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Laws of the Republic of Korea |
1
INHERITANCE TAX AND GIFT TAX ACT
Wholly Amended by Act No. 5193, Dec. 30, 1996
Amended by Act No. 5493, Dec. 31, 1997
Act No. 5498, Jan. 8, 1998
Act No. 5582, Dec. 28, 1998
Act No. 6048, Dec. 28, 1999
Act No. 6124. Jan. 12, 2000
Act No. 6301, Dec. 29, 2000
Act No. 6780, Dec. 18, 2002
Act No. 7010, Dec. 30, 2003
Act No. 7335, Jan. 14, 2005
Act No. 7580, Jul. 13, 2005
Act No. 8139, Dec. 30, 2006
Act No. 8346, Apr. 11, 2007
Act No. 8347, Apr. 11, 2007
Act No. 8435, May 17, 2007
Act No. 8828, Dec. 31, 2007
Act No. 8852, Feb. 29, 2008
Act No. 8863, Feb. 29, 2008
CHAPTER GENERAL PROVISIONS
Article 1 (Inheritance Tax Taxables)
Article 2 (Gift Tax Taxables)
Article 3 (Liability for Inheritance Tax Payment) Article 4 (Gift Tax Liability)
Article 5 (Location of Inherited Property, etc.)
Article 6 (Taxation Jurisdiction)
CHAPTER ASSESSMENT STANDARD AND CALCULATION OF TAX AMOUNT OF INHERITANCE TAX
SECTION 1 Inherited Property
Article 7 (Scope of Inherited Property)
Article 8 (Insurance Money Regarded as Inherited Property) Article 9 (Trust Property Regarded as Inherited Property) Article 10 (Retirement Allowance, etc. Regarded as Inherited Property) SECTION 2 Non-Taxation
Article 11 (Non-Taxation of Inheritance Tax Pertaining to Deceased Soldier, etc.) Article 12 (Non-Taxable Inherited Property)
SECTION 3 Taxable Value of Inheritance Tax
INHERITANCE TAX AND GIFT TAX ACT
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Article 13 (Taxable Value of Inheritance Tax)
Article 14 (Public Imposts, etc. Deducted from Value of Inherited Property) Article 15 (Presumption, etc. of Inheritance to Property Disposed, etc. Prior to Commencement Date of Succession,)
SECTION 4 Non-Inclusion in Taxable Value of Property Contributed for the Purpose of Public Good
Article 16 (Non-Inclusion in Taxable Value of Inheritance Taxes of Property Contributed to Public Service Corporation, etc.)
Article 17 (Non-Inclusion in Taxable Value of Inheritance Taxes of Property Entrusted with Public Trust)
SECTION 5 Inheritance Deductions
Article 18 (Basic Deductions)
Article 19 (Spousal Inheritance Deductions)
Article 20 (Other Personal Reliefs)
Article 21 (Blanket Deduction)
Article 22 (Inheritance Deductions of Financial Property) Article 23 (Disaster Loss Deductions)
Article 24 (Limit of Application of Deductions)
SECTION 6 Tax Base and Tax Rates
Article 25 (Tax Base of Inheritance Tax and Minimum Taxables) Article 26 (Inheritance Tax Rates)
Article 27 (Premium Taxation Pertaining to Inheritance Across Generations) SECTION 7 Tax Credit
Article 28 (Gift Tax Credit)
Article 29 (Foreign Tax Payment Credit)
Article 30 (Tax Credit Pertaining to Short-Term Re-Succession) CHAPTER TAX BASE OF GIFT TAX AND CALCULATION OF TAX AMOUNT
SECTION 1 Donated Property
Article 31 (Scope of Donated Property)
SECTION 2 Calculation of Donated Property
Article 32 Deleted.
Article 34 (Donation of Insurance Money)
Article 35 (Donation etc. of Benefits from Low Price or High Price Transfer)
Article 36 (Donation Accompanying Exemption, etc. from
Obligation)
Article 37 (Donation of Benefits Accompanying Gratuitous Use of Real Estate)
Article 38 (Donation of Benefits Accompanying
Merger)
Article 39 (Donation of Benefits Accompanying Increase of Capital)
Article 39-2 (Donation of Benefits Accompanying Decrease
of Capital)
INHERITANCE TAX AND GIFT TAX ACT
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Article 39-3 (Donation of Benefits Accompanying Investment in Kind)
Article 40 (Donation of Benefits Accompanying Conversion of
Convertible Bonds etc.
into Stocks)
Article 41 (Donation of Benefits from Transactions with Specific Corporation)
Article 41-2 Deleted.
Article 43 Deleted.
SECTION 4 Non-Inclusion in Taxable Amount of Property Contributed,
etc. for Purposes of Public Good
Article 48 (Non-Inclusion in Taxable Amount of Property Received, as Contribution,
by Public Service Corporation, etc.)
Article 49 (Possession Standard of Stocks, etc. of Public Service Corporation, etc.)
Article 50 (Tax Verification with Respect to
Public Service Corporation, etc. by Outside
Experts)
Article 50-2 (Responsibility to Open and Use Exclusive Accounts of Public Service
Corporations, etc.)
Article 50-3 (Responsibility to Publicly Announce Statement of Accounts of Public Service
Corporation, etc.)
Article 51 (Duty of Drawing-up and Keeping Books and Records)
Article 52 (Application Mutatis Mutandis)
Article 52-2 (Non-Inclusion in Taxable Amount of Property Donated to Disabled Person)
SECTION 5 Donation Deductions
Article 53 (Donated Property Deductions)
Article 54 (Application Mutatis Mutandis)
SECTION 6 Tax Base and Tax Rate
Article 55 (Tax Base and Taxable Minimum of Gift Tax)
Article 56 (Tax Rate of Gift Tax)
Article 57 (Premium Gift Tax with Respect to Lineal Descendant)
SECTION 7 Tax Credit
Article 58 (Deduction of Tax Amount Already Paid)
Article 59 (Application Mutatis Mutandis)
CHAPTER APPRAISAL OF PROPERTY
INHERITANCE TAX AND GIFT TAX ACT
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Article 60 (General Rules, etc. of Appraisal)
Article 61 (Appraisal of Real Estate, etc.)
Article 62 (Appraisal of Vessels and Other Tangible Assets)
Article 63 (Appraisal of Securities, etc.)
Article 64 (Appraisal of Intangible Property Rights, etc.)
Article 65 (Appraisal of Conditional Rights, etc.)
Article 66 (Special
Cases of Appraisal of Properties whose Mortgages, etc. are Settled)
CHAPTER REPORT AND PAYMENT
SECTION 1 Report
Article 67 (Reporting of Tax Base of Inheritance Tax)
Article 68 (Reporting of Tax Base of Gift Tax)
Article 69 (Tax Credit on Reporting)
SECTION 2 Payment
Article 70 (Voluntary Payment)
Article 71 (Payment by Annual Installments)
Article 72 (Additional Dues on Payment by Annual Installments)
Article 73 (Payment in Kind)
Article 74 (Deferment of Collection of Cultural Heritage Data, etc.)
Article 75 (Applicable Provisions)
CHAPTER DETERMINATION AND REVISION
Article 76 (Determination and Revision)
Article 77 (Notification of Determination of Tax Base and Tax Amount)
Article 78 (Additional Tax, etc.)
Article 79 (Special Case of Request for Revision, etc.)
CHAPTER SUPPLEMENTARY PROVISIONS
Article 80 (Notification of Commencement, etc. of Succession)
Article 81 Deleted.
Article 83 (General Inquiry into Financial Property)
Article 84 (Questioning and Investigation)
Article 85 (Gathering and Management of Individually Classified Data for Assessment
of Property)
Article 86 (Prohibition on Levy of Value-Added Tax)
CHAPTER GENERAL PROVISIONS
Article 1 (Inheritance Tax Taxables)
(1) In cases where, owing to a succession [including a testamentary gift,
INHERITANCE TAX AND GIFT TAX ACT
5
a donation becoming effective due to the death of a donor (including the
relevant donation in case where the donor has deceased
during the per-
formance of the donation debts under Article 14 (1) 3; hereinafter the
same shall apply), and a divisional donation
of inherited property to a
special relative under the provisions of Article 1057-2 of the Civil Act;
hereinafter the same shall
apply], there is inherited property falling
under one of the following subparagraphs on the commencement date of
the succession
(in case of succession being commenced due to a judicial
declaration of disappearance, it means the day of such judicial declaration
of disappearance; hereinafter the same shall apply), the inheritance tax
shall be levied on such inherited property, pursuant to
this Act: 1. In cases of the death of a person who has either established a domicile
in the country or has established a temporary domicile
in the country
for not less than one year (hereinafter referred to as a "resident"),
all of the resident's inherited property (including
property bequeathed
by a person to be succeeded, or donated property entering into force
due to the death of the person to be succeeded;
hereinafter the same
shall apply); and
2. In case of the death of a person who is not a resident (hereinafter
referred to as a "non-resident"), all of the non-resident's
inherited
property within the territory of Korea.
(2) Matters necessary with respect to domicile and temporary domicile,
and definitions of resident and non-resident shall be prescribed
by the
Presidential Decree.
Article 2 (Gift Tax Taxables)
(1) In cases where, owing to donation from another person, (excluding
donation which enters into force due to the death of a donor;
hereinafter
the same shall apply), there is donated property on the donation day
falling under any of the following subparagraphs,
in respect of such
donated property, the gift tax shall be levied, pursuant to this Act:
1. In case where a person who has received a donation of property
(hereinafter referred to as a "donee") is a resident (including
a non-profit
juristic person whose head or main office is located within the territory
of Korea; hereafter in this paragraph and
Articles 54 and 59, the same
shall apply), all of the property received, as a donation, by the resident;
INHERITANCE TAX AND GIFT
TAX ACT
6
and
2. In case where the donee is a non-resident (including a non-profit
juristic person whose head or main office is not located within
the
territory of Korea; hereafter in this paragraph and Articles 4 (2), 6
(2) and (3), the same shall apply), of the property received
as a
donation by the non-resident, all of the property which is found within
the territory of Korea.
(2) When, in respect of donated property as provided in the provisions
of paragraph (1), the income tax under the Income Tax Act,
the corporate
tax under the Corporate Tax Act and the agricultural income tax under
the Local Tax Act are levied on the donee,
the gift tax shall not be levied.
In this case, the same shall also apply to the case where the income tax,
corporate tax and agricultural
income tax are exempted from taxation or
reduced or exempted under the Income Tax Act, Corporate Tax Act, Local
Tax Act or the
provisions of other laws.
(4) In case where it is admitted that the inheritance tax or gift tax are
unjustly reduced by the indirect method through a third
party or the
method of going through two or more acts or transactions, the provisions
of paragraph (3) shall be applied by deeming
that the interested party
has directly transacted or a continued single act or transaction in accord-
ance with the relevant economic
substances.
Article 3 (Liability for Inheritance Tax Payment)
(1) In respect of the inheritance tax levied pursuant to this Act, a successor
(referring to the successor under Articles 1000, 1001, 1003, and 1004
of the Civil Act, including a person who renounces succession
under the
provisions of Article 1019 (1) of the same Act and a special relative under
the provisions of Article 1057-2 of the same
Act; hereinafter the same
shall apply) or a person who received a testamentary gift (including a
person who acquires property in
accordance with a donation which enters
INHERITANCE TAX AND GIFT TAX ACT
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into force owing to the death of the donor, and hereinafter referred to
as a "testamentary donee") is obligated to pay inheritance
taxes, in the
ratio calculated under the conditions as prescribed by the Presidential
Decree on the basis of the property, among
inherited properties, received
or to be received by each person: Provided, That in case that the special
relative or the testamentary
donee is a profit-making corporation, the
profit-making corporation concerned shall be exempted from paying in-
heritance taxes.
(3) Among the donated property being added to inherited property, pur-
suant to the provisions of Article 13, donated property received
by the
successor or testamentary donee shall be included in the inherited prop-
erty under the provisions of paragraph (1).
(4) Successors or testamentary donees are jointly and severally obligated
to pay the inheritance tax under the provisions of paragraph
(1), within
limits of the property received or to be received by each successor or
testamentary donee.
Article 4 (Gift Tax Liability)
(1) A donee has an obligation to pay gift taxes pursuant to this Act: Provided,
That in case where a donee is a profit-making corporation,
the relevant
profit-making corporation shall be exempted from paying gift taxes, but
in case where the profit-making corporation
that is a holder of the title
has been exempted from paying the gift tax under Article 45-2, the actual
owner (excluding the profit-making
corporation) shall be liable to pay the
relevant gift tax.
(2) In a case where the donee is a non-resident on the day of the donation,
he is obligated to pay gift taxes only in respect of
that property found
within the territory of Korea, which was received as a gift.
(3) In applying the provisions of paragraphs (1)
and (2), when the donee
is admitted to be incapable of paying the gift tax, which are the cases
falling under the provisions of
Articles 35 through 37, and 41-4, all or
part of the gift tax equivalent thereto shall be exempted.
(4) In respect of the gift tax to be paid by the donee, in case where the
donee falls under one of the following subparagraphs,
the donor is jointly
INHERITANCE TAX AND GIFT TAX ACT
8
obligated to pay the gift tax: Provided, That in cases where the donee
falls under the provisions of Articles 35, 37 through 41,
41-3 through
41-5, 42 and 48 (limited to the case as prescribed by the Presidential
Decree, which is the case where the contributor
is not responsible for
the management of the relevant public service corporation), this shall
not apply:
1. A case where, owing to the unknown domicile or temporary domicile,
it is difficult to secure the tax claim; and
2. A case where the donee is deemed not to have the ability to pay the
gift tax, such that even by instituting a process against
the donee
for the recovery of taxes in arrears, it is difficult to secure the tax
claim.
(5) In a case falling under the provisions of paragraph (2) and Article
45-2, even where the donee does not fall under any subparagraph
of
paragraph (4), the donor shall be obligated to pay the gift tax jointly
with the donee.
(6) In case where the donor is compelled to pay the gift tax, pursuant
to the provisions of paragraph (4), the head of tax office
shall notify the
donor of such cause.
