Suwon District Court 2008Guhap4430 ( December 22, 2009)

Early High Court Decision 2008J0634 (2008.04)

Additional tax on negligent tax returns in case of reliance on and wrong report of the national tax comprehensive counseling center’s oral response and established rules;

Even if shares were transferred at the trading price calculated without evaluation of certificate, it is interpreted that underreporting the capital gains tax to be reported and paid in connection with the transfer transaction of shares is applied to the plaintiff himself/herself by the National Tax General Counseling Center that does not fall under the public opinion expressed by the administrative agency, and thus, the imposition of additional tax is legitimate.

1. The part against the defendant in the judgment of the first instance shall be revoked;

2. The plaintiff's claim corresponding to the above revoked part is dismissed.

3. The plaintiff's appeal is dismissed.

4. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The Defendant’s disposition of imposition of capital gains tax of KRW 384,790,170 for the Plaintiff on November 12, 2007 shall be revoked.

2. Purport of appeal

A. The plaintiff

The judgment of the court of first instance is modified as follows. The defendant's disposition of imposition of capital gains tax of KRW 384,790,170 on November 12, 2007 against the plaintiff on November 12, 2007 is revoked.

B. Defendant

The provisions of paragraphs 1 and 2 shall apply.

1. Circumstances of the disposition;

A. On April 18, 2005, the Plaintiff, the representative director of MM Co., Ltd. (hereinafter referred to as “MM”), and the shareholders of AAAAAAAAAAAAAAAAAAAA agreement (hereinafter referred to as “AAAAA agreement”) calculated the AAAAAA agreement shares at KRW 39,200 (hereinafter referred to as “instant shares”) to MM at KRW 365,075 per share price, and sold at KRW 14,310,940,000 per share.

B. With respect to the provisions of Article 101 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005; hereinafter referred to as the "former Income Tax Act"), in the case of stock transfer, the taxpayer evaluated the transfer value of the shares as the transfer value of the shares to the related parties under Article 98 (1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19327 of Feb. 9, 2006; hereinafter referred to as the "former Enforcement Decree of the Income Tax Act") by applying the former Restriction of Special Taxation Act (amended by Act No. 8146 of Dec. 30, 2006; hereinafter referred to as the "former Restriction of Special Taxation Act") to the effect that the special provisions on exemption from the appraisal of shares are applied to the transfer value of the shares as the transfer value of the shares as the transfer value of the shares to the largest shareholder (hereinafter referred to as 00-20 per share).

C. The defendant transferred the shares of this case to MM to 365,075 won per share shall be deemed as subject to the increase and decrease of the shares of this case on the ground that it constitutes "a case where shares are transferred below the market price due to a transaction with a person with a special relationship under Article 167 (4) of the former Enforcement Decree of the Income Tax Act", and the shares of this case shall be deemed as 44,568 won per share according to the supplementary method under Article 63 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of December 31, 2007; hereinafter referred to as the "former Inheritance Tax and Gift Tax Act"), and the difference between the total issued shares of this case to the plaintiff under Article 63 (1) 1 (c) of the former Inheritance Tax and Gift Tax Act, Article 63 (1) 7 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 18989 of August 5, 2005; hereinafter referred to as "former Enforcement Decree"), which shall be 3050 percent of the total shares.

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on February 4, 2008, but received a decision of dismissal on August 4, 2008, and filed the instant lawsuit on October 31, 2008.

[Reasons for Recognition] The facts without dispute, Gap evidence Nos. 1 through 4, Gap evidence Nos. 1 and 2 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) Article 63(3) of the former Inheritance Tax and Gift Tax Act provides that "the case where stocks of the largest shareholder, etc. of a small and medium enterprise are inherited or donated in the evaluation of the value of stocks pursuant to Article 63 of the same Act" shall not be subject to the evaluation of the amount of gift under Article 63(3) of the same Act. The former Inheritance Tax and Gift Tax Act, unlike the concept of donation under the Civil Act, provides that "donation" means a case where a tangible or intangible property, which can calculate economic value, is transferred without compensation (including a case where the property is transferred at a remarkably low price) by direct or indirect means to another person (including a case where it is transferred at a remarkably low price), and Article 35 of the former Inheritance Tax and Gift Tax Act provides that "the difference between the acquisition value and the market value, where the property is acquired at a price lower than the market value, or where inheritance tax or gift tax is limited to where the subject of inheritance or gift is imposed even if it is not subject to the application of the former Inheritance Tax and Gift Tax Act."

