Seocho 2017west 5012 ( October 23, 2018)

The exchange of the shares in this case constitutes an "non-market stock exchange, etc. for strategic alliance" under Article 46-7 of the former Restriction of Special Taxation Act and cannot be deemed as the subject of taxation deferment.

The stock exchange of this case constitutes an all-inclusive stock exchange under the Commercial Act, and thus cannot be deemed as the subject of deferred taxation because it constitutes an exchange of non-listed stocks for strategic alliance.

Article 46-7 of the Restriction of Special Taxation Act (Special Taxation on Stock Exchange, etc. for Strategic Partnership)

2018Gudan57974 Revocation of Disposition of Imposing capital gains tax

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AA Head of the Tax Office

October 23, 2018

January 8, 2019

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The Defendant’s disposition of imposition of capital gains tax of KRW 173,66,210 (including additional tax) for the Plaintiff on September 8, 2017 is revoked in excess of KRW 19,703,810 (including additional tax).

1. Details of the disposition;

A. The Plaintiff, as the representative director of AAA (hereinafter referred to as the “instant company”) and the shareholder holding 442,692 shares issued by the instant company (54.4%) on May 20, 2014, transferred 17,185 shares of the shares held by the Plaintiff to Kim○, respectively, on May 30, 2014. On July 1, 2014, the Plaintiff exchanged 350,507 shares (43.07%; hereinafter referred to as the “instant shares”) issued by the U.S. corporation with 20,396,223 shares, but did not report and pay capital gains tax.

B. On September 8, 2017, the Defendant decided and notified the Plaintiff of KRW 173,66,210 of the capital gains tax belonging to the year 2014 on the transfer of shares of the said 442,692 share (hereinafter “instant disposition”).

C. On October 16, 2017, the Plaintiff dissatisfied with the instant disposition, filed an appeal with the Tax Tribunal, but the Tax Tribunal dismissed the Plaintiff’s appeal on January 23, 2018.

[Ground of recognition] Unsatisfy, Gap evidence No. 1, Eul evidence No. 1, and the purport of the presumption of pleading

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Since the exchange of the instant shares constitutes a “non-corporate exchange for strategic alliance” as prescribed by Article 46-7 of the former Restriction of Special Taxation Act (amended by Act No. 13560, Dec. 15, 2015; hereinafter the same), the transfer income tax on the instant stock exchange becomes the subject of deferred taxation. The part imposing transfer income tax on the instant stock exchange under a different premise among the instant disposition is unlawful.

B. Relevant statutes

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

C. Determination

1) Relevant regulations and legal principles

According to Article 46-7 (1) of the former Act on Special Cases concerning the Restriction of Taxes, the stockholders of a venture business, etc. who hold not less than 10/100 of the total number of issued stocks of the venture business, etc. shall promote a strategic partnership plan between the venture business, etc. and exchange them according to such plan (subparagraph 1), the stockholders of the venture business, etc. shall hold the stocks acquired through stock exchange, etc. and the stocks acquired by the stockholders of the affiliated corporation or the affiliated corporation for not less than one year, respectively (subparagraph 3), and the venture business, etc. shall enter into a contract between the affiliated corporation, etc. and the affiliated corporation and hold not less than 10/10 of the total number of issued stocks of the affiliated corporation or the affiliated corporation, or enter into an investment in kind with the stocks held by the affiliated corporation, etc. on or before December 31, 2015, the contract shall be established for the purpose of improving the competitiveness of the venture business and the corporation's investment in kind (Article 27 (1) of the former Enforcement Decree of the Special Taxation Act).

On the other hand, the principle of strict interpretation derived from the principle of no taxation without law is applicable not only to the cases that meet the taxation requirements, but also to the cases that meet the requirements for non-taxation and tax reduction and exemption. It is not allowed to expand or analogically interpret the requirements for non-taxation or tax exemption and exemption as favorable to taxpayers without any justifiable reason, which is contrary to the principle of fair taxation, which is the basic ideology of tax law (see, e.g., Supreme Court Decision 2005Da19163, May

(ii)a fact;

A) On July 1, 2014, the Plaintiff, as the representative director of the instant company, entered into a “stock exchange contract” with the content of exchanging 100% (813,747 shares) of the shares issued by the instant company with new shares 47,352,450 shares to be issued by the CCC parent company (hereinafter “instant stock exchange contract”).

Specialized: Parent Company (referred to in this Agreement as CCCS) will take over 100% of the ownership of this Company by exchanging with the old shares of this Company owned by the shareholders of this Company (referred to in this Agreement as the Company) (hereinafter referred to as the "shareholders") and issuing the new shares of this Company to the shareholders of the parent Company.

Specialized:The Company holds 813,747 shares per share issued at the par value of 500 won per share (hereinafter referred to as "share shares").

