Supreme Court: "Imposing Additional Gift Tax Based on Arbitrary Tax Authority Appraisals Is Unlawful"

Appraised Value Based on a Date Other Than the Gift Date Cannot Be Considered Market Value

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

The Supreme Court has ruled that it is illegal for the tax authorities to impose additional gift tax based on an appraised value obtained through a separate appraisal request after a taxpayer has already filed a gift tax return.

According to the legal community on July 8, the Supreme Court's second division (Presiding Justice Kwon Youngjun) upheld the lower court's decision in a case seeking the cancellation of a gift tax assessment, dismissing the appeal filed by the tax authorities.

The plaintiffs, who received real estate in Sujeong-gu, Seongnam, Gyeonggi Province in July 2019, calculated the value of the property at approximately 3.9 billion won in October of the same year in accordance with the then-Inheritance and Gift Tax Act and paid the gift tax.

Subsequently, in April 2020, the Commissioner of the Seoul Regional Tax Office designated October 2019 as the valuation date and requested appraisals from two appraisal firms. The tax authorities then assessed the market value as 6,191,080,000 won, which was the average of the two appraised values, and imposed additional gift tax on the amount exceeding the previously paid tax.

The first trial ruled in favor of the plaintiffs. The court found that because the appraised value was calculated based on a date other than the date of the gift, it could not be considered the market value at the time of the gift. In addition, the court determined that the appraised value unilaterally commissioned by the tax authorities lacked objective and fair supporting data, making it difficult to regard as the market value. The appellate court and the Supreme Court upheld this judgment.

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