Top court confirms gift tax imposed on CJ chairman unlawful

SEOUL, The chairman of CJ Group, South Korea’s leading food and entertainment conglomerate, on Thursday won a suit against the tax authority over the imposition of a gift tax worth tens of billions of won.
The Supreme Court upheld a lower court’s ruling that a Seoul tax office must revoke its order for Lee Jay-hyun, the chairman of CJ Group, to pay some 156.2 billion won (US$141.1 million) of gift tax. It, however, ruled the levy of 12.2 billion won of transfer income tax and the general income tax put on him was lawful.
Lee was accused of evading tax by establishing a special purpose company (SPC) in the Virgin Islands, a British territory famous for being a tax haven, and trading his shares in the name of the company between September and November in 2013.
Jungbu District Office of National Tax Service ordered Lee to pay 261.4 billion won in taxes, including a gift tax, a transfer income tax and a general income tax, deeming him the practical owner of the shares acquired by the SPC.
It applied a rule on the inheritance and gift tax laws which allows the tax authority to impose a gift tax to the real owner of property when it is registered under the name of a third party, taking it as a gift from the owner.
In 2016, the Tax Tribunal ruled that the tax service should cancel 94 billion won out of the total sum after Lee filed a petition against the tax imposition.
But he also sought administrative litigation the following year arguing that he should not pay the remaining amount of tax that was imposed on him.
The first court, in 2018, dismissed his claim, saying there was nothing wrong with the tax authority’s application of the rule.
The appellate court overturned the decision on the gift tax, citing the lack of evidence to support the authority’s claim that Lee evaded his tax through the process of acquiring shares through the SPC.

Source: Yonhap News Agency

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