Article 60 of the Inheritance Tax and Gift Tax Act (Principles of Appraisal, etc.)

2. The Defendant’s imposition of capital gains tax of KRW 652,812,170 against the Plaintiff on March 2, 2005 shall be revoked.

3. The costs of the lawsuit shall be borne by the Defendant in both the first and second instances.

A. ○○ Holdings Co., Ltd. (hereinafter “○○○ Holdings”) is a company registered with the Association (i.e., KOSDAQ-registered companies). Of the total issued stocks, the Plaintiff owned 18.2% (i.e., 2,008, 940 shares; hereinafter “instant shares”); 15.8% of the total issued stocks; and 19.5% of the foreign fund company.

B. The Plaintiff, as the representative director of ○○○, owned 30.1% of the 30.1% of the 30.1% of the 30.1% of the shares and thus, the Plaintiff and ○○○ constitutes “a person having a special relationship under Article 101(1) and (4) of the former Income Tax Act (amended by Act No. 7066 of Dec. 30, 2003; hereinafter the same shall apply) and Article 98(1)4 of the former Enforcement Decree of Income Tax Act (amended by Presidential Decree No. 17825 of Dec. 30, 200; hereinafter the same shall apply). The Plaintiff and ○○○ constituted “a person having a special relationship under Article 98(1)4 of the former Enforcement Decree of Income Tax Act” (amended by Presidential Decree No. 17825 of Dec. 30, 202; hereinafter the same shall apply) and Article 63(3) of the former Inheritance Tax and Gift Tax Act.

C. On July 31, 2001, the Plaintiff transferred the instant stocks to ○○ through over-the-counter trading to KRW 9,900,00, the closing price of the Association Brokerage Market on the day immediately preceding the trading date (hereinafter “the transfer price of this case”), and made a preliminary return on the tax base of transfer income by making the transfer price of this case as the transfer price per share of the instant stocks, and paid the said tax amount.

D. On March 2, 2005, the defendant issued the instant disposition imposing capital gains tax of KRW 652,812,170 to the plaintiff for the year 2001. The grounds for the disposition are as follows.

『 이 사건 양도가격은 구 상속세 및 증여세법 제60조 제1항에 따른 이 사건 주식의 1주당 시가로 볼 수 없고, 구 상속세 및 증여세법 제63조 제1항 제1호 가목에 의한 평가기준일(양도일) 전⋅후 2월간의 한국증권거래소 최종시세가액의 평균액 9,949원에, 구 상속세 및 증여세법 제63조 제3항에 따라 할증률 20%의 최대주주 할증가액을 가산한 11,938원을 이 사건 주식의 1주당 시가로 보아야 한다. 따라서 원고는 이 사건 주식을 특수 관계있는 자인 ○○에게 시가인 11,938원보다 낮은 가격인 이 사건 양도가격에 양도하여 조세의 부담을 부당하게 감소시킨 것으로 인정된다. 그러므로 구 소득세법 제101조 제1항의 양도소득의 부당행위계산부인 규정을 적용하여, 원고가 신고한 양도가액과의 차액 4,094,219,720원{(11,938원-9,900원)☓2,008,940주}에서 증권거래세 산출세액 20,471,098원을 차감한 4,073,748,622원을 소득금액에 가산한다.」

[Recognition] Facts without dispute, Gap evidence 1-1, Eul evidence 1-1, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. Summary of the plaintiff's assertion

(1) Article 63(1)1 of the former Inheritance Tax and Gift Tax Act is merely a supplementary assessment method applicable to cases where it is difficult to calculate the market price under Article 60(1) of the same Act as of the base date of appraisal. In transferring the instant shares, the transfer price of the Plaintiff is the closing price of the Association Brokerage Market as of the day immediately preceding the transaction date, and that price constitutes the market price as provided in Article 60(1) of the same Act, which is the objective exchange price formed through a normal transaction between many and unspecified persons, and is the market price defined in Article 60(1) of the same Act. As such, since the market price of the instant shares can be calculated for the instant shares by means of a supplementary assessment method and supplementary assessment method as provided in Article 63(1)1(a) of the same Act, the provision on the largest shareholder under Article 63(3) of the same Act, which applies only to cases where

(2) Even if the market price at the time of transfer of the shares of this case is calculated by applying the supplementary evaluation method stipulated in Article 63(1)1(a) of the former Inheritance Tax and Gift Tax Act, the purport of the appraisal of the shares of this case is to reflect the value of management or right of management. Thus, since the transfer of shares of this case is a transaction between the largest shareholders and there is no change in management or right of management, the provision

(b) Related statutes;

Article 101 of the former Income Tax Act (amended by Act No. 7006 of Dec. 30, 2003) by wrongful calculation of transfer income under Article 101 of the former Income Tax Act.

