CJ chairman wins tax case at Supreme Court

CJ Group Chairman Lee Jay-hyun. [NEWS1]

CJ Group Chairman Lee Jay-hyun took his tax bill to the Supreme Court — and won.

The good news: he won't have to pay some 150 billion won ($126.38 million) in gift taxes.

Lee does have to pay 3.3 billion won in capital gains tax and 7.8 billion won in comprehensive income tax.

Lee sued tax authorities in 2017 and a lower court ruled last year that Lee did not have to pay a gift tax of 156.2 billion won. The Supreme Court on Thursday agreed, along with the ruling on the capital gains and comprehensive income tax.

“The fact that the plaintiff is the actual owner of the shares of [CJ Group’s] domestic affiliates, and the lack of evidence to prove the agreement among the plaintiff, the company and financial institutions on registering [the company] under a third party’s name make imposing a gift tax illegal,” the court said.

Tax authorities accused Lee of not reporting earnings from trading stock under the name of a company registered under a third party’s name in the British Virgin Islands in the 1990s. Lee traded stock through overseas financial institutions.

The tax service's Jungbu District Office sent Lee a bill for 261.4 billion won in capital gains, comprehensive income and gift taxes, saying Lee did not report earnings from shares acquired through the Virgin Islands company from September to November 2013.

Lee protested the bill and appealed to the Tax Tribunal, which partially accepted his claims and reduced the tax by 94 billion won.

Lee filed administrative litigation to avoid paying the remaining 167.4 billion won. Most of his claims were dismissed in a first trial, but the appeals court ruled in favor of Lee. The higher court concluded that acquiring shares through the Virgin Islands company was not illegal. It added that there was a lack of evidence that Lee tried to evade gift taxes.

The Supreme Court upheld the appeals ruling, but said Lee had to pay the capital gains and comprehensive income tax because earnings from trading shares was used by Lee personally, although the Virgin Islands company was not registered under his name.

Meanwhile, CJ Group reported 15.64 trillion won in sales in the first half of this year, down 3.7 percent compared to the same period last year. Its net profit inched up 3.4 percent on-year to 418 billion won.

CJ CheilJedang, CJ CGV and CJ Logistics are some of the group’s affiliates.

BY JIN MIN-JI [jin.minji@joongang.co.kr].