[2] The meaning and standard time of “market price” under Article 88(1)3 of the former Enforcement Decree of the Corporate Tax Act, which provides for “where assets are transferred at a price lower than the market price” as one of the causes of wrongful calculation denial, and the standard time of determining whether a different transaction contract constitutes wrongful calculation

[3] The base date for determining whether a stock option is granted as a low-price transfer (=the time when stock option is granted)

[2] Article 88(1)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 21302, Feb. 4, 2009) stipulates that one of the objects of the denial of wrongful calculation under Article 52 of the Corporate Tax Act refers to a case where a corporation transfers assets to a person with a special relationship, such as shareholders, at a price lower than the market price. Here, “market price” refers to an objective exchange value formed through a general and normal transaction. The determination is based on the time of transaction. Thus, if the time and time of transaction differs, whether the transaction constitutes wrongful calculation should be determined at the time of transaction that determines the price. However, the amount of income to be disposed of by including the gross income shall be determined at the time of acquisition, except in extenuating circumstances.

[3] In a case where a corporation grants a stock option to executives, employees, etc., whether the granting of the stock option is subject to the avoidance of wrongful calculation should be determined on the basis of the time of granting the stock option rather than on the date of exercising the stock option. If the price at which the option was exercised at the time of granting the stock option is higher than the market price at the time of granting the stock option, barring special circumstances, such as where the stock price would be likely to increase within the short time due to undisclosed internal information, it is difficult to view it as a low-price transfer subject to the avoidance of wrongful calculation, barring special circumstances

1. Regarding ground of appeal No. 1

Article 15 of the former Restriction of Special Taxation Act (amended by Act No. 6297 of Dec. 29, 2000; hereinafter the same shall apply) and Article 13 of the Enforcement Decree of the Act (amended by Presidential Decree No. 17034 of Dec. 29, 2000) provide that stock options shall not be deemed to be earned income, business income, or other income within the total purchase price of 30 million won among gains from exercising stock options granted until December 31, 2003 by a domestic corporation of a founder, a new technology business operator, etc., and a corporation meeting certain requirements, such as a stock-listed corporation under the Securities and Exchange Act (hereinafter referred to as a "business start-up corporation, etc."). In this case, the provisions of Article 52 of the Corporate Tax Act regarding the rejection of unfair calculation shall not apply to a business start-up corporation, etc. within the limit of 50 million won in total.

In light of the above provisions and legislative intent of Article 15 of the Act, it is nothing more than a passive expression that the provision of wrongful calculation under the Corporate Tax Act does not apply to the portion of the special exemption for non-taxation in order to effectively guarantee the right to purchase stocks, and the latter part of Article 15 of the Act does not inquire into whether the amount exceeding the above special exemption limit satisfies the requirements for the denial of wrongful calculation under Article 52 of the Corporate Tax Act, and the purport of Article 15 of the Act should not be interpreted as denying wrongful calculation. Accordingly, when an employee of a stock-listed corporation exercises the stock option granted until December 31, 2003, the amount of the stock option granted by the employee by December 31, 2003 should be excluded from corporate tax under Article 52 of the Corporate Tax Act until the annual exercise limit of KRW 50,000,000 per capita, the amount exceeding the above special exemption requirement should be deducted from corporate tax under Article 52 of the Corporate Tax Act.

The judgment of the court below in accordance with the above legal principles is just, and there are no errors in the misapprehension of legal principles as to Article 15 of the Act and Article 52 of the Corporate Tax Act as otherwise alleged in the ground of appeal.

2. Regarding ground of appeal No. 2

Article 8(1)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 21302, Feb. 4, 2009) provides that one of the objects of rejection of unfair act and calculation under Article 52 of the Corporate Tax Act transfers assets to persons with a special relationship, such as shareholders, etc. “market price” refers to an objective exchange value formed through general and normal transactions (see Supreme Court en banc Decision 2006Du8648, May 17, 2007, etc.). The determination is based on the point at the time of transaction (see Supreme Court Decision 97Nu15821, Jan. 29, 199). Thus, if the time when the stock option was concluded and the time of transfer differs, it is difficult to determine whether the stock option is subject to unfair act and calculation at the time of trading, and thus, it is difficult to determine whether the stock option is subject to the same time as the time of acquisition, unless there are any special circumstances to the contrary.

According to the facts duly established by the court below, the company of this case entered into the contract of this case with the non-party 1 and 2 after the special resolution of the general meeting of shareholders regarding the type and number of shares to be delivered to the non-party 1 and 2 in granting the stock option, the method of granting the stock option, the exercising price, and the exercise period. The total number of shares issued by the company of this case at the time of the contract of this case was 40 million won and 6 million won equivalent to 15/100, and the stock option was paid to the non-party 1 and 2. The company of this case was issued the stock option to the non-party 1 and 00 won at the time of the conclusion of the contract of this case. The company of this case was issued to the non-party 1 and 200 won after the issuance of the stock option to the non-party 6,238 won per share under Article 84-9 (2) of the former Enforcement Decree of the Securities and Exchange Act (amended by Presidential Decree No. 16960, Sept. 2, 2000, 1500.

Examining the above facts in light of the legal principles as seen earlier, in this case where there are no special circumstances such as that the Plaintiff Company’s share price was clearly anticipated to rapidly increase within the short period at the time of granting the above stock option to Nonparty 1 and 2, setting the exercise price higher than the market price at the time of the Plaintiff Company pursuant to the relevant statutes, etc., and granting the stock option does not constitute a low-price transfer subject to the avoidance of wrongful calculation. Although the reasoning of the lower judgment is somewhat different, the lower court is justifiable in its conclusion that each of the above stock options granted by the Plaintiff Company is not subject to the avoidance of wrongful calculation, and thus, the Defendant’s allegation in the grounds of appeal against this error is not acceptable.

3. Conclusion

Therefore, the appeal is dismissed and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Shin Young-chul (Presiding Justice)