(1) If it is deemed that any act or computation of a resident having any transfer income has reduced unreasonably the tax burden on such income through transactions with a person having a special relation with the resident, the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the local tax office may calculate the income amount for the relevant year

(4) The scope of persons specially related under the provisions of paragraph (1) and other necessary matters concerning wrongful calculation shall be prescribed by the Presidential Decree.

Article 98 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17825 of Dec. 30, 2002) rejected of wrongful calculation

(1) "Person in a special relationship" in Articles 41 and 101 of the Act means a person in a relationship falling under any of the following subparagraphs:

4. The corporation in which the relevant resident and persons under subparagraphs 1 through 3 possess 50/100 or more of the total issued stocks or investments, or whose representative is the relevant resident;

(2) The term "if it is deemed that any act makes the burden of tax reduced unreasonably" in Article 41 of the Act means cases falling under any of the following subparagraphs:

1. When a person purchases assets from a person with a special relationship at a price higher than the market price, or transfers assets to a person with a special relationship at a price lower than the market price;

Article 167 of the former Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 17825 of Dec. 30, 2002) (amended by the Presidential Decree No. 17825 of Dec.

(3) The term “if it is deemed that any act makes the burden of tax reduced unreasonably” in Article 101 (1) of the Act means the occasion falling under each subparagraph of Article 98 (2).

(5) In the application of the provisions of paragraphs (3) and (4), the market price shall be the value appraised by applying mutatis mutandis the provisions of Articles 60 through 64 of the Inheritance Tax and Gift Tax Act and Articles 49 through 59 of the Enforcement Decree of the same Act. In this case, the term “period within 6 months before or after the standard date of appraisal (3 months in the case of donated property)” in the main sentence of Article 49 (1) of the Enforcement Decree of the Inheritance Tax and Gift Tax

Article 60 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002), the principle of evaluation, etc.

(1) The value of property on which an inheritance tax or gift tax is levied under this Act shall be the market price as of the date the inheritance commences or the date of donation (hereinafter referred to as the "date of appraisal"). In such cases, the value appraised by the method of appraisal stipulated in Article 63 (1) 1 (a) and (b) (excluding cases falling under the provisions of Article 63 (2))

(2) The market price referred to in paragraph (1) shall be the price which is deemed to be normal in cases of free trade between many and unspecified persons, and shall include the price of expropriation, public auction, appraisal price, and others which are deemed to be the market price

(3) In applying paragraph (1), where it is difficult to compute the market price, the price assessed by the methods prescribed in Articles 61 through 65 shall be based on the types, scale, transaction conditions, etc. of the relevant property.

Article 63 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002), the appraisal of securities, etc.

(1) The appraisal of securities, etc. shall be conducted by the following methods:

1. Appraisal of stocks and investment shares:

(a) Stocks and equity shares traded with the Korea Stock Exchange shall be the average amount of the final market price ( regardless of whether they have a transaction record) of the Korea Stock Exchange every two months before or after the evaluation base date: Provided, That in the calculation of the average amount, in cases where it is inappropriate to be based on the average amount of the period calculated, as prescribed by Presidential Decree, during two months before or after the evaluation base date, in cases of capital increase or merger, etc. which have occurred during two months before or after the evaluation base date, the average amount of the periods calculated

(b) The provisions of item (a) shall apply mutatis mutandis to the stocks and equity shares as prescribed by the Presidential Decree among the stocks and equity shares of the Association-registered corporations as prescribed by the Presidential Decree. In this case, the “final market price” shall be deemed

(3) In the application of the provisions of paragraphs (1) 1 and (2), 20/100 of the value appraised under the provisions of paragraphs (1) 1 and (2) of this Article shall be added to the value of stocks and equity shares (excluding stocks and equity shares of a corporation that has losses under the provisions of Article 14 (2) of the Corporate Tax Act continuously from business year within three years before the business year including the appraisal base date) of the largest shareholder, largest investor, and stockholders or investors specially related to such largest shareholder (hereafter referred to as "major shareholder, etc." in this paragraph) as prescribed by the Presidential Decree, but where the largest shareholder, etc. holds in excess of 50/100 of the total number of stocks issued by the relevant corporation, 30/100 shall be added thereto. In this case,

Article 19 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17808, Dec. 30, 2002) (amended by Presidential Decree No. 17808, Dec.

