Hanjin Family Loses First Trial in 600 Million KRW Capital Gains Tax Cancellation Lawsuit

[Image source=Yonhap News]

[Asia Economy Reporter Seongpil Cho] The Hanjin Group's founding family filed a lawsuit challenging the capital gains tax of over 600 million won imposed on real estate transactions conducted during the lifetime of the late Chairman Cho Yang-ho, but lost in the first trial.

The Administrative Division 2 of the Seoul Administrative Court (Chief Judge Jonghwan Lee) ruled against the plaintiffs?Hanjin Group Chairman Cho Won-tae, Jungseok Enterprise Advisor Lee Myung-hee, former Korean Air Vice President Cho Hyun-ah, and Hanjin Vice President Cho Hyun-min?in the lawsuit filed against the Jongno Tax Office Chief seeking cancellation of the capital gains tax imposition. The court stated, "Former Chairman Cho committed fraudulent acts by using covert methods, unlike ordinary transactions, to evade capital gains tax during the land transfer process, making imposition and collection difficult," and ruled that "since the land transfer occurred in 2009, the imposition of capital gains tax is valid." According to the Framework Act on National Taxes, the period during which capital gains tax can be imposed is five years, but if national taxes are evaded through fraudulent acts, this period is extended to ten years.

Previously, former Chairman Cho inherited land parcels of 1,438㎡ and 330㎡ located in Gyeonggi-do from his father, the late founder of Hanjin Group, Cho Jung-hoon, who passed away in November 2002. These lands were held in name trust by a third party. In 2005, former Chairman Cho contracted to sell the land to the name trustee and received payment in eight installments by 2009. The tax authorities concluded that former Chairman Cho evaded capital gains tax by selling the land without registering the ownership transfer and issued a capital gains tax notice of approximately 680 million won in 2018. After former Chairman Cho's passing, the heirs with inheritance rights filed a lawsuit in July last year, arguing that the period for imposing capital gains tax had already expired and the tax should be canceled.

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