Dad borrowed cash to buy a house and repaid it, but faced a 'gift tax bomb'... Kwon Ik-wi Commission says "unfair"

The Anti-Corruption and Civil Rights Commission Recommends Correction to Tax Authorities

"If Actual Borrowing and Repayment Occurred, It Is Difficult to Consider It a Gift"

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Moon Chaeseok]

#Mr. A borrowed a 300 million won check from his father due to a shortage of the intermediate payment to buy an apartment, then repaid 270 million won by taking out a loan secured by the apartment. The tax authorities regarded the 300 million won borrowed from his father as 'gifted money' and imposed a gift tax of about 60 million won on Mr. A. Feeling unfairly treated, Mr. A filed a grievance requesting the cancellation of the gift tax.

The Anti-Corruption and Civil Rights Commission (ACRC) announced on the 24th that it concluded the tax authorities' decision was unjust. It is inappropriate to conclude that repaying the money borrowed from the father constitutes a gift transaction.

The ACRC judged that even if Mr. A used the 300 million won received from his father to buy the apartment, the money was borrowed, not gifted, and recommended the tax authorities cancel the gift tax. As a result, the local tax office accepted the ACRC's recommendation and canceled the gift tax imposed on Mr. A.

The grounds presented by the ACRC include ▲confirmation that on the acquisition day, Mr. A took out a 200 million won loan secured by the apartment and repaid his father a total of 270 million won ▲even if no contract was written, the repayment fact is confirmed, making it reasonable to consider it a monetary loan agreement ▲Mr. A did not transfer the 300 million won to his own bank account but used a check received from his father to purchase the apartment, so the 300 million won was not mixed with Mr. A's bank balance.

An Junho, Director of the Grievance Handling Bureau at the ACRC, said, "Tax authorities should strictly tax illegal gift transactions, but cases of taxation due to differences in fact-finding are occurring. The ACRC will continue to do its best to protect taxpayers' rights so that citizens are not unfairly taxed."