(1) The location of inherited property or donated property shall be the
place falling under any of the following subparagraphs:
1. With respect to real estate or a right pertaining to real estate, the
location of such real estate;
2. With respect to a mining claim or a mining concession right, the
location of the mining area;
3. With respect to a fishing right or a right of entry into a fishing area,
the coast closest to the fishing area;
4. With respect to a vessel, the location of the registry of the vessel;
5. With respect to aircraft, the location of the parking hangar of the
INHERITANCE TAX AND GIFT TAX ACT
9
aircraft;
6. With respect to stocks, contribution quotas, or debentures, the location
of the main or head office of the corporation which issued,
or in whom
is invested, such stocks, contribution quotas, or debentures: Provided,
That in respect of stocks, contribution quotas,
or debentures issued
within the territory of Korea by a foreign corporation, pursuant to the
domestic Act, the location of the
place of business of the financial in-
stitution handling such transactions;
7. With respect to a money trust handled by a person operating a trust
business which is subject to the application of the Trust
Business Act
and the Indirect Investment Asset Management Business Act, the
location of the business place of such person who accepted
the trust
property concerned: Provided, That with respect to a trust property
other than a money trust, the location of the property
entrusted;
8. With respect to financial property as prescribed by the Presidential
Decree other than subparagraph 7, the location of the business
place
of the financial institution handling the property concerned;
9. With respect to a claim on a loan, the location of the domicile of the
debtor;
10. With respect to other tangible assets or movables in addition to those
of subparagraphs 2 through 9, the location of the tangible
assets con-
cerned, or the place where the movables are extant;
11. With respect to a right requiring registration of trademark rights,
patent rights, etc., the location of the administrative body
with which
such right is registered;
12. With respect to a copyright (including publishing rights and neighboring
rights), in case there is a published work which is
the object of the
copyright, the place of such publication; and
13. Besides the property prescribed under the provisions of subparagraphs
1 through 12, with respect to rights pertaining to a business
of a person
who possesses a place of business, the location of such business place.
(2) With respect to the location of property
besides those prescribed
under the provisions of subparagraphs 1 through 12, it shall be in accord-
ance with the domicile of the
rightful person of such property.
(3) Decisions on the locations of properties under the provisions of para-
graphs (1) and (2)
shall be in accordance with the conditions at the time
of the donation or commencement of the succession.
INHERITANCE TAX AND GIFT
TAX ACT
10
Article 6 (Taxation Jurisdiction)
(1) The inheritance tax shall be levied by the head of tax office having
jurisdiction over the place of the domicile (in case where
either the person
to be succeeded does not have a domicile or it is unknown, it means a
temporary domicile of the person to be
succeeded, hereinafter referred
to as a "place of the commencement of succession") of the successor (with
respect to taxation matters
of a succession that the Commissioner of the
National Tax Service deems especially important, the inheritance tax
shall be levied
by the Director of the Regional Tax Office; hereinafter
referred to as the "head of a tax office, etc."): Provided, That when the
place of the commencement of succession is overseas, the inheritance tax
shall be levied by the head of a tax office, etc. having
jurisdiction over
the location of the property which is within the territory of Korea, and
in case where the inherited property
is within the jurisdictional areas
of the heads of two or more tax offices, etc., the inheritance tax shall
be levied by the head
of tax office, etc. having jurisdiction over the location
of the main property.
(2) The gift tax shall be levied by the head of a tax office, etc. having
jurisdiction over the place of the domicile (in case where
either a donee
does not have a domicile or it is unknown, it means the donee's temporary
domicile, hereafter in this paragraph
the same shall apply) of the donee:
Provided, That in case where the donee is a non-resident, or in case the
domicile or temporary
domicile of the donee is unknown, the gift tax shall
be levied by the head of tax office, etc. having jurisdiction over the place
of the domicile of the donor.
(3) In cases where the donee and the donor are both non-residents, or
the domiciles and temporary domiciles of the donee and donor
are unknown,
the gift tax shall be levied by the head of tax office, etc. having jurisdiction
over the location of the donated
property.
CHAPTER ASSESSMENT STANDARD AND
CALCULATION OF TAX
AMOUNT OF INHERITANCE
TAX
SECTION 1 Inherited Property
INHERITANCE TAX AND GIFT TAX ACT
11
Article 7 (Scope of Inherited Property)
(1) As prescribed by Article 1, in the inherited property, as property
accruing to the person to be succeeded, shall be included
all things which
may be realized as money and/or having economic value, and all de facto
or de jure rights having asset value.
(2) From inherited property pursuant to the provisions of paragraph (1),
those belonging exclusively to the person to be succeeded
himself which
become extinct due to the death of the person to be succeeded, shall be
excluded.
Article 8 (Insurance Money Regarded as Inherited Property)
(1) Insurance money received from a life insurance or an accident in-
surance, due to the death of the person to be succeeded, in accordance
with an insurance contract of which the person to be succeeded
is the
policyholder, shall be regarded as an inherited property.
(2) Even in case where the policyholder is a person other than
the person
to be succeeded, when there is the person to be succeeded who in fact
paid the insurance premium, the person to be succeeded
shall be regarded
as the policyholder, and the provisions of paragraph (1) shall be applicable.
Article 9 (Trust Property Regarded
as Inherited Property)
(1) Property left in trust by the person to be succeeded shall be regarded
as inherited property: Provided,
That in case where a third party holds
the rights to receive benefits of the trust, the value equivalent to such
benefits shall
be excluded.
(2) In case where the person to be succeeded holds, as a result of a trust,
the rights to receive benefits of the trust from a third
party, a value
equivalent to the benefits concerned shall be included in the inherited
property.
Article 10 (Retirement Allowance, etc. Regarded as Inherited Property)
With respect to the retirement allowance, severance pay,
merit pay, pen-
sion, or other items similar thereto which are to be paid to the person
to be succeeded, and being paid as a result
of the death of the person
to be succeeded, such amount shall be regarded as inherited property:
Provided, That in case the amount
falls under any of the following subpara-
graphs, this shall not apply:
1. A survivor's pension, being paid pursuant to the National Pension
Act, or a lump sum return, being paid owing to the death of
the person
INHERITANCE TAX AND GIFT TAX ACT
12
to be succeeded;
2. A survivor's annuity, a survivor's annuity supplement, a survivor's
annuity lump sum, a survivor's lump sum, or a survivor's compensation
paid pursuant to the Public Officials Pension Act or the Pension for
Private School Teachers and Staff Act;
3. A survivor's annuity, a survivor's annuity supplement, a survivor's
annuity lump sum, a survivor's lump sum, or a disaster compensation
being paid pursuant to the Veterans' Pension Act;
4. A survivor's compensation pension, a survivor's compensation lump
sum, or a survivor's special salary being paid pursuant to the
Industrial
Accident Compensation Insurance Act;
5. A survivor's compensation or a disaster compensation or others similar
thereto which are to be paid to the surviving family members
of the
employee concerned by the employer, as a result of the industrial death
of the employee, by applying the Labor Standards
Act, etc.; and
6. Cases similar to subparagraphs 1 through 5, as prescribed by the
Presidential Decree.
SECTION 2 Non-Taxation
Article 11 (Non-Taxation of Inheritance Tax Pertaining to Deceased
Soldier, etc.)
(1) In case where a succession commences due to death in battle, or other
deaths corresponding to such, or warfare or other deaths
corresponding
to such caused by disease or injury suffered in the course of executing
official duties, the inheritance tax shall
not be levied.
(2) The scope of deaths corresponding to death in battle, and the scope
of official duties corresponding to warfare,
under the provisions of paragraph
(1), shall be prescribed by the Presidential Decree.
Article 12 (Non-Taxable Inherited Property)
With respect to property under the provisions of the following subpara-
graphs, the inheritance tax shall not be levied: 1. Property bequeathed (including donations which enter into force owing
to the death of the person to be succeeded, and hereinafter
referred
to as a "testamentary gift, etc.") to the State, a local government,
or a public organization determined by the Presidential
Decree
INHERITANCE TAX AND GIFT TAX ACT
13
(hereinafter referred to as the "public organization");
2. State-designated cultural heritage, City/Do-designated cultural her-
itage and lands in the protected area as prescribed by the
Presidential
Decree pursuant to the Cultural Heritage Protection Act;
3. Among the properties pursuant to Article 1008-3 of the Civil Act,
property within the scope of that as prescribed by the Presidential
Decree;
4. Property bequeathed, etc. to a political party pursuant to the Political
Parties Act;
5. Intra-company labor welfare fund, pursuant to the Intra-Company
Labor Welfare Fund Act, or other property similar to such bequeathed,
etc. to an organization as prescribed by the Presidential Decree;
6. Socially accepted and recognized disaster relief funds and goods, medi-
cal fees, or other property similar to such, as prescribed
by the
Presidential Decree; and
7. Of the inherited properties, property which a successor donates to
the State, local government, or public organization within
the period
of report under Article 67.
SECTION 3 Taxable Value of Inheritance Tax
Article 13 (Taxable Value of Inheritance Tax)
(1) The taxable amount of inheritance tax shall be an amount obtained
by adding the property value falling under any of the following
subpara-
graphs after subtracting the amount described in the provisons of Article
14 from the value of inherited property:
1. The value of property donated, within 10 years prior to the commence-
ment date of succession, by the deceased to his successor;
and
2. The value of property donated, within 5 years prior to the commence-
ment date of succession, by the deceased to a person who
is not his
successor.
(2) In case where the succession commences due to the death of a non-resi-
dent, in applying the provisions of paragraph (1) 1 and
2, only those cases
of donations of property which are found within the territory of Korea
shall be added.
(3) The value of property under Articles 46, 48 (1), 52, and 52-2 (1)
INHERITANCE TAX AND GIFT TAX ACT
14
and the value of donated property excluding any summing-up under the
provisions of Article 47 (1) shall not be included in the value
of donated
property being added to the taxable value of inheritance tax, pursuant
to the provisions of paragraph (1).
Article 14 (Public Imposts, etc. Deducted from Value of Inherited Property)
(1) In case where a succession commences due to the
death of a resident,
the equivalent values or expenses of the following subparagraphs relating
to the inherited property or to
the deceased, on the commencement date
of the succession, shall be deducted from the value of the inherited property:
1. Public imposts;
2. Funeral expenses; and
3. Debts (excluding the donation debts owed by the deceased to his successor
within 10 years prior to the commencement date of succession,
and
the donation debts owed by the deceased to a person who is not his
successor within 5 years prior to the commencement date
of succession;
hereafter in this Article the same shall apply).
(2) In case where a succession commences due to the death of a non-resident,
the values or expenses of the following subparagraphs
shall be deducted
from the value of the inherited property:
1. Public imposts pertaining to the inherited property concerned;
2. Debts secured with liens, pledges, right to lease on a deposit basis,
right of lease (including the case of conclusion of de facto
rental contract),
right to property transferred for security, or mortgages for the purposes
of the inherited property concerned;
and
3. Debts and public imposts, confirmed in accordance with books and
records, of the business place(s) within the territory of Korea
belonging
to the deceased at the time of his death.
(3) The scope of the public imposts and funeral expenses deducted from
the value of inherited property, pursuant to the provisions
of paragraphs
(1) and (2), shall be prescribed by the Presidential Decree.
(4) The amount of debts deducted from the value of inherited
property,
pursuant to the provisions of paragraphs (1) and (2), shall be an amount
substantiated in accordance with methods as
prescribed by the
Presidential Decree.
Article 15 (Presumption, etc. of Inheritance to Property Disposed, etc.
INHERITANCE TAX AND GIFT TAX ACT
15
Prior to Commencement Date of Succession,)
(1) In cases where the person to be succeeded has either disposed of his
property or borne debts and falls under one of the following
subparagraphs,
such property or debts shall be presumed to have been inherited, and
shall be included in the taxable amount of
inheritance tax under Article
13:
1. Where the amount obtained by disposing of the property of the person
to be succeeded or by drawing from the property of the person
to be
succeeded is not less than 200 million won that is calculated according
to the types of property within one year prior to
the commencement
date of succession or not less than 500 million won that is calculated
according to the types of property within
two years prior to the commence-
ment date of succession, and the use of such amount is not objectively
and clearly verified in
accordance with the Presidential Decree; and
2. Where the sum of the debts borne by the person to be succeeded is
either not less than 200 million won within one year before
the com-
mencement date of succession or 500 million won within two years
before the commencement date of succession, and the use
of such sum
is not objectively and clearly verified in accordance with the Presidential
Decree.
(2) Where any debt owed by a person to be succeeded to a person other
than the State, a local government, and a financial institution
prescribed
by the Presidential Decree is presumed that the inheritor is not liable
to repay such debt as prescribed by the Presidential
Decree, such debt
shall be added to the taxable value of the inheritance tax.
(3) The calculation of the amounts, etc. either received
from disposing
of property under the provisions of paragraph (1) 1, or withdrawn from
such property, and the classification of
property types shall be prescribed
by the Presidential Decree.
SECTION 4 Non-Inclusion in Taxable Value of
Property Contributed for the Purpose of
Public Good
Article 16 (Non-Inclusion in Taxable Value of Inheritance Taxes of Property
Contributed to Public Service Corporation, etc.)
(1) With respect to the value of property, among inherited property, con-
INHERITANCE TAX AND GIFT TAX ACT
16
tributed to a person operating a business for religious, charitable, academ-
ic or other purpose of public good (hereinafter referred
to as a "public
service corporation, etc."), by a person to be succeeded or a successor,
only those contributions made within the
report deadline (in case where,
in incorporating a public service corporation, etc. by contributing property
acquired through succession,
there exists any unavoidable cause, the report
deadline shall be 6 months from the date of conclusion of such cause)
under the
provisions of Article 67 shall not be included in the taxable
amount of inheritance taxes.
(2) In applying the provisions of paragraph (1), where stocks with voting
rights or equity shares (hereafter referred to as the
"stocks, etc." in this
Article, Articles 48, 49 and Article 78 (4) and (7)) of a domestic corporation
are contributed and the aggregate
of the stocks, etc. to be contributed
and the stocks, etc. falling under any of the following subparagraphs is
in excess of 5/100
[10/100 in cases of contributions to public service
corporations, etc. which correspond to standards prescribed by the
Presidential
Decree, and conduct external audits pursuant to Article 50
(3), open and use exclusive accounts pursuant to Article 50-2 and make
public announcement on their statement of accounts, etc. pursuant to Article
50-3 (hereinafter a "public service corporation in
good faith, etc.")] of
total number of stocks with voting rights, which are issued by such
domestic corporation or total amount
of equity shares (hereafter referred
to as the "total number, etc. of issued stocks" in this Article, Articles
48, 49 and Article
63 (3)), the excess amount shall be added to the
taxable amount of inheritance tax: Provided, That this shall not apply
to the
case prescribed by the Presidential Decree where it falls under the
proviso of other portions than each subparagraph of Article
49 (1), and
where the stocks, etc. of domestic corporation, which is not specially
related to the contributors to the relevant
public service corporation, etc.,
are contributed to such public service corporation, etc. as is not specially
related to the enterprise
group subject to the limitations on mutual invest-
ment under Article 9 of the Monopoly Regulation and Fair Trade Act
(hereinafter
referred to as the "enterprise group subject to the limitations
on mutual investment"): 1. The stocks, etc. of a domestic corporation, which are the same as the
stocks, etc. that a public service corporation, etc. concerned
owns at
INHERITANCE TAX AND GIFT TAX ACT
17
the time when investors make such contributions; and
2. The same stocks, etc. of a domestic corporation, which are the same
as the stocks, etc. that are contributed by investors and
their specially
related persons for a public service corporation, etc. other than the
public service corporation, etc. concerned.
