ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

The Study in Law System of Taxation Supportive to The Inheritance of Medium and Small Family Enterprise

  • Chung－Jin Shim Konkuk University
  • Koo, Ja Eun Center for Tax Law Research, Korea Institute of Public Finance

Asian Tax Journal Vol. 10 No. 3 (2009), pp. 1-31

Abstract

This study aims to establish the laws about taxation supportive to proper inheritance of medium and small enterprises. To achieve this purpose, this study has tried to understand related laws of foreign countries with understanding Korean laws in their comparison for finding out problems with directions of improvement. Suggestions include its harmony with civil codes on the reserve, with codes of special cases in taxation on partnership companies in laws about the special tax treatment control law, and with exceptional regulations in gift laws. Major suggestive points for improvement are as below； First, As the successor can take the merit of the deduction of property in inheritance of family business only when he/she inherits the whole of it, the scope of the family business demands its exception from the reserve assigned to other successor based on terms of civil codes. This also demands the correction of codes of limitation about the period of successor's holding position as representative director as over 80% of term of operating family business after the special regulations about taxation on presentation are applied to the successor who inherits the share on the premise of inheritance of family business. Second, Also in the case of partnership businesses, clearly definitive laws about the merits in taxation on inheritance should be promptly established, while currently activated laws about the exception of inherited property in family business should be also applied to the case in which the successor of the reserve inherits the family business, as this case can guarantee the third party such as professional manager, employee, to have the chance of being the successor of it. Third, To compensate the merits of taxation in inheritance of family business, the improvements of corporate governance, such as transparency of business finance and tax, clarification of decision making system, should be accompanied with them as supportive acts to taxation should also be activated in case joint venture is under the operation in the co－inheritance. Fourth, In case of personal business, the scope of business property should be clarified, as it should have constant supports to the inheritance of family business even after it is developed into holding company while the establishment of laws for keeping the average level of employment is demanded even after the inheritance of family business. Fifth, Review for renewal of the successor's constant period of business is needed. I expect that the successful model of laws about the family business and its inheritance would be created by the study in future.

Keywords

  • business inheritance
  • family business inheritance
  • reserve
  • partnership
  • corporate governance
  • holding company

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