Go to Content Area :::

Decisions

Home > Decisions > Docket Search > Before 2022
:::
:::
  • Interpretation
  • No.311
  • Date
  • 1992/12/23
  • Issue
    • Where an heir is late in declaring and paying the estate tax and as a result the market price of the estate inherited by him has become higher than the value of the property at the date of death of the decedent, is it constitutional for the Estate and Gift Taxes Act to require that estate tax be levied on the basis of such increased value?
  • Holding
    •        The Estate and Gift Taxes Act provides, in Article 10, Paragraph 1, first sentence, that for the purpose of imposition of estate tax, the value of the estate is determined according to its market price prevailing at the time of death of the decedent. In the case of late declaration of the estate tax, however, the proviso to the same paragraph makes the market price at the date of overdue declaration the value of the estate if it is higher than the market price at the date of death of the decedent. While the legislative purpose of this provision is to prevent the taxpayer from adopting tricky wait-and-see tactics, the fact that this provision, requiring that the market price subsequent to increase of the value of the estate be taken as the basis for assessment of the value of the estate, is incorporated in the same Act in parallel with the penal provisions laid down in Article 44 thereof, gives rise to the doubt of double punishment, and must therefore be reviewed and amended promptly. As regards the proviso to Paragraph 1, Article 48-1, of the Tax Levy Act, whereby interest is made accruable and collectible together with the tax, we hold it is not contrary to the Constitution as the taxpayer, by late payment of the tax, has earned passive interest therefrom.
  • Reasoning
    •        Inheritance commences upon death of the decedent, and the heir thereupon begins to assume all obligations and rights with respect to the property of the decedent. This is also the time the obligation of the heir to pay estate tax occurs, and it explains the reason that the Estate and Gift Taxes Act provides in Article 10, Paragraph 1, first sentence, that for the purpose of imposition of estate tax, the value of the estate is determined according to its market price prevailing at the time of death of the decedent. In the case of late declaration of the estate tax, however, the proviso to the same paragraph makes the market price at the date of overdue declaration the value of the estate if it is higher than the market price at the date of death of the decedent. While the legislative purpose of this provision is to prevent the taxpayer from adopting tricky wait-and-see tactics, the fact that this provision, requiring that the value of the property increased after the heir acquired the right to the estate be included in the estate for higher assessment, is incorporated in the same Act in parallel with Article 44, which imposes on the taxpayer who fails to declare the estate tax within the specified time limit a penalty in sum equal to or twice the amount of the tax payable, without allowing any choice of application between them, gives rise to the doubt of double punishment. In contrast, in the case of re-transfer of land acquired by inheritance, a land value increment tax is levied on the amount of increase in the land value. Under Article 31, Paragraph 2, of the Land Tax Act and Article 38, Paragraph 2, second sentence, of the Equalization of Land Rights Act, however, land value increment tax is computed on the basis of the government-declared value of the land at the time of commencement of the inheritance. Thus, the relevant laws must be reviewed and amended for the purpose of reconciliation promptly. As regards the proviso to Paragraph 1, Article 48-1, of the Tax Levy Act, which states: "An interest shall be paid together with the tax amount made up by the taxpayer, for each day in arrears from the date following the last day of the initial time limit for the payment of such tax until the date of such make-up payment, at the interest rate paid by the Directorate General of Postal Remittances and Savings Bank for one-year time deposit and prevailing at the date of expiration of the initial time limit for payment of such tax," we hold it is not contrary to the Constitution as the taxpayer, by late payment of the tax, has earned passive interest therefrom. 
      
    • *Translated by Raymond T. Chu.
Back Top