(3) In case where property not included in the taxable amount of inheritance
taxes pursuant to the provisions of paragraph (1),
and the whole or part
of the benefits arising from such property, belong to the successor and/or
a person(s) having a special relationship
with the successor, the values
as prescribed by the Presidential Decree shall be regarded as having
been received through succession
by the successor and/or a person(s) having
a special relationship with such successor, and as such they shall be included
in the
taxable amount of inheritance taxes and the inheritance tax shall
be promptly levied.
(4) The scope of a public service corporation, etc., contribution method
for inherited property, the method of calculating the value
of stocks exceed-
ing 5/100 (10/100 in cases of a public service corporation in good faith,
etc.) of the total number, etc. of
outstanding stocks, method of determining
a public service corporation in good faith, etc., the scope of public service
corporation,
etc. which is not specially related to the enterprise group
restricted on mutual contribution, the scope of domestic corporation
which
is not specially related to the contributors to the relevant public service
corporation, etc., the scope of persons who are
specially related to the
contributors, the scope of persons who are specially related to the successor,
and other necessary matters
as provided in paragraphs (1) through (3)
shall be prescribed by the Presidential Decree.
(1) The value of property, among inherited property, contributed by a
person to be succeeded or a successor to a public service
corporation, etc.
as a public trust pursuant to the provisions of Article 65 of the Trust
Act, through a trust for religious, charitable,
academic or other purposes
of public good (hereafter referred to as a "public trust" in this Article)
shall not be included in
the taxable amount of inheritance taxes.
(2) In applying the provisions of paragraph (1), the scope and operation
INHERITANCE TAX AND GIFT TAX ACT
18
of the public trust and the time of commencement of the contribution and
other necessary matters shall be prescribed by the Presidential
Decree.
SECTION 5 Inheritance Deductions
Article 18 (Basic Deductions)
(1) Where succession commences owing to the death of a resident or a
non-resident, 200 million won shall be deducted from the taxable
amount
of inheritance taxes (hereinafter referred to as "basic deductions").
(2) Where succession commences owing to the death of a resident and
falls under any of the following subparagraphs, the following
amount shall
be deducted from the taxable amount of inheritance taxes: 1. Succession (hereinafter "succession to a family business") to a family
business (referring to a small-or-medium business prescribed
by the
Presidential Decree which has been run by the predecessor for 15
years or more; the same shall apply hereinafter): Bigger
amount among
amounts classified pursuant to the following items:
(a) Amount equivalent to 20/100 of the value of property of an
inherited
family business: Provided, That if the amount exceeds 3 billion
won, 3 billion won shall be the limit; and
(b) 200 million won: Provided, That if the value of property of inherited
family business is less than 200 million won, the amount
shall be
equivalent to the value of an inherited family business; or
2. Succession to farming (including livestock raising, fishing, and forest
management; hereafter the same shall apply in this Article):
The amount
of the value of the farming property to be inherited (where the amount
exceeds 200 million won, it shall be limited
to 200 million won).
(3) A successor who succeeds to a family business or farming shall submit
documents verifying that it falls
under a succession to a family business
or a succession to farming, to the head of tax office having the jurisdiction
over the
place of tax payment, pursuant to the provisions of Article 67.
(4) In application of paragraph (2), the scope of succession to
a family
business, such as requirements for a predecessor and successor, the meth-
od of application in cases of succession to
stocks, etc. and succession to
farming and other necessary matters shall be prescribed by the
INHERITANCE TAX AND GIFT TAX ACT
19
Presidential Decree.
(5) In cases where, within 10 years (5 years, in cases of subparagraph
2) from the commencement date of succession, a successor
who receives
deduction pursuant to any subparagraph of paragraph (2) comes to fall
under any of the following subparagraphs, without
justifiable cause, as
prescribed by the Presidential Decree, the amount of the deduction under
paragraph (2) shall be included
in the taxable amount of inheritance
taxes at the time of the commencement of succession, and an inheritance
tax shall be levied:
1. Any of the following items among the cases of paragraph (2) 1:
(a) In cases where the successor has disposed of 20/100 (10/100,
in
cases of 5 years or less from the commencement date of succession)
or more of assets for the family business concerned;
(b)
In cases where the successor concerned is not engaged in such
family business any more; or
(c) In cases where the equity of the successor who succeeded to stocks,
etc. has decreased; or
2. In cases of paragraph (2) 2, when the successor either disposes of
the inherited property used in farming, or is no longer engaged
in
farming.
(6) The successor who has received deduction pursuant to paragraph (2)
1 shall submit the details of assets for the family business
concerned,
the family business and share as prescribed by the Presidential Decree
to the head of competent tax office.
(7) In application of paragraph (5), the extent of assets for a family
business, method of calculating the ratio of disposal of
assets for a family
business, method of determining decrease in the share, necessary matters
for the method of including deducted
amount, etc. shall be prescribed by
the Presidential Decree.
(1) The actual amount received through succession by a spouse, from the
death of a resident, shall be deducted from the taxable
amount of inheritance
taxes: Provided, That the limit of such amount shall be the value derived
by multiplying the value of the
inherited property (among the inherited
INHERITANCE TAX AND GIFT TAX ACT
20
property, excluding property which is received as a testamentary gift by
a person who is not a successor, but including property
under the provisions
of Article 13 (1) 1) by the spouse's statutory shares in succession (in
case where there is a person who has
renounced his succession among
cosuccessors, it means the statutory shares the spouse would be entitled
to succeed if such person
would have not renounced his succession), under
the provisions of Article 1009 of the Civil Act; from the calculated amount
of
which is then deducted the tax base on the property (referring to the
tax base under Article 55 (1)) donated to the spouse (in case
that such
amount exceeds 3 billion won, the limit shall be 3 billion won), among
donated property added to inherited property pursuant
to the provisions
of Article 13.
(3) In the case of paragraph (1), when there is no actual amount received
INHERITANCE TAX AND GIFT TAX ACT
21
through succession by the spouse or the amount received through succession
by the spouse is not more than 500 million won, notwithstanding
the provi-
sions of paragraph (2), 500 million won shall be deducted.
(4) Deleted.
Article 20 (Other Personal Reliefs)
(1) In the case of succession commencing as a result of the death of a
resident, when the successor falls under any of the following
subparagraphs,
the amount concerned shall be deducted from the taxable amount of in-
heritance taxes. In this case, when a person
falling under subparagraph
1 falls under subparagraph 2, or when a person falling under subparagraph
4 falls under subparagraphs
1 through 3 or Article 19, such amount shall
each be added together and deducted:
1. With respect to one child, 30 million won;
2. With respect to a successor (excluding spouse: the same shall be
applicable in subparagraph 3) who is a minor or a minor among
the
successor's family living together, an amount calculated by multiplying
5 million won by the number of years until the attainment
of 20 years
of age;
3. With respect to a successor or a person among the successor's family
living together who is 60 years old or older, 30 million
won; and
4. With respect to a successor or a person among the successor's family
living together who is disabled, an amount calculated by
multiplying
5 million won by the number of years until the attainment of 75 years
of age.
(2) The scope of family living together referred to in paragraph (1) 2
through 4, and of a handicapped person referred to subparagraph
4 of
the same paragraph, shall be prescribed by the Presidential Decree.
(3) In case where, in applying the provisions of paragraph
(1) 2 through
4, there is a period of under one year, it shall be calculated as one year.
Article 21 (Blanket Deduction)
(1) In case where a succession commences as a result of the death of a
resident, between the total amount of deductions, pursuant
to the provisions
of Articles 18 (1) and 20 (1), and the amount of 500 million won, the
successor or testamentary donee may deduct
the larger amount: Provided,
That in case where there is no report, pursuant to the provisions of Article
67, the amount of the
deduction shall be 500 million won.
Act No. 5582, Dec. 28, 1998>
(2) In applying the provisions of paragraph (1), in case where the spouse
of the person to be succeeded receives the inheritance
independently, only
the total amount of the deductions, pursuant to the provisions of Articles
18 and 20 (1), shall be deducted.
(3) Deleted.
Article 22 (Inheritance Deductions of Financial Property)
(1) In case where a succession, commencing as a result of the death of
a resident, when, as of the commencement date of succession, there remains,
among the taxable amount of inheritance taxes, a value
obtained by deduct-
ing a financial debt determined by the Presidential Decree from the value
of financial property prescribed
by the same Decree (hereafter in this Article
referred to as the "value of net financial property"), an amount pursuant
to the
classification of the following subparagraphs shall be deducted from
the taxable amount of inheritance taxes, but when such an amount
exceeds
200 million won, 200 million shall be deducted:
1. In case where the value of the net financial property exceeds 20 million
won, an amount equal to 20 percent of the value of the
net financial
property concerned: Provided, That in case where such an amount falls
short of 20 million won, then 20 million won;
and
2. In case where the value of the net financial property is not more than
20 million won, the value of the net financial property
concerned.
(2) In the financial property, prescribed under the provisions of paragraph
(1), the shares or the contribution quotas
possessed by the largest investor
or the largest shareholder, as prescribed by the Presidential Decree, shall
not be included.
Article 23 (Disaster Loss Deductions)
(1) In case where a succession, commencing as a result of the death of
a resident, when, within the report deadline pursuant to
the provisions
of Article 67, the inherited property is destroyed or damaged, owing to
a disaster, as prescribed by the Presidential
Decree, the value of such
loss shall be deducted from the taxable amount of inheritance taxes:
Provided, That in case the receipt
of insurance money pertaining to the
value of such loss, or coverage of the amount equal to the loss concerned,
pursuant to the
exercise of the right of indemnification, is possible, such
shall not apply.
INHERITANCE TAX AND GIFT TAX ACT
23
(2) In the case of paragraph (1), the successor or the testamentary donee
shall submit documentation of the value of his loss and
the details, and
documentation which may verify such matters, to the head of tax office
having jurisdiction over the place of tax
payment, pursuant to the
Presidential Decree.
Amounts to be deducted under the provisions of Articles 18 through 23
shall be limited to the balance deriving from deducting the
amounts falling
under one of the following subparagraphs from the taxable amount of
inheritance taxes:
1. Value of the property bequeathed, etc., to a person who is not a successor;
2. Value of the property inherited to the next-order successor due to
a renunciation of inheritance by a successor; or
3. Value of the donated property added to the taxable amount of inheritance
taxes under the provisions of Article 13 (where there
exists any amount
deducted under Article 53 (1) or 54, referring to the amount obtained
by deducting such amount from the value
of such donated property).
[This Article Wholly Amended by Act No. 6780, Dec. 18, 2002]
SECTION 6 Tax Base and Tax Rates
Article 25 (Tax Base of Inheritance Tax and Minimum Taxables)
(1) The tax base of inheritance tax shall be the amount derived by
deducting
the amount falling under each of the following subparagraphs from the
taxable amount of inheritance taxes pursuant to
the provisions of Article
13:
1. Inheritance deduction amount under the provisions of Articles 18 through
24; and
2. Fees for appraisal and assessment of the inherited property as prescribed
by the Presidential Decree.
(2) When the tax base is under 500 thousand won, no inheritance taxes
shall be levied.
The inheritance tax shall be the calculated amount (hereinafter referred
to as the "inheritance tax amount calculated") derived
by applying the
tax rates of the following to the tax base of inheritance tax pursuant to
the provisions of Article 25.
24
100 million won and less 10 percent of the tax base
over 100 million won, but less
than 500 million won
10 million won + 20 percent of amount
in excess of 100 million won
over 500 million won, but less
than 1 billion won
90 million won + 30 percent of amount
in excess of 500 million won
over 1 billion won, but less
than 3 billion won
240 million won + 40 percent of amount
in excess of 1 billion won
over 3 billion won 1 billion 40 million won + 50 percent of
amount in excess of 3 billion won
Article 27 (Premium Taxation Pertaining to Inheritance Across
Generations)
In case where the successor or testamentary donee is a lineal descendant
other than a son or daughter of the person to be succeeded,
an amount
equivalent to 30 percent of the amount calculated by multiplying the in-
heritance tax amount calculated under Article
26 by the percentage of
the property, among inherited property (among donated property added
to inherited property pursuant to
the provisions of Article 13, including
the donated property received by the successor or testamentary donee),
received or to be
received by such successor or testamentary donee, shall
be added: Provided, That the same shall not apply to succession by repre-
sentation under Article 1001 of the Civil Act.
SECTION 7 Tax Credit
Article 28 (Gift Tax Credit)
(1) The gift tax amount (it means the gift tax amount calculated relating
to the donated property at the time of its donation),
pertaining to donated
property which was added to inherited property provided for in the provisions
of Article 13, shall be deducted
from the inheritance tax amount calculated:
Provided, That in a case where, with respect to donated property being
added to the
taxable amount of inheritance taxes, the gift tax fails to
be levied, owing to the expiration of the period, under the provisions
of
INHERITANCE TAX AND GIFT TAX ACT
25
Article 26-2 (1) 4 or paragraph (3) of the same Article of the Framework
Act on National Taxes, such shall not apply.
(2) The amount of the gift tax to be deducted under paragraph (1) shall
be within the limit of the amount calculated by multiplying
the percentage
of tax base of donated property which was added to the tax base of the
inherited property (including donated property
being added to inherited
property, under the provisions of Article 13; hereafter the same shall be
applicable in this paragraph),
by the inheritance tax amount calculated.
In this case, when the donee of such donated property is a successor or
a testamentary
donee, within limits of the amount calculated by multi-
plying the percentage of the tax base of donated property which was
added
to the tax base calculated under the conditions as prescribed by
the Presidential Decree of inherited property received or to be
received
by such successor or testamentary donee, by the inheritance tax amount
to be paid by each successor or testamentary donee
concerned, a deduction
shall be made from the inheritance tax amount to be paid by each.
Article 29 (Foreign Tax Payment Credit)
In case where, owing to the death of a resident, the inheritance tax is
being levied, when, with respect to inherited property in
a foreign country,
the inheritance tax, levied in accordance with the Acts and subordinate
statutes of the foreign country, is
paid, an amount equivalent to such
paid inheritance tax, pursuant to the Presidential Decree, shall be deducted
from the inheritance
tax amount calculated.
Article 30 (Tax Credit Pertaining to Short-Term Re-Succession)
(1) In case where, within 10 years after the commencement of succession
owing to death of the successor or testamentary donee, the succession
re-commences, among inherited property on which the inheritance
tax
was previously levied, an amount of the previous inheritance tax pertaining
to that part of the property being re-inherited
shall be deducted from
the inheritance tax amount calculated.
