GS Group Owner Wins First Trial in 2.3 Billion KRW Stock Transfer Tax Lawsuit: "National Tax Service Taxation Illegal"

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[Asia Economy Reporter Kim Bo-kyung] The children of the late Heo Wan-gu, former chairman of Seungsan and a member of the GS Group owner family, won the first trial after filing a lawsuit to cancel the imposition of capital gains tax on stock transfers amounting to over 2.3 billion won.

According to the legal community on the 28th, the Seoul Administrative Court Administrative Division 4 (Chief Judge Kim Jeong-jung) recently ruled in favor of the plaintiffs in the lawsuit filed by Heo Yong-su, CEO of GS Energy, and Heo In-young, CEO of Seungsan, against the Seongbuk Tax Office head to cancel the capital gains tax imposition.

The Seoul Regional Tax Office conducted a tax investigation from 2018 to 2019 and judged that the late chairman Heo transferred approximately 480,000 shares of GS stock to his children and grandchildren at prices lower than the market price through on-market competitive trading.

The National Tax Service viewed this method as falling under the Income Tax Act's provision for "transactions between related parties at prices lower than market value without economic rationality" and additionally imposed capital gains tax of approximately 2.33 billion won in March 2019.

Heo and others filed an administrative lawsuit in November 2020, arguing that "the price determined through on-market competitive trading corresponds to the market price, so it is not a low-price transfer."

The court ruled that "this transaction was conducted through a competitive trading method within the exchange, and considering its characteristics, it cannot be regarded as a transaction between specific persons," declaring the National Tax Service's tax imposition illegal.

The court explained that unfair transactions between related parties are characterized by "closedness," but in this case, there was no attempt to block third-party involvement or conceal the transaction while trading the stocks.

Furthermore, the court stated, "There is no evidence to recognize that the deceased transferred the stocks at a low price or that the transaction method was abnormal without economic rationality compared to social norms," and "there is no evidence that the essence of competitive trading was lost." The National Tax Service has appealed the first trial ruling.

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