Busan District Court 2009Guhap4013 (201.08)

Cho High Court Decision 2009Da1571 (Law No. 25, 2009)

on the basis of the transferor of shares, whether it is the largest shareholder should be examined.

When the shares of one shareholder and their relatives, employees, etc. are combined with the shares of the shareholder, if the number of shares is the largest, the shareholder was defined as the largest shareholder, but the shareholder who transferred the shares should be identified as the largest shareholder.

The contents of the decision shall be the same as attached.

1. The defendant's appeal is dismissed.

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

1. Purport of claim

The Defendant’s disposition of imposition of KRW 276,746,670 of the gift tax on December 8, 2008 and the disposition of imposition of KRW 276,746,670 of the gift tax on the Plaintiff KimB shall be revoked in entirety.

2. Purport of appeal

The judgment of the first instance court is revoked. The plaintiffs' claims are dismissed.

1. Quotation of judgment of the first instance;

The reasoning of this Court’s explanation concerning this case is as stated in the reasoning of the judgment of the court of first instance except for the second instance’s sub-paragraph (c) of Article 2.3 of the Civil Procedure Act and Article 420 of the Civil Procedure Act.

Parts used in bulk

C. Determination

1) Issues

Article 41-3(1) of the Inheritance Tax and Gift Tax Act provides that where a person in a special relationship with the largest shareholder, etc. receives a donation of stocks or equity shares of the relevant corporation from the largest shareholder, etc. or acquires them for consideration (the value of donated property subject to gift tax shall be determined at the time when profits are acquired in excess of a certain standard as the stocks or equity shares are listed on the Korea Securities and Futures Exchange within a certain period thereafter). In order to apply the above provision, namely, for the imposition of gift tax, the instantCC that transfers stocks to the Plaintiffs falls under the largest shareholder

However, the plaintiffs asserted that thisCC is not the largest shareholder, and the defendant asserts that thisCC is the largest shareholder under Article 19(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, and this is examined.

2) Contents and interpretation of statutes

First of all, Article 41-3 (1) of the Inheritance Tax and Gift Tax Act provides that the largest shareholder, etc. (Article 41-3 (1) of the Inheritance Tax and Gift Tax Act, Article 19 (2) of the Enforcement Decree provides that the largest shareholder or largest investor shall be the largest shareholder, etc., and the shareholder or largest shareholder shall be the shareholder, shares, or equity shares, etc. shall be the shareholder, shares, or equity shares, etc., and the non-party company shall be the largest shareholder, etc. under Article 22 (2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (Article 22 (2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the largest shareholder, etc. shall be the shareholder, etc. when citing the contents of the Act and subordinate statutes, and Article 22 (2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the largest shareholder shall be the shareholder, etc. in cases where the total shares

According to the above provisions, if the total number of shares held by one shareholder and his relatives or employees is the largest number of shares, the shareholder shall be deemed to be the largest shareholder.

3) Examination of the defendant's assertion

A) The CC that transferred the instant shares did not hold only 1.8% of the shares of the non-party company. The relationship between the plaintiffs and the 44.1% of each of the 44.1% shares is obvious that thisCC does not become the largest shareholder, and the defendant asserts that thisCC can be seen as the largest shareholder, since this is the relationship between thisCC and the plaintiffs and the plaintiffs, and if the plaintiffs' shares are consistent with the plaintiffs' shares, the number of shares of thisCC is the largest.

In addition, according to Article 13(8) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, the "corporation controlled by investment" shall be regarded as an employee, a commercial employee, or any other person in an employment contract, not an employee by collecting health expenses, Article 13(6)2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, and Article 4 of the Enforcement Rule of the Inheritance Tax and Gift Tax Act.

Therefore, in order to see that thisCC is controlled by the investment of non-party company, there is a relative or employee of thisCC among those holding stocks of the non-party company. Since the plaintiffs are not relatives or employees of thisCC, the shares held by thisCC are only 11.8%, and this cannot be deemed that thisCC is controlled by the investment of non-party company. Accordingly, even if the plaintiffs are executives of the non-party company, the plaintiffs cannot be deemed as the employee of thisCC, and the plaintiffs' shares of thisCC cannot be combined.

On the contrary, all of the plaintiffs were holding not less than 30% of the shares of the non-party company, and all of the plaintiffs were controlling the non-party company, and since thisCC was a director of the non-party company, it can be deemed that the plaintiffs were the employees of the non-party company, and where the shares of thisCC are added to the shares of the plaintiffs, all of the plaintiffs are the largest shareholders. However, since the person who transfers the shares in this case is thisCC, it is a key issue whether thisCC

B) In interpreting and applying Article 19(2) of the Enforcement Decree, the Defendant asserts that, not only the transferor’s shareholder, the transferee (the Plaintiffs in this case) may substitute for one shareholder. In such a case, the Defendant asserts that, in both cases, the transferee and the transferor are the largest shareholder.

However, Article 41-3(1) of the Inheritance Tax and Gift Tax Act provides that the person having a special relationship with the largest shareholder acquires the stock as the largest shareholder, and Article 19(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the largest number of the stocks of one shareholder and his relatives or employees is the largest shareholder, and it should be clarified whether the person who transfers the stock is the largest shareholder, and the provision of the Enforcement Decree of the Inheritance Tax and Gift Tax defines the "the largest shareholder" as the largest shareholder, not the relative or employee of the shareholder as the largest shareholder. Therefore, in this case, it is necessary to examine whether the "CC becomes the largest shareholder" based on the "CC that transfers the stock.

4) Inheritance Tax and Gift Tax Act 41

The legislative purpose of Article 3-3

As above, it is clear that this case’sCC cannot be seen as its largest shareholder even under Article 41-3 of the Inheritance Tax and Gift Tax Act and the relevant Acts and subordinate statutes. However, in addition to the fact that where the legislative purpose of the above provision is to obtain large profits from the listing of stocks, etc. with the purpose of obtaining large profits from the listing of stocks, etc., the donation of non-listed stocks to children and related persons, etc. before the listing and listing them, the actual stock value assessed as at the time of three months after the listing should be the donation amount, and thereby preventing an irregular inheritance and donation by imposing gift tax, it is clear that this case’s minority shareholder (1.8%) can not be applied to the transfer of stocks to the Plaintiffs (4.1% holding each 4.8%) (the minority shareholder), and it can be further confirmed that Article 41-3 of the Inheritance Tax and Gift Tax Act enacted pursuant to the above legislative purpose is reasonable to interpret the statutes on the largest shareholder as seen earlier.

5) Sub-decisions

Therefore, each of the dispositions of this case by the defendant on the premise that thisCC falls under the largest shareholder under Article 41-3(1) of the Inheritance Tax and Gift Tax Act is unlawful.

2. Conclusion

If so, the judgment of the first instance court is legitimate, and the defendant's appeal is dismissed as it is without merit. It is so decided as per Disposition.