Se-ri Park, Was Her Father's Debt Repayment Not the End... Could Face a 'Gift Tax Bomb'

"If 10 Billion Won Was Repaid, Tax Over 5 Billion Won"
"Different If Directly Repaid to Creditor," Opinions Also Expressed

Park Seri, Chairperson of the Park Seri Hope Foundation, is expected to face a large gift tax. This is due to current laws that consider repaying a parent's debt on their behalf as a form of gifting.

At a press conference held on the 18th regarding her filing a complaint against her father, Park Joon-cheol, for forgery of private documents, Chairperson Park stated, "Because we are family, I repaid all of my father's debts."

Former golf player and broadcaster Park Seri is making a statement on the 18th at Space Share Samsung COEX Center in Gangnam-gu, Seoul, regarding allegations of forgery of private documents by her father. Photo by Kang Jin-hyung aymsdream@

The debts mentioned at the press conference included provisional seizures set on a 2,324.8㎡ (703-pyeong) land in Yuseong-gu jointly owned by Park Seri and her father. According to the real estate registry, the father and daughter each held a 50% share of the land, and provisional seizures had been in place since 2001. By 2014, the amount claimed under seizure and provisional seizure on the property totaled approximately 3.093 billion KRW.

All seizure and provisional seizure registrations on the registry were canceled by September 2012. Subsequently, another provisional seizure was set, and in July 2016, Chairperson Park repaid an additional 1 billion KRW of her father's debt and acquired the remaining shares in exchange.

At the press conference on the 18th, Chairperson Park also said, "In 2016, when the property went to auction, I urgently repaid my father's debt and bought the shares," adding, "After retirement, whenever I solved one debt issue of my father, it was like a chain reaction where the next problem would arise as if lined up." Although she did not disclose specific amounts, some speculate that the debt she repaid for her father exceeded 10 billion KRW.

However, under current tax laws, taxes are known to arise during this process. Both gifting a house or car to parents and repaying their debts are subject to gift tax.

Attorney Kim Seong-hoon appeared on YTN's "News Wide" and explained, "A gift tax is imposed when property is transferred without compensation. Repaying a debt on behalf of someone else is essentially transferring property value without compensation." He added, "Even between parents and children, gift tax can be imposed on this part, so any amount exceeding the exemption threshold may be subject to gift tax."

Park Young-beom, Chief Tax Accountant at YB Tax Consulting, also pointed this out to DdanJipGo on the 21st. He said, "In principle, the tax should be paid by the father, but if the father cannot pay the tax, the child becomes liable for the gift tax." He continued, "If Chairperson Park repaid about 10 billion KRW of her father's debt over 10 years as reported by the media, she could face a gift tax bomb exceeding 5 billion KRW, considering the highest gift tax rate of 50% plus various additional taxes."

However, there is an opinion that if the repayment was made directly to the creditor rather than gifting cash to the father to repay the debt, it is considered a benefit from debt forgiveness, and only the recipient has the obligation to pay gift tax, not the person who made the gift.

Attorney Heo Ju-yeon stated on TV Chosun's "Case File 24," "We need to look at how the debt was repaid separately," adding, "It is unlikely that Chairperson Park would be in a situation where she has to bear the tax payment obligation on behalf of someone else."