Seo Jung-jin, Honorary Chairman of Celltrion, Finally Loses 13 Billion Won Gift Tax Lawsuit

Seo Jung-jin, Honorary Chairman of Celltrion Group Photo by Yonhap News

[Asia Economy Reporter Heo Kyung-jun] Seo Jung-jin, Honorary Chairman of Celltrion, has lost the final administrative lawsuit against the tax authorities demanding a refund of 13.2 billion KRW in gift tax he had already paid.

The Supreme Court's 2nd Division (Presiding Justice Min Yoo-sook) on the 10th upheld the lower court's ruling that dismissed Seo's appeal in the gift tax reassessment refusal cancellation lawsuit filed against the Nam Incheon Tax Office.

Honorary Chairman Seo paid approximately 11.67 billion KRW in gift tax for 2012 and about 1.54 billion KRW for 2013 on profits generated from transactions between Celltrion and Celltrion Healthcare. According to the Inheritance and Gift Tax Act, if transactions between related parties and beneficiary corporations exceed a certain ratio, the beneficiary corporation's controlling shareholders are deemed to have received a gift of part of the after-tax operating profit, and gift tax is imposed accordingly.

The proportion of Celltrion's sales to Celltrion Healthcare accounted for 94.57% in 2012 and 98.65% in 2013. Based on this regulation, Chairman Seo, who paid the gift tax, claimed a refund of a total of 13.2 billion KRW in October 2014, arguing that he was not a controlling shareholder and therefore had no obligation to pay. After being rejected by the Nam Incheon Tax Office, he filed an administrative lawsuit.

The first and second trials ruled that Honorary Chairman Seo was a controlling shareholder of Celltrion and thus a gift tax taxpayer.

The trial courts stated, "Profits arising from transactions between related parties and beneficiary corporations include a mixture of normal income and profits due to market conditions, making it very difficult to separate and prove the parts that are gifts and those that are not." They concluded, "Therefore, if there are transactions between related parties and beneficiary corporations, it is considered that controlling shareholders have received certain benefits as gifts."

They also ruled, "Persons who hold shares of the beneficiary corporation indirectly, without direct ownership, are also included as controlling shareholders of the beneficiary corporation."

The Supreme Court also agreed with the lower courts' judgment. Since the donor, a related party corporation, is a separate legal entity distinct from its shareholders, even if the controlling shareholders of the beneficiary corporation are also shareholders of the related party corporation, the donor and recipient cannot be considered the same, allowing gift tax to be imposed.

The court stated, "In the case of gift tax under the relevant legal provisions, the donor should be regarded as the related party corporation, and the recipient as the controlling shareholders of the beneficiary corporation who are obligated to pay the gift tax."

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