(2) The tax amount being deducted, pursuant to the provisions of paragraph
(1), shall be an amount derived by multiplying the amount
calculated,
INHERITANCE TAX AND GIFT TAX ACT
26
pursuant to subparagraph 1, by the credit rate of subparagraph 2: Provided,
That in case of subparagraph 1, when, among the value
of previously in-
herited property, property which is again inherited exceeds the amount
equivalent to the value of previously
inherited property, such excess amount
shall be regarded as being non-existent:
1. Previous
Inheritance
Tax Amount
Calculated
Value of
Re-Succeeded
Part
Value of Previous
Inheritance Taxables
Value of Previously
Inherited Property
Value of Previous Inheritance Taxables
2. Credit Rates:
Within 1 year 100 percent
Within 2 years 90 percent
Within 3 years 80 percent
Within 4 years 70 percent
Within 5 years 60 percent
Within 6 years 50 percent
Within 7 years 40 percent
Within 8 years 30 percent
Within 9 years 20 percent
Within 10 years 10 percent
(3) Of the formula under paragraph (2) 1, the property amount of re-
succeeded portion shall refer to what obtained by deducting
the amount
equivalent to a previous inheritance tax from the value of a previous inherited
property.
AND CALCULATION OF TAX
AMOUNT
SECTION 1 Donated Property
INHERITANCE TAX AND GIFT TAX ACT
27
Article 31 (Scope of Donated Property)
(1) Under the provisions of Article 2, the donated property, as property
reverting to the donee, shall include all things which
may be realized as
money and/or having economic value, and all de facto or de jure rights
having asset value.
(2) Deleted.
(3) After the commencement of succession, with respect to inherited prop-
erty, after the shares in succession of each successor
are determined and
a registration, record, and/or entry of a change of holders is made
(hereinafter referred to as a "registration,
etc."), by means of a registration,
etc., then, with respect to such inherited property, the value of property
being received by
a specific successor, in excess of the original shares
in succession, in accordance with a distribution pursuant to an agreement
between the co-successors, shall be included in the property received as
a donation from the successor whose shares in succession
decreased, due
to the distribution concerned: Provided, That the same shall not apply
to the case where acquiring in excess of
the portion of original inheritance
by a re-distribution within the deadline to file a tax base return of in-
heritance tax under
the provision of Article 67, and where there is any
justifiable cause, such as invalidity or revocation, etc. prescribed by the
Presidential Decree with respect to redistribution of the original inherited
property.
(5) In case, within 3 months after the elapse of the report deadline, pursuant
to the provisions of Article 68, the donee either
returns the property
(excluding money), received as a gift, to the donor or re-donates such
property to the donor, with respect
to such returned or re-donated property,
gift taxes shall not be levied.
SECTION 2 Calculation of Donated Property
INHERITANCE TAX AND GIFT TAX ACT
28
Article 32 Deleted.
(1) In case where a truster, by means of a trust contract, has designated
another person to be the beneficiary of the whole or part
of the benefits
of the trust, where such is provided for under one of the following subpara-
graphs, the value of rights to receive
the benefits of the trust shall be
considered as the value of donated property of the beneficiary. In this
case, the value of donated
property shall be calculated by the method
as prescribed by the Presidential Decree if the principal and benefits are
received
by dividing into a few occasions:
1. In case the right to receive benefits of the principal is shown to be
owned by the beneficiary, when the beneficiary receives
such capital:
and
2. In case the right to receive benefits is shown to be owned by the benefi-
ciary, when the beneficiary receives such benefits.
(2) In the case of paragraph (1), when the beneficiary is not specified
or does not exist, the truster or his successor shall be
regarded as the
beneficiary, and when a beneficiary is either specified or comes to exist,
it shall be regarded that there exists
a new trust.
Article 34 (Donation of Insurance Money)
(1) In case where the beneficiary of insurance money and the payer of
premiums are different in a life insurance or non-life insurance,
the amount
equivalent to insurance money shall be deemed to be the value of donated
property of the beneficiary of insurance money
in the case of an occurrence
of insurance risk, and in case where the beneficiary of insurance money
has paid the premiums by receiving
a donation of property from another
person within the insurance contract period, the amount obtained by
deducting the paid amount
of relevant premiums from the amount equiv-
alent to the insurance money in return for the paid amount of such pre-
miums shall
be deemed to be the value of donated property of the benefi-
ciary of insurance money.
(2) In case where the insurance money is regarded as being inherited
property, pursuant to the provisions of Article 8, the provisions
of paragraph
(1) shall not be applicable.
(3) In applying paragraph (1), in case where a beneficiary of the insurance
INHERITANCE TAX AND GIFT TAX ACT
29
money pays a portion of the premiums, only an amount proportionate to
the possessory ratio of the insurance premiums paid by the
person who
is not the beneficiary of the insurance money from among the gross ag-
gregate of premiums paid from the insurance money,
shall be regarded
as the value of donated property. 1. In case where property is acquired by transfer from another person,
for an equivalent value which is lower than the current market
value,
the transferee of such property; and
2. In case where property is transferred to another person for an equivalent
value which is higher than the current market value,
the transferor
of such property.
(2) In applying the provisions of paragraph (1), if the property has been
transferred or taken over between other persons than those
in a special
relationship, only in case where the property has been transferred or taken
over by remarkably lower price or remarkably
higher price than market
values without any justifiable reasons in the common practices of trans-
action, the amount equivalent
to the benefits as prescribed by the
Presidential Decree shall be deemed to be the value of donated property
of the person obtaining
such benefits, by presuming that the amount
equivalent to the difference between the original cost and current market
values has
been donated.
Article 36 (Donation Accompanying Exemption, etc. from Obligation)
In case where a person has obtained from an obligee an exemption
from
obligation, or received from a third party an acceptance or performance
of obligation, the amount equivalent to the benefits
arising from such
exemption, acceptance, or performance (if there exists any payment of
INHERITANCE TAX AND GIFT TAX ACT
30
compensation, it shall be the amount less such compensation) shall be
deemed to be the value of donated property of the person obtaining
such
benefits.
(1) In case where one has acquired the benefits prescribed by the Presidential
Decree as he uses gratuitously the real estate of
the person in a special
relationship (excluding the housing in which one resides together with
the owner of relevant real estate
and the land appurtenant thereto), the
amount equivalent to the relevant benefits shall be deemed to be the value
of donated property
of the gratuitous user of the real estate.
(2) Deleted.
(3) In applying the provisions of paragraph (1), the scope of persons in
a special relationship, the time of donation, the method
for calculating
benefits of gratuitous use of real estate, and other necessary matters shall
be prescribed by the Presidential
Decree.
Article 38 (Donation of Benefits Accompanying Merger)
(1) As a shareholder (including an investor; hereafter the same shall apply
in this Article) of a corporation eliminated or absorbed, or of a corporation
newly established or surviving (hereinafter referred
to as a "merged corpo-
rate party") as a result of a merger of corporations having special relationship
prescribed by the Presidential
Decree (including a merger through division;
hereafter in this Article the same shall apply) in case a large shareholder
prescribed
by the Presidential Decree has acquired benefits prescribed
by the said Decree as a result of a merger, the amount equivalent to
relevant
benefits shall be deemed to be the value of donated property of a person
obtaining such benefits on the day of relevant
merger (referring to the
date on which a merger registration was made).
(2) The amount equivalent to the benefits under the provisions of paragraph
(1) shall be the difference of the values appraised
on the basis of immediately
before and immediately after the merger, under the conditions as prescribed
by the Presidential Decree,
for the stocks or equity shares possessed by
shareholders of the merged corporate party.
Article 39 (Donation of Benefits Accompanying Increase of Capital)
INHERITANCE TAX AND GIFT TAX ACT
31
(1) In case where the benefits have been obtained, which fall under any
of the following subparagraphs as a corporation issues new
stocks or
equity shares (hereafter in this Article, referred to as "new stocks") for
increasing its capital (including the investment
amount; hereafter in this
Article and Article 39-2, the same shall apply), the amount equivalent
to relevant benefits shall be
deemed to be the value of donated property
of the person who has acquired such benefits:
1. In case where new stocks are issued at lower price than the market
price (referring to the price assessed under Articles 60 and
63; here-
after the same shall apply in this paragraph and Article 40), the benefits
falling under any of the following items:
(a) In case where a shareholder of the relevant corporation (including
an investor; hereafter the same shall apply in this Article)
renounced
wholly or partially the right to receive new stocks, and where such
renounced new stocks (hereafter referred to as "forfeited
stocks"
in this paragraph) are allocated (excluding the case where a corpo-
ration listed on the stock market or on KOSDAQ, pursuant
to the
Securities and Exchange Act allocates such new stocks by the method
of solicitation of securities under Article 2 (3) of
the same Act;
hereafter the same shall apply in this paragraph), the benefits ac-
quired by those who received the allocation of
relevant forfeited
stocks, by obtaining such allocation of forfeited stocks;
(b) In case where a shareholder of the relevant corporation
renounced
wholly or partially the right to receive new stocks, and where such
forfeited stocks are not allocated, the benefits
acquired by those
who are specially related to persons renouncing the right to receive
the relevant new stocks, by receiving the
new stocks; and
(c) The benefits acquired by those who are not the shareholders of
relevant corporation by directly obtaining the
new stocks from the
relevant corporation (including the case where they directly receive
or acquire the relevant new stocks from
the underwriter pursuant
to the Securities and Exchange Act; hereafter the same shall apply
in this paragraph), or by the shareholders
of relevant corporation
by directly obtaining the allocation of new stocks in excess of the
number entitled to obtain the allocation
under equal conditions in
proportion to the number of stocks owned by him;
INHERITANCE TAX AND GIFT TAX ACT
32
2. In case where new stocks are issued at higher price than the market
price, the benefits falling under any of the following items:
(a) In case where a shareholder of the relevant corporation renounced
wholly or partially the right to receive new stocks, and
where such
forfeited stocks are allocated as the person who is entitled to obtain
the allocation of such forfeited stocks has accepted
them, the bene-
fits acquired by the person renouncing the receipt of new stocks
who is specially related to such allotted person;
(b) In case where a shareholder of the relevant corporation renounced
wholly or partially the right to receive new stocks, and
where such
forfeited stocks are not allocated, the benefits acquired by the
person renouncing the receipt of new stocks who is
specially related
to him, by accepting the relevant new stocks; and
(c) In case where those who are not the shareholders of relevant
corpo-
ration have directly obtained the allocation of new stocks from the
relevant corporation, or the shareholders of relevant
corporation
have directly obtained the allocation of new stocks and accepted
them in excess of the number entitled to obtain the
allocation under
equal conditions in proportion to the number of stocks they own,
the benefits acquired by the person specially
related to them; and
3. In case where the methods and benefits are similar to those stipulated
in subparagraph 1 or 2, the benefits acquired directly
or indirectly
from the person in special relationship, by accepting or not accepting
the new stocks or forfeited stocks.
(2) In applying the provisions of paragraph (1) 1, in case where the number
of minor shareholders who renounced the right to receive
new stocks allocated
or who obtained the allocation in short of the number entitled to obtain
the allocation under equal conditions
in proportion to the number of their
possessed stocks (including the case where new stocks are not allotted)
is not less than 2,
the benefits shall be calculated by considering that
one of the minor shareholders has renounced or obtained the allocation
insufficiently.
(3) The persons in special relationship under paragraphs (1) and (2),
the scope of minor shareholders, the method of calculating
the benefits
and other necessary matters shall be prescribed by the Presidential
Decree.
INHERITANCE TAX AND GIFT TAX ACT
33
[This Article Wholly Amended by Act No. 6301, Dec. 29, 2000]
Article 39-2 (Donation of Benefits Accompanying Decrease of Capital)
(1) In case where the large shareholder specially related to some share-
holders has acquired the benefits, as a corporation retires
the stocks or
equity shares of the said shareholders in the retirement of its stocks or
equity shares in order to decrease its
capital, the amount equivalent to
such benefits shall be deemed to be the value of donated property of the
relevant large shareholders.
[This Article Newly Inserted by Act No. 6301, Dec. 29, 2000]
Article 39-3 (Donation of Benefits Accompanying Investment in Kind)
(1) In case where the benefits falling under one of the following subpara-
graphs have been acquired by taking over the stocks
or equity shares
issued by a corporation through the investment in kind (hereafter in this
Article, referred to as the "stocks
etc."), the amount equivalent to the
relevant benefits shall be deemed to be the value of donated property of
the person who has
acquired such benefits:
1. Benefits acquired by the investor in kind by taking over the stocks
etc. at the lower price than market prices (referring to the
price as-
sessed under the provisions of Articles 60 and 63; hereafter in this
Article, the same shall apply): and
2. Benefits acquired by the shareholders other than the investors in kind
in a special relationship or the investors by taking over
the stocks
etc. at the higher price than market prices.
(2) Matters necessary for the calculating method of the benefits referred
to in paragraph (1), and the scope etc. of shareholders
and investors in
a special relationship shall be prescribed by the Presidential Decree.
[This Article Newly Inserted by Act No.
7010, Dec. 30, 2003]
Article 40 (Donation of Benefits Accompanying Conversion of Convertible
Bonds etc. into Stocks)
(1) In case where the benefits falling under any of the following subpara-
graphs have been acquired by converting into or exchanging
with the
convertible bonds, the debentures cum preemptive rights on new stocks
(referring to the certificates for preemptive right
to new shares, if they
are separated) and other stocks, or by accepting, acquiring or transferring
INHERITANCE TAX AND GIFT TAX
ACT
34
the debentures entitled to accept the stocks (hereafter in this Article,
referred to as the "convertible bonds, etc."), or by converting
into or exchang-
ing with the stocks with the convertible bonds or accepting the stocks,
the amount equivalent to such benefits
shall be deemed to be the value
of donated property of the person who has acquired such benefits: 1. Benefits falling under any of the following items which are acquired
by accepting or acquiring the convertible bonds, etc.:
(a)
Benefits acquired by the acquisition of the convertible bonds, etc.
from the person in special relationship at the price lower than
the market price;
(b) Benefits acquired by the largest shareholder of the corporation issuing
the convertible bonds, etc. (excluding the case where
a corporation
listed on the stock market or on KOSDAQ, pursuant to the Securities
and Exchange Act issues the convertible bonds,
etc. by the method
of solicitation of securities under Article 2 (3) of the same Act;
hereafter the same shall apply in this paragraph)
or other share-
holders in special relationship with him, by accepting or acquiring
(including the case where they accept or acquire
from the under-
writers under the Securities and Exchange Act; hereafter referred
to as the "acceptance, etc." in this paragraph)
the convertible bonds,
etc. from the relevant corporation at the price lower than the market
price and in excess of the number
entitled to obtain the allocation
under equal conditions in proportion to the number of their possessed
stocks; and
(c) Benefits acquired by those who are not the shareholders of the
corporation issuing the convertible bonds, etc. and who are specially
related to the largest shareholder of the relevant corporation, by
accepting, etc. the convertible bonds, etc. from the relevant
corpo-
ration at the price lower than the market price;
2. Benefits falling under one of the following items which are acquired
by converting into or exchanging with the stocks or accepting
the
stocks with the convertible bonds, etc., or by transferring the convertible
bonds, etc.:
(a) In case where the convertible bonds, etc. have been acquired from
the person in special relationship, the benefits acquired
as the value
of the stocks received or to be received with the convertible bonds,
INHERITANCE TAX AND GIFT TAX ACT
35
etc. exceeds the value of conversion, exchange or acceptance
(hereafter referred to as the "converting value, etc." in this para-
graph);
(b) In case where the largest shareholder of the corporation issuing
the convertible bonds, etc. or other shareholders in special
relation-
ship with him have accepted, etc. the convertible bonds, etc. from
the relevant corporation in excess of the number entitled
to obtain
the allocation under equal conditions in proportion to the number
of their possessed stocks, the benefits acquired as
the value of the
stocks received or to be received with the convertible bonds, etc.
exceeds the value of the converting value,
etc.;
(c) In case where a person who is not a shareholder of the corporation
issuing the convertible bonds, etc. and who is specially
related to
the largest shareholder has accepted, etc. the convertible bonds,
etc. from the relevant corporation, the benefits acquired
as the
value of the stocks received or to be received with the convertible
bonds, etc. exceeds the value of the converting value,
etc.;
(d) In case where the convertible bonds, etc. are converted into or
exchanged with the stocks, or the stocks are accepted,
the benefits
acquired by the person specially related to those to whom the relevant
stocks are delivered, as the value of stocks
delivered against the
convertible bonds, etc. becomes lower than the converting value,
etc.; and
(e) In case where the convertible bonds, etc. are transferred to those
who are specially related, the benefits acquired as the transferred
value exceeds the market price; and
3. In case where the methods and benefits are similar to those stipulated
in subparagraph 1 or 2, the benefits acquired directly
or indirectly
from the person who is specially related, by making the transaction
of the convertible bonds, etc. or by converting
the convertible bonds,
etc. into the stocks.
