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GIFT TAX ON TRANSFER OF LAND RESERVED FOR PUBLIC USE TO CHILDREN
According to a directive issued by the Ministry of Finance on July 3, 2009, it will be considered an evasion of gift tax if (i) a person who is in charge of a construction company transfers a piece of land reserved for public use to his/her children as a gift, which is exempted from gift tax, (ii) the construction company he/she is in charge of constructs a building jointly with his/her children after they obtain a transferrable development right in return for donating the land to the local government and (iii) the construction company distributes the income generated from the sale of the building to his/her children.
For any land transfer that fits the description above and that was made on or before August 31, 2009, the relevant gift tax must be paid in full in order to avoid the statutory penalty. However, if the land transfer is made on or after September 1, 2009 and the relevant gift tax is unpaid, the donor will have to pay a penalty equal to one to two times the amount of the unpaid gift tax, pursuant to Article 44 of the Estate and Gift Tax Act in addition to paying the unpaid gift tax in full.