[2] In a case where Company A decided to retire the said shares by holding a temporary general meeting after one year and three months after purchasing the shares of Company A from shareholders Eul, etc. and registered the change of capital reduction, and the tax authority imposed corporate tax and income tax on Company A as a withholding agent by deeming the amount equivalent to the sales price as a provisional payment for the reason that the payment of the sales price was made in advance, the case affirming the judgment below holding that the tax authority did not err in the imposition of corporate tax by including the recognized amount of the sales price and the amount equivalent to the amount of the dividend paid prior to the realization of the said income in the business year where the tax authority notified Company A to withhold the dividend income tax for the business year to which the date on which the tax

[2] In a case where Company A decided to retire the above shares by holding a temporary general meeting after one year and three months after purchasing the shares of Company A from shareholders Eul, and the tax authority imposed corporate tax and income tax on Company A as a withholding agent on the ground that the payment of purchase price was made in advance on the ground that the sales price was paid in advance, the case affirming the judgment below which held that in light of all the circumstances, the transaction of the above shares was made as part of the capital reduction procedure by means of stock retirement, and the income from constructive dividend was made as part of the capital reduction procedure under Article 46 subparag. 4 of the Enforcement Decree of the Income Tax Act, unlike the general capital gains, the date when Company A decided to retire the shares was the date of realizing the income as dividend income, and the tax authority notified Company A to withhold the dividend income tax from the fictitious dividend income for the business year in which the income from the above income was received in advance, and the amount paid prior to the realization of the above income was merely an advance payment, and thus, it did not err in the disposition of gross income by including the amount equivalent to corporate tax.

1. Whether the Plaintiff acquired its own shares for the purpose of stock retirement (ground of appeal No. 1)

A. Whether a sale of stocks constitutes a transfer of stocks, or whether a capital transaction constitutes stock retirement or capital refund, is a matter of interpretation of a legal act, and must be determined based on the substance and intent of the parties. However, under the substance over form principle, not simply depends on the content or form of a contract, but also on the entire process of the transaction, such as the party’s intent and the process of concluding a contract, the method of determining the price, and the progress of the transaction (see Supreme Court Decision 2012Du27091, May 9, 2013, etc.).

B. Comprehensively taking account of the evidence adopted, the lower court acknowledged the following facts. On January 12, 201, the Plaintiff purchased 4,980 shares (hereinafter “instant shares”) of the Plaintiff from Nonparty 1, Nonparty 2, Nonparty 3, Nonparty 4, and Nonparty 5 (hereinafter “transfer shareholders”) as the Plaintiff’s shareholder to the total amount of KRW 5,695,128,000 per share (hereinafter “instant shares”) and remitted the sales price to the transferor shareholders. On May 10, 2012, the Plaintiff decided to hold a temporary general meeting of shareholders on April 5, 201 to retire the instant shares acquired from the transferor shareholders.

Based on these facts, the lower court determined that the instant stock transaction was made as a part of the capital reduction procedure by means of stock retirement, based on the following reasons.

(1) In light of the fact that the Plaintiff, while running real estate leasing business, acquired shares that are limited to the acquisition under the former Commercial Act (amended by Act No. 10600, Apr. 14, 201) on the same day and did not take any measures to dispose of such shares. In light of the fact that Nonparty 1, one of the transfer shareholders of the said land sold by the Plaintiff, was the representative director and the largest shareholder, it is doubtful whether the instant shares transaction was merely a simple asset transaction.

(2) There is no evidence to deem that the Plaintiff, as a small-scale non-listed company, had made considerable efforts to dispose of the shares of this case, which became 49.8% of the total shares of this case and became 49.8% of the shares since its incorporation, and shareholders were composed of relatives of the representative director.

(3) The sales contract between the Plaintiff and the transferor, and the minutes of a temporary general meeting for the acquisition of the instant shares do not contain any details on the future disposal of the instant shares. However, it cannot be readily concluded that the Plaintiff had no purpose of stock retirement or capital refund at the time of acquiring the instant shares to the Plaintiff on the sole basis of such circumstances.

(4) In fact, as the instant shares were retired, there was a decrease in capital as much as possible.

C. Examining the reasoning of the lower judgment in light of the aforementioned legal doctrine and the evidence duly admitted, the lower court did not err by misapprehending the legal doctrine on the classification of capital transactions and asset transactions, contrary to what is alleged in the grounds of appeal

2. Whether the time when deemed dividend falls under the Plaintiff’s determination on the retirement of the instant shares (ground of appeal No. 2)

A. Article 17(2)1 of the Income Tax Act provides, one of the fictitious dividends under Article 17(1)3, “The value of money and other property acquired by a stockholder due to the retirement of stocks or reduction of capital, or due to retirement, withdrawal, or reduction of investment and the value of other property in excess of the amount necessary for the stockholder, employee, or investor to acquire the stocks or investment.” Article 39(6)4 of the Enforcement Decree of the Income Tax Act, which provides for the receipt time of dividend income under Article 17(2)1 of the Income Tax Act, provides, “The date of determining the retirement of stocks, reduction of capital, or transfer of capital (referring to the date determined by Article 461(3) of the Commercial Act, in cases of a resolution of the board of directors), or the date of withdrawal or withdrawal.”

B. The lower court, citing the reasoning of the first instance judgment, determined as follows. Fictitious dividend income, unlike general stock transfer income, arrives at the date of determination, such as the retirement of stocks as stipulated in Article 46 subparag. 4 of the Enforcement Decree of the Income Tax Act. In this case, the time of realizing income is the time of the Plaintiff’s receipt of dividend income by the transferor shareholder on April 5, 2012, which is the date the Plaintiff decided to retire the stocks of this case. Therefore, the Defendant notified the Plaintiff of the receipt date of the said income in 2012 to withhold the dividend income accrued from constructive dividend, deeming that the said income is merely an advance payment for the stocks paid prior to the realization of the said income, and there is no illegality in the disposition of this case, which included the recognized interest and the amount equivalent thereto

C. Examining the reasoning of the lower judgment in light of the foregoing provision and related legal principles, the lower court did not err in its judgment by misapprehending the legal doctrine on the time when deemed dividend income accrue, contrary to what is alleged in

3. Whether the special relationship has been terminated on the transfer date of stocks of this case (ground of appeal No. 3)

The allegation in the grounds of appeal on this part is a new argument that the Plaintiff was only at the time of the final appeal and cannot be a legitimate ground of appeal. Furthermore, even if examining the record in light of the relevant legal principles, the lower court did not err by misapprehending the legal doctrine on the recognition of the lower court and the inclusion

4. Conclusion

The Plaintiff’s appeal is dismissed as it is without merit, 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.

Justices Lee Dong-won (Presiding Justice)