(2) The persons having a special relationship under paragraph (1), the
largest shareholder, the persons having a special relationship
with the
largest shareholder, the values of stocks received or to be received, the
method of calculating the benefits, and other
necessary matters shall be
prescribed by the Presidential Decree.
[This Article Wholly Amended by Act No. 6301, Dec. 29, 2000]
INHERITANCE TAX AND GIFT TAX ACT
36
Article 41 (Donation of Benefits from Transactions with Specific
Corporation)
(1) In case where any person in a special relationship with the shareholders
or investors of a corporation, that has an amount of
deficit, or faces a
business suspension or close-down (hereafter in this Article, referred
to as the "specific corporation"), transacts
business falling under any of
the following subparagraphs with the specific corporation, and the share-
holders or investors of
the relevant specific corporation have acquired
the benefits, the amount equivalent to such benefits shall be deemed to
be the
value of donated property of the investors: 1. Transactions in which property or services are provided or rendered
without compensation;
2. Transactions in which property or services are provided or rendered
for significantly low prices in the light of the common practices
of trans-
actions;
3. Transactions in which property or services are transferred or taken
over in return for significantly high prices in the light
of normal trans-
action practices; and
4. Other transactions similar to those described in subparagraphs 1
through 3 and prescribed by the Presidential Decree.
(2) The
Presidential Decree shall govern the specific corporation, persons
having special relationship, and the calculation of the benefits
acquired
by the shareholders or investors of the specific corporation, and the scope
of remarkably low price and remarkably high
price referred to in the provi-
sions of paragraph (1).
Article 41-2 Deleted.
(1) When the person, who has received a donation of relevant stocks or
equity shares (hereafter in this Article and Article 41-5,
referred to as
the "stocks, etc.") or acquired them with compensation, has earned the
operating incomes in excess of the standards
as prescribed by the
Presidential Decree, by exceeding the original taxable amount of gift
tax (excluding the case of acquiring
the stocks, etc. with the donated
property; hereafter in Article 41-5, the same shall apply), or exceeding
INHERITANCE TAX AND
GIFT TAX ACT
37
the acquired value, the amount equivalent to such benefits shall be deemed
to be the value of donated property of the person who
has acquired such
benefits; which is the case where the value of relevant stocks, etc. has
been increased as they are listed on
the Korea Exchange (referring to
listing on the stock market or on KOSDAQ) pursuant to the Securities
and Exchange Act within 5
years either from the date of receiving a
donation or acquiring with compensation, in case where any person spe-
cially related
to those falling under any of the following subparagraphs,
who are deemed to be in a position to make use of undisclosed information
on the corporate management, etc. (hereafter in this Article and Article
41-5, referred to as the "largest shareholder, etc."),
has received a donation
of stocks, etc. of the relevant corporation or acquired them with compensa-
tion, or from the date of acquisition
(hereafter in this Article and Article
41-5, referred to as the "donation date, etc."), in case where he has
acquired the stocks,
etc. of relevant corporation from other person than
the largest shareholder, etc. with the donated property (referring to the
property
donated by the largest shareholder within 3 years retroactively
from the date of acquiring the stocks, etc. with compensation; hereafter
in this Article and Article 41-5, the same shall apply): 1. The largest shareholder or the largest investor described in the provisions
of Article 22 (2); and
2. A person who owns not less than 25/100 of the total number of the
stocks issued or the total amount of the investment by a domestic
corporation, and is prescribed by the Presidential Decree.
(2) The operating income referred to in the provisions of paragraph
(1)
shall be calculated based on the date belonging to the last date of three
months from the listing day (referring to the date
of death, the date of
donation or the date of transfer in case that a person who owns the stocks,
etc. dies, donates or transfers
the stocks, etc. during a period ranging
from the listing day to the date belonging to the last date of three months;
hereafter
referred to as the "adjustment base day" in this Article and
Article 68). In this case, where the operating income is confirmed
to have
come from the practical growth of corporate value that is substantiated
by documents prescribed by the Presidential Decree
including a financial
report, etc. filed by a taxpayer, such tax amount shall be deducted as
prescribed by the Presidential Decree.
38
(3) In respect of any person who has acquired the operating income
under paragraph (1), the tax base of gift tax and a tax amount
shall
be adjusted by adding the relevant operating income to the original taxable
amount of gift tax (in case where the stocks,
etc. have been acquired with
the donated property, referring to the taxable amount of gift tax on the
relevant donated property;
hereafter in this Article, the same shall apply):
Provided, That where the value of the stocks, etc. as of the adjustment
base
day is smaller than the original taxable amount of gift tax and the
difference is wider than the standard prescribed by the Presidential
Decree, a tax amount of gift tax (referring to the original tax amount
of gift tax paid at the time that donation is made) equivalent
to the
difference may be refunded.
(4) The listing day referred to in paragraph (1) shall be deemed the day
on which the trading of the stocks, etc. first commences
on the securities
market under the provisions of Article 2 (12) of the Securities and Exchange
Act or KOSDAQ under the provisions
of Article 2 (14) of the same Act.
(5) In applying the provision of paragraph (1), in case where the acquisition
of the stocks, etc. with the donated property is obscure
since the donated
property and other property are mixed, it shall be presumed that the relevant
stocks, etc. have been acquired
with the relevant donated property. In
this case, if the stocks, etc. have been acquired with the money borrowed
by offering the
donated property as a security, it shall be deemed to have
acquired them with the donated property.
(6) In applying the provision of paragraph (1), the aquisition of stocks,
etc. shall contain the new stocks which have been subscribed
and appro-
priated as the corporation issues the new stocks in order to increase its
capital (including the investment amount).
(7) Where convertible bonds that may be converted to the stocks, etc.
and other bonds prescribed by the Presidential Decree (hereafter
referred
to as the "convertible bond, etc." in this paragraph) are donated or acquired
with compensation (including the case of
direct subscription and acquis-
ition of the convertible bonds, etc. from issuers) and the convertible bonds,
etc. are converted
to the stocks, etc. within a period under paragraph (1)
INHERITANCE TAX AND GIFT TAX ACT
39
(referring to 5 years), such converted stocks, etc. shall be deemed to be
donated or acquired at the time when the convertible bonds,
etc. are donated
or acquired, and the provisions of paragraphs (1) through (5) shall be
applied thereto. In this case, where the
convertible bonds, etc. are not
converted to the stocks, etc. by the adjustment base day, such convertible
bonds, etc. shall be
deemed to be converted to the stocks, etc. on the
adjustment base day and the provisions of paragraphs (1) through (4)
shall be
applied thereto, and where the convertible bonds, etc. are not
converted to the stocks, etc. by the maturity date of convertible
bonds,
etc., the tax amount of gift tax imposed based on the adjustment base
day shall be refunded.
(9) The provisions of Article 42 (6) shall apply mutatis mutandis to the
case of donations under the provisions of paragraph (1).
[This Article Newly Inserted by Act No. 6048, Dec. 28, 1999]
Article 41-4 (Donation of Benefits Accompanying Gratuitous Cash Loan,
etc.)
(1) Where any person obtains money of not less than 100 million won
on loan without compensation or at an interest rate lower than
the appro-
priate interest rate from any specially-related person, the amount falling
under any of the following subparagraphs
shall be deemed to be the value
of donated property of the person who has obtained such money on loan
on the date on which such
money is obtained on loan. In this case, where
nothing is prescribed with respect to the loan period, such loan period
shall be
deemed one year and where the loan period is not less than one
year, fresh money shall be deemed to be obtained on loan every year
from
the date following the date on which one year expires and then the relevant
amount shall be calculated: 1. An amount obtained by multiplying the loaned money by the appropriate
interest rate in case that such money is loaned without
compensation;
and
2. An amount obtained by deducting an amount equivalent to the amount
actually paid as interest from the amount obtained by multiplying
the
loaned amount by the appropriate interest rate in case that the money
is loaned at an interest rate lower than the appropriate
interest rate.
INHERITANCE TAX AND GIFT TAX ACT
40
(2) The scope of the specially-related person described in paragraph (1),
the method of calculating the money of not less than 100
million won,
the appropriate interest rate and other necessary matters shall be de-
termined by the Presidential Decree.
[This Article Newly Inserted by Act No. 6048, Dec. 28, 1999]
Article 41-5 (Donations of Profits, Such as Listing, etc. Due to Merger)
(1) In case where any person specially related with the largest shareholder,
etc. has received a donation of the stocks, etc. of
relevant corporation,
or acquired them with compensation from the largest shareholder, etc.,
or where he has acquired with the
donated property the stocks, etc. of
relevant corporation from other person than the largest shareholder, etc.,
or acquired the
stocks, etc. of another corporation, and if the relevant
corporation or another corporation has been merged with the specially-re-
lated corporation listed on the stock market or on KOSDAQ within five
years from the donation date, etc. of relevant stocks, etc.
and thus their
values have been increased, and where the person having received a donation
of relevant stocks, etc. or acquired
them with compensation has gained
the benefits in excess of the standards as prescribed by the Presidential
Decree by exceeding
the taxable amount of original gift tax or the acquired
prices, the amount equivalent to relevant benefits shall be deemed to be
the value of donated property of the person who has acquired such benefits.
(3) Provisions of Article 41-3 (2) through (7) shall apply mutatis mutandis
to the donation of the benefits, such as the listing,
etc., due to the merger
under paragraphs (1) and (2). In this case, the term "listing day" shall
be deemed "the registration date
of merger".
(4) The provisions of Article 42 (6) shall apply mutatis mutandis to the
case of donation under the provisions of paragraph (1).
[This Article Newly Inserted by Act No. 6780, Dec. 18, 2002]
Article 42 (Donations etc. of Other Benefits)
(1) In case where the benefits not smaller than the standards as prescribed
by the Presidential Decree have been acquired which
are those falling
INHERITANCE TAX AND GIFT TAX ACT
41
under one of the following subparagraphs other than the donations under
the provisions of Articles 33 through 41, 41-3 through 41-5,
44 and 45,
the relevant benefits shall be deemed to be the value of donated property
of the person who has acquired such benefits:
1. Benefits acquired by using or let one use the property worthy of 100
million won or more (excluding immovables and money; hereafter
in
paragraph (2), the same shall apply) gratuitously or by paying other
person the price lower than market price (referring to
the value assessed
pursuant to the provisions of Chapter ; hereinafter the same shall
apply) or by receiving from other person
the price higher than market
price. In this case, the relevant benefits shall be the difference between
the market price and the
price actually paid or received;
2. Benefits acquired by receiving service (limited to what worthy of the
paid price of 10 million won or more that is normal among
many un-
specified persons: hereafter in this subparagraph and paragraph (2),
the same shall apply) gratuitously or by paying other
person the price
lower than market price, or by providing service to other person by
receiving the price higher than market price.
In this case, the relevant
benefits shall be the difference between the market price and the price
actually paid or received; and
3. Benefits acquired from the transaction to increase or decrease a corporate
capital (including the investment amount), such as
the investment,
reduction of capital, merger (including merger through division: here-
after in this Article, the same shall apply),
division, conversion, accept-
ance, exchange of stocks with convertible bonds etc. under Article 40
(1) (hereafter in this Article,
referred to as the "stock conversion,
etc."), or benefits acquired from a fluctuation of equity share or its
value due to the transfer
or takeover of business, exchange of business,
organizational changes of a corporation, etc. In this case, the relevant
benefits
shall be the amount obtained by deducting the value of stock
conversion, etc. from the stock prices at the time of stock exchange
etc. in the case of stock exchange, and shall be the assessment differ-
ence of relevant properties before or after the fluctuation
of equity
share or its value in other cases than the stock exchange, etc.
(2) In applying the provisions of paragraph (1) 1 and
2, if there exists
no fixing of a use period of properties or a provision period of service,
the said period shall be one year,
and in case where the said period is
INHERITANCE TAX AND GIFT TAX ACT
42
one year or more, it shall be deemed that the property has been newly
used or the service has been newly provided each year on the
day next
to that on which one year elapses.
(3) In applying the provisions of paragraph (1), if it is admitted that
there exists a reasonable cause in the transaction practices,
it shall not
apply among the persons other than the specially-related persons.
(4) In case where the person prescribed by the Presidential
Decree, such
as minors etc., has acquired the property due to causes falling under each
of the following subparagraphs, and within
five years from the date of
acquiring the said property, has acquired the benefits exceeding the stand-
ards as prescribed by the
Presidential Decree, which are those accompany-
ing an increase of the relevant property value due to the causes prescribed
by
the Presidential Decree, such as the execution of development project,
form and quality alteration, partition of co-owned property,
authorization
or license of business, listing of stocks or equity shares and merger, etc.
(hereafter in this Article, referred
to as the "cause for increasing a property
value"), the relevant benefits shall be deemed to be the value of donated
property of
the person who has acquired such benefits:
1. Where a property has been donated by other person;
2. Where an internal information on the corporate management that has
not been published was received from the specially-related
person,
and a property related with the relevant information has been acquired
for value; and
3. Where a property has been acquired with the fund borrowed from the
specially-related person or the fund borrowed with security
of the
property of the specially-related person.