Accordingly, the parties to this contract agree to the legal binding force of the following terms and conditions, with the consideration in effect and value, the possibility and sufficiency of which have been confirmed:

Article I

Parent Company’s shares

§ 1.1. The parent company shall issue to shareholders the general share of the parent company 47,352,450 shares, and the total value of shares of the parent company issued to shareholders shall be KRW 2,414,974,998.

(b)

Article II

shares of this corporation

Article 2.1 In accordance with the terms and conditions of this Agreement, this Company agrees to sell to the parent company all the common shares of the old shares of 406,873,500 won, which are owned by the shareholders, representing 100% of the General Shares of 500 won per share above the par value at this Company. For the purpose of this Agreement, the shares of this Company are fixed at 2,967.5 won per share below the par value, and accordingly new shares to be issued at 2,414,974,98 won per share.

(b)

Article Ⅲ

Statement and Guarantee of this Corporation

(b)

§ 3.5. The present company represents that the shares of the present company are issued legally and legally with the approval of the issuance and there is no additional obligation to pay in full the shares of the present company, and that the General Shares 406,873,500, purchased by the parent company under this contract, commended 100% of the shares of the present company, and therefore this company is a subsidiary in which the subscription person owns 100% of the shares of the present company.

(B)

B) On the other hand, on July 1, 2014, the instant company and CCCMoz drafted a “colological partnership agreement” with the following contents (hereinafter “instant partnership agreement”).

“A” (as referred to in this Agreement in the term “I”) and “B” (as referred to in this Agreement in the term “I”) shall:

shall enter into strategic alliance agreements, such as negative agreements.

(b)

Article 2. Details of Strategic Partnership Business

1. A and B shall maximize mutual interests by making maximum use of their capabilities and resources as much as possible;

and shall promote strategic partnership business contracts for the following matters:

(1) In the case of the Electricctic Baketing, Gap's best use of Gap's infrastructure as soon as possible.

within this section the best cooperation to cause sales

(2) B Promotion of joint technological development with A’s affiliate companies to improve productivity and competitiveness.

(3) A’s project promotion body for electric art promotion and promotion of related products

(iv)personal, material, and technical assistance to maximize the interests of the two generations;

(v)any other relevant comprehensive work.

Article 5 Distribution of Profits

If profits are generated after the closing of the accounts settlement, A and B mutually agree to distribute the dividend rate per share determined by the ordinary shareholders' meeting of B according to the share ratio of A as of the base date for the settlement of accounts.

(B)

C) After July 10, 2014, the Plaintiff and CCC parent drafted a "Agreement" (hereinafter referred to as the "Agreement") with the following contents.

Article 1 Purpose

The purpose of this Agreement is to clarify the rights and obligations between the parties in promoting the stock exchange contracts of the instant company held by Gap (referring to the CCC parent in this Agreement) and Eul (referring to the plaintiff in this Agreement) in order to increase mutual interests based on mutual respect and trust.

Article 2 Contents of Agreement

(b)

2. On the basis of the contents of the share swap contract between the CCC parent and the instant company, Party A shall issue to Party B the following number of CCC parent stocks certificates:

- As of June 15, 2014, as of June 15, 2014, Eul owns 350,507 shares, 43.07% of the total number of shares of the instant company as of 813,747 shares.

- In order to acquire 100% ownership of the Company A, Party A will issue CCC 47,352,450 shares in accordance with the terms and conditions of the exchange agreement.

- A must issue a certificate of stock with 20,396,223 shares in the name of B, among 47,352,450 shares to be issued.

(b)

4.B agrees to issue Party A with limited shares with a period of time for protection deposit in accordance with the provisions of TRE 114 of the U.S. Securities Transaction Regulations, and agrees to further terms and conditions as follows:

- Eul does not sell the CCC stocks exchanged for at least two years, taking into account the period of normalization of the company of this case.

(B)

3) Determination

The following circumstances revealed by the above facts, i.e., the stock exchange contract of this case seems to fall under the "comprehensive stock exchange contract" of Article 360-2 of the Commercial Act, which becomes a wholly owning parent company of the company of this case by issuing new shares and exchanging all shares held by the shareholders of the company of this case. The company of this case and CCC mothers entered into the partnership contract of this case including the matters concerning the cooperation of technology, facilities and human resources and profit distribution, etc., but such agreement cannot be compatible with the stock exchange contract of this case with the contents that become a wholly owned subsidiary of CCC mothers (Article 38 of the former Restriction of Special Taxation Act provides that the requirement for deferment of taxation can not be separately stipulated in Article 38 of the former Special Taxation Act). The plaintiff's share exchange agreement of this case can not be accepted for 2 years or more of the 3 years of stock exchange agreement of the 3-year stock exchange with the 3-year stock exchange agreement of this case that the 3-year stock exchange company acquired the 3-year stock exchange agreement of this case.

3. Conclusion

The plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.