doctrine on the supplementary evaluation method under the Inheritance and Gift Tax Act, thereby adversely affecting the conclusion of the judgment.

D. As to the grounds of appeal Nos. 1 and 5

The lower court rejected the Plaintiffs’ assertion that the largest shareholder should not be allowed to increase the amount of operating income under the corporate accounting standards from October 15, 2003 to March 31, 2005 on the first financial statements prepared on March 31, 2005, on the following grounds: (a) it is not sufficient to recognize that the Plaintiffs’ internal payment was made from October 15, 2003 to March 31, 2004, which was the business year immediately preceding the business year to which March 15, 2005, the base date for appraisal belongs; and (b) on the stocks of GFT, the largest shareholder should not be allowed to increase the amount of operating income under Article 53(5)4 of the former Enforcement Decree of the Inheritance Tax Act; and (c) the lower court rejected the Plaintiffs’ assertion that there was no liquidation procedure conducted by FT at the time of commencing the inheritance on March 15, 2005, and that there was no possibility of the Plaintiffs’ assertion that the amount of capital was paid from the Hong Kong tax base.

Examining the reasoning of the lower judgment in light of the relevant legal principles and records, the lower court did not err in its judgment by misapprehending the legal doctrine on presumption or by misapprehending the legal doctrine on the grounds for exception to the evaluation of the largest shareholder under Article 53(5)4 and 5 of the Enforcement Decree of the former Inheritance and Gift Tax Act, or by violating

3. Determination on the assertion regarding the foreign assets of this case among each disposition of this case (Ground of appeal Nos. 7 and Plaintiff 1’s ground of appeal No. 8)

The lower court determined that the instant disposition on global income tax was lawful on the premise that it is difficult to regard the instant overseas assets as assets outside the territory of the Hong Kong corporations, and that such assets are included in the inherited property as personal property of the inheritee. Therefore, the instant disposition on imposition of inheritance tax on this premise is lawful. Furthermore, the lower court determined that the instant disposition on global income tax was lawful on the premise that Plaintiff 1 did not report and pay the dividend income accrued from the CM account in which a significant amount was transferred from the instant overseas assets,

Examining the reasoning of the lower judgment in light of the record, the lower court did not err in its judgment by violating the rules of evidence.

4. Conclusion

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

Supreme Court Decision 201

Justices Kim Jae-in

Justices Min Il-young in charge

Justices Lee Jae-hwan