Suwon District Court-2014-Gu Partnership-5813 ( November 10, 2015)

The transfer value acquired by the Plaintiff due to the transfer of shares falls under the value significantly higher than the market value under Article 35(2) of the former Inheritance Tax and Gift Tax Act.

It is reasonable to view that the value assessed by the method under Articles 61 through 65 of the former Inheritance Tax and Gift Tax Act pursuant to Article 60(3) falls under not only the market value which is the basis for calculating the value of the property on which the gift tax is levied, but also the market value which is the basis for determining whether the property is subject to the gift tax pursuant to Article 3

Gift, etc. of profits from transfer at low price or high price under Article 35 of the Inheritance Tax and Gift Tax Act;

2015Nu70692 Revocation of Disposition of Imposition of Gift Tax

○ Kim

○○ Head of tax office

Suwon District Court Decision 2014Guhap58113 Decided November 10, 2015

July 19, 2016

August 30, 2016

1. The plaintiff's appeal is dismissed.

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

The part against the plaintiff in the judgment of the court of first instance shall be revoked. On July 5, 2011, the defendant revoked all the imposition of gift tax on the plaintiff (the plaintiff filed a claim for revocation of the first instance judgment (hereinafter referred to as "the first instance judgment") and each of the above taxation dispositions. The court of first instance rejected the claim for revocation of the first instance judgment, and the plaintiff appealed as above, and the defendant appealed against the part of the order to revoke the first taxation disposition, but the defendant appealed against the first instance judgment. However, the plaintiff revoked the first taxation disposition ex officio, and accordingly the first instance judgment as to the first taxation disposition and the defendant's appeal become invalid).

1. Details of the disposition;

The reasoning for the court’s explanation on this part is as follows: “A defendant, on November 2, 2015, revoked the first taxation disposition and notified the plaintiff on November 3, 2015. The plaintiff, at the trial, withdraws the lawsuit in this case on the first taxation disposition.” This part of the judgment is identical to the corresponding part of the judgment of the first instance, except where “the fourth 18th 14th 15” is “15”. Thus, this part of the judgment is cited pursuant to Article 8(2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act.

2. Whether a secondary taxation disposition is lawful.

A. The plaintiff's assertion

1) At the time of the transfer of the instant shares, DDR has continuously increased the value of the issued shares due to the increase in net assets, and such trend was anticipated to continue in the future, and the price of the instant shares subject to transfer is determined based on the ordinary market price, considering comprehensively considering the impact, etc. on management rights due to the transfer of the instant shares. Therefore, there are justifiable reasons in light of transactional practices.

2) The Defendant also imposed capital gains tax on the transfer of the instant shares. The Defendant imposed capital gains tax on KRW 1,022,941,360, not KRW 1,622,878,360, not KRW 1,622,878,360, not KRW 600,000, in the transfer value.

3) According to the main sentence of Article 26(9) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, in a case where a property is acquired by transfer between an individual and a corporation as a specially related person, gift tax under Article 35 of the former Inheritance Tax and Gift Tax Act shall not be imposed in a case where Article 52 of the Corporate Tax Act does not apply to the case where a provision on the register of wrongful calculation is applied to the transfer of property between an individual and a corporation as a non-specially related person. Thus, even in a case where a property is acquired by transfer between an individual and a corporation, gift tax under Article 35 of the former Inheritance Tax and Gift Tax

4) The Plaintiff did not perform its duty to pay and pay gift tax due to differences in the market price of stocks subject to transfer, and the gift tax has not been unjustly reduced by fraud or other improper means. As such, the portion of penalty tax in the second taxation is unlawful.

B. Relevant statutes

The court's explanation on this part is identical to the corresponding part of the judgment of the court of first instance except for the addition of the judgment of the court of first instance as follows. Thus, this part is cited in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

○ Part 15 of the first instance judgment:

⑨ 법 제35조의 규정을 적용함에 있어서 개인과 법인간에 재산을 양수 또는 양도하는 경우로서 그 대가가 「법인세법 시행령」 제89조의 규정에 의한 가액에 해당되어 당해 법인의 거래에 대하여 「법인세법」 제52조의 규정이 적용되지 아니하는 경우(제1항 제2호의 규정에 의한 시간외시장에서 매매된 경우를 포함한다)에는 제1항 내지 제8항의 규정을 적용하지 아니한다. 다만, 거짓 그 밖의 부정한 방법으로 상™T세 또는 증여세를 감소시킨 것으로 인정되는 경우에는 그러하지 아니하다.

§ 56 (Method of Calculating Amount of net profit and loss for the last three years per share) following the 16th judgment of the first instance court

(1) The weighted average amount of net profits and losses per share for the preceding three years under Article 54 (1) shall be the value under subparagraph 1, but in cases prescribed by Ordinance of the Ministry of Strategy and Finance as being unreasonable to be based on the value under subparagraph 1 due to such reasons as the abnormal increase in the amount of net profits and losses for the preceding three years through a temporary contingency case by the relevant corporation, the value under subparagraph 2 may be made. In such cases, if the value is not more than zero won

1. The amount calculated by the following formula:

The weighted average amount of net profit and loss per share for the preceding three years = (the net profit and loss per share for the business year that has become one year before the base date of appraisal x 3) + (2) + (the net profit and loss per share for the business year that has become two years before the base date of appraisal x 1) + (1) 】 1/6

C. Determination

1) As to the first argument

A) Article 35(2) of the former Inheritance Tax and Gift Tax Act provides that "if a property is transferred between a person without a special relationship at a remarkably higher price than the market price without any justifiable reason, an amount equivalent to the difference between the price and the market price shall be presumed to have been donated to the person who has obtained such profits as determined by the Presidential Decree," and Article 26(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "the amount of money so delegated shall be deemed to be the value of donated to the person who has obtained such profits." Article 35(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "if the value of the transferred property subtracting from the market price is 30/100 or more of the market price, the value of the property at issue shall be deemed to have been deducted from the market price." Article 35(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "if it is difficult to calculate the market price at a free price under the provisions of paragraph (1) of the same Article."

