Busan District Court 2017-Guhap2128 (Law No. 14, 2017)

The requirement under Article 42(4) of the former Inheritance Tax and Gift Tax Act is not satisfied.

It is reasonable to view that Article 42(4) of the former Inheritance Tax and Gift Tax Act can apply only to a case where a profit is obtained directly from the increase in the value of property due to the reason of increase in

2017Nu23841 Action demanding revocation of gift tax imposition

AA

BB Director of the Tax Office

Busan District Court 2017Guhap2128

March 9, 2018

April 6, 2018

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

The Defendant’s imposition of gift tax X, a trade-related class, a trade-related class, a trade-related class, a trade-related class (including additional tax), and a gift tax X, a trade-related class, a trade-related class, or a trade-related class (including additional tax) on the Plaintiff’s gift on October 2015. The imposition disposition of gift tax X, a trade-related class, and a trade-related class (including additional tax) is revoked.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Details of the disposition;

The court's explanation on this part is the same as the corresponding part of the judgment of the court of first instance. Thus, this part of the court's reasoning is accepted in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. The parties' assertion

A. The plaintiff's assertion

1) The Plaintiff is a shareholder of the instant legal entity and is not in the position of executing DD projects and EE projects (including the above two projects) on its own account. Therefore, even if HH conducted the project on its behalf, the benefit of implementing the project belongs to the instant legal entity. Therefore, the application of Article 42(4) of the former Inheritance Tax and Gift Tax Act is unlawful on the premise that the Plaintiff was given a donation of the benefit accrued from the implementation of the project.

2) The term “in-house information” under Article 42(4)2 of the former Inheritance Tax and Gift Tax Act is limited to the information pertaining to the increase in property value objectively expected to accrue. Since the housing construction project performed by the corporation of this case is a project whose future profit is uncertain, it is difficult to view the information on the instant project conducted by H as an unpublished internal information. In particular, as a project promoted by H prior to the establishment of the FF, the information on the project was widely known to the industry, and the FF was merely an acceptance of the said project. In addition, since the Plaintiff was holding all outstanding shares as a single shareholder of GG before the implementation of the EE project, the Plaintiff did not acquire the above company’s shares in relation to the information. Although the Defendant was subject to the increase in property value of PG and stocks acquired by the Plaintiff, the Plaintiff is not entitled to the increase in property value due to the increase in property value as a shareholder, even if the Plaintiff did not obtain the above increase in property value as a result of the increase in property value.

3) The term “development project” under Article 31-9(6)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act means a development project involving procedures designated and publicly notified as a development zone pursuant to the Restitution of Development Gains Act, etc., and “other reasons similar to those under subparagraphs 1 through 4 of the same paragraph, which cause an increase in property value” means cases where an increase in future property value is objectively presumed to have occurred, such as the implementation of the development project. The instant project is not a development project involving the designation or public notice of a development zone, but does not constitute a case where an increase in property value is objectively presumed to have occurred due to a housing sale project carrying risks unsold in lots. In addition, it cannot be deemed that there is a direct relation between the increase in corporate stock value, which is the Plaintiff’s acquired property, and the implementation of the instant project

4) While considering the property subject to gift tax as the stocks of the instant corporation acquired by the Plaintiff, the Defendant deducted the increase in value of the land subject to gift tax of the instant corporation, not the ordinary increase in value of the said stocks, but the date of completion of the instant project, rather than the date of approval of the housing construction project plan of the instant corporation, which was the date of occurrence of the cause of increase in property value. This erred

B. Defendant’s assertion

The Plaintiff’s increase in the value of shares satisfies the taxation requirement under Article 42(4)2 of the former Inheritance Tax and Gift Tax Act, and even if the said taxation requirement is not satisfied, the Plaintiff satisfies the taxation requirement under Article 2(3) of the former Inheritance Tax and Gift Tax Act.

3. Relevant statutes;

The entries in the attached Table-related statutes are as follows.

4. Determination

A. Whether the taxation requirement under Article 42(4) of the former Inheritance Tax and Gift Tax Act is satisfied

(i) taxation requirements;

Article 42 (4) of the former Inheritance Tax and Gift Tax Act provides that "if a person prescribed by the Presidential Decree, such as a minor, etc., acquires the property and acquires the property within five years from the date of acquisition of the property due to the reasons prescribed by the Presidential Decree such as execution of development projects, change of form and quality, partition of co-owned property, authorization and permission of projects, listing and merger of stocks and investment shares, etc. (hereafter referred to as "reasons for increase of property value" in this Article), such profits shall be regarded as the value of property donated to the person who obtains such profits." Article 42 (5) of the former Inheritance Tax and Gift Tax Act provides that "if he/she obtains profits above the criteria prescribed by the Presidential Decree, such profits shall be regarded as the value of property donated to the person who has acquired the profits, who has not been published on the management, etc. of the company by being provided with internal information from the person with a special interest, and acquires the property related to such information for a fee, such profits shall be the amount calculated as prescribed by the Presidential Decree in consideration

Article 31-9 (5) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "a person prescribed by Presidential Decree, such as a minor, etc., shall be deemed unable to perform the relevant act on his/her own account in view of his/her occupation, age, income, and property status," and Article 42 (4) of the Act provides that "The benefit above the standard prescribed by Presidential Decree shall be deemed 30 million won or more (hereafter referred to as "the increase in property value" in this paragraph) calculated in accordance with the part other than the subparagraphs of paragraph (8) of the same Article (hereafter referred to as "the increase in property value" in this paragraph) or the increase in property value is more than 30 percent of the total amount under subparagraphs 2 through 4 of the same paragraph."

Therefore, in order to establish the gift tax liability under Article 42 (4) of the former Inheritance Tax and Gift Tax Act, the donee is required to be a person who is deemed unable to perform the relevant act on his/her account on his/her own account in view of his/her occupation, age, income, and property condition such as a minor (hereinafter referred to as "main requirement"), ② to acquire property related to the information by being provided with internal information not published on the management, etc. of an enterprise by a related party (hereinafter referred to as "requirements for acquisition of property"), ③ to increase the value of property due to such reasons as execution of the development project, change of the form and quality, etc. within five years from the date of acquisition of the property (hereinafter referred to as "requirements for increase of the value

According to the above facts and the purport of the entire pleadings, the Plaintiff appears to have obtained profits above the standard prescribed in Article 42(4) of the former Inheritance Tax and Gift Tax Act and Article 31-9(7) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act as a result of an increase in the value of the pertinent shares within five years from the date of acquisition of the said shares. Thus, it is reasonable to view whether the Plaintiff satisfies the remaining requirements, excluding the requirement that the amount of property value

2) Determination of the subject requirement

A) Under the principle of no taxation without law, or under the principle of no taxation without law, the interpretation of tax laws and regulations shall be interpreted in accordance with the text of the law unless there are special circumstances, and it shall not be permitted to expand or analogically interpret without reasonable grounds (see, e.g., Supreme Court Decision 2003Du7