CONTENTS
- 1. Inheritance upon Death, What Were the Detailed Circumstances?
- - Inheritance upon Death, What Are the Relevant Statutes?
- 2. Inheritance upon Death, What Was the Court's Determination?
- 3. Inheritance upon Death, What Was Daeryun's Strategy?
1. Inheritance upon Death, What Were the Detailed Circumstances?
Plaintiff A, who filed the lawsuit relating to inheritance upon death, inherited real estate, including a building located in Jamwon-dong, Seocho-gu, Seoul, when his father passed away.
After valuing the inherited real estate at approximately KRW 14.1 billion, A reported and paid inheritance tax of approximately KRW 9.8 billion.
In the course of conducting its inheritance tax investigation, the Seoul Regional Tax Office commissioned appraisals of the real estate inherited by A from two appraisal institutions, and A also commissioned appraisals from two appraisal institutions.
The Seoul Regional Tax Office's Appraisal Review Committee notified the head of the district tax office that the average of the four appraised values, KRW 33.2 billion, should be regarded as the market value, and accordingly the head of the district tax office additionally imposed inheritance tax of approximately KRW 9.6 billion on A.
In response, A argued, with respect to the inherited property, that, “where there is no existing appraised value or the like, the taxation authority has no power to commission an appraisal,” and filed a lawsuit to revoke the disposition imposing inheritance tax.
A further argued that, “if the taxation authority is construed as being able to commission an appraisal even where there is no existing appraised value, then ex post facto and arbitrary valuation becomes possible, allowing the exercise of arbitrary discretionary power, and the taxpayer becomes unable to predict the scope of the tax amount before such valuation, which therefore violates the principle of no taxation without law,” contending that the relevant statute is unconstitutional.
Inheritance upon Death, What Are the Relevant Statutes?
In the case of inheritance upon death, disputes relating to 🔗inheritance tax may arise.
In particular, lawsuits contesting the appraised value calculated by the taxation authority with respect to the value of the inherited property are frequently filed. The relevant statutes are as follows.
▣ Inheritance Tax and Gift Tax Act Article 60 (Principles of Valuation, etc.) (1) The value of property on which inheritance tax or gift tax is imposed under this Act shall be based on the market value as of the date the inheritance commences or the date of the gift. (2) The market value under paragraph (1) shall be the value that is generally recognized as being established where free transactions take place among many unspecified persons, and shall include amounts recognized as the market value, such as expropriation prices, public auction prices, and appraised prices, as prescribed by Presidential Decree. (3) In applying paragraph (1), where it is difficult to calculate the market value, the value appraised by the methods prescribed in Articles 61 through 65, taking into account the type, scale, transaction circumstances, etc. of the relevant property, shall be deemed the market value.
Article 61 (Valuation of Real Estate, etc.) (1) Real estate shall be valued by one of the methods prescribed in the following subparagraphs. 1. Land 2. Buildings 4. Housing (a) Where there is no publicly announced housing price for the relevant housing (b) Where, after the publicly announced housing price has been announced, the relevant housing has undergone major repair or remodeling under Article 2(1)9 and 10 of the “Building Act,” so that it is not appropriate to value it based on the publicly announced housing price |
2. Inheritance upon Death, What Was the Court's Determination?
In connection with inheritance upon death, the Administrative Court, which examined the appropriateness of an external institution's appraisal for the purpose of calculating the inheritance tax on the real estate, ruled in favor of the tax authority, stating that, “the taxation authority may commission an appraisal even where there is no existing appraised value, such as an appraised value presented by the taxpayer.”
The court explained that, “inheritance tax is a tax assessed by the imposition method, and a taxpayer's return is merely a duty to cooperate for the taxation authority's investigation and determination,” and that, “the tax obligation is determined when the taxation authority decides the tax base and the tax amount.”
In other words, the court held that the taxation authority, upon receiving an inheritance tax return, has a duty to investigate and determine the proper tax base and tax amount, and that commissioning an appraisal for this purpose is a legitimate power of the taxation authority with respect to a tax assessed by the imposition method.
As to A's argument of unconstitutionality, the court determined that, “where a taxpayer judges that the market value of the inherited property is unclear, the taxpayer may, on his own, file an inheritance tax return based on appraised values obtained by commissioning two or more reputable appraisal institutions,” and that, “it is difficult to find that the taxpayer is unable to predict the scope of the tax amount,” concluding that it does not violate the principle of tax equality either.
3. Inheritance upon Death, What Was Daeryun's Strategy?
In connection with inheritance upon death, we have analyzed an Administrative Court judgment holding that it was appropriate to impose inheritance tax by commissioning an external institution to conduct an appraisal of real estate whose market value cannot be ascertained.
In the case of apartments or officetels, the market value of the inherited property can be calculated by comparison with similar properties; however, in the case of high-value buildings or land, there are no comparable objects, so taxpayers come to report inheritance tax based on the publicly announced value, and legal disputes such as this one arise as a result.
To prevent this kind of problem, it is important to carry out the inheritance tax reporting procedure through consultation with an attorney experienced in inheritance matters.
Daeryun Law Firm LLP operates an 🔗Inheritance and Family Litigation Group and provides dedicated assistance to clients facing difficulties with inheritance tax reporting.
If you are experiencing difficulties in this regard, you are welcome to visit Daeryun Law Firm LLP at any time.
