2. All plaintiffs' claims are dismissed.

3. The costs of the lawsuit are assessed against the Plaintiffs.

Each transfer income tax stated in the separate disposition list issued by the Defendants against the Plaintiffs shall be revoked in entirety.

2. Purport of appeal

The same shall apply to the order.

The court's explanation on this part is the same as the corresponding part of the judgment of the court of first instance (Article 8 (2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act. The meaning of the language used in this part is the same as that of the judgment of the court of first instance.

2. Whether the instant disposition is lawful

A. The parties' assertion

1) The plaintiffs' assertion

The "stocks or equity shares subject to capital gains tax under subparagraph 3 of Article 118-2 of the former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009; hereinafter referred to as the "former Income Tax Act") are not included in the "stocks or equity shares subject to capital gains tax" and the transfer of securities depository receipts cannot be the same as the transfer of stocks.

2) The defendants' assertion

Since the transfer of the plaintiffs' securities depository receipts constitutes a transfer of the "stocks or equity shares subject to capital gains tax under subparagraph 3 of Article 118-2 of the former Income Tax Act", the disposition of this case is legitimate. Even if the transfer gains are not included in the "stocks or equity shares" under subparagraph 3 of Article 118-2 of the former Income Tax Act, it shall be deemed that the plaintiffs transferred the securities depository receipts of this case and thus, the transfer of the securities depository receipts of this case constitutes a transfer income tax subject to Article 94 (1) 3 (c) of the former Income Tax Act, and the disposition of this case is legitimate.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

(c) Fact of recognition;

(i) the meaning and type of securities depository receipts;

A) When an enterprise intends to issue stocks and raise funds abroad, as in the Republic of Korea, the issuance of stock certificates would result in inconvenience due to trade customs between countries, legal system, and language differences. Therefore, separate certificates issued as a substitute for stock certificates are securities depository receipts for the purpose of facilitating financing by removing such inconvenience and enhancing circulation.

B) The securities depository receipts may be divided into new stocks DDR, old stocks DDR, and distribution DDR as follows, depending on how the original stock price of the securities depository receipts is procured and how the securities depository receipts are issued. The distribution DDR may be further divided into DDR accompanied by the funding flow and DDR by the conversion of stocks (i.e., transfer of AA stocks held by the Plaintiff to the securities depository receipts without payment, according to the aforementioned classification, the securities depository receipts of this case constitute 'negotiable DDR by conversion of stocks’).

New shares DDR

European Notes DDR

Distribution DDR

A third party by the issuing company

Paid-in capital increase with fixed consideration

by means of a State in Korea

after issuance of awareness

Storage at the original State Storage Agency

on this basis.

issued by a foreign depository institution

depository receipts, the depository receipts,

corporate holding;

on the basis of its own shares

outside of the territory of the Republic of Korea

securities issued in danger to flag;

Deposited Securities

Stocks already issued and circulated in Korea

(U) keep the original owner in the original storage institution, and the basis therefor.

foreign depository institution is allowed to be traded overseas;

Securities depository receipts issued

accompanied by financial flow;

Distribution DDR

by conversion of shares

Distribution DDR

under section 10 of this title.

the Corporation shall pay the price to such person.

receipt of such securities depository receipts

The stock report without paying the price in advance.

under section 103 of this title.

receipt of such securities depository receipts

C) Where a domestic corporation issues securities depository receipts abroad, it shall keep them in custody, issue securities depository receipts via an overseas depository institution, and conclude a deposit contract with a depository institution to specify the form of the certificate, the original owner’s name and contents, the method of exercising shareholder’s rights, the method of depositing the certificate, the procedure for transferring, selling, and removing the certificate, the dividend remittance, and the capital increase procedure.

2) Legal relations after the conversion of securities depository receipts

A) In a case where the original stock owner, other than the issuing company, converted the original stock into the DDR (applicable to the distribution DDR due to the aforementioned stock conversion), the original stock owner is converted into the status of the DDR owner, and the DDR owner may not dispose of the original stock separately from the DDR by transferring it, etc.

B) After the conversion of DDR, the de facto owner of DDR may instruct the exercise of voting rights to the DDR depository institution in accordance with the deposit contract, and may receive dividends through the DDR depository institution.

C) After the conversion of DDR, the de facto owner may be limited to some rights when compared to the rights of the de facto owner in accordance with the deposit agreement.

D) If a DR de facto owner files an application for termination of the DR with the DR depository, the DR depository shall instruct the delivery of the DR shares to the Korea Securities Depository, which is the original depository, and the Korea Securities Depository shall deliver the shares by means of account transfer rather than the real delivery method. When the transfer of shares is completed in accordance with these procedures, the DR owner may directly exercise the DR’s rights by becoming the original shareholder (shareholders).

3) Change in the original shares of the instant securities depository receipts

The statement of changes in stocks, etc. prepared by AA states that the plaintiffs transferred the shares of AA as follows in 2008 and 2009.

4) Plaintiffs’ report of capital gains tax

In reporting and paying the transfer income tax on the transfer of the instant securities depository receipts, Plaintiff ○○ entered the tax rate of 10% as “10%,” stating that the “transfer income tax return and statement of payment” in the “location of the transferred assets” column, and Plaintiff △△△△ also applied the tax rate of 10% by deeming the transfer of the instant securities depository receipts as the transfer of the stocks of small and medium enterprises.

