1.

Background of Retroactive Real Estate Appraisal Program

Regarding the value of property subject to inheritance and gift tax, Article 60 (1) of the Inheritance Tax and Gift Tax Act (the “IGTA”) stipulates that the value will be based on its market value “as of the date of commencement of inheritance or as of the date of the gift,” thereby establishing the market value principle. Article 60 (2) further provides that the market value under Article 60 (1) “includes what is accepted as the current market price, as prescribed by Presidential Decree, such as the price of expropriation, price of public auction and appraised value.”

In the context of the inheritance and gifting of real property, properties with frequent transactions, such as apartments, have relatively easily ascertainable market values. However, in the case of other types of properties, such as land, buildings, commercial properties and detached houses, it is difficult to precisely determine the market value. Therefore, it has been common practice to file tax returns based on the officially announced property value, which is recognized as a statutory valuation method under Article 61 (1) of the IGTA. However, since the officially announced values are generally lower than market values, criticism has arisen that taxation on such basis contravenes the market value principle. Moreover, there has been a surge in cases of taxpayers filing tax returns based on officially announced values to reduce the tax burden—even where market values were ascertainable.

In response, on February 12, 2019, the government amended the proviso to Article 49 (1) of the Enforcement Decree of the IGTA (Presidential Decree No. 29533), issued pursuant to Article 60 (2) of the IGTA, to allow the market value of taxable real estate to be determined by appraisal even after the filing deadline. Specifically, under the pre-amendment Enforcement Decree, the value of a sale, appraisal, expropriation, auction or public sale (“Appraisals, Etc.”) occurring during the valuation period—(i) in the case of inheritance, within six months before and after the date the inheritance commenced, and (ii) in the case of gifts, within the period from six months before the date of the gift to three months after (the “Valuation Period”)—could be recognized as market value. The amendment (the “Enforcement Decree Provision at Issue”), however, extended this window to allow tax authorities to recognize, as market value, the prices from Appraisals, Etc., occurring within (i) nine months from the filing date in the case of inheritance, and (ii) six months from the filing date in the case of gifts (the “Statutory Determination Period”).

Based on this Enforcement Decree Provision at Issue, since 2020, the National Tax Service of Korea (the “NTS”) has commissioned retroactive real estate appraisals for non-residential real estate properties for which inheritance or gift tax returns had been filed based on officially announced values. Based on the resulting appraised values, the NTS has issued additional tax assessments, and, from 2025, expanded this practice to ultra-high-priced residential properties.

Taxpayers have filed administrative lawsuits seeking the revocation of the tax assessments, arguing that the Enforcement Decree Provision at Issue exceeded the permissible scope of delegated legislation, and that the assessments violated the principle of taxation by law and the principle of tax equality. Lower courts reached divergent conclusions on these issues. Notably, however, the Supreme Court has recently rendered a series of rulings on the matter, which finally confirmed the validity of retroactive real estate appraisals, while also clarifying the conditions under which a retroactively appraised value may be recognized as market value.
 

2.

Key Holdings of Supreme Court Decisions
 

A.

Supreme Court Decision 2025Du35499, April 2, 2026

This case involved plaintiffs who received a residential property as a gift from their parents, filed gift tax returns based on the officially announced value, and subsequently learned that a sale of a comparable unit within the same residential area had been contracted around that time. The plaintiffs voluntarily commissioned two appraisal firms to value the property and filed on that basis. The tax authority determined the market value by averaging the two appraisal values and issued gift tax assessments accordingly.

In seeking a revocation of the assessments, the plaintiffs argued that the Enforcement Decree Provision at Issue—by allowing transaction prices arising within nine months from the last day of the month in which the asset was gifted to be recognized as market value—was unlawful. The plaintiffs specifically argued that the Enforcement Decree Provision at Issue exceeds the scope of authority delegated under Article 60 (1) of the IGTA on the following grounds: (i) it permits transaction prices formed well after the date of gifting to be treated as market value, and (ii) it imposes an excessive gift tax burden on the parties based on changed circumstances unforeseeable at the time of the gift.

