Supreme Court nixes tax on donor
The final verdict on Thursday ended a near eight-year battle.
In 2003, Hwang, then-owner of the media group Suwon Kyocharo, which is headquartered in Suwon, Gyeonggi, donated 90 percent of his company stocks, or 18 billion won, and 1.5 billion won more in cash to his alma mater, Ajou University.
The school established the Guwon Scholarship Foundation and funded around 730 students over the past six years with the money.
But in 2008, the Suwon branch of the National Tax Service launched an investigation into the transaction and concluded Hwang had to pay 14 billion won in taxes.
The decision was based on a clause in the Inheritance Tax and Gift Tax Act, which states that a donation must be taxed if the money is given through stocks, and if the amount exceeds 5 percent of total stakes.
In his first trial in 2010, the court ruled in Hwang’s favor, saying that his intentions were based on goodwill and that the Inheritance Tax and Gift Tax Act must not be interpreted literally.
Imposing taxes on Hwang, the Suwon court continued, would “inflict harm to public services trying to gain financial resources.”
The Seoul High Court later overturned the ruling, saying, “making exceptions would prompt the public to believe the court was making arbitrary decisions.”
On Thursday at the Supreme Court, in the final ruling, Chief Justice Yang Sung-tae said, “there is no reason” to impose gift taxes on Hwang because he is no longer the largest shareholder of the media group Suwon Kyocharo, therefore he has no means of control over the company.
The decision, he added, was backed by a special provision in the Inheritance Tax and Gift Tax Act, which states that a stockholder who donates his or her stocks is exempt from being taxed if that person is no longer the largest stakeholder in the company.
After Hwang made his donation, he held a 10-percent stake in the Suwon Kyocharo.
BY YU GIL-YONG, SONG SEUNG-HWAN [firstname.lastname@example.org]