Early High Court Decision 201Du1728 (No. 02, 2011)

In calculating profits, such as listing following the merger, the representative director shall fall under the scope of a related person.

In calculating profits, such as listing following a merger, the representative director is a person who is recognized to exercise de facto influence through the exercise, etc. of the right to appoint officers of the relevant company, since the representative director determined and implemented all matters concerning the business performance of the relevant company, and plays a role externally to represent the company.

2011Guhap14587 Disposition of revocation of a request for revocation of gift tax

XX

port of origin

July 6, 2012

August 10, 2012

1. The plaintiff's claim is dismissed.

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

The defendant's rejection disposition against the plaintiff on February 7, 201 against the gift tax of 00 won is revoked.

1. Details of the disposition;

A. On July 28, 2008, the Plaintiff acquired 6,000 shares of the instant company (hereinafter referred to as “instant shares”) from thisA, a shareholder of the XX Internet (hereinafter referred to as the “instant company”) for KRW 000,000. (b) On April 16, 2010, the Plaintiff merged with the instant company by setting the merger ratio of 1:1.137, the Plaintiff, a shareholder of the instant company, obtained 6,826 shares of XXO as the price for the relevant merger.

C. On October 28, 2010, the Plaintiff deemed that the acquisition of the instant shares constitutes a donation of profits, such as listing under Article 41-5(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “former Inheritance Tax and Gift Tax Act”), and calculated the value of donated property at KRW 000, and reported and paid the said amount to the Defendant on October 28, 2010.

D. However, on November 29, 2010, the Plaintiff asserted that the acquisition of the instant shares does not constitute a donation of profits under Article 41-5(1) of the former Inheritance Tax and Gift Tax Act, and sought a correction claim for refund of the amount of gift tax paid to the Defendant, but the Defendant rejected it on February 7, 2011 (hereinafter “instant disposition”).

E. On April 27, 2011, the Plaintiff filed an appeal with the Tax Tribunal on the instant disposition, but the said claim was dismissed on September 2, 2011.

[Ground of recognition] Facts without dispute, entry of Gap evidence 1 to 6, purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Article 41-5(1) of the former Inheritance Tax and Gift Tax Act that provides that gift tax shall be imposed on profits, such as listing, etc. upon the merger of corporations, applies to cases where a person having a special relationship with the largest shareholder, etc. receives stocks, etc. of the relevant corporation from the largest shareholder, etc. or acquires them for consideration. However, this does not fall under “large shareholder, etc.” under paragraph (1) above, and the Plaintiff and thisA does not have a special relationship under paragraph (1) above. Nevertheless, the Defendant’s refusal of the Plaintiff’s request for correction on the ground that the Plaintiff is the largest shareholder of

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Whether thisA constitutes "the largest shareholder, etc." under Article 41-5 (1) of the former Inheritance Tax and Gift Tax Act

(A) Article 41-5 (1) of the former Inheritance Tax and Gift Tax Act provides that "in case where a person having a special relationship with the largest shareholder, etc. has received stocks, etc. of the relevant corporation from the largest shareholder, etc. or has acquired stocks, etc. of another corporation from the person other than the largest shareholder, etc. with the property received as a donation of stocks, etc. or received as a donation, the value of the relevant stocks, etc. increased as a result of the merger with a stock-listed corporation or KOSDAQ-listed corporation in a special relationship with the relevant corporation or another corporation within five years from the donation date of the relevant stocks, etc., the amount equivalent to the relevant profits shall be deemed as the value of property donated to the person who has received as a gift, etc. under Articles 41-3 and 22 of the same Act, and the former largest shareholder, etc. means the largest shareholder or largest investor

Furthermore, Article 19(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 21292, Feb. 4, 2009; hereinafter the same) provides that "the largest shareholder or largest investor as prescribed by Presidential Decree" in Article 22(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 21292, Feb. 4, 2009; hereinafter the same) refers to the shareholder in the case where the total number of shares held by one shareholder or one investor (hereinafter referred to as "shareholders, etc."), and includes "a person in the relationship of another company belonging to the business group as prescribed by Ordinance of the Ministry of Strategy and Finance (including the officers of the company)

