Gift Tax Varies Based on Gift Value Assessment
Appraised Value May Be Lower Than Used Market Price
Ranges Around 30 Million Won or Below 10 Million Won
"If we win the Korean Series, I will give a gift to the Most Valuable Player (MVP)."
This was a statement made by the late Koo Bon-moo, chairman of LG Group, who was passionate about baseball, while presenting an 80 million won Rolex watch he personally bought during an overseas business trip in 1998. This watch had been lying dormant in the LG Twins office safe at Jamsil Stadium, unable to find its owner. This year, as the LG Twins are on the verge of winning the Korean Series, the possibility of the watch finally meeting its owner has greatly increased.
However, even the lucky recipient cannot avoid taxes. How much tax would be paid if they receive a watch worth hundreds of millions of won? If LG gives the watch to the MVP, it is considered a gift. In this case, the player selected as MVP must pay gift tax directly. The gift tax is calculated based on the appraised value of the gift at the time the watch is handed over to the MVP. If the appraised value is 100 million won or less, 10% of the amount must be paid as gift tax. If the appraised value is between 100 million and 200 million won, the gift tax rate jumps to 20%.
An official from the National Tax Service explained, "If the taxpayer submits the market price appraised within 6 months before and 3 months after the gift date, the Statistical Office verifies it, and then gift tax is imposed," adding, "The appraised value of the gift is determined by evaluating various prices such as sales, auctions, public sales, and appraisals."
On the 7th, LG Twin Tower in Yeouido, Seoul, ahead of LG Electronics' preliminary announcement of its fourth-quarter earnings for last year. According to the securities industry, LG Electronics is expected to record sales in the 20 trillion won range and operating profit in the 800 billion won range in the fourth quarter, driven by strong sales of home appliances and TVs. Photo by Jinhyung Kang aymsdream@
If the appraised value is calculated based on the used market price, the gift tax is likely to be around 30 million won by applying the 20% tax rate. After applying the progressive deduction (10 million won), the actual gift tax would be around 20 million won. However, since this product is not frequently traded and the presented used price is a price set by the seller who has not completed a transaction, an accurate appraisal may be necessary.
The appraisal industry estimates that if a professional appraisal is conducted, the appraised value may be lower than the current used price. If the appraised value falls below 100 million won, the gift tax will be drastically reduced to less than 10 million won.
An official from the Korea Personal Property Appraisal Institute said, "The appraisal price is a guarantee amount concept rather than a general market price, so it can be lower than the market price," adding, "Since appraisals can vary slightly by company, we check at least two places and take the average price."
Of course, there is also a possibility that LG Group will pay the gift tax on behalf of the recipient. It would be difficult to say that the tax burden falls on the MVP when the former chairman, who so deeply wished for the championship, is giving a gift to the key contributor to the victory. In this case, additional gift tax may be imposed on the amount paid on behalf of the recipient.
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