In addition, although the special provisions of this case stipulate that the premium assessment rule does not apply to "a light that was inherited or donated on or before December 31, 2006," the special provisions of this case also apply to "a case where the stocks of the largest shareholder of a small or medium enterprise are transferred" in light of the legislative intent of the special provisions of this case established to facilitate family business succession by supporting the smooth family business succession of a small or medium enterprise, and in view of the legislative intent of the special provisions of this case, it is reasonable to apply the special provisions of this case to "a case where the stocks of the largest shareholder of a small or medium enterprise are transferred without compensation, inheritance tax or gift tax is levied on the assignee, and where the stocks are transferred with compensation, the same method of assessment should be applied as transfer income tax is imposed on the transferor. However, if the special provisions of this case provide that the special provisions of this case are excluded from the application of the premium assessment rule only on inheritance tax and gift tax, the special provisions of this case should be applied to the transfer of stocks as well as the legislative provisions of this case.

Therefore, an amount calculated by adding 15/100 to the appraised value per share under Article 63 (1) 1 (c) of the former Inheritance Tax and Gift Tax Act and Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act shall be deemed as the market value of the shares of this case, and then the disposition of this case calculated capital gains tax on the basis of the aforementioned amount is unlawful.

(2) The Plaintiff transferred the instant shares to MM on April 18, 2005, and reported and paid the transfer income tax by evaluating the value per share to 365,075 won without a certificate evaluation on August 31, 2005, as it goes against the principle of trust and good faith, since the instant disposition is contrary to the official statement of opinion of the administrative agency and is contrary to the principle of trust and good faith, by reliance on the verbal answer of the staff of the National Tax Counseling Center employees of the National Tax Service and the National Tax Service established rules (hereinafter referred to as the “established rules of this case”) on March 30, 2005, to the effect that the Plaintiff is exempt from the increase of the premium for the largest shareholder in the application of the provision on the rejection of unfair act of transfer income by certified public accountant B by requesting advice on the change of certified public accountant.

(3) Although it is lawful for the Plaintiff to increase the market price of the instant shares to the Plaintiff’s transfer of the instant shares, the Plaintiff’s oral answer to the employee of the National Tax Integrated Counseling Center to the effect that, in applying the provision on the denial of unfair act and calculation of transfer income, he/she becomes aware of in the process of transferring the instant shares, the Plaintiff is exempt from an increase in the market price of the instant shares, and thus, he/she trusted and assessed the market price of the instant shares. As such, the additional tax in the instant disposition is unlawful on the grounds that there is a justifiable ground that it is not attributable to

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Judgment on the first proposal

(A) Article 2 (3) of the former Inheritance Tax and Gift Tax Act provides that "the former Inheritance Tax and Gift Tax Act shall mean the transfer (including the transfer of tangible or intangible property at a remarkably low price) of the property to another person without consideration, regardless of its title, form, and purpose." Article 35 (1) 1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the difference between the value of the property and the market value of the property shall be determined as the value of the property at a lower price than the market value if it is acquired by another person, and the amount equivalent to the difference between the value of the property and the market value of the property at a lower price than the market value, which is determined by Presidential Decree, shall be deemed as the value of the property at a lower price than the market value, and Article 4 (1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the gift tax shall be exempted if the donee is a profit-making corporation, and Article 300 (1) of the former Enforcement Decree of the same Act provides that the difference between the market value of the property at a profit-making corporation shall be deemed as the market value.

In addition, Article 101(1) of the former Income Tax Act and Article 167(4) of the former Enforcement Decree of the Income Tax Act provide that the transfer value shall be calculated based on the market price if it is deemed that the tax burden has been unjustly reduced because land, stocks, etc. are transferred below the market price in trading with the related parties. Article 101(4) of the former Income Tax Act and Article 167(5) of the former Enforcement Decree of the Income Tax Act provide that the amount assessed according to the supplementary method stipulated in Article 63 of the former Inheritance Tax and Gift Tax Act shall be deemed as the market price if the market price is unclear as non-listed stocks listed on the Stock Exchange as in the instant case. Article 63(1)1(c) of the former Inheritance Tax and Gift Tax Act and Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provide for the general method of assessment of non-listed stocks, etc. Article 63(3) of the former Enforcement Decree of the Income Tax Act provides that the largest shareholder is more than the market price of the newly established by 20.

On the other hand, with respect to the interpretation of tax-related laws, it shall be interpreted as the legal text, barring special circumstances, regardless of the requirements for imposition or exemption, and it shall not be extensively interpreted or analogically interpreted without reasonable grounds, and in particular, it accords with the principle of fairness to strictly interpret it as the preferential provision among the requirements for reduction or exemption (see, e.g., Supreme Court Decision 2007Du9884, Oct. 26, 2007).