Article 60(2) of the former Inheritance Tax and Gift Tax Act provides that “The value assessed by the methods prescribed in Articles 61 through 65 of the former Inheritance Tax and Gift Tax Act shall be the market value that is the basis for calculating the value of the property on which the gift tax is levied pursuant to Article 60(3) of the former Inheritance Tax and Gift Tax Act, and Article 60(3) of the former Inheritance Tax and Gift Tax Act provides that “The value assessed by the methods prescribed in Articles 61 through 65 of the latter Inheritance Tax and Gift Tax Act shall be the market value that is the basis for determining the value of the property on which the gift tax is levied pursuant to Article 60(3) of the latter Inheritance Tax and Gift Tax Act, as an alternative to cases where it is difficult to calculate the market value pursuant to Article 60(2) of the latter Inheritance Tax and Gift Tax Act.” (see Supreme Court Decision 2012Du3200, Jun. 14, 2012).

B) In light of the above provisions and legal principles, it is difficult to find out that the following circumstances were revealed by comprehensively taking account of the overall purport of pleadings as to the transfer of shares by the public health account and evidence Nos. 2 through 14 (including the serial number) of this case, i.e., (i) the shareholders of DDR at the time of the transfer of shares were only 3 non-listed shares, which are the Plaintiff and transferee, and thus, it cannot be deemed that the transfer of shares was freely traded among many and unspecified persons. Thus, it is difficult to find that there was a normal transaction practice reflecting the objective exchange value of DDR's issued shares at the time of transfer of shares at 0.7 billion won, and thus, it is difficult to calculate the market price of shares as to the transfer of shares at 50 billion won, and thus, it is reasonable to deem that the Plaintiff already acquired DDR's shares at the time of transfer of shares at the time of the transfer of shares at 00 billion won + 70.7 billion won per share price per 70.4 billion won per share.

C) Also, according to the following circumstances that can be acknowledged by the aforementioned evidence, i.e.,CC (thisU’s children own 95% shares) and FNE (an amount of 95% shares) still hold less than 50% shares after the transfer of the instant shares, it is difficult to view the shares subject to transfer as shares for which the management rights accrue. Moreover, in light of the fact thatCC and FFE with 98% shares prior to the transfer of the instant shares are controlled by U and EM, it is difficult to view the shares subject to transfer as shares for which the determination of ownership belongs to the management rights based on the net market value of the Plaintiff’s 207, 2008, 2008, 209, 2009, 300, 100,000, 30,000,000,000,000,000,000,000,000,000 won.

2) As to the second argument

Of the transfer proceeds for which the Plaintiff claimed double taxation, KRW 600 million is the amount that the Defendant deducted from calculating the profit accrued from high-value transfer pursuant to Article 26(6) and (7) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (300 million won x two transfers), and for which gift tax is not imposed (the taxable value of gift tax on the transfer of stocks in this case is KRW 377,121,640, which is the amount obtained by deducting KRW 600 million from the difference between the transfer proceeds and the market value of the stocks subject to transfer). Thus, there is no double taxation of transfer income tax and gift

3) As to the third argument

Article 26 (9) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that Article 26 (1) through (8) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act shall not apply where the payment for the transfer of property between an individual and a corporation falls under the value under the provisions of Article 89 of the Enforcement Decree of the Corporate Tax Act, but Article 26 (1) through (8) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act shall not apply where the payment for the transfer of property falls under the value under the provisions of Article 89 of the Corporate Tax Act. In addition, Article 26 (9) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the payment for the transfer of property between an individual and a corporation falls under the value under the provisions of Article 89 of the Corporate Tax Act. The Plaintiff’s assertion is without merit.

4) As to the fourth argument

Under the tax law, in order to facilitate the exercise of the right to impose taxes and the realization of tax claims, the taxpayer’s intention and negligence is not considered as administrative sanctions imposed as prescribed by the tax law in cases where a taxpayer violates a return and tax liability, etc. under the tax law without justifiable grounds, while such sanctions should be imposed on the taxpayer for nonperformance of tax obligations unless there are justifiable grounds, such as cases where the taxpayer is deemed to have not been aware of his/her duty, or where there are circumstances where it is unreasonable for him/her to expect the fulfillment of his/her duty, and where it is unreasonable for him/her to do so (see Supreme Court Decision 2010Du16622, Apr. 28, 201).

Even if the Plaintiff reported and paid the transfer income tax on the transfer of stocks of this case, it did not perform the duty to report the gift tax, and thus, the Plaintiff neglected this duty. Of the method of assessing the market price per share of DDR as of September 15, 2009, there is no room for doubt as to the interpretation of the former Inheritance Tax and Gift Tax Act and the Enforcement Decree thereof concerning the business year which served as the basis for assessing the net profit and loss value, and the Defendant alleged that the Defendant did not apply the unfair act of calculation to the Plaintiff (the Plaintiff did not have a special relationship with the Plaintiff, as it did not apply to the Plaintiff, the Plaintiff did not report and pay the gift tax on the high-priced transfer due to a mere lot or misunderstanding of laws and regulations, and therefore, the Plaintiff did not have any justifiable reason for not infringing the Plaintiff’s duty to report and pay the gift tax on the high-priced transfer. The Plaintiff’s assertion is without merit.

3. Conclusion

If so, the plaintiff's claim of this case is without merit, and it shall be dismissed, and the judgment of the court of first instance is just with this conclusion, and the plaintiff's appeal is dismissed as it is without merit.