(5) Benefits under the provisions of paragraph (4) shall be the amount
calculated under the conditions as prescribed by the Presidential
Decree
by taking account of the value of relevant property as of the date on which
a cause for increasing property values occurred,
aquisition value (referring
to the taxable value of gift tax in the case of donated properties), portion
of normal increase in
values, portion of contribution to a value increase
by the property acquirer etc. In this case, if the relevant property has
been
transferred before the date of occurrence of causes for an increase
of relevant property value, the date of such transfer shall
be considered
as the date of occurrence of causes for an increase of relevant property
INHERITANCE TAX AND GIFT TAX ACT
43
value.
(6) In applying the provisions of paragraph (4), if it is admitted that
the inheritance tax or gift tax has been reduced by falsity
or other illegal
means, the same provisions shall apply to the donations among the persons
other than those in a special relationship.
In this case, the provisions
for time period from among those of paragraph (4) shall be deemed to
be nonexistent.
(7) In applying the provisions of paragraphs (1), (3), (4) and (6), matters
necessary for the value of stocks at that time, such
as the scope of assets
of 100 million won or more, scope of the specially-related person, computa-
tion method of the difference
of assessment of the relevant asset before
and after fluctuations in the equity share and its value, and conversion
into stocks,
etc.
[This Article Wholly Amended by Act No. 7010, Dec. 30, 2003]
Article 43 Deleted.
Fiction of Donation
Article 44 (Presumption of Donation at Time of Transfer to Spouse etc.)
(1) Properties transferred to the spouse or lineal ascendants
of descendants
(hereafter in this Article, referred to as the "spouse, etc.") shall be deemed
to be the value of donated properties
of the spouse, etc. by presuming
that the spouse, etc. have obtained donations of the value of such properties
when the transferor
made a transfer of relevant properties.
(2) Where the specially-related person (hereafter in this paragraph and
paragraph (4),
referred to as the "transferee") has again transferred the
assets transferred to the person in a special relationship as prescribed
by the Presidential Decree, to the spouse, etc. of the original transferor
within three years from the takeover date, the value
of assets at the time
of the transfer of relevant assets by the transferor shall be deemed to
be the value of donated assets of
the spouse, etc., by presuming that the
relevant spouse, etc. received a donation of the said value of assets: Provided,
That the
same shall not apply in case where the aggregate of finalized
tax amount under the Income Tax Act that are borne by the original
transferor
and transferee is larger than the gift tax in the case of presumption that
the relevant spouse etc. received the donations.
INHERITANCE TAX AND GIFT TAX ACT
44
(3) Paragraphs (1) and (2) shall not apply to the cases falling under
any of the following subparagraphs: 1. Where being disposed of by an auction procedure under a court decision;
2. Where being disposed of by a bankruptcy pronouncement;
3. Where being auctioned pursuant to the National Tax Collection Act;
4. Where the securities have been disposed of through the securities
market under the provisions of Article 2 (12) of the Securities
and
Exchange Act or KOSDAQ under paragraph 14 of the same Article:
Provided, That the case as prescribed by the Presidential Decree
shall
be excluded, which is the case where it is unable to deem that the
securities have been disposed of by the transactions among
the many
unspecified persons; and
5. Where being prescribed by the Presidential Decree, which is the case
where the fact of transfer through a receipt of the price
from the
spouse etc. is clearly admitted.
(4) Where the gift tax has been imposed on the relevant spouse, etc. under
the provisions of the main sentence of paragraph (2),
the income tax due
to the relevant asset transfer shall not be imposed on the original transferor
and transferee, notwithstanding
the provisions of the Income Tax Act.
[This Article Newly Inserted by Act No. 7010, Dec. 30, 2003]
Article 45 (Presumption of Donation of Funds etc. to Acquire Assets)
(1) Where being prescribed by the Presidential Decree, which is the case
where it is difficult to admit that the assets have been
acquired by his
own financial capacity in view of the occupation, age, income and property
status, etc., it shall be presumed that
the acquirer of relevant assets received
a donation of funds to purchase the relevant assets when he has acquired
the relevant
assets, and the said funds shall be deemed to be the value
of donated property of the acquirer of relevant assets.
(2) Where being
prescribed by the Presidential Decree, which is the case
where it is difficult to admit that the debts have been repaid by his own
financial capacity in view of the occupation, age, income and property
status, etc., it shall be presumed that the debtor received
a donation of
funds for the relevant repayment when he has repaid the relevant debts,
and the said funds shall be deemed to be
the value of donated property
of the relevant debtor.
(3) Provisions of paragraphs (1) and (2) shall not apply to the cases where
INHERITANCE TAX AND GIFT TAX ACT
45
the relevant fund for acquisition or repayment is equivalent to the amount
falling short of that as prescribed by the Presidential
Decree by taking
account of the occupation, age, income and property status, etc., and where
there exists a sufficient vindication
of the sources for the relevant fund
for acquisition or repayment.
[This Article Newly Inserted by Act No. 7010, Dec. 30, 2003]
Article 45-2 (Legal Fiction of Donations for Title Trust Assets)
(1)
Where the actual owner and title holder are different in the assets
requiring a registration, etc. for a transfer or exercise of
the rights
(excluding the land and building: hereafter in this Article, the same shall
apply), the value of relevant assets shall
be deemed to have been donated
by the actual owner to the title holder on the date on which a registration
etc. has been made in
the name of the title holder (where the relevant
assets require a transfer of the title, referring to the date next to the
last
day of the year next to that whereto belongs the date of ownership
acquisition), notwithstanding the provisions of Article 14 of
the Framework
Act on National Taxes: Provided, That, the same shall not apply to a
case falling under any of the following subparagraphs:
1. Where a registration, etc. of assets has been made in the name of
another person without any purpose of avoiding taxes, or where
failing
to make a transfer of tile in the name the actual owner who has acquired
the ownership; and
2. Where converting into the title of actual owner during the period until
December 31, 1998 (hereafter in this Article, referred
to as the "grace
period") for the stocks, etc. which have been entered on the shareholders
roster or the members roster in the
tile of another person or whose
titles have been transferred pursuant to the trust or agreement prior
to January 1, 1997, from
among the stocks or equity shares (hereafter
in this Article, referred to as the "stocks, etc."): Provided, That the
same shall
not apply to the case where converting into the titles of
the person in a special relationship with shareholders or investors of
the corporation which has issued the relevant stocks, etc. (hereafter
in this Article, referred to as the "shareholders, etc."),
or the titles
of persons who are the minors as of January 1, 1997.
(2) Where a registration of assets etc. in the title of another
person has
been made, where failing to make a transfer of title in the tile of actual
INHERITANCE TAX AND GIFT TAX ACT
46
owner, and where failing to convert the title of stocks, etc. into the title
of actual owner during the grace period, it shall be
deemed to have a
purpose of avoiding taxes: Provided, That the same shall not apply to
the cases where the transferor makes a report
on the details of changes
in ownership together with a report on tax base for transfer incomes under
Articles 105 and 110 of the
Income Tax Act or a report under Article 10
of the Securities Transaction Tax Act.
(6) The term "taxes" in paragraphs (1) and (2) means the national tax
and local tax as referred to in subparagraphs 1 and 7 of Article
2 of the
Framework Act on National Taxes and the customs as referred to in the
Customs Act.
Article 46 (Donated Property Subject to Non-Taxation)
INHERITANCE TAX AND GIFT TAX ACT
47
With respect to an amount falling under any of the following subpara-
graphs, the gift tax shall not be levied:
1. The value of property received, as a donation, from the State or a
local government;
2. In case where a person who, as an employee of a domestic corporation,
joined an employee association (hereinafter referred to
as an "employee
stockholders association") satisfying the requirements as prescribed
by the Presidential Decree, and acquired shares
of the corporation con-
cerned, through the employee stockholders association falls under the
criteria of a minor shareholder,
as determined by the Presidential Decree,
the value equivalent to the benefits received as a result of the difference
between the
acquisition value of such shares and their current market
value;
3. The value of property received, as a donation, by a political party,
pursuant to the provisions of the Political Parties Act;
4. The value of property which is donated to an intra-company labor
welfare fund, pursuant to the provisions of the Intra-Company
Labor
Welfare Fund Act, or other similar association as prescribed by the
Presidential Decree;
5. Socially recognized disaster relief funds and goods, medical fees, de-
pendents' living expenses and education fees or others
similar to
such, as prescribed by the Presidential Decree;
6. The value of property which is donated to the Credit Guarantee Fund
pursuant to the provisions of the Credit Guarantee Fund Act
or other
similar association as determined by the Presidential Decree;
7. The value of property which is donated to the State, local government,
or public organization; and
8. Insurance money of the insurance, as prescribed by the Presidential
Decree, whereunder a disabled person shall be an insurance
beneficiary.
Article 47 (Taxable Amount of Gift Tax)
(1) The taxable amount of gift taxes shall be the amount derived from
deducting the amount of donated property taken over by the
donee, which
is put up as security for debt (including the debt as prescribed by the
Presidential Decree, such as the debts, etc.
related to the relevant donated
property), from the total amount of the value of donated property under
INHERITANCE TAX AND GIFT
TAX ACT
48
the provisions of this Act [excluding the value of the donated property
(hereinafter referred to as the "donated property excluding
any sum-
ming-up") under the provisions of Articles 40 (1) 2, 41-3, 41-5, 42 (4)]
as of the donation date.
(2) In case, within 10 years prior to the donation date concerned, the
total amount of the value of donated property received from
the same
person (in case the donor is a lineal ascendant, including the spouse of
such lineal ascendant) is not less than 10 million
won, such value shall
be added to the taxable amount of gift taxes: Provided, That the same
shall not apply to the case of the
donated property excluding any sum-
ming-up.
SECTION 4 Non-Inclusion in Taxable Amount of
Property Contributed, etc. for Purposes
of Public Good
Article 48 (Non-Inclusion in Taxable Amount of Property Received, as
Contribution, by Public Service Corporation, etc.)
(1) The
value of any property contributed by any public service corporation,
etc. shall not be included in the taxable amount of gift tax:
Provided,
That where the stocks, etc. received by a public service corporation,
etc., as a contribution, from a domestic corporation,
which, when combined
with the stocks, etc. falling under any of the following subparagraphs,
exceed 5/100 (10/100 in cases of a
public service corporation in good
faith, etc.) of the total number, etc. of stocks issued with voting rights
of such domestic
corporation, [excluding cases falling under the proviso
to the part other than subparagraphs of Article 16 (2)] an excess portion
INHERITANCE TAX AND GIFT TAX ACT
49
calculated according to the method prescribed by the Presidential Decree
shall be excluded:
1. The stocks, etc. of a domestic corporation, which are the same as the
stocks, etc. the public service corporation, etc. is in
possession at the
time that the contributor makes contributions; and
2. The stocks, etc. of a domestic corporation, which are the same as the
stocks, etc. contributed by the contributor or the person
in a special
relationship with him to other public service corporation, etc. than
the public service corporation, etc. concerned.
(2) In case a public service corporation, etc. which received, as a con-
tribution, property, under the provisions of paragraph
(1) and Article 16
(1), falls under subparagraphs 1 through 4 and 5-1, the head of tax office,
etc. shall regard the equivalent
amount, as prescribed by the Presidential
Decree, to have been received by the public service corporation, etc. as
a donation,
and promptly levy gift taxes, and in case where it falls under
subparagraph 4-2, the additional tax under Article 78 (9) shall be
levied:
Provided, That among property received, as a contribution, from many
and unspecified persons, those property whose calculation
of equivalent
value, classified according to contributors, is difficult, as prescribed by
the Presidential Decree, shall be excepted:
1. Case of using property received, as a contribution, in projects (a case
of operating such property for profit-making or as a profit-making
business in order to apply it to activities for the purpose of direct public
good, etc. included; hereafter in this subparagraph
the same shall be
applicable) other than that for the purpose of direct public good etc.,
or not putting such property to use,
within 3 years from the date of
the receipt of the contribution, in projects for the purpose of direct
public good, etc.: Provided,
That when, as in a case where a protracted
period is required in the use of such property, etc. or there being compel-
ling cause
as prescribed by the Presidential Decree, there is submission
of a report, pursuant to the provisions of paragraph (5), together
with
reporting of such fact to the head of tax office having jurisdiction over
the place of tax payment, such case shall be excepted;
2. Where the total of stocks, etc. of a domestic corporation, which are
INHERITANCE TAX AND GIFT TAX ACT
50
acquired by utilizing contributed property (including cases where such
property is operated for profit-making or profit-making business,
or
yields any operating income) and stocks, etc. falling under any of the
following items exceeds 5/100 (10/100 in cases of a public
service corpo-
ration in good faith, etc.) of total number, etc. of outstanding stocks
with voting right of the domestic corporation:
Provided, That this shall
not apply to the case where it falls under the proviso to the part other
than the subparagraphs of Article
49 (1), and public service corporations,
etc., which are not specially related to the enterprise group subject
to the limitations
on mutual investment, acquire the stocks, etc. of
a domestic corporation which is not specially related to the contributors
to
the relevant public service corporation, etc., and is prescribed by
the Presidential Decree, and to the case where an industry-academic
cooperation group pursuant to the Promotion of Industrial Education
and Industry-Academic Cooperation Act acquires stocks, etc.
pre-
scribed by the Presidential Decree:
(a) The stocks, etc. that are the same as the stocks, etc. owned by
the public service corporation, etc. concerned at the time that
the
stocks, etc. are acquired; and
(b) The stocks, etc. of a domestic corporation, which are the same
as the stocks, etc. contributed by a contributor in a special
relation-
ship with the domestic corporation concerned to a public service
corporation, etc. other than the public service corporation,
etc. con-
cerned;
3. Where property received as a contribution is operated for profit-making
or as a profit-making business, a case where such operating
income
is used in projects other than that for the purpose of direct public
good;
4. Where property received as contribution is sold, and the proceeds from
such sale (including the property that is increased by
such proceeds
from sale, and excluding the public charges, etc. prescribed by the
Presidential Decree) are used in other projects
than those for public
good, or have not been used in public projects until the date when
3 years have passed since the date of
sale under the conditions as
prescribed by the Presidential Decree;
4-2. Where the operating income under subparagraph 3 is used in short
INHERITANCE TAX AND GIFT TAX ACT
51
of the standard amount as prescribed by the Presidential Decree, or
the proceeds from sale under subparagraph 4 have been used in
short
of the standard amount as prescribed by the Presidential Decree for
the period of 3 years since the date of sale; and
5. With respect to other property received as contribution and/or operation
of projects for the purpose of direct public good, where
the property
or project is not being operated pursuant to the Presidential Decree.
(3) In case a public service corporation, etc.,
which received property,
etc., as a contribution under the provisions of paragraph (1), allows a
person falling under one of the
following subparagraphs to use or have
benefit of the property concerned through method of lease, loan for con-
sumption, and/or
loan for use, etc., the public service corporation, etc.
shall be presumed as having received an amount as prescribed by the
Presidential
Decree as a donation, and the gift tax shall promptly be levied:
Provided, That where, in connection with the projects of the public
service
corporation, etc. for the purpose of direct public good, services are rendered
and regular costs are being paid, etc.,
as determined by the Presidential
Decree, this shall not be applicable:
1. Contributor and his relative;
2. Other public service corporation, etc. to whom the contributor gave
a contribution; and
3. Persons having special relationships with those of subparagraphs 1
and 2.
