Whether there was a donation of shares or not shall be determined by the acquisition of shares and the acquisition of the status to exercise the rights as a shareholder.

Whether there is a stock donation as a subject of gift tax under tax law should be determined by not only the agreement of the intention on stock donation, but also the acquisition of shares to exercise the status as a de facto shareholder.

Article 2 of the Inheritance Tax and Gift Tax Act (Gift Tax Taxables)

2016Guhap51427 Revocation of Disposition of Imposition of Gift Tax

AA

The Director of the PPP Tax Office

on October 016, 2010

November 08, 2016

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 gift tax of KRW 307,517,170 against the Plaintiff on August 3, 2015 is revoked.

1. Details of the disposition;

A. On October 15, 201, the Plaintiff transferred 150,000 shares of q Co., Ltd. (which was established as www Co., Ltd. on January 9, 1996 and changed to the trade name as of May 10, 2001; hereinafter referred to as q) under the name of the Plaintiff.

B. On August 3, 2015, the Defendant: (a) deemed that “Around October 15, 2011, the Plaintiff received the gift from e, his father,” and based thereon, calculated KRW 877,500,000, the average of the closing price of the Plaintiff’s father, as the value of donated property, as the value of donated property; and (b) imposed KRW 307,517,17,170 on the Plaintiff (hereinafter “instant disposition”).

C. The Plaintiff appealed and filed an appeal with the Tax Tribunal on August 10, 2015, but the Tax Tribunal dismissed the said appeal on May 19, 2016.

[Ground of recognition] Unsatisfy, Gap evidence 1, 2, Eul evidence 1, 2 and 5, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff did not receive the said shares from e in return for joint efforts with e, but rather deemed to have received only 5:5 shares out of 10,000 shares as the contribution rate was presumed to have been 5:5, and the Plaintiff received shares on November 20, 2006. As such, inasmuch as the Plaintiff received shares on November 20, 2006, the gift tax should be calculated on the basis of KRW 50,000,000, which is the face value of shares at that time. Nevertheless, the Defendant: (a) deemed on October 15, 2011, which is the time when a transfer was made in the name of the Plaintiff, as the donation date; and (b) calculated the gift tax as KRW 877,50,000,00; and (c) thus, the instant disposition was unlawful.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) On December 6, 2002 and January 2, 2003, 2003, e grants e e e e e e e e e e e e e e e e e e e e with the right to exercise Stockholm options with regard to 10,00 shares after the end of the year in which the sales of the special business headquarters (including leading heating projects and automation-related projects) achieve 3 billion won, and additionally grants the right to exercise Stockholm options with regard to 20,000 shares after the end of the year in which the sales amount reaches 7 billion won. In this context, Switzerland options was concluded with the content that "the Stockholm option price is 10,00 won per week."

2)qqs made available to e on May 2005 a certificate of stockholding of 10,00 shares with the following content while paying 10,00 shares to e:

3. e waives rights relating to the shares of the Company, such as transfer of shares and Stockholm, which have been conferred as previous contractual terms and conditions.qs shall grant the rights from 4 to 6 paragraphs 5, instead of waiver of all rights relating to the shares of the Company by e.

4.qq will pay 10,000 shares of the Company to the Plaintiff on behalf of the Plaintiff on behalf of e e, provided that such shares cannot be transferred to any other person and that stock certificates may be exercised only when one year has elapsed after listing on the stock market.

5.qq shall pay 70 million won to e by no later than 20 November 2006, 30 million won by March 31, 2007, 50 million won by September 30, 2007, and 50 million won by December 31, 2007.

6.qq shall be payable to e 20 million won to e within one year after the date on which the company listed in the stock market.

Certificates of Stock Transfer

transferee: Plaintiff

Number of transferred shares: Manch shares

5. Conditions of stock transfer; and

1) The shares may exercise stock certificates with a lapse of one year after the listing of the stock market.

2) The rights to this share may not be transferred or sold to a third party.

3) All the documents relating to the transfers of shares delivered to e from qqs to e prior to the present deed shall be null and void.

1. Ascertainment that the e.g. shares of stockholders e.g. held by the qq and e.g. in all contracts executed prior to this Agreement (a written contract, each letter, the transfer of shares) verify that the e.g. shares held by qq.