In full view of the language, contents, purport, etc. of the above provisions, the term "large shareholder, etc." under Article 41-5 (1) of the former Inheritance Tax and Gift Tax Act means, where the shareholder, etc. is an enterprise belonging to the enterprise group (including the officers of the relevant enterprise), the total amount of the shares held by him/her and the shares held by other enterprises belonging to the said enterprise group is the largest, it is reasonable to deem

(B) In light of the above legal principles, upon acquiring the shares of this case, the company of this case and the company of this case were holding 82.9% of the total shares of the company of this case and 56.5% of the company of this case through corporate division, and the company of this case and the company of this case were holding 17.1% of the total shares of the company of this case as representative director of the company of this case. In light of the above legal principles, the company of this case and the company of this case are belonging to the same business group of this case, and the company of this case 10% of the shares of this case and 82.9% of the shares of this case and 5% of the shares of this case are owned by the company of this case as representative director of the company of this case and 17.1% of the shares of this case of the company of this case as representative director of this case of this case, the company of this case and 20% of the shares of this case are owned by the majority shareholder of this case 14% of this case.

(2) Whether the Plaintiff and thisA have a special relationship under Article 41-5(1) of the former Inheritance Tax and Gift Tax Act

(A) Article 41-5(2) of the former Inheritance Tax and Gift Tax Act provides that the scope of persons in a special relationship under paragraph (1) shall be determined by the Presidential Decree. Articles 31-8 and 31-6 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provide that shareholders and other persons in a special relationship under each subparagraph of Article 19(2) of the former Enforcement Decree of the said Tax and Gift Tax Act shall be the specially related persons, and Article 19(2)3 of the said Enforcement Decree provides that one of the specially related persons is "a person who is recognized as exercising de facto influence on the management of an enterprise group by exercising the right to appoint and dismiss officers of the pertinent enterprise group or by determining the business policy, etc. of another company (a) of the enterprise group belonging to the said enterprise group, a person in a de facto control over the enterprise group (b) and a relative (c) of a person under item (a) of the said Article shall be defined as a specially related person:

In full view of the language, content, and purport of the above provisions, the term “specially related person” under Article 19(2)3 of the former Inheritance Tax and Gift Tax Act means: (a) where one stockholder, etc. is an enterprise belonging to an enterprise group (including an executive of the relevant enterprise), a person in a relationship under any item of Article 19(2)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act; or (b) a person who is deemed to exercise de facto influence on the management by exercising the right to appoint and dismiss the executive officers or by determining business policies.

(B) Based on the above legal principles, according to the health class, Gap evidence Nos. 1 through 3, and Eul evidence Nos. 3 through 5 (including branch numbers), the plaintiff held office as representative director of the company of this case from May 1, 2008 to April 16, 2010, and the plaintiff purchased the shares of this case and held approximately 2.5% ( = 6,000 shares/ 241,40 shares) of the shares issued by the company of this case as to the purchase of the shares of this case. However, it is difficult to view the above recognition alone that the plaintiff actually controlled the whole group belonging to the company of this case, and there is no other evidence to view that the plaintiff actually controlled the above enterprise group or was related to its supervisor. Since Article 19(2)3 (a) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act can only be applied to a person who acquired shares of this case as a juristic person (the company affiliated with the enterprise group) and there is no room for the plaintiff to apply the above provision No. 3(A).

However, the fact that the plaintiff was a representative director of the company of this case at the time of purchase of the shares of this case was seen earlier. Since the representative director externally determined and implemented all matters concerning the company's business performance and plays an external role of representing the company externally, the plaintiff who is the representative director shall be deemed to be a person who is recognized as exercising de facto influence over the company's management through the exercise of the right to appoint and dismiss officers of the company of this case under the latter part of Article 19 (2) 3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, and the decision of business policy, etc. Therefore, inasmuch as the plaintiff purchased the shares of this case from this case from thisA, which is the largest shareholder under Article 41-5 (1) of the former Inheritance Tax and Gift Tax Act, the plaintiff and thisA have a special relationship

Therefore, the plaintiff's assertion on this part is without merit.

(3) Sub-decisions

Therefore, this case’s disposition rejecting the Plaintiff’s request for correction of gift tax reduction on the ground that this case’s disposition is the largest shareholder of the instant company and the Plaintiff was in a special relationship with this case.

3. Conclusion

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