Seoul Administrative Court 2015Guhap59266 ( October 25, 2016)

Whether profits from the acquisition of the preemptive right of this case and the conversion constitute subject to gift tax

Since the Plaintiffs anticipated the share price increase of the instant corporation and received profits from the share price increase through a series of actions such as issuance, etc., the Plaintiffs were lawful to report gift tax and accordingly there was no illegality in the disposition of refusal of correction.

Donation of profits from the conversion of stocks into convertible bonds, etc. under Article 40 of the Inheritance Tax and Gift Tax Act

Seoul High Court 2016Nu60814 Revocation of Disposition Rejecting Gift Tax Correction

KimAA and 3

Samsung Head of Samsung Tax Office

on July 25, 2016

on October 28, 2017

on 14, 2017

1. All appeals filed by the plaintiffs are dismissed.

2. The costs of appeal are assessed against the Plaintiffs.

the Gu Office's place of service and place of service

The judgment of the first instance shall be revoked. The defendant shall revoke all the disposition rejecting to correct the gift tax stated in the attached disposition list against the plaintiffs.

1. Quotation of the reasons for the judgment of the first instance;

This judgment is based on the reasoning of the judgment of the court of first instance, except for dismissal, deletion, or addition of the following, and thus, it is consistent with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

○ 4 3 pages, "The former Inheritance Tax and Gift Tax Act" is regarded as "the former Inheritance Tax and Gift Tax Act".

○ 6, 14 pages " December 1, 2012" shall be read as " December 1, 201".

○ 6, 19 pages, “the patent right,” and “the patent right, 6 December 2012,” shall be added to “the patent right, 6.”

The "Financial Supervisory Commission" of the Tenth 10th 10th son shall be the "Financial Services Commission".

○ 10, 11 pages d) are raised as follows:

(D) The ○○○○ decided to issue the instant bonds with warrants in the form of private placement, and on 13, 201. XX. 13, 201, the scheduled sale date of the preemptive right to new stocks is 2001. XX.14, the issue date of the instant bonds with warrants, i.e., e., 201. the sale date of the instant bonds with warrants, and i.e., apB and specially related parties. The instant financial institutions, on 14, 2001, sold the instant bonds with warrants to the Plaintiffs on the same day.

However, the above facts alone are insufficient to recognize that the financial institutions of this case acquired the bonds with warrants of this case for the purpose of acquiring the bonds with warrants of this case from the plaintiffs, and there is no other evidence to acknowledge this otherwise.

Rather, the following circumstances revealed in the statement No. 5, namely, the instant financial institution did not receive fees for the purchase of the instant bonds with warrants, and the instant financial institution did not impose risks on the issuance of the instant bonds with warrants. In light of the fact that the instant financial institution did not have any content that the instant financial institution would impose risks on the issuance of the bonds with warrants, etc., the instant financial institution was subject to investment to the largest shareholder and specially related parties on the date of issuance of the instant bonds with warrants to minimize risks associated with the investment in the instant bonds with warrant, and the Plaintiffs acquired the instant bonds with warrants under such investment conditions, merely because the instant financial institution acquired the instant bonds with warrants under such investment conditions, it is reasonable to deem that the instant financial institution itself acquired the instant bonds with warrants as an investor to obtain interest profits and sales profits, not as the underwriter under the former Capital Markets Act.

Therefore, since the financial institutions of this case are not the underwriters under Article 40 (1) of the former Inheritance Tax and Gift Tax Act, they cannot be viewed as the basis provision for the taxation of gift tax. This part of the plaintiffs' assertion is with merit (On the other hand, the defendant should interpret the "acquisition, etc." under Article 40 (1) of the former Inheritance Tax and Gift Tax Act, so it cannot be viewed as only the case where bonds with warrants are acquired from the underwriters under the former Inheritance Tax and Gift Tax Act. However, interpreting the "acquisition, etc." under Article 40 (1) of the former Inheritance Tax and Gift Tax Act as alleged by the defendant cannot be permitted because it violates the principle of no taxation without law, and there is no special ground for interpreting

The "(family judgment)" of 11, 20 and 11, 15, shall be deleted.

○ 11. From 21. to 12.1., the term “this case’s financial institution is deleted even if it is difficult to see it as an underwriter under Article 9(12) of the former Capital Markets Act.”