3) qq was drafted between e and e on November 2006 with the following contracts in the course of amending the previous Stockholm options, etc.:

4)qq prepares to ee on the same day a certificate of stock assignment as follows:

5) Between e and e on April 30, 2007, work out the following contracts:

Agreements

[Article 2] r until October 15, 201, until October 15, 2011, the applicant’s share certificates (ordinary shares 100,000

A transfer entry procedure shall be implemented to issue shares and 500 won per share, and a transfer entry procedure shall be conducted to change a shareholder’s name on the register of shareholders with respect to r’s common shares 100,000 shares out of rrqs issued shares.

All matters related to interests, such as relevant, shall be null and void and shall be replaced by this Agreement.

2. e waives all rights relating to the shares of the Company, such as transfer of shares and Stockholm options, which were conferred as previously agreed upon.

3.Notwithstanding paragraphs 1 and 2 above, paragraphs 1 and 2 below are valid.

1) Only 10,00 shares of the Company that were paid to the Plaintiff on behalf of e are valid, and such shares cannot be transferred to any other person, and share certificates can be exercised only after one year has elapsed since the listing of the shares on behalf of e. Taxes imposed upon the transfer of shares here are the obligations of e under the principle of beneficiary burden.

2)qq will pay e 20 million won to e within two years after the date on which the company listed in the stock market.

6)qq was listed on September 14, 2010 to the KOSDAQ market. After that, the Plaintiff was thereafter listed on November 2010.

12. A lawsuit seeking the transfer process implementation against rqq and the representative director rr. The Plaintiff prepared the following agreements betweenqq and rr on April 15, 2011, and the Plaintiff voluntarily withdrawn the said action.

7) On June 26, 201, the shares ofqq were 0.5 p.m. free of charge per share on June 26, 2011, and theq was 150,000 shares of rr on October 15, 201.

[Ground of recognition] Facts without dispute, Gap's 3 through 5, 9 through 15, Eul's 3 and 4, Eul's e's testimony and the purport of the whole pleadings

D. Determination

1) First of all, according to the facts as seen earlier, as long as E completed the transfer of title to 10,00 shares received from qq to Stockholm option to the Plaintiff, the Plaintiff is deemed to have received 10,00 shares of the above shares from e-e, and thus, the Plaintiff’s assertion on this part is without merit.

2) Next, Article 2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 2011) provides that “in cases where a person who received a donation of property under subparagraph 1 (a) is a resident (a person who has his/her domicile in the Republic of Korea or has his/her abode for at least one year), gift tax shall be levied on any of the following donated property as of the donation date, as prescribed by this Act.” Article 23(2) of the former Enforcement Decree of the same Act (amended by Presidential Decree No. 23527, Jan. 25, 2012) provides that “Where the donated property is a stocks, etc., the donee shall be deemed to have acquired the relevant stocks, etc. on the date objectively confirmed that the donee received the relevant stocks, etc. by paying dividends or exercising shareholder’s rights:

However, in cases where the date of delivery of the relevant shares, etc. is unclear or the name, etc. of an acquisitor is entered in the register of shareholders or the register of members pursuant to Article 337 or 557 of the Commercial Act before the said shares, etc. are delivered, the date of transfer or entry thereof shall be the date of entry. According to the tax law, whether there was a share donation as a subject of gift tax shall be determined by the agreement between the intention of donation of shares and the acquisition of the status as a de facto shareholder by acquiring the shares (see Supreme Court Decision 2011Du14579, Jan. 26, 2012).

In addition to the above facts, the following circumstances are acknowledged pursuant to the overall purport of this evidence and arguments, i.e., ①q becomes invalid on November 20, 2006, and the Plaintiff agreed to pay 10,000 shares to e on behalf of ee on November 20, 2006. The above contract dated November 20, 2006 and the certificate of transfer of shares on the same day were newly issued a condition that the q may exercise share certificates only when 1 year has passed since it was listed on the stock market. ② Whether there was a share donation as subject of gift tax under the tax law should be determined based on whether not only the intention on share donation but also the status that can actually exercise shareholder's rights, and it is difficult to 15/100 of the Plaintiff's share transfer income tax as shareholder of 5/10 of the Plaintiff's transfer income tax as shareholder of 10/15/10 of the above shares.

Therefore, the instant disposition that the Plaintiff imposed gift tax on October 15, 201 by deeming that the instant shares were donated on October 15, 201, by calculating KRW 877,500,000 as the value of donated property is lawful.

3. Conclusion

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