Where stocks are disposed of in accordance with the rehabilitation plan approval plan, it shall not constitute a disposition of change of organization, such as merger, division, etc.

It is difficult to view that the disposal of shares according to the rehabilitation plan approval plan constitutes a disposition of change of organization such as merger, division, etc. under the Restriction of Special Taxation Act, and it does not constitute a "equity swap due to the expansion of facility investment and business size of a corporation" under the Enforcement Decree of the Restriction

Article 27-6 (6) of the Enforcement Decree of the Restriction of Special Taxation Act

Suwon District Court 2018Guhap61957

Title 00

000 director of the tax office

May 23, 2018

June 14, 2018

1. The plaintiff's claim is dismissed.

2. Revocation of the disposition imposing gift tax of KRW 1,458,474,870 on the Plaintiff on August 1, 2016 by the former Defendant to whom the Plaintiff was responsible for the litigation cost is revoked.

1. Details of the disposition;

A. On January 3, 2012, the Plaintiff, the father of the Plaintiff, issued a certificate of KRW 190,876 (hereinafter “instant shares”) of the non-listed shares of j Co., Ltd. (hereinafter “Non-Party Corporation”) from k0 (hereinafter “Non-Party Corporation”) and held 236,352 shares (52%) out of the total number of outstanding shares of Non-Party Corporation 454,52, and held 236,352 shares (52%) as the representative director of the Non-Party Corporation from August 30, 2013.

B. On April 30, 2012, the Plaintiff reported and paid KRW 249,99,800, which is calculated by deducting KRW 500 million from the taxable value of the gift tax on shares in this case, according to the special taxation of gift tax on succession to family business as stipulated in Article 30-6(1) of the former Restriction of Special Taxation Act (amended by Act No. 12173, Jan. 1, 2014; hereinafter the same) with respect to the donation of shares in this case, to the Defendant on April 30, 201, the Plaintiff reported and paid KRW 249,99,80,00, which is calculated by applying the tax rate of 10%. The non-party corporation received an objection from the rehabilitation plan (00.200,000,000,000) from the District Court on June 30, 2014 (hereinafter referred to as the “former Restriction of Special Taxation Act”). The Plaintiff’s number of shares owned by the non-party corporation was 40, 27.716.

[Ground of recognition] Unsatisfy, entry of Gap evidence 1 through 6 (including branch numbers for those with a satisfy number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. Summary of the plaintiff's assertion

1) The reduction of shares due to the consolidation of shares, etc. according to the court's approval plan for rehabilitation plan constitutes "a disposition following the change of organization, such as merger, division, etc." under the proviso of Article 27-6 (6) 1 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 26070, Feb. 3, 2015; hereinafter "former Enforcement Decree of the Restriction of Special Taxation Act"), and thus, it does not constitute "a case where the share of donated shares is reduced" under Article 30-6 (2) 2 of the Restriction of Special Taxation Act.

2) Even if the decrease in the share of the Plaintiff’s share in accordance with the court’s rehabilitation plan does not constitute “disposition following the change of organization, such as merger and division,” the largest reason for the decrease in the Plaintiff’s share is due to debt-equity swap according to the rehabilitation plan. This constitutes a case of forfeited shares to allocate new shares to a person other than a person who is in a special relationship with the donee as capital gains due to the expansion of facility investment and business size of the corporation, which is stipulated as an exception to the exclusion of the provision on the special taxation of gift tax under the proviso of Article 27-6(6)2 of the former Enforcement Decree of the Restriction of Special Taxation Act, and thus, it does not constitute “the decrease in the share of donated shares” under Article 30-6(2)2 of the Restriction of Special Taxation

3) Therefore, the instant disposition should be revoked in an unlawful manner on the premise that the Plaintiff’s decrease in the Plaintiff’s shares in Nonparty Corporation constitutes “the decrease in the shares received as a donation,” which is stipulated to exclude the application of the special provisions on taxation of gift tax.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) The purport of Article 27-6(6)1 of the former Enforcement Decree of the Restriction of Special Taxation Act is to prevent the taxation requirements, non-taxation requirements, or tax reduction or exemption requirements under the principle of no taxation without the law, barring any special circumstance. It is not permissible to expand or analogically interpret the tax regulations without reasonable grounds. In particular, it is consistent with the principle of fair taxation (see, e.g., Supreme Court Decision 2008Du11372, Aug. 20, 2009). Article 30-6(1) and (2) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that a person who received a donation of shares falls under the category of gift tax under the proviso of Article 6 of the former Enforcement Decree of the Restriction of Special Taxation Act (see, e.g., Article 30-6(1)6 of the former Enforcement Decree of the Restriction of Special Taxation Act for the purpose of transferring the shares of a donee to another company for the purpose of transferring the shares of the donee by December 31, 2013).

2) The main text of Article 27-6(6)2 of the former Enforcement Decree of the Restriction of Special Taxation Act provides that “Where the equity ratio of the donee is lowered due to forfeited stocks, etc. during the process of providing for a person who has issued donated stocks, etc. for the reason that he/she issued such stocks, the case where the equity ratio of the donee is reduced due to forfeited stocks, etc. shall be excluded from the application of the special provision on taxation on gift tax shall be included in “where the equity ratio of the donated stocks is reduced”, and the proviso is a capital increase due to capital increase following expansion, etc. of facility investment and business size of the relevant corporation, and thus, the case where the donee forfeited stocks to assign new stocks to a person other than the

This provision provides that "not the same shall apply."

B) Comprehensively taking account of the purport of the entire pleadings, the Plaintiff’s share in the Plaintiff’s shares was reduced as the debt-equity swap was conducted in the rehabilitation procedure of the non-party corporation. The debt-equity swap is limited to the conversion of the debt into capital, and it does not constitute additional capital. Therefore, it is difficult to view the Plaintiff’s assertion on a different premise as above is without merit, without further examining the remainder of the issue.

3. Conclusion

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