(B) As seen earlier, in light of the fact that, as seen in the foregoing case, in a case where MM, a profit-making corporation, purchased the instant shares at a low price from the Plaintiff who was a related party, the concept of donation under the former Inheritance Tax and Gift Tax Act cannot be extended and applied to the case where transfer income tax is imposed on the Plaintiff as it constitutes gross income under Article 15(2)1 of the Corporate Tax Act, rather than the gift under the former Inheritance Tax and Gift Tax Act, and the concept of donation under the latter Inheritance Tax and Gift Tax Act cannot be extended and applied to the case where transfer income tax is levied, and it is not allowed to expand or analogically interpret that the special case of this case under the Restriction of Special Taxation Act, which provides that the special case

Therefore, in evaluating the market price of the shares transferred by the Plaintiff to MM, it is lawful to add 15/100 to the assessed value per share evaluated in accordance with Article 63(1)1(c) of the former Inheritance Tax and Gift Tax Act and Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act. Thus, this part of the Plaintiff’s assertion is without merit.

(2) Judgment on the second ground

(A) In general, in order to apply the principle of trust and good faith to the tax authority's acts in tax law relations, the tax authority should give the taxpayer a public opinion that is the subject of trust, and the taxpayer should not be responsible for the taxpayer's reliance on the legitimacy of the tax authority's expression of opinion, and the third, the taxpayer must act in trust and what is the taxpayer's reliance on the expression of opinion, and fourth, the tax authority's disposition against the above expression of opinion should result in infringing on the taxpayer's interest. Meanwhile, the content of the tax law and the administrative rules or the response of the National Tax Counseling Center does not constitute the public opinion of the tax authority (see, e.g., Supreme Court Decisions 2001Du403, Sept. 5, 2003; 2007Du3107, Apr. 23, 2009).

(B) According to the above evidence, the plaintiff's oral response to the National Tax Service's staff member of the National Tax Service Counseling Center to the effect that "where applying the provision on the denial of unfair act of transfer income to the largest shareholder of a small or medium enterprise, the plaintiff is exempt from the assessment of premium on the unlisted stock" through the request of counseling with certified public accountantB during the transfer of the shares in this case, and the rule of this case [the rule of this case is interpreted contrary to the former Income Tax Act and the Enforcement Decree of the same Act, which was applied at the time, and was corrected or amended as the National Tax Service's established rule of July 27, 2005] was known. Meanwhile, the National Tax Service Counseling Center's response to the National Tax Service (the current change to the National Tax Service customer satisfaction Center was changed to the National Tax Service's customer satisfaction Center) is the method of providing simple consultation or guidance to counseling with 1,000 days or more on the basis of expertise and experience of counseling staff members or small-scale business operators, the plaintiff's opinion and reasoning of the National Tax Service's opinion that it does not constitute an oral reply.

(3) A third-class judgment

(A) In order to facilitate the exercise of taxation rights and the realization of tax claims, additional tax under the tax law is an administrative sanction imposed as prescribed by individual tax laws in cases where a taxpayer violates various obligations, such as a return and tax payment, without justifiable grounds, and it is unreasonable for the taxpayer to be aware of such obligations, and thus, it is unreasonable for the taxpayer to be reasonably present or to expect the performance of such obligations to be carried out by the party concerned, etc. (see, e.g., Supreme Court Decisions 2003Du4089, Apr. 15, 2005; 2003Du4089, Apr. 15, 2005; 2005Du10545, Apr. 26, 2007; 2009Du3177, Apr. 27, 2009).

(B) As to the instant case, even if the Plaintiff’s oral response to the National Tax Counseling Center’s request for advice to certified public accountants during the transfer of the instant shares, and the market price of the instant shares was assessed based on the market price calculated based on the trust and evaluation of the established rules of this case without any verification, and as seen earlier, underreporting the transfer income tax to be reported and paid by the Plaintiff in connection with the transfer transaction of the instant shares, is based on the interpretation that the National Tax Counseling Center’s oral response and the established rules of this case, which do not constitute an administrative agency’s public opinion, apply to the Plaintiff, and thus, cannot be deemed to have any justifiable ground for not infringing on the Plaintiff’s duty. Thus, this part of the Plaintiff’s assertion is without merit.

(4) The theory of lawsuit

Therefore, the instant disposition is lawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed due to the lack of reason, and the judgment of the court of first instance is unfair with different conclusions. Thus, the part against the defendant in the judgment of the court of first instance which accepted the defendant's appeal and dismissed the plaintiff's claim corresponding to the above cancellation part, and the plaintiff's appeal is dismissed as it is without merit. It is so decided