〈Case in which inheritance tax was imposed in excess of the value of the inherited property located in Korea〉[Gong 2024Ha, 1656]

【Holding】

The method of determining ‘the property that each heir has received or is to receive’ under Article 3-2(1) and (3) of the former Inheritance Tax and Gift Tax Act / Where the decedent is a non-resident, whether ‘the property that each heir has received or is to receive’ under Article 3-2(1) and (3) of the former Inheritance Tax and Gift Tax Act includes ‘inherited property located abroad,’ which is not subject to inheritance tax (negative)

【Summary of Decision】

Article 3 of the former Inheritance Tax and Gift Tax Act (before amended by Act No. 14388 on December 20, 2016; hereinafter the ‘former Inheritance and Gift Tax Act’) provides in subparagraph 1 that ‘where the decedent is a resident, inheritance tax shall be imposed on all inherited property,’ and in subparagraph 2 that ‘where the decedent is a non-resident, inheritance tax shall be imposed on inherited property located in Korea,’ thereby distinguishing between cases where the decedent is a resident and cases where the decedent is a non-resident and prescribing differently the property subject to inheritance tax. Article 13 of the former Inheritance and Gift Tax Act provides in paragraph (1) that the taxable value of inherited property shall be calculated by adding to the value of the inherited property ‘the value of property donated by the decedent to an heir within 10 years before the date of commencement of inheritance’ (subparagraph 1) and ‘the value of property donated by the decedent to a person other than an heir within 5 years before the date of commencement of inheritance’ (subparagraph 2), and in paragraph (2) that ‘where inheritance commences due to the death of a non-resident, the value of the property donated in advance under subparagraphs 1 and 2 above shall be added to the value of the inherited property only where property located in Korea was donated,’ thereby distinguishing between cases where the decedent is a resident and cases where the decedent is a non-resident and prescribing differently the method of calculating the taxable value of inherited property.

Article 3-2 of the former Inheritance and Gift Tax Act provides in paragraph (1) that ‘an heir is liable to pay, as inheritance tax, the amount calculated according to the ratio prescribed by Presidential Decree on the basis of the property that each heir has received or is to receive out of the inherited property (including, among the donated property added to the inherited property under Article 13, the donated property received by an heir or a legatee),’ and in paragraph (3) that ‘the inheritance tax under paragraph (1) shall be paid jointly and severally, up to the limit of the property that each heir has received or is to receive,’ thereby prescribing, with respect to the total inheritance tax computed on the basis of the inherited property subject to inheritance tax, each heir's own liability to pay inheritance tax and joint and several liability for payment on the basis of the property that each heir has received or is to receive. ‘The property that each heir has received or is to receive’ referred to here is determined only after the inherited property subject to inheritance tax is valued under the former Inheritance and Gift Tax Act, debts and the like are deducted from the value of the property so valued, and the result is divided according to the shares of inheritance.

Taking together the legal principles set out above and the text, structure, and purport of the relevant provisions, where the decedent is a non-resident, ‘the property that each heir has received or is to receive’ under Article 3-2(1) and (3) of the former Inheritance and Gift Tax Act must be regarded as including only ‘inherited property located in Korea,’ which is subject to inheritance tax, and cannot be regarded as extending to ‘inherited property located abroad,’ which is not subject to inheritance tax.

【Referenced Statutes】

Article 3, Article 3-2(1) and (3), and Article 13 of the former Inheritance Tax and Gift Tax Act (before amended by Act No. 14388 on December 20, 2016)

【Referenced Precedents】

Supreme Court Decision 2000Du3221, November 13, 2001 (Gong 2002Sang, 92)

(Source: Supreme Court Decision 2022Du64143, September 12, 2024 [Revocation of Disposition Imposing Capital Gains Tax, etc.] > Comprehensive Legal Information, Precedents)