(4) In applying the provisions of paragraphs (1) through (3) and (8),
the scope of persons having special relationship, the decision
criteria for
whether or not being used in public projects, the scope of the public
service corporations, etc. which are not specially
related to the enterprise
group subject to the limitations on mutual investment, the scope of domes-
tic corporations which are
not specially related to the contributors to
relevant public service corporations, the scope of the contributors in a
special relationship,
and other necessary matters shall be prescribed by
the Presidential Decree.
(5) In case where a public service corporation, etc. received property as
a contribution, pursuant to the provisions of paragraph
(1) and Article
16 (1), the public service corporation, etc. shall submit a report pertaining
to the plan and progress on the use
of such property, to the head of tax
INHERITANCE TAX AND GIFT TAX ACT
52
office having jurisdiction over the place of the tax payment, pursuant to
the Presidential Decree.
(6) In case where the head of tax office levies gift tax or inheritance tax
on a public service corporation, etc., he shall inform
the competent author-
ities of the public service corporation, etc. concerned of such fact.
(7) In case the competent authority
of a public service corporation, etc.
grants an incorporation license to the public service corporation, etc., re-
vokes it incorporation
license, or gives it a corrective order, or it is discovered
that the public service corporation, etc. falls under paragraphs (1)
(proviso),
(2), and (3) as a result of supervision, it shall inform the head of tax
office having jurisdiction over the place of
tax payment of the public
service corporation, etc. concerned of such fact, pursuant to the Presidential
Decree.
(8) Where contributors or persons in a special relationship with such
contributors hold office in excess of 1/5 (in case that the
current number
of directors falls short of 5, it shall be deemed 5) of the current number
of directors, or officers and employees
(excluding directors; hereinafter
the same shall apply) of the public service corporation, etc. prescribed
by the Presidential
Decree, the additional tax under the provisions of Article
78 (6) shall be imposed.
(10) Where the public service corporation, etc. advertises or publicizes
INHERITANCE TAX AND GIFT TAX ACT
53
without receiving justifiable prices for the purpose of boosting interest
of a domestic corporation in a special relationship with
it, the additional
tax under the provisions of Article 78 (8) shall be levied. In this case,
the scope of domestic corporation
in a special relation, the method of
advertisement and public relations, and other necessary matters shall
be prescribed by the
Presidential Decree.
(11) Where a public service corporation, etc. fall under any of the following
subparagraphs in relation to the contribution, acquisition
and possession
of stocks, etc., it shall be included in the taxable value of inheritance
tax or gift tax pursuant to the main text
of the part other than the
subparagraphs of Article 16 (2) or pursuant to Article 48 (1) as prescribed
by the Presidential Decree,
or the gift tax shall be imposed immediately:
1. Where a public service corporation in good faith, etc. does not fall
under public service corporations in good faith, etc. after
it has received
contributions (including cases of acquiring stocks, etc. with the con-
tributed property) of stocks, etc. in excess
of 5/100 of the total number,
etc. of outstanding stocks with voting right of a domestic corporation;
or
2. Where a public service corporation, etc. pursuant to the proviso to
the part other than the subparagraphs of Article 16 (2) or
to the proviso
to Article 48 (2) 2 does not fall under public service corporations, etc.
pursuant to the proviso to the part other
than the subparagraphs of
Article 49 (1), or possesses in excess of 5/100 of the total number,
etc. of outstanding stocks, etc.
of a domestic corporation that has special
relationship with the relevant contributor.
Article 49 (Possession Standard of Stocks, etc. of Public Service
Corporation, etc.)
(1) In case where a public service corporation, etc., on December 31, 1996,
is in possession of stocks, etc. of the same domestic
corporation in excess
of 5 percent of the total number, etc. of issued stocks, the public service
corporation, etc. concerned shall
be made, until a period falling under
one of the following subparagraphs, not to be in possession of stocks, etc.
in excess of
5 percent of the total number, etc. of issued stocks in question
(hereinafter referred to as the "possession standard of stocks,
etc."):
Provided, That this shall not apply to a public service corporation, etc.
meeting the standards as determined by the Presidential
Decree by taking
INHERITANCE TAX AND GIFT TAX ACT
54
into account the actual use of such stocks, etc. towards projects for the
purpose of direct public good and other contribution levels,
etc. to public
good by the public service corporation, etc. concerned, and a public service
corporation, etc. established through
contributions of the State and/or
a local government and public service corporations, etc. conforming to such,
as determined by
the Presidential Decree:
1. In case the equity ratio of the stocks, etc. in the possession of the
public service corporation, etc. concerned is in excess
of 5 percent but
20 percent and less than the total number, etc. of issued stocks, until
December 31, 1999; and
2. In case the equity ratio of the stocks, etc. in the possession of the
public service corporation, etc. concerned is in excess
of 20 percent
of the total number, etc. of issued stocks, until December 31, 2001.
(2) In applying the provisions of paragraph
(1), the calculation method
of the possession standard of the stocks, etc. and other necessary matters
shall be prescribed by the
Presidential Decree.
Article 50 (Tax Verification with Respect to Public Service Corporation,
etc. by Outside Experts)
(1) The public service corporation, etc. shall, by taxation period or business
year, select not fewer than two attorneys-at-law,
certified public account-
ants, or certified tax accountants who meet the requirements as determined
by the Presidential Decree
and receive a tax verification (hereinafter referred
to as the "tax verification by outside experts") with respect to whether
or
not property received as a contribution is being used in public projects:
Provided, That to public service corporations, etc. that
receive financial
audit pursuant to paragraph (3) and to public service corporations, etc.
prescribed by the Presidential Decree
in consideration of the special qualities
in the operations of projects by the public service corporations, etc. and
the size of
contributed property, etc., such shall not apply.
(2) A public service corporation, etc. which received a tax verification
by outside experts, pursuant to the provisions of paragraph
(1), shall
report the findings of such tax verification to the head of tax office having
jurisdiction over the place of tax payment,
pursuant to the Presidential
Decree. In this case, the head of tax office shall have the findings, of
the tax verification by outside
experts pertaining to whether or not the
INHERITANCE TAX AND GIFT TAX ACT
55
public service corporation, etc. is using the contributed property in public
projects, so as to allow for their perusal by the general
public.
(3) Public service corporations, etc. shall receive financial audit from
auditors pursuant to Article 3 of the Act on External
Audit of Stock
Companies by taxation period or business year: Provided, That to public
service corporations, etc. falling under
any of the following subparagraphs,
this shall not apply: 1. Public service corporations, etc. whose size of property is smaller than
the size prescribed by the Presidential Decree; or
2. Public service corporations, etc. prescribed by the Presidential Decree
in consideration of the characteristics of business.
(4) In applying the provisions of paragraphs (1) through (3), the tax
verification items, the tax verification procedure and methods,
the draw-
ing-up of the report and the reporting procedure, method, etc. of external
audit of the findings of the tax verification,
and other necessary matters
shall be prescribed by the Presidential Decree.
Article 50-2 (Responsibility to Open and Use Exclusive Accounts of Public
Service Corporations, etc.)
(1) Where revenue and expenditure that are received or disbursed in
relation to a direct public project by public service corporations,
etc. fall
under any of the following subparagraphs, public service corporations, etc.
(excluding public service corporations, etc.
prescribed by the Presidential
Decree in consideration of the characteristics of project; hereinafter the
same shall apply) shall
use exclusive accounts (hereinafter "exclusive ac-
counts") for a direct public project:
1. Where revenue and expenditure relating to a direct public project are
received or settled through a financial institution prescribed
by the
Presidential Decree;
2. Where donations, contributions or membership fees are received:
Provided, That to cases where cash is received directly as prescribed
by the Presidential Decree, this shall not apply;
3. Where personnel expenses and rent are disbursed;
4. Where expenses for a direct public project prescribed by the Presidential
Decree, such as donations, scholarship, research expenses,
etc. are
disbursed: Provided, That it shall be limited to cases exceeding 1
million won; or
INHERITANCE TAX AND GIFT TAX ACT
56
5. Where the money obtained by disposing assets for profit-making or
profit-making business and other operating income are transferred
to
the accounting of an essential business (applicable only when the
transfer of fund, such as cash is accompanied).
(2) Where it does not fall under any of the subparagraphs of paragraph (1)
with regard to a direct public project, public service
corporations, etc.
shall separately prepare and keep details: Provided, That to the revenue
and expenditure prescribed by the Presidential
Decree, such as the case,
etc. of getting ready with the evidencing documents falling under Article
160-2 (2) 3 or 4 of the Income
Tax Act, this shall not apply.
(3) Public service corporations, etc. shall open an exclusive account within
3 months from the day
they initially fall under public service corporations,
etc., and shall report to the head of the tax office having jurisdiction
over
the place of tax payment of the public service corporation, etc.
(4) Where public service corporations, etc. intend to change
an exclusive
account or open additional exclusive account, they shall report it as pre-
scribed by the Presidential Decree.
(5) The opening, report, change and addition of exclusive accounts of a
public service corporation, etc. and the method of reporting
thereof, extent
of using exclusive account, necessary matters for such details, etc. shall
be prescribed by the Presidential Decree.
[This Article Newly Inserted by Act No. 8828, Dec. 31, 2007]
Article 50-3 (Responsibility to Publicly Announce Statement of Accounts
of Public Service Corporation, etc.)
(1) A public service corporations, etc. (excluding a public service corpo-
ration, etc. whose size of property is under the size
prescribed by the
Presidential Decree and public service corporations, etc. prescribed by the
Presidential Decree in consideration
of the characteristics of the project;
hereafter in this Article the same applies) shall publicly announce docu-
ments, etc. in
the following subparagraphs (hereafter in this Article the
"statement of accounts, etc.") by having them available on the internet
homepage of the National Tax Service within 4 months from the end of
taxation period or business year of the public service corporation,
etc.
concerned as prescribed by the Presidential Decree:
1. Balance sheets;
2. Income statements (including statement of revenue and expenditure,
etc. equivalent to income statement);
INHERITANCE TAX AND GIFT TAX ACT
57
3. Detail of collection and disbursement of donations;
4. Matters concerning the representative, directors, contributors, location
and object project of the public service corporation,
etc. concerned;
and
5. Matters prescribed by the Presidential Decree, such as the present
status of the stocks in possession.
(2) Where public service corporations, etc. fail to announce the statement
of accounts in public pursuant to paragraph (1) or there
is a mistake
in the details of public announcement, the Commissioner of the National
Tax Service may set a period not exceeding
one month and have such
public service corporation, etc. concerned announce in public during the
period, or may request them to
correct such mistake.
(3) In applying paragraphs (1) and (2), matters necessary for the public
announcement of statement of accounts,
procedures for requesting for the
correction thereof, etc. shall be prescribed by the Presidential Decree.
[This Article Newly
Inserted by Act No. 8828, Dec. 31, 2007]
Article 51 (Duty of Drawing-up and Keeping Books and Records)
(1) The public service corporation,
etc. shall draw up books and records
pertaining to properties received as contributions as well as the details,
etc. of operating
public projects, classified according to the income tax
taxable periods or the corporate tax fiscal years, and shall keep important
documentary evidence in connection with the books and records.
(2) The books, records and important documentary evidence, pursuant
to the provisions of paragraph (1), shall be preserved for 10
years from
the expiration date of the income tax taxable period or corporate tax fiscal
year of the public service corporation,
etc. concerned.
(3) The books, records and important documentary evidence, with respect
to a profit-making business of the public
service corporation, etc., drawn
up and kept, pursuant to the provisions of Article 160 of the Income Tax
Act and the proviso of
Article 112 of the Corporate Tax Act, shall be
regarded as books and records and important documentary evidence drawn
up and kept,
pursuant to the provisions of paragraph (1). In this case,
the books, records and important documentary evidence concerned shall
include those drawn up and kept by means of microfilms, magnetic tapes,
diskettes, and other information preserving devices.
58
books, records and documentary evidence, pursuant to the provisions of
paragraphs (1) through (3), shall be prescribed by the Presidential
Decree.
Article 52 (Application Mutatis Mutandis)
The provisions of Article 17 (1) shall be applicable mutatis mutandis with
respect to the gift tax. In this case, in Article 17
(1), the term "among
inherited property, the person to be succeeded or the successor" shall be
regarded as "among donated property,
the donor", and the term "taxable
amount of inheritance taxes" shall be regarded as "taxable amount of gift
taxes".
Article 52-2 (Non-Inclusion in Taxable Amount of Property Donated to
Disabled Person)
(1) Where a disabled person as prescribed by the Presidential Decree receives
a donation of property (referring to that which can
be entrusted to a trust
company under the Trust Business Act, as prescribed by the Presidential
Decree; hereafter in this Article
the same shall apply) from his lineal
ascendants and descendants or other relatives as prescribed by the
Presidential Decree, and
the following requirements are all satisfied within
the time limit of report under Article 68, the value of the donated property
(the total value of property which, within the limit of five hundred million
won, is donated to the disabled person for his life)
shall not be included
in the taxable amount of gift taxes: 1. The disabled person shall entrust all of the donated property to a
trust company under the Trust Business Act;
2. The disabled person shall be the beneficiary who receives all profits
accruing from the trust; and
3. The period of trust shall be until the time of the disabled person's
death: Provided, That where the period of trust expires before
the
disabled person dies, the period shall be extended to the time of his
death.
(2) Where a disabled person who receives a donation of property under
paragraph (1) falls under any of the following subparagraphs,
the head
of tax office, etc. shall forthwith impose gift taxes on the disabled person,
deeming that the value of the property is
donated to the disabled person
on a day prescribed by the Presidential Decree: Provided, That this shall
not apply where there
exist any inevitable causes as prescribed by the
Presidential Decree:
1. Where the trust is rescinded for the future, or the period of trust is
INHERITANCE TAX AND GIFT TAX ACT
59
not extended after its expiration;
2. Where the beneficiary is changed during the period of trust or the
value of the donated property under paragraph (1) 1 is decreased;
and
3. Where it is confirmed that all or part of the profits accruing from the
trust is reverted to a person other than the disabled
person.
(3) A person who desires to be subject to the provisions of paragraph (1)
shall, within the period of report under Article
68, apply to the head of
tax office having jurisdiction over the place of tax payment under the
conditions prescribed by the Presidential
Decree.
(4) The calculation of the amount of the gift taxes under paragraph (2)
and other necessary matters shall be prescribed
by the Presidential Decree.
