Supreme Court Rules Post-Facto Appraisal by Tax Authorities After Inheritance Tax Filing Is Lawful

"If the Officially Announced Price Does Not Reflect True Value, Separate Investigation Is Permissible"

The Supreme Court has ruled that it is lawful for tax authorities to reassess inheritance taxes based on the actual market value through a post-facto appraisal, even if the taxpayer initially reports taxes using the officially announced price.

Supreme Court, Seocho-gu, Seoul. Photo by Yonhap News Agency

According to the legal community on June 17, the Supreme Court's second division (Presiding Justice Kwon Youngjun) dismissed all appeals in the case where heir A filed a lawsuit against the head of the Mapo Tax Office to cancel the inheritance tax assessment, thereby upholding the lower court's ruling, which partially favored the plaintiff.

In April 2019, A inherited land located in Seodaemun-gu, Seoul, from their mother. A reported and paid approximately KRW 2.722 billion in inheritance tax, having valued the land at about KRW 7.434 billion based on its officially announced value.

However, the National Tax Service found a significant discrepancy between the market value of the land and the reported amount, and therefore conducted a post-facto appraisal. As a result, the appraised value of the land rose to the KRW 12 billion range. Based on this, the National Tax Service imposed an additional inheritance tax of about KRW 2.19 billion.

The key issue in the trial was whether the tax authority could recognize the appraised value obtained after the taxpayer's report as the market value. The Supreme Court stated, "Inheritance tax is determined by the tax authority using an assessment system, meaning the tax obligation is finalized when the authority sets the tax base and amount." The court further explained, "Even if the taxpayer reports based on a supplementary evaluation method (officially announced price), if this does not properly reflect the objective exchange value, the tax authority may calculate the tax amount using the market value confirmed through a separate investigation."

However, the Supreme Court also held that, for the appraised value by the tax authority to be recognized as the market value, there must be no special circumstances that would cause a price fluctuation between the inheritance date and the date the appraisal report is prepared. In this case, as in the lower court, the National Tax Service's appraisal did not meet this requirement and was not recognized as the market value.

The Supreme Court found it appropriate for the lower court to calculate the tax based on the KRW 11.35 billion value determined by a court-appointed appraiser during the proceedings.

Accordingly, the Supreme Court finalized the lower court's decision, which canceled about KRW 99 million of the additionally imposed KRW 2.19 billion inheritance tax, as this amount exceeded the court-appraised value.

This content was produced with the assistance of AI translation services.