Corporate Tax Act | The Supreme Court's Determination That Land Received as a Gift by a Non-Profit Domestic Corporation Is Subject to Gift Tax

This case concerned whether land received as a gift by a non-profit domestic corporation was subject to gift tax under the Corporate Tax Act.

The plaintiff, Foundation A, is a non-profit corporation established by a third party who owned forest land in Seongnam.

Subsequently, part of the forest land at issue was used as temple grounds by Temple B of the Jogye Order of Korean Buddhism, and on the remaining portion the plaintiff operated a project to develop and maintain a public cemetery.

In 2010, the plaintiff received as a gift a portion of the co-ownership shares held by the third party and Temple B of the Jogye Order of Korean Buddhism, thereby acquiring ownership.

Regarding this, the defendant tax office took the view that the gift ‘fell within the scope of gift tax,’ and in 2020 it imposed gift tax and an additional tax.

The plaintiff contested this and filed a request for adjudication (a request contesting an administrative action before an agency prior to court litigation, comparable to seeking administrative review) with the Tax Tribunal. Although a partial reduction was made, the plaintiff filed a revocation lawsuit with respect to the remaining taxed portion.

As to whether the property was subject to taxation under the Corporate Tax Act, the lower court, relying on the former Corporate Tax Act, defined the scope of income subject to corporate tax as follows.

As to the applicability of the Corporate Tax Act, the lower court determined that among the income of a non-profit domestic corporation for each business year, the income subject to corporate tax is limited to income arising directly from a profit-making business.

The former Corporate Tax Act enumerates ‘income arising from a profit-making business,’ and the court took the view that special gains outside the business, such as gains from assets received without consideration, are not included.

From this perspective, the court determined that property acquired by a non-profit domestic corporation through a gift was not obtained as a result of a profit-making business and therefore is not subject to corporate tax.

As to whether the property was subject to taxation under the Corporate Tax Act, the Supreme Court found that the lower court's determination conformed to the legal principles, and it dismissed the plaintiff's final appeal.

This case concerned whether property was subject to taxation under the Corporate Tax Act.

The Corporate Tax Act is a statute that taxes corporate income and governs the tax treatment of various corporate activities.

Because the Corporate Tax Act covers many items, including the scope of deductible expenses, restricted items, tax credits, and tax reductions, it is advisable to seek the assistance of a professional to prevent risks related to corporate tax.

At Daeryun Law Firm LLP, 🔗attorneys experienced in tax matters, together with certified public accountants and tax accountants, form a team to protect clients' rights and interests.