[This Article Newly Inserted by Act No. 5582, Dec. 28, 1998]
SECTION 5 Donation Deductions
Article 53 (Donated Property Deductions)
(1) In case where a resident received a donation from a person falling
under any of the following subparagraphs, an amount based
on classification
by the following subparagraphs shall be deducted from the taxable amount
of gift taxes. In this case, should
the total of an amount for which a deduction
is to be received within 10 years prior to the relevant donation by the
standard of
the donee, and an amount for which a deduction was received
from the taxable amount of gift taxes, be in excess of an amount as
stipulated
in the following subparagraphs, the excess part shall not receive such
deduction: 1. In case where a donation was received from a spouse, 600 million
won;
2. In case where a donation was received from a lineal ascendant or lineal
descendant, 30 million won: Provided, That in case where
a minor
received a donation from a lineal ascendant, the deduction shall be
15 million won; and
3. In case where a donation was received from a relative who is not a
spouse or a lineal ascendant or descendant, 5 million won.
(2) The scope of relatives, under the provisions of paragraph (1), shall
be prescribed by the Presidential Decree.
Article 54 (Application Mutatis Mutandis)
INHERITANCE TAX AND GIFT TAX ACT
60
The provisions of Article 23 shall be applicable mutatis mutandis with
respect to the gift tax. In this case, within Article 23
(1), the term "a
succession commencing as a result of the death of a resident" shall be
regarded as "property donated by a third
party", the term "Article 67"
as "Article 68", the term "inherited property" as "donated property", the
term "taxable amount of
inheritance taxes" as "the taxable amount of
gift taxes", and within paragraph (2) of the same Article, the term "successor
or
testamentary donee" shall be regarded as "donee".
SECTION 6 Tax Base and Tax Rate
Article 55 (Tax Base and Taxable Minimum of Gift Tax)
(1) The tax base of gift tax shall be an amount derived by deducting the
fees for appraisal and assessment of the donated property as prescribed
by the Presidential Decree from the amount falling under
any of the following
subparagraphs: 1. In the legal fiction of title trust property under the provisions of Article
45-2, the amount of relevant title trust property;
2. In the donated property excluding any summing-up, the amount derived
by deducting 30 million won from the value of relevant donated
property;
and
3. In other cases than subparagraphs 1 and 2, the amount derived by
deducting the amount under the provisions of Articles 53 and
54 from
the taxable amount of gift tax is levied under the provisions of Article
47 (1).
(2) When the tax base is below 500 thousand won, the gift tax shall not
be levied.
The gift tax shall be the calculated amount (hereinafter referred to as
the "gift tax amount calculated") derived by applying the
tax rate, under
the provisions of Article 26, to the tax base, under the provisions of Article
55.
Article 57 (Premium Gift Tax with Respect to Lineal Descendant)
In case where the donee is a lineal descendant who is not an
offspring
of the donor, an amount equivalent to 30 percent of the gift tax amount
calculated shall be added: Provided, That in
case where, through the
INHERITANCE TAX AND GIFT TAX ACT
61
death of a lineal descendant who is the closest relative of the donor, the
lineal descendant who is the closest relative of the
deceased receives the
donation, such shall not be applicable.
SECTION 7 Tax Credit
Article 58 (Deduction of Tax Amount Already Paid)
(1) The amount of gift tax (meaning the gift tax amount calculated pertain-
ing
to donated property concerned at the time of donation) paid or to be
paid with respect to the value of donated property (meaning
the aggregated
amount of the values of donated properties when there are not less than
two donations) which was added to the taxable
amount of gift taxes, pursuant
to the provisions of Article 47 (2), shall be deducted from the gift tax
amount calculated: Provided,
That in case where, owing to the expiration
of the period under the provisions of Article 26-2 (1) 4 or 26-2 (3) of
the Framework
Act on National Taxes, the gift tax with respect to donated
property being added to the taxable amount of gift taxes is not being
levied,
such shall not apply.
(2) The amount of the gift tax to be deducted, in the case of paragraph (1),
shall be within the limit of the amount calculated
by multiplying the gift
tax amount calculated by the ratio occupied by the tax base of donated
property, which is added to the
tax base of aggregated amounts of the
value of relevant donated property and of the value of the donated property
added under Article
47 (2).
The provisions of Article 29 shall be applicable mutatis mutandis with
respect to the gift tax. In this case, in Article 29, the
term "owing to
death of a resident, the inheritance tax is being levied" shall be regarded
as "property donated another person",
each "inheritance tax" as "gift tax",
"inherited property" as "donated property", and "inheritance tax amount
calculated" as "gift
tax amount calculated".
CHAPTER APPRAISAL OF PROPERTY
Article 60 (General Rules, etc. of Appraisal)
(1) The value of a property on which the inheritance tax or the gift tax
INHERITANCE TAX AND GIFT TAX ACT
62
is levied, pursuant to this Act, shall be based on its current market value
at the donation date or the commencement date of succession
(hereinafter
referred to as the "appraisal base day"). In this case, the value (excluding
cases falling under the provisions of
Article 63 (2)) appraised in accordance
with the appraisal methods under the provisions of Article 63 (1) 1 (a)
and (b) shall be
regarded as the current market value of the property.
(2) The current market value, under the provisions of paragraph (1), shall
be the value recognized as having been arranged under normal conditions
in the case of transactions effected freely between many
and unspecified
persons, and shall include the public sale price from expropriation and
appraised price, etc., current market values
recognized pursuant to the
Presidential Decree.
(3) In case where, in applying the provisions of paragraph (1), the calculation
of the current market value is difficult, it shall
be based on the appraised
value calculated in accordance with methods under the provisions of
Articles 61 through 65, by taking
into consideration the type, size, and
transaction circumstances, etc. of the property concerned.
(4) In applying the provisions
of paragraph (1), the value of donated property
added to the value of inherited property, pursuant to the provisions of
Article
13, shall be based on the current market value at the donation
date.
Article 61 (Appraisal of Real Estate, etc.)
(1) Real estate shall be appraised by the method falling under one of the
following subparagraphs: 1. Lands: An individual public notification of the value of the land
(hereinafter referred to as an "individual public notification
of land
value") pursuant to the Public Notice of Values and Appraisal of Real
Estates Act: Provided, That in the case of the equivalent
value of land
not having an individual public notification of land value, it shall be
an amount appraised by the head of tax office
having jurisdiction over
the place of tax payment, by taking into consideration the individual
public notifications of land values
of similar neighboring lands, in
accordance with methods as prescribed by the Presidential Decree.
With respect to land of a region
determined by the Presidential Decree
as being one where the land values are rising quickly, it shall be based
on the value appraised
in accordance with a multiplication method;
INHERITANCE TAX AND GIFT TAX ACT
63
2. Buildings: The value that the Commissioner of the National Tax Service
calculates and publishes once or more every year taking
into account
the prices of newly constructed buildings (excluding buildings falling
under the provisions of subparagraph 3 or 4),
structures, purposes,
locations and the year of such new construction, etc. of buildings;
3. Office/residential mixed use buildings and commercial buildings: With
respect to office/residential mixed use buildings and commercial
build-
ings (including lands annexed thereto) whose lands annexed thereto
are jointly owned and their buildings are divisionally
owned and they
are prescribed by the Presidential Decree taking into account the pur-
poses of use and the area of the buildings
and the number of buildings
that are divisionally owned, the value of the lands and the buildings
that the Commissioner of the
National Tax Service calculates and pub-
lishes in the block not less than once every year taking into account
kinds, scales, transactions
and locations, etc. of the buildings; and
4. Housing: The prices of the individual housing and the prices of the
collective housing provided for in the Public Notice of Values
and
Appraisal of Real Estate Act: Provided, That when the Commissioner
of the National Tax Service determines and publishes the
prices of
the collective housing pursuant to the provisions of the proviso of Article
17 (1) of the same Act, the prices of the
collective housing shall be
governed by the prices that are determined and published by him.
(2) Deleted.
(3) Deleted.
(4) "Multiplication method", as stated in the proviso of paragraph (1)
1 means a calculating method which is in accordance with
amounts calculated
by multiplying individual public notifications of land values by a rate as
determined by the Presidential Decree.
(5) With respect to rights to acquire real estate and surface rights and
to use specific facilities, they shall be in accordance
with equivalent values
appraised, pursuant to methods as prescribed by the Presidential Decree,
by taking into account the residual
period, nature, substance, transaction
circumstances, etc., of the rights, etc. concerned.
(6) With respect to other facilities
and constructed structures, they shall
be in accordance with values appraised, pursuant to methods as prescribed
by the Presidential
Decree, by taking into account the values required
when such facilities or constructed structures are either constructed again
INHERITANCE TAX AND GIFT TAX ACT
64
or acquired again on the appraisal base day.
(7) The value of property the lease contract of which is de facto concluded
or the lease of which is registered shall be the larger
amount between
the appraised value based on its rental in accordance with the provisions
of the Presidential Decree and the appraised
value under the provisions
of paragraphs (1) through (6).
(2) With respect to goods, products, paintings and writings, antiques,
animals subject to ownership and other tangible assets, they
shall be in
accordance with equivalent values appraised, pursuant to methods as pre-
scribed by the Presidential Decree, by taking
into account the type, size,
transaction circumstances of the property concerned.
(3) In the case of the assets for which the de
facto lease contract has
been concluded or a right of lease has been registered, the value of the
relevant assets shall be the
larger amount between the value assessed
under conditions prescribed by the Presidential Decree based upon the
standard of the
relevant rents and the value assessed under the provisions
of paragraphs of (1) and (2).
(1) Securities shall be appraised by methods falling under one of the following
subparagraphs: 1. Appraisal of stocks and equity shares:
(a) With respect to stocks and equity shares of stock-listed corpo-
rations traded on
the Korea Exchange, the average value of the
INHERITANCE TAX AND GIFT TAX ACT
65
daily Korea Exchange closing market value (irrespective of ex-
istence or non-existence of actual trading) publicly announced for
2 months prior to and after the appraisal base day: Provided, That
in case where, concerning the calculation of the average value,
there occurs during the period of 2 months prior to and after the
appraisal base day a cause such as an increase in capital, a
merger,
etc., thus rendering unfitness to an appraisal based on the average
value, the appraisal then shall be based on the average
value of
the period calculated under the conditions as prescribed by the
Presidential Decree among the period of 2 months before
and after
the appraisal base day respectively;
(b) With respect to stocks and equity shares prescribed by the
Presidential Decree, from among those of a NASDAQ-listed corpo-
ration pursuant to the Securities and Exchange Act, the provisions
of item (a) shall be applicable mutatis mutandis; and
(c) With
respect to stocks and equity shares not listed on the Korea
Exchange in addition to those of item (b), they shall be appraised
in accordance with methods as prescribed by the Presidential
Decree, by taking into account the assets and profits, etc., of the
corporation concerned; and
2. Appraisal of public bonds, state bonds, etc. and other securities in
addition to those of subparagraph 1 shall be in accordance
with meth-
ods prescribed by the Presidential Decree, by taking into account the
type, size, transaction circumstances, etc., of
the property concerned.
(2) Notwithstanding the provisions of paragraph (1) 1, with respect to
the stocks or equity shares (hereafter
in this paragraph and paragraph
(3), referred to as the "stocks, etc.") falling under any of the following
subparagraphs, they
shall be appraised based on methods as prescribed
by the Presidential Decree, by taking into account the nature of the
business,
transaction circumstances, etc. of the corporation concerned:
1. Stocks, etc. of a corporation for which a securities report was filed
with the Financial Services Commission for the purpose of
going public
within the period as prescribed by the Presidential Decree;
2. Among stocks, etc. under the provisions of paragraph (1) 1 (c), those
stocks, etc. of a corporation for which an application for
listing was
INHERITANCE TAX AND GIFT TAX ACT
66
filed with the Korea Exchange under Article 172-2 of the Securities
and Exchange Act within the period as prescribed by the Presidential
Decree, for the purpose of transactions of stocks, etc. on KOSDAQ
under the same Act; and
3. Among stocks of a corporation listed on the Korea Exchange, those
new stocks acquired as a result of an increase in capital of
the corpo-
ration concerned but not listed as of the appraisal base day.
(3) In applying the provisions of paragraphs (1) 1 and
(2), the stocks,
etc. (excluding the stocks, etc., prescribed by the Presidential Decree such
as those of any corporation that
has continued to register an operating
loss under the provisions of the Article 14 (2) of the Corporate Tax Act
starting with the
business year within 3 years prior to the business year
belonging to the appraisal base day) of the largest shareholder or the
largest investor prescribed by the Presidential Decree and a shareholder
or an investor in a special relationship with such largest
shareholder or
such largest investor (hereafter referred to as the "largest shareholder,
etc." in this paragraph) shall be calculated
by adding 20/100 (in the case
of a small or medium enterprise as prescribed by the Presidential Decree,
it shall be 10/100) of
the value to the value appraised in accordance
with the provisions of paragraphs (1) 1 and (2), but where the largest
shareholder,
etc. owns in excess of 50/100 of the total number, etc. of
stocks issued by the corporation concerned, 30/100 (in the case of a
small
or medium enterprise as prescribed by the Presidential Decree, it shall
be 15/100) shall be added. In this case, the calculation
of stocks, etc.
in possession of the largest shareholder, etc. shall be determined by the
Presidential Decree.
(4) Deposits, savings, installment savings, etc. shall be appraised based
on the value derived by deducting an equivalent amount
of the withholding
tax, pursuant to the provisions of Article 127 (1) of the Income Tax Act,
from the combined amount of the total
of the deposits and receipts as
of the appraisal base day of appraisal and the amount of outstanding interest
already passed as
of the same date.
67
the appraisal base day, from the value of the purchase.
(2) Industrial property rights, etc. and other intangible property rights,
etc. in addition to those of paragraph (1), shall be
appraised by the
methods as prescribed by the Presidential Decree, by taking into account
the value required in the acquisition
of the property concerned or the future
economic benefits, etc. of the property concerned.
Article 65 (Appraisal of Conditional
Rights, etc.)
(1) With respect to conditional rights, rights whose durations are un-
determined, rights to receive benefits of
trusts, rights which are in litigation,
and rights to receive money payable by periodical installments as pre-
scribed by the Presidential
Decree, their values shall be appraised In
accordance with methods as prescribed by the Presidential Decree, with
the nature, substance,
duration, etc. of the right concerned as the criteria.
(2) Other property whose appraisal methods are not provided for separately
in this Act shall be appraised by applying mutatis mutandis the appraisal
methods provided in paragraph (1) and Articles 60 through
64.
Article 66 (Special Cases of Appraisal of Properties whose Mortgages, etc.
are Settled)
The property falling under one of the following subparagraphs, notwith-
standing the provisions of Article 60, shall be appraised
based on the value
of such property; the value being the bigger amount between the value
appraised pursuant to the Presidential
Decree and the value appraised
pursuant to the provisions of Article 60, with the claim amounts being
secured with the property
concerned as the criteria:
1. Property whose mortgage or pledge is settled;
2. Property transferred for security;
3. Property registered for lease on a deposit basis (including property
leased with lease deposit); and
4. Deleted.