[Ground of recognition] Facts without dispute, Gap evidence 3-1 through 3, Eul evidence 2-3, 4, Eul evidence 1, fact inquiry results against the Korea Securities Depository of this Court, the purport of the whole pleadings

D. Determination

1) Article 94 (1) 3 (c) of the former Income Tax Act stipulates "income generated from the transfer of stocks, equity shares, or preemptive rights of a corporation which is not a stock-listed corporation or KOSDAQ-listed corporation" as one of the taxable objects of capital gains tax, and Article 104 (1) 4 (b) stipulates "10/100 of the tax base of capital gains tax on stocks, etc. of small and medium enterprises among the assets under Article 94 (1) 3 (c) of the same Act."

Meanwhile, Article 118-2 of the former Income Tax Act provides that "the income accruing from the transfer of assets located abroad in the corresponding year shall be the income falling under any of the following subparagraphs from the transfer of assets located abroad in the corresponding year", and subparagraph 3 of Article 118-5(1)3 provides that "the income accruing from the transfer of stocks or equity shares as prescribed by the Presidential Decree" shall be "20/100 of the tax base for capital gains". In addition, Article 178-2(2) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22034, Feb. 18, 2010) provides that "the stocks or equity shares prescribed by the Presidential Decree which are stocks or equity shares issued by a foreign corporation and the stocks issued by a domestic corporation and listed in a foreign market similar to the securities market or Association brokerage market under the Securities and Exchange Act".

However, it is reasonable to view that the Plaintiffs reported and paid the transfer income tax rate of 10% on the premise that they transferred non-listed stocks located in Korea. Therefore, the Plaintiffs’ transfer of the instant securities depository receipts to determine whether they constitute subject to capital gains tax under Article 94(1)3(c) of the former Income Tax Act.

2) Article 88 of the former Income Tax Act provides that an asset is actually transferred for price due to sale, exchange, investment in kind in a corporation, etc., regardless of the registration or enrollment of the asset in the transfer column of transfer income tax. In full view of the following circumstances acknowledged in addition to the purport of the entire pleadings, it is reasonable to deem that the Plaintiffs’ transfer of the instant securities depository receipts, thereby referring to the transfer of the said securities depository receipts to Gap, etc.

① The de facto owner of the DR who holds the securities depository receipts may exercise his/her voting right to the original stocks through the DR depository institution, receive dividends, and may exercise his/her voting right by receiving the shares again upon application for the termination of the DR. As such, the de facto owner of the securities depository receipts controls the original stocks representing the said securities depository receipts. Therefore, the de facto owner of the securities depository receipts of this case should be deemed to have de facto control over the AA shares

② The original shares representing securities depository receipts and securities depository receipts cannot be separately transferred, and in a case where securities depository receipts are transferred, the actual control over the original shares representing securities depository receipts may also be deemed to have been transferred to the assignee. Therefore, it is reasonable to view that the Plaintiffs transferred the de facto control over the AA shares representing securities depository receipts by transferring the securities depository receipts of this case from the Plaintiffs to Gap and Eul.

③ In the case of issuance of so-called “DDR” with capital flow, the original owner of the original shares deposited the original shares in the DDR depository institution for money, and an overseas investor is issued securities depository receipts by paying the price to the DDR depository institution. The deposit of the original shares with the DDR institution is deemed the transfer of original shares (see Supreme Court Decision 2011Du18557, Jun. 28, 2013) (see Supreme Court Decision 2011Du1857, Jun. 28, 2013). However, even in the case of “DDR” with “stock conversion,” as in the instant case, the original owner of the original shares will own the money, and the overseas investors will own the securities depository receipts, and thus, the original shares will be transferred during the said process. Although it is difficult to find any difference between the aforementioned transfer of the securities depository receipts and the aforementioned transfer of the securities in the process of trading, it is difficult to treat the same reasons differently.

④ AA appears to have been transferred at the time of transfer of the instant securities depository receipts according to the statement on the change of stocks, etc. of AA.

3) Therefore, since the disposition of this case is recognized that the transfer of securities depository receipts by the plaintiffs constitutes subject to capital gains tax under Article 94 (1) 3 (c) of the former Income Tax Act, the disposition of this case is legitimate, and the plaintiffs' assertion on a different premise is without merit.

Although the Plaintiffs asserted that the transfer of the instant securities depository receipts is not subject to capital gains tax under Article 118-2 subparag. 3 of the former Income Tax Act, as seen above, the instant disposition is legitimate, as long as the transfer of the instant securities by the Plaintiffs falls under the subject of capital gains tax under Article 94(1)3(c) of the former Income Tax Act, even if the Plaintiffs’ assertion is acknowledged, the instant disposition is not unlawful.

3. Conclusion

Therefore, the plaintiffs' claims shall be dismissed due to the lack of reasonable grounds, and since the judgment of the court of first instance is unfair with different conclusions, the appeal by the defendants shall be accepted, and the judgment of the court of first instance shall be revoked, and all of the plaintiffs' claims shall be dismissed. It