○ 12 pages 6 to 16 are as follows:

(B) Article 2(4) of the former Inheritance Tax and Gift Tax Act provides that gift tax shall be imposed by deeming the act or transaction subject to gift tax as a continuous single act or transaction according to the economic substance in cases where it is deemed that the said act or transaction has been unjustly reduced by two or more acts or transaction. In order to achieve the effect of gift bypassing or changing the transaction, and to cope with the act of tax evasion that unfairly reduces gift tax, it is intended to deny the various transaction forms and to impose tax depending on the substance. In addition, one of the various legal relationships in order to achieve the same economic purpose, and the taxpayer may choose one of the legal relations selected by the parties in the absence of special circumstances, and the tax authority shall respect the legal relationship chosen by the parties in order to achieve the same economic purpose, as well as the compensation for risks, such as losses, etc., and the external factor or act may be involved in the result of the transaction after multiple stages, and thus, only the actual substance of gift after the donation is easily considered as the result of the transaction.

A gift tax is not subject to gift tax (see, e.g., Supreme Court Decision 2015Du3270, Jan. 25, 2017). Therefore, under Article 2(4) and (3) of the former Inheritance Tax and Gift Tax Act, if the legal form or process of the transaction chosen by the taxpayer is merely a means to achieve the purpose of tax avoidance from the beginning, and thus, the substance of the transfer of the property can be assessed to the same extent as the transfer of the property was directly donated. Such determination should be made by comprehensively taking account of the following: (a) whether there are other reasonable grounds such as business necessity; (b) interval between each transaction or act; and (c) loss and possibility of risk burden arising from taking place such transaction form (see, e.g., Supreme Court Decision 2016Du46365, Feb. 15, 2017).

○○ 14 pages 14, the "claim with Preemptive Rights" shall be raised to "bonds with warrants".

○ 14 pages 8 to 20 are as follows.

[4] ① Under the characteristics of the pharmaceutical company, the acquisition of a patent right can have an impact on the share price of 00. In light of the fact that ○○○○○○○○○○○○○○○○○○○○○○’s acquisition of a patent right had an effect on the share price even if the patent right was finally developed, not on new drug price.) The public notice of ○○○○○○○○○’s acquisition of a patent right had been limited to two months since the Plaintiffs acquired the instant preemptive right. 20 years since the fact that ○○○○○○○○○○○○○○○○○’s acquisition of a patent right had been 0 billion won since the acquisition of the instant preemptive right, and that 20 billion won had been 1 billion won since the 2010s since the 201st century’s acquisition of the instant preemptive right (○○○○○○○○○○○’s acquisition of a new product.

(5) Although Plaintiff ○○○○’s shareholder was the Plaintiff ○○○○, there seems to be no particular reason to purchase the instant preemptive right in excess of the shareholding ratio. Furthermore, Plaintiff KimE was not a shareholder or employee of ○○○○○○○○, and thus, was allocated 284,345 shares of ○○○○○○ (2.5% holding ratio) by acquiring and exercising the instant preemptive right despite having no direct connection with ○○○○○○○○○, and there is no reasonable ground to have had the Plaintiff KimE purchased the instant preemptive right.

(6) The Plaintiffs asserted to the effect that ○○○○○ had a need to raise funds for repayment, etc. of loans due to the high liquidity crisis due to the increase in △△ New Factory Operation, but it was difficult to borrow funds from general financial institutions due to the lack of high debt ratio and the pharmaceutical industry. However, there is no objective evidence to deem that ○○○○ was difficult to borrow funds from general financial institutions as alleged by the Plaintiffs, and rather, according to the audit report (Evidence No. 12) for 2001, ○○○ did not have a large-scale investment plan, and thus there is no big problem about liquidity, and it is recognized that the purpose of issuing the instant bonds with warrants is “the raising of research and development funds.”

(7) Ultimately, from the issuance of the instant bonds with warrants, the Plaintiffs anticipated to obtain conversion marginal profits by acquiring ○○○’s new stocks through a series of acts following the acquisition and exercise of the instant preemptive right, and such series of acts are deemed to have been used as a means of such act, with the intention to anticipate ○○○○○’s stock price increase from the beginning and to distribute profits arising from the stock price increase to the Plaintiffs ( even if the business purpose of ○○○○○’s issuance of the instant bonds with warrants is partially recognized, the Plaintiffs may be deemed to have received profits arising from the stock price increase through a series of acts, such as the said issuance, etc.).

○ 18 pages 18, “Plaintiffs” is regarded as “Plaintiffs.”

2. Conclusion

Therefore, the plaintiffs' claim of this case is dismissed in its entirety due to the lack of reason, and the judgment of the court of first instance is just, and the plaintiffs' appeal is dismissed in its entirety due to the lack of reason, and it is so decided as per Disposition.