The Supreme Court rejected these arguments. The Supreme Court reasoned that the legislative purpose of Articles 60 (1) and 60 (2) of the IGTA was “to fairly calculate the market value of property subject to inheritance or gift tax, within the scope of legislative discretion in which the legislator may select a valuation method approximating market value, while responding nimbly to changes in socio-economic conditions.” The Court further explained that the Enforcement Decree Provision at Issue, in order to align with its objective exchange value, specifies and clarifies the conditions under which the price of a sale or other comparable transaction occurring outside the Valuation Period may nevertheless be recognized as the market value of inherited or gifted properties. Accordingly, the Court upheld the legality of the Enforcement Decree Provision at Issue, concluding that it did not exceed the scope of delegation under Articles 60 (1) and 60 (2) of the IGTA.
 

B.

Supreme Court Decision 2024Du61780, April 30, 2026

This case involved a plaintiff who filed an inheritance tax return for inherited land based on the officially announced value. The tax authority then commissioned retroactive appraisals through two appraisal firms after the Valuation Period had elapsed. The plaintiff also commissioned two appraisal firms to conduct independent valuations of the land. The tax authority ultimately calculated the market value as the average of all four appraisal values and issued an inheritance tax assessment on that basis.

The plaintiff sought revocation of the tax assessment, contending that since no separate appraisal value or similar value existed at the time the inheritance tax return was filed, the plaintiff’s filing based on the officially announced value was lawful, and that the tax authority’s post-filing commissioning of appraisals under the Enforcement Decree Provision at Issue violated the principle of taxation by law. The plaintiff also argued that the tax authority’s selective designation of only certain non-residential properties for appraisal and subsequent taxation based thereon is unlawful, as it violates the principle of clarity—which safeguards taxpayers’ legal certainty and predictability—as well as the principle of tax equality.

The Supreme Court, however, took a different view. The Supreme Court stated that “the Enforcement Decree Provision at Issue equally applies to cases in which taxpayers commission appraisals for the purpose of filing tax returns, as well as cases in which the tax authority commissions appraisals to review the adequacy of reported values,” and that “there is a degree of practical necessity in limiting appraisals to high-value non-residential real property where there is a significant risk of material impairment of tax equity.” Accordingly, the Supreme Court held that “it is permissible for the tax authority to commission appraisals pursuant to the Enforcement Decree Provision at Issue for the purpose of investigating and determining the correct tax base and tax amount, and that even where the resulting appraised value is recognized as the market value of the inherited property, this does not constitute a violation of the principle of taxation by law or the principle of tax equality.”

In reaffirming the legality of retroactive real estate appraisals, the Supreme Court also clarified that, for an appraised value obtained through an appraisal conducted after the expiration of the Valuation Period to be recognized as market value, there must be no special circumstances causing price fluctuations. This requirement must be met not only (i) during the period from the valuation date to the appraisal base date, but also (ii) during the period until the date on which the appraisal report is prepared.
 

3.

Future Outlook and Response Measures

With the Supreme Court’s affirmation of the legality of retroactive real estate appraisals, taxpayers who file inheritance or gift tax returns based on officially announced values should be mindful of the risk that the tax authority may conduct an appraisal and issue an additional assessment based on a higher appraised value until the expiration of the Statutory Determination Period.

Moreover, the scope of retroactive real estate appraisals is gradually expanding. In the context of inheritance and gift transfers involving shares in unlisted companies, the NTS has also been commissioning appraisals of real estate owned by the relevant companies to determine the value of such unlisted shares and issue corresponding tax assessments. In addition, on June 11, 2025, the NTS amended the “Guidelines on the Administration of Inheritance and Gift Tax Affairs” (NTS Directive No. 2681), expressly providing a legal basis for conducting appraisals of real estate in calculating the net asset value used for the valuation of unlisted shares. Accordingly, where inherited or gifted assets include shares in an unlisted company that owns real estate, and such shares are valued for tax filing purposes based on the officially announced value of that real estate, there remains a risk of additional tax exposure arising from retroactive real estate appraisals.

Under these circumstances, taxpayers who receive assets by way of inheritance or gift may consider a range of approaches, including proactively obtaining an appraisal before filing a return, or alternatively filing without an appraisal based on the officially announced value and obtaining an appraisal if the tax authority initiates its own appraisal process. As the relevant regulations and enforcement practices continue to evolve, a careful advance assessment of available filing strategies—including the valuation method to be used for inheritance and gift tax purposes and whether to obtain an independent appraisal—will be necessary to reduce tax-related uncertainty in inheritance and gift planning.