[비즈한국] It has been confirmed that the Shincheonji Church of Jesus (Shincheonji) has achieved successive legal victories against tax authorities. Following a high-intensity tax audit conducted on the group in 2020, the National Tax Service (NTS) imposed gift taxes and corporate taxes on Shincheonji and its leader, Lee Man-hee. Recently, however, Shincheonji has won most of the lawsuits filed to cancel these assessments. This development invites criticism that the NTS may have conducted an unreasonable tax investigation targeting a specific religious group.
Gift Taxes Imposed on Lee Man-hee and Shincheonji—All Cancelled?
In April 2020, the NTS conducted a special tax audit of Shincheonji. It was a high-intensity investigation involving about 200 personnel, aimed at confirming allegations of tax evasion by the group, which was identified at the time as the epicenter of the COVID-19 outbreak. It has been confirmed, however, that the NTS lost the subsequent lawsuits filed by Shincheonji and Lee Man-hee to cancel the gift tax assessments imposed during that period.
In October 2022, leader Lee Man-hee filed a lawsuit to cancel a gift tax assessment of 1,043,618,730 KRW issued by the Dong-Anyang District Tax Office. This tax was imposed following an investigation by the Seoul Regional Tax Service into Shincheonji and Lee Man-hee from April to August 2020.
The incident traces back to 2013, when Lee Man-hee and Kim Nam-hee, the former representative of the International Women’s Peace Group (IWPG), jointly purchased land and a building for the "Peace Palace" in Gapyeong-gun, Gyeonggi-do. The NTS determined that Kim had covered 1,856,744,367 KRW of the purchase and construction costs that should have been borne by Lee Man-hee. Considering this amount a gift to Lee, the NTS imposed a gift tax including surcharges totaling 1,043,618,730 KRW.
However, the court ruled in favor of Lee Man-hee. The Suwon District Court (Presiding Judge Gwak Hyeong-seop) ruled that the tax authorities failed to provide concrete evidence to prove the gift. Pointing to evidence that Lee Man-hee had drafted a loan agreement with Shincheonji to borrow the funds and had registered the property under the joint names of himself and Kim, the court determined it was not a gift. Consequently, the gift tax assessment of over 1 billion KRW was cancelled on February 8 of this year.
The NTS also lost a lawsuit filed by the Shincheonji church organization regarding gift taxes. Between 2012 and 2017, Shincheonji remitted approximately 8.5 billion KRW to its LA church and approximately 2.3 billion KRW to its South African church. The Seoul Regional Tax Service deemed these remittances as gifts and imposed a gift tax of 5,235,574,860 KRW. Shincheonji filed a lawsuit to cancel this assessment in July 2022.
The Suwon District Court (Presiding Judge Eom Sang-moon) ruled that the LA and South African churches are recognized as public interest entities that "contribute significantly to the dissemination and edification of religion." Under tax law, the court noted, public interest entities are exempt from gift tax, whether domestic or international. The court also determined that the founding purpose, articles of association, operating methods, and usage of the remitted funds supported their religious public interest. In September 2023, the court cancelled the 5.2 billion KRW tax assessment, stating that it violated the principle of protecting the taxpayer's trust.
The defendant, the head of the Dong-Anyang District Tax Office, has appealed the decision, and the appellate trial is currently underway, with a sentencing date set for December 6.
3.1 Billion KRW Corporate Tax Assessment Upheld
However, the corporate tax assessment, excluding the gift tax, was upheld. In May 2022, Shincheonji filed a lawsuit against 66 district tax office heads, including the head of the Dong-Anyang District Tax Office, to cancel corporate and other tax assessments. Following a tax audit from April to October 2020, the Seoul Regional Tax Service had imposed approximately 3.1 billion KRW in corporate and value-added taxes. The NTS determined that Shincheonji had omitted revenue and profits generated from operating snack bars in branch churches and producing/selling event DVDs. They alleged that Shincheonji operated snack bars under borrowed names from 2012 to 2019 to evade taxes and failed to report profits from DVD sales. Shincheonji claimed that operating the snack bars under personal names was not for tax evasion purposes and that the DVDs were distributed to members for free.
On June 26, the Suwon District Court (Presiding Judge Lim Soo-yeon) dismissed all of Shincheonji’s claims, ruling that the group's intent to evade taxes and the profits from DVD sales were confirmed, thereby upholding the NTS's assessment. Shincheonji has appealed, and the case is currently in the appellate court.
Meanwhile, as the gift tax assessments by tax authorities are being cancelled one after another, some are pointing out that the NTS conducted an excessive investigation. Kim Sang-kyum, a professor at Dongguk University Law School, noted, "There were aspects of the tax audit that were difficult to understand. Not only is a tax audit on a religious organization unconventional, but this is the first time such a high-intensity investigation has been targeted at a specific religion. An investigation involving 200 personnel was an unusual measure that is not even taken for large corporations."
The NTS has not released any official statement regarding its loss in the gift tax cancellation lawsuits.