The early high-2014-Seoul Government-3772

Whether or not a foreign corporation acquires stocks issued domestically by a foreign corporation which is a complete subsidiary due to a merger of a mother and child foreign corporation.

If a foreign corporation which is a parent company due to a merger of a parent corporation in a parent-child relationship acquires domestic issued stocks owned by a foreign corporation which is a wholly owned subsidiary, the transfer of stock certificates under the former Securities Transaction Tax Act constitutes

Article 1 of the Securities Transaction Tax Act

2015Guhap59693 Revocation of Disposition of Imposing Securities Transaction Tax

AA

BB Director of the Tax Office

October 15, 2015

February 18, 2016

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant revoked the disposition of imposition of securities transaction tax of KRW 0,00,000,000 against the Plaintiff on April 2, 2014 by the Plaintiff

section 3.

1. Details of the disposition;

A. The Plaintiff is a foreign corporation established under the SSS Act, and held 100% of the shares of the CCC, the same SS corporation (hereinafter “CCC”). However, on September 1, 2010, the Plaintiff merged the merged corporation, which is a complete subsidiary (hereinafter “instant merger”). Accordingly, the 3,020,40 shares of DD non-listed stocks owned by the merged corporation (hereinafter “instant shares”) were transferred to the Plaintiff. The Plaintiff did not issue new shares at the time of the instant merger, and the Plaintiff owned 100% of the shares of the merged corporation, and thus, did not pay for the merger.

C. On September 1, 2010, the date of the instant merger, the Plaintiff’s trade name was changed from AAa to AA, the current trade name.

D. The Defendant against the Plaintiff on April 2, 2014, on the ground that the transfer of the instant shares constitutes “transfer of stock certificates” as stipulated in Article 1 of the former Securities Transaction Tax Act (amended by Act No. 10401, Dec. 27, 2010; hereinafter “former Securities Transaction Tax Act”), and that the transfer of the instant shares constitutes “transfer of stock certificates” as stipulated in Article 1 of the former Securities Transaction Tax Act.

0,000,000,000 won (principal tax of KRW 0,000,000,000, additional tax on negligent tax returns of KRW 000,000,000, additional tax on negligent tax on negligent tax, and KRW 000,000,00).

E. The Plaintiff appealed and filed an appeal with the Tax Tribunal on July 16, 2014. On January 2, 2015, the Tax Tribunal corrected the tax amount as not imposing additional tax among the disposition imposing the said securities transaction tax, and decided that the remainder of the appeal is dismissed.

F. On January 15, 2015, the Defendant corrected the amount of securities transaction tax imposed as of April 2, 2014 as of April 2, 2014 by reducing the amount as KRW 0,000,000 (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 and 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The transfer of shares in this case is not subject to the "transfer" due to a merger, the essence of which is the personality unity day, and it is not the "transfer for consideration" because the price for the merger is not paid. Thus, it does not constitute the "transfer of share certificates" under the former Securities Transaction Tax Act.

In particular, the parent company and the subsidiary company in the complete mother and child relationship are formally separate independent entities with each corporate personality until the merger is conducted, but substantial and financially, it is nothing more than a single entity that has already been merged, and the merger of the complete mother and child corporations is nothing more than a removal of the distinction of the corporate personality that has existed only formally, and there is no need to pay any merger cost in the actual merger process. Therefore, even if the shares owned by the merged corporation are transferred to the merged corporation due to the merger, the compensation for the merger cannot be recognized.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) The main sentence of Article 1 of the former Securities Transaction Tax Act defines "transfer of share certificates or shares" as "transfer of share certificates or shares subject to securities transaction tax," and Article 2 (3) of the same Act defines "transfer" as "transfer of share certificates or shares at cost due to contractual or legal causes."

In full view of the following circumstances in light of the language, purport, etc. of the legal provisions as seen above, it is reasonable to view that acquiring stocks issued by a foreign corporation which is a parent company due to a merger of a foreign corporation in a mother-and-child relationship constitutes a transfer of stock certificates under the former Securities Transaction Tax Act. Accordingly, the Plaintiff’s assertion is not acceptable.

① Since, even if an extinguished corporation does not directly receive the payment from the merged corporation, new shares, which are the payment for the merger, are delivered to the shareholders of the extinguished corporation, the merger as a whole, is deemed to fall under a commercial transaction in nature. In this case, given the special circumstance that the Plaintiff, a merged corporation, holds 100% of the equity shares of the extinguished corporation, namely, the Plaintiff, is the same as the one who is liable to pay the payment for the merger, and the one who is liable to receive the payment, the merger is not paid the payment (it can be deemed that the procedures for the retirement of treasury shares have been omitted after the issuance of new shares, and it is a legal relationship similar to the confusion, which can be

② If the merged corporation holds 100% of the equity shares of an extinguished corporation and is unable to impose tax on the transfer of shares due to such merger, there is a concern that the merged corporation, which is not wholly mother and child-related, will cause unfair taxation in comparison with those subject to securities transaction tax in the case of a share transfer due to a merger between parent and child-related companies, and that the merged corporation, which is in an incomplete mother and child-related relationship, will encourage evasion of the law

③ Article 117(1) of the former Restriction of Special Taxation Act (amended by Act No. 10596, Apr. 14, 201; hereinafter “former Restriction of Special Taxation Act”) provides that in cases falling under any of the subparagraphs of Article 117(1), securities transaction tax shall be exempted, and Article 44(2) or (3) of the Corporate Tax Act provides that “where stocks are transferred for merger under any subparagraph of Article 44(2) or (3) of the Corporate Tax Act.

Article 44 of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter referred to as the "former Corporate Tax Act") provides that "where the merged corporation is dissolved due to the merger, the assets of the relevant corporation shall be deemed to be transferred to the merged corporation," and Paragraph 2 of the same Article provides that "where the merged corporation is dissolved due to the merger, the transfer profit or loss may be deemed to exist (in the case of qualified merger), and Paragraph 3 of the same Article provides that where a domestic corporation merges another corporation holding the total number of issued stocks or total amount of investment, the transfer profit or loss may be deemed to exist, notwithstanding Paragraph 2.

In light of the opposite interpretation of the above provision of the Restriction of Special Taxation Act, in principle, where stocks are transferred for a merger, securities transaction tax shall be imposed. However, it is understood that securities transaction tax shall be exempted pursuant to the former Restriction of Special Taxation Act if stocks are transferred for a merger under each subparagraph of Article 44(2) or (3) of the Corporate Tax Act, such as where stocks are transferred for the purpose of a merger. Therefore, as in this case, even if stocks are transferred for a merger between foreign corporations in full mother and child relationship

3. Conclusion

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

Related Acts and subordinate statutes

4. Securities Transaction Tax Act (amended by Act No. 10401, Dec. 27, 2010)

Article 1 (Objects of Taxation)

The securities transaction tax shall be levied on a transfer of stock certificates or shares (hereinafter referred to as "stock certificates, etc."): Provided, That in cases where the transfer of stock certificates, etc. falls under any of the following subparagraphs, the securities transaction tax shall not be levied:

1. Where stocks, etc. listed are transferred to a foreign market (limited to a market prescribed by Presidential Decree; hereafter in this Article, the same shall apply) similar to the securities market under Article 9 (13) 1 of the Financial Investment Services and Capital Markets Act and the KOSDAQ market under subparagraph 2 of the same paragraph, which is located in the foreign country;

2. Where stock certificates, etc. are transferred to an underwriter (referring to the underwriter under Article 9 (12) of the Financial Investment Services and Capital Markets Act; hereinafter the same shall apply) for listing stocks, etc. in a foreign securities market;

3. The Korea Exchange that assumes obligations pursuant to subparagraph 3 of Article 377 of the Financial Investment Services and Capital Markets Act;

Where share certificates, etc. are transferred;

Article 2 (Definitions)

(1) The term "share certificates" in this Act means certificates falling under any of the following subparagraphs:

1. Stock certificates of a corporation established under the Commercial Act or special Acts;

2. Stock certificates or depository receipts issued by a foreign corporation, which are listed on the securities market.

(2) The term "shares" in this Act means partners of unlimited partnerships, limited partnerships and limited companies established under the Commercial Act.

of this chapter. The term "share" means a share;

(3) For the purpose of this Act, the term "transfer" means that the ownership is transferred at a cost due to contractual or legal causes.

(4) Shares prior to the issuance of share certificates, rights arising from underwriting of shares, preemptive rights and investment certificates issued by a corporation established by special Acts shall be deemed share certificates in the application of this Act.

(5) In the application of this Act, the terms of a resident, nonresident, domestic corporation, foreign corporation, or domestic business place of a non-resident and a foreign corporation shall be governed by the examples of terms used in the Income Tax

Article 3 (Taxpayer)

A taxpayer of securities transaction tax shall be any of the following persons:

1. Where stock certificates falling under any of the following items are traded and settled by transfer between accounts, the Korea Securities Depository established pursuant to Article 294 of the Financial Investment Services and Capital Markets Act (hereinafter referred to as the "Securities Depository"):

(a) Stocks transferred on the securities market;

(b) Stock certificates transferred in a manner prescribed by Presidential Decree outside the securities exchange;

2. In addition to subparagraph 1, where share certificates, etc. are transferred through a financial investment business entity under Article 8 (1) of the Financial Investment Services and Capital Markets Act (hereinafter referred to as "financial investment business entity"), the relevant financial investment

3. In cases of transfer of stock certificates, etc. other than those under subparagraphs 1 and 2, the transferor of the relevant stock certificates, etc.: Provided, That where a nonresident or a foreign corporation that does not have a domestic business place in Korea transfers stock certificates, etc. other than those through a financial investment business entity, the transferee of

/ former Restriction of Special Taxation Act (amended by Act No. 10596, Apr. 14, 2011)

Article 117 (Exemption of Securities Transaction Tax)

(1) Securities transaction tax shall be exempted in any of the following cases:

14. Where stocks are transferred for the purpose of the establishment of a new corporation under Article 47-2 of the Corporate Tax Act, a merger under each subparagraph of Article 44 (2) or (3) of the same Act, a division meeting the requirements under each subparagraph of Article 46 (2) or Article 47 (1) of the same Act, the comprehensive transfer of assets meeting all the requirements under each subparagraph of Article 37 (1) of the same Act, or the comprehensive exchange and transfer of stocks meeting all the requirements under each subparagraph of Article 38 (1);

director of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010)

Article 44 (Taxation on merged Juristic Person)

(1) Where an extinguished corporation is dissolved through a merger, the assets of the corporation shall be deemed transferred to the merged corporation. In such cases, transfer gains or losses (referring to the amount calculated by subtracting the value under subparagraph 2 from the value under subparagraph 1; hereafter the same shall apply in this Article and Article 44-3) accruing from the transfer shall be included in the calculation of the income amount for the business year in which the merger is

1. The transfer value received by an extinguished corporation from the merged corporation;

2. The value obtained by subtracting the total book value of liabilities from the total book value of assets as at the date the merger of the extinguished corporation is registered (hereafter in this Sub-Section, referred to as "net asset book value");

(2) In applying paragraph (1), in cases of a merger that meets all of the following requirements, the value under paragraph (1) 1:

Transfer profit or loss may be deemed nonexistent in light of the net asset book value as at the date the merger of a extinguished corporation is registered: Provided, That in extenuating circumstances prescribed by Presidential Decree, transfer profit or loss may be deemed nonexistent, as prescribed by Presidential Decree, even if it fails to meet the requirements under subparagraph 2 or 3,

1. A merger shall be between domestic corporations which have continued business for not less than one year as of the date of merger registration;

2. The total cost of merger which stockholders, etc. of an extinguished corporation receive through the merger shall be at least 80 percent of the value of the stocks, etc. and the stocks, etc. shall be allocated, as prescribed by Presidential Decree, and the stockholders, etc. of the extinguished corporation shall hold by the last day of the business

3. The merged corporation shall continue the business succeeded from the extinguished corporation by the end of the business year in which the merger is registered.

(3) Where a domestic corporation merges with another corporation which holds the total number of outstanding stocks or total amount of investment, transfer gains or losses may be deemed nonexistent, notwithstanding paragraph (2).