(2) The term "major shareholder or largest investor as prescribed by the Presidential Decree" in Article 22 (2) of the Act means the relevant stockholder, etc. in case where the total number of stocks, etc. held by one shareholder or one investor (hereinafter referred to as the "shareholders, etc.") and a person with a relationship falling under any of the following subparagraphs is the largest:

1. Relatives;

2. Persons other than employees and employees, who maintain their livelihood with the property of such stockholders, etc.;

3. Persons who are in the following relations with an enterprise group as determined by Ordinance of the Ministry of Strategy and Finance (including executives of the enterprise) or persons who are deemed to exercise de facto influence over the management of the enterprise group by exercising the right to appoint and dismiss executives of the enterprise or by determining business policies:

(a) Other companies belonging to an enterprise group;

(b) A person who substantially controls an enterprise group;

(c) Relatives of the persons under item (b);

4. Non-profit corporations established by one shareholder, etc. and persons under subparagraphs 1 through 3 who occupy the majority of directors or contribute assets;

5. Nonprofit corporations in which an officer of an enterprise under the main sentence of subparagraph 3 or (a) is the president.

6. A corporation in which one stockholder, etc. and persons under subparagraphs 1 through 5 own 30/100 or more of the total number of stocks issued;

Article 53 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17808 of December 30, 2002), appraisal, etc. of stocks of Association-registered corporations, etc.

(3) The term “major shareholder or largest investor as prescribed by the Presidential Decree” in Article 63 (3) of the Act means the person falling under the main sentence of Article 19 (2) and the person having the relationship falling under any subparagraph of the said Article with him.

C. Determination

According to the relevant provisions of the former Enforcement Decree of the Income Tax Act and the former Enforcement Decree of the Income Tax Act, where a resident transfers assets to a person with a special relationship at a price lower than the market price, the term "market price" refers to the value appraised by applying mutatis mutandis Articles 60 through 64 of the former Inheritance Tax and Gift Tax Act.

However, under Article 60 of the former Inheritance Tax and Gift Tax Act, the calculation of the value of property by the supplementary evaluation methods stipulated in Articles 61 through 65 of the same Act is limited to cases where it is difficult to calculate the market price as of the evaluation base date, and the tax authority bears the burden of proving that it is difficult to calculate the market price. Here, the market price refers to cases where free transactions are made between many and unspecified persons (see Supreme Court Decision 2003Du5723, Oct. 15, 2004). The provision on the certificate of largest shareholder under Article 63 (3) of the former Inheritance Tax and Gift Tax Act applies only to cases where the value of stocks is assessed by the supplementary evaluation methods under Article 63 (1) 1 of the same Act. If the value of stocks is assessed by the market price, the provision on the certificate of largest shareholder can not be applied even if the largest shareholder, etc. holds the stocks, which shall not be deemed to be the market price under Article 60 (1) 1 (a) and (b) of the same Act.

There is no evidence to acknowledge that the transfer price of this case does not correspond to the market price of this case at the time of transfer and that it is difficult to calculate the market price (or, in light of the fact that the transfer price of this case 9,900 won is only the difference between the average market price of the Korea Stock Exchange for 2 months before and after the date of transfer and 9,949 won and that the transfer price of this case falls under the above "market price" as referred to in Article 63 (1) 1 (a) of the former Inheritance Tax and Gift Tax Act, and therefore, the transfer price of this case cannot be calculated as the supplementary evaluation method stipulated in Article 63 (1) 1 (a) of the former Inheritance Tax and Gift Tax Act.

3. Conclusion

Therefore, the disposition of this case is unlawful, and the judgment of the court of first instance with different conclusions is unfair, and it is so decided as per Disposition with the plaintiff's appeal acceptance.