Late Honorary Chairman Shin Gyeok-ho Family Wins Second Trial in 200 Billion KRW Gift Tax Dispute

Lotte Group founder, the late Honorary Chairman Shin Kyuk-ho [Image source=Yonhap News]

[Asia Economy Reporter Kim Daehyun] The family of the late Shin Kyuk-ho, Honorary Chairman of Lotte Group, won again in the second trial of an administrative lawsuit challenging the tax authorities' imposition of gift tax amounting to 200 billion KRW.

On the morning of the 12th, the Seoul High Court Administrative Division 1-3 (Presiding Judges Lee Seunghan, Shim Junbo, Kim Jongho) ruled in favor of the plaintiff, the Shin family, in the appeal trial against Jongno Tax Office, which had imposed the gift tax, just as in the first trial.

The successors in litigation of Honorary Chairman Shin, who passed away at the age of 99 in January 2020, are his children: Shin Young-ja, Chairwoman of the Lotte Welfare Foundation; Shin Dong-joo, Chairman of SDJ; Shin Dong-bin, Chairman of Lotte Group; and Shin Yumi, former advisor of Lotte Hotel.

Previously, Honorary Chairman Shin held a 6.2% stake in the Japanese holding company Lotte Holdings, the holding company of Lotte Group, under a borrowed name, and in 2003 sold it to Kyungyu Corporation, where Seo Mi-kyung, his common-law partner, was the major shareholder.

In 2016, prosecutors investigated management irregularities involving the Lotte family, including leasing Lotte Cinema's directly operated concession stands to a family company under unfavorable conditions causing losses to the company, and bribing former President Park Geun-hye.

During this process, prosecutors detected signs of gift tax evasion, and the National Tax Service imposed 212.6 billion KRW in gift tax on Honorary Chairman Shin's side. In response, Honorary Chairman Shin filed a lawsuit in May 2018 challenging the gift tax imposition. However, the tax was initially paid by his eldest son, Chairman Shin.

During the trial, Honorary Chairman Shin's side argued, "The 2003 stock transaction was merely a transfer of borrowed-name shares to Kyungyu Corporation to gift them to Seo and (her daughter) former advisor Shin, not for the purpose of borrowed-name trust." Borrowed-name trust refers to registering ownership of assets, which should be publicly disclosed, under someone else's name rather than the actual owner.

The first trial court ruled in favor of Honorary Chairman Shin in December 2020. The court stated, "Considering the structure and method of the stock transaction, the 2003 stock transaction was a gift from Honorary Chairman Shin to Seo and former advisor Shin," and "the evidence submitted by the defendant is insufficient to recognize it as a borrowed-name trust."

Furthermore, the court expressed doubt about the tax authorities' claim, saying, "It is questionable whether there was a reason to transfer stocks registered under a third party's name to a company established and effectively controlled by Seo's side." Jongno Tax Office appealed the first trial ruling.

This content was produced with the assistance of AI translation services.