The sum of the taxable value of the donated property received from the same person within 10 years before the date of donation is lawful.

Even in cases where the exclusion period for imposition of gift tax on the gift added to the taxable value of the gift tax on the re-donation expires, the sum of the donated property received from the same person within ten years before the date of the relevant donation is lawful.

Article 47 of the Inheritance Tax and Gift Tax Act

2016Guhap70582 Revocation of Disposition of Imposition of Gift Tax

LAA

BB Director of the Tax Office

May 30, 2017

June 20, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of gift tax of KRW 000,000,000 against the Plaintiff on June 1, 2016 exceeds KRW 00,000,000 shall be revoked.

1. Details of the disposition;

A. On March 11, 2009, the Plaintiff acquired 10,000 shares (10,000 won per share, and 100 million won per share) of 10,00 shares (10,000 won per share) that were previously owned shareholders at the time of capital increase with respect to the said stock company.

B. On June 9, 2016, the Defendant: (a) deemed that the Plaintiff received a gift (hereinafter “instant gift”) equivalent to KRW 00,000,000 from his parents through an acquisition of new shares as stated in paragraph (1) of Article 1; and (b) on July 12, 2000, which was made by the lineal ascendant, etc. within 10 years from the date of the donation, the Defendant calculated the tax amount by aggregating the taxable value of the instant gift and the taxable value of the instant gift (including additional taxes; hereinafter the same shall apply); and (c) calculated the tax amount by adding all the taxable value of the instant gift to the taxable value of the instant gift (hereinafter “each of the instant gift”); and (d) imposed and notified the Plaintiff of KRW 00,00,000,000, which was made by the lineal ascendant, etc. (hereinafter “instant disposition”). The specific details are as set out in the following table.

C. On July 1, 2016, the Plaintiff filed a claim with the Tax Tribunal for the revocation of the instant disposition, but the Tax Tribunal rendered a decision to dismiss the Plaintiff’s claim on September 30, 2016.

[Ground of recognition] Facts without dispute, entry of Gap evidence 1 to 5, purport of the whole pleadings

2. The plaintiff's assertion

The disposition of this case is unlawful to impose gift tax by adding up the taxable value of the existing donated portion for which the exclusion period expires to the taxable value of the gift of this case. Therefore, the part of the disposition of this case exceeding KRW 00,000,000, which is the tax amount calculated by excluding the taxable value of the existing donated portion

3. Related statutes;

The entries in the attached Table shall be as follows.

4. Determination of legality of the instant disposition

A. The main text of Articles 47(2) and 58(1) of the former Inheritance Tax and Gift Tax Act (wholly amended by Act No. 9916, Jan. 1, 2010; hereinafter “former Inheritance Tax and Gift Tax Act”) which was applied at the time of the donation of this case where the total amount of the value of donated property received from the same person is not less than 10,000 won within 10 years prior to the date of donation, such value shall be added to the taxable value of donated property; however, the amount of gift tax paid or to be paid with respect to the added value of donated property shall be deducted from the calculated taxable value of donated property; therefore, the Defendant’s calculation of the taxable value of the existing donated property made by the same person within 10

B. As to this, the Plaintiff asserts that the sum of the taxable value of each of the instant donations is unreasonable in light of the purport of the exclusion period system, since the period of exclusion under the former Framework Act on National Taxes (amended by Act No. 7329, Jan. 5, 2005; hereinafter referred to as the “former Framework Act on National Taxes”) was ten years after the expiration of the exclusion period prescribed by the former Framework Act on National Taxes from July 12, 2000.

C. According to Article 26-2(1)4 of the former Framework Act on National Taxes, no gift tax may be imposed after the expiration of the ten-year period (15-year period where a registration statement is not filed) from the date on which the gift tax can be imposed on the existing donation. However, Articles 47(2) and 58(1) of the former Inheritance Tax and Gift Tax Act purported to prevent a progressive reduction of the amount of gift tax due to a divided donation, while avoiding double taxation by deducting the amount of gift tax on the previous donation from the calculated amount of gift tax. Article 58(1) proviso of the same Act provides that “The same shall not apply where a gift tax is not imposed on the donated property added to the taxable value of gift tax due to the expiration of the period stipulated in Article 26-2(1)4 of the Framework Act on National Taxes, even if the exclusion period of gift tax on the donated property expires, the Plaintiff’s assertion on the premise that the donated property should be added to the taxable value of the next donated property should not be deducted from the calculated amount of gift tax on the previous donation.

5. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.