Actor Yoon Tae-young “gift tax 95 million won too much”…court “cancels only 500 million won of additional tax”

Actor Yoon Tae-young (49), the son of former Samsung Electronics vice chairman Yoon Jong-yong, won a partial victory in a lawsuit to cancel the gift tax of 95 million won. The court held that the imposition of the gift tax itself was justified, but that the additional tax of 5 million won out of 95 million won should be cancelled.

The Administrative Division 2 of the Seoul Administrative Court (Deputy Chief Justice Shin Myung-hee) ruled in part in favour of the plaintiff (Yoon Tae-young안전놀이터) in a lawsuit against the Gangnam Tax Office to cancel the gift tax surcharge, the court said on Friday.

In September 2019, Yoon received 400,000 shares of an unlisted company from her father, former vice chairman Yoon. Yoon assessed the value of the shares at 3.17 billion won ($3.1 billion) and reported and paid gift tax based on this premise. However, in September 2020, the tax authorities determined that the value of the shares was higher than Yoon’s calculation and imposed a gift tax of 95 million won (including a surcharge of 5 million won) on the increase.

View of the Seoul Administrative Court. [Courtesy of the Supreme Court].

Yoon appealed the tax authorities’ decision. He argued that the tax authorities used the “book value” of each company’s financial statements to value the shares, while the tax authorities used the “acquisition value” to value the shares.

The court found the tax authorities’ interpretation correct. “Interpreting the book value as the book value in the enterprise’s accounting results in a lower limit that varies depending on the accounting policies and accounting estimation methods adopted by the enterprise,” the court said.

However, the tribunal found it unreasonable to impose additional tax on Mr Yun. “The tax administration seems to have assumed that book value meant the book value in the company’s accounting until it changed its interpretation to mean the acquisition value in June 2019,” the tribunal said, “and the tax tribunal has also interpreted book value to mean the book value in the financial statement.” There was confusion in practice.

“Surcharge is an administrative sanction imposed when a taxpayer violates various obligations such as filing and paying taxes prescribed by law,” the tribunal said, adding that “it is reasonable to assume that there are legitimate reasons why such liability cannot be attributed to Mr Yoon beyond the scope of a mere mistake or misunderstanding of the law.”

In response to the ruling, a representative from Yoon’s agency said, “We have paid all relevant taxes,” and that “there has been no illegal behaviour or unfair gain.”