Lotte Scholarship Foundation Wins Appeal in Lawsuit to Cancel 19.1 Billion KRW Gift Tax Imposition

[Asia Economy Reporter Jeon Jin-young] Lotte Scholarship Foundation filed a lawsuit to cancel the imposition of gift tax amounting to about 19.1 billion KRW, lost in the first trial, but won in the appellate court.

On the 26th, the Ulsan Division 1 of the Busan High Court Administrative Department (High Court Judge Park Hae-bin) announced that it ruled in favor of the plaintiff in the appeal trial of the 'Cancellation of Gift Tax Imposition' lawsuit filed by Lotte Scholarship Foundation against the tax office.

In June 2018, Lotte Scholarship Foundation was imposed with gift tax (including additional tax) of about 19.12 billion KRW for the years 2012 to 2014 by the tax office and filed a lawsuit.

At that time, the tax office imposed tax on the portion exceeding a 5% share of the stocks held by Lotte Scholarship Foundation after the amendment of the Enforcement Decree of the Inheritance and Gift Tax Act (hereinafter referred to as the IGTA) in February 2008, which caused the foundation to no longer meet the requirements of a sincere public interest corporation. This meant that the tax office retroactively imposed taxes on the tax-exempt benefits that Lotte Scholarship Foundation had received as a certified sincere public interest corporation before the amendment of the Enforcement Decree.

However, the appellate court judged that this was an expansive interpretation of the relevant law. The court stated the reason for the ruling, saying, "Tax laws and regulations should be interpreted literally unless there are special circumstances," and "This is especially true when it results in unfavorable consequences for the taxpayer."