Seoul High Court 2007Nu27464 (No. 14, 2008)

National High Court Decision 2004Do2145 (Law No. 18, 2006)

on-the-spot transfer value of shares means the agreed amount.

In calculating transfer income tax or securities transaction tax, the actual transfer value refers to the amount actually agreed upon as the price at the time of transaction. If the actual transfer value is confirmed if the transaction is accompanied by an objective monetary value, such as the appraisal value or market price, and the actual transfer value is confirmed. Therefore, it is necessary to examine whether the

Article 94 of the Income Tax Act, Articles 96 and 114 of the Income Tax Act

Article 7 of the Securities and Exchange Act, Article 4 of the Enforcement Decree thereof

208Du9874, revocation of disposition of imposing capital gains tax, etc.

-Appellee

Section AA

-Appellant

○ Head of tax office

Seoul High Court Decision 2007Nu27464 Decided May 14, 2008

July 28, 2011

The judgment below is reversed and the case is remanded to Seoul High Court.

The plaintiff's grounds of appeal (the supplemental grounds submitted after the expiration of the submission period are to the extent of supplement) and the defendant's grounds of appeal are examined together.

1. According to Article 94 subparagraph 4, Article 96 (2), and Article 114 (5) of the former Income Tax Act (amended by Act No. 6292 of Dec. 29, 2000), the transfer value of stocks not listed on the Korea Stock Exchange shall be based on the actual transaction price as at the time of transfer, and if it is impossible to recognize or confirm such actual transaction price, it may be based on the standard market price, etc.

2. The reasoning of the lower judgment reveals the following facts.

A. On June 6, 200, the Plaintiff and eight domestic and foreign corporations (hereinafter collectively referred to as “the transferor in this case”) and △△△ Group Co., Ltd. (hereinafter referred to as “△△△”). On June 6, 200, the transferor in this case decided to transfer approximately 47.85% of the shares issued by △△△. 74,93,052 shares to △△△. The transfer price is 30% in cash, the remaining 70% in cash, the listed shares, and the shares of △△△ Group were received as 40,00 won per share, 390,000 won per share, and 30% of the total shares issued by △△△△△ Group were assessed as 10,000 won per share, and 30% of the outstanding shares of △△△△△△ Group were assessed as 10,000 won per share, and 300% of the outstanding shares of △△△ Group were transferred to 30,00,00.

B. On June 8, 2000, Korean shareholders, including the Plaintiff, were entitled to receive 76,923 share of the Ga branch and BB group, foreign shareholders, from the company affiliated with the AA branch and the company affiliated with the BB group, the amount of which would be equivalent to 30 billion won. The foreign shareholders decided to re-distribution to the two groups according to the ratio of transferred shares by aggregating the price allocated to both groups by payment means, and such content was reflected in the agreement with △△ on June 15, 200.

C. On July 25, 200, 200, the transferor of this case and △△△△, based on the result of the asset loss conducted by △△△. The total amount of KRW 280,875,517,412, shall be deducted from the total amount of transfer, and KRW 13,49,99,98 among them shall be deducted from cash, KRW 235,875,217,414, respectively, and the remaining KRW 31,500,300,000 per share shall be assessed as KRW 390,000 per share, and among the transferor of this case, the transferor of this case agreed to deduct KRW 80,770,00 from the total amount of stock transferred to domestic shareholders.

D. According to such agreement, the transferor of this case, other than the Plaintiff, transferred the shares of △△ Docom held on July 26, 200 to △△△△, and received the price for the transfer thereof, and the Plaintiff transferred △△△△. In order to avoid the transfer income tax out of the short-term holding of shares of △△ Docom, 5,883,218 shares (hereinafter “the shares of this case”) held on October 5, 200 to △△△, and in return, received 66,69,526,019 shares of cash and 421,265 shares of △△△△.

3. Based on these factual relations, the court below held that the transferor of this case transferred △△. Since the transferor of this case's shares jointly transferred △△△△△. The transfer proceeds paid by △△△△ Group can be deemed to have been calculated in accordance with the same standard for all of the transferors of this case. The transfer proceeds of △△△△△ Group's shares in cash are 32,845, while the transfer proceeds of △△△△△ Group's shares in Korea are 36,107 won per share for the plaintiff who received cash and △△△com shares due to its transfer proceeds, while the transfer proceeds are 36,107 won per share, the transfer proceeds per share are for compensating for losses, such as decline in the market price of △△ Telecom shares received as cash substitute for the transfer proceeds, and thus the difference cannot be included in the transfer proceeds of the shares of this case, the transfer proceeds of this case's shares between the plaintiff and △△△△△△△, 32,845 won per share.

However, it is difficult to accept such judgment of the court below for the following reasons.

The actual transfer value, which is the basis for calculating capital gains tax or securities transaction tax, refers to the amount of actual agreement at the time of transaction rather than the market price that reflects objective exchange values. As such, if the transaction is a value exchange based on which the monetary value of the object of exchange is determined by objective monetary value, such as the appraisal value or market price, and entails the settlement procedure on the difference between different values based on this, it shall be deemed that the actual transfer value is confirmed, barring any other circumstances where it is not an exchange (see, e.g., Supreme Court Decisions 98Du19841, Nov. 26, 199; 2009Du19465, Feb. 10, 201). If the value of the object of exchange is determined by objective monetary value and the settlement amount is received together based on such value, the actual transfer value shall be the sum of the actual transaction value.

However, according to the facts acknowledged by the court below, among the transferors of △△. The domestic shareholders, including the plaintiff, received 30 billion won more from the foreign shareholders as the price for the transfer of the shares of this case. Thus, the transfer value per share of △△-com by the domestic shareholders cannot be deemed to be the same as that of the foreign shareholders. Moreover, even if the difference between the transfer value per share of △△-com by the domestic shareholders and the transfer value per share of △-B reflects the losses arising from the decline or cashation of the domestic shareholders’ shares of △△-sicom, the difference between the transfer value per share of △△-si shares and the transfer value per share received by the domestic shareholders of Korea, it cannot be deemed to be the transfer price as long as it is in a relationship with the domestic shareholders’ transfer of shares △△-si shares by the domestic shareholders, and thus, the foreign shareholders, as long as it is in a relationship with the domestic shareholders’ transfer of shares

Rather, as acknowledged by the court below, if the value of the shares of this case was determined as the price for the transfer of the shares of this case at KRW 390,00 per share and was paid the settlement amount based thereon, if the value of the shares of this case is deemed to have been determined based on objective monetary value, the sum of the value and the settlement amount shall be deemed the actual transfer value of the shares of this case. If the value of the shares of this case is not calculated based on objective value, the transfer value of the shares of this case shall be deemed to be the actual transfer value of the shares of this case. If it is not calculated based on objective value, the transfer value of the shares

If so, the court below should have deliberated on whether the value of the shares received by the plaintiff was determined based on objective monetary value, and judged whether the sum of the value and the settlement amount can be seen as the actual value of the shares of this case. However, without examining the above, the court below determined that the transfer value per share of △△△com shares of Korea constitutes the actual value of the shares of this case. In so doing, the court below erred by misapprehending the legal principles on the actual value of exchange, which led to the failure to exhaust all necessary deliberations, and the plaintiff's grounds of appeal pointing this out and the defendant's grounds of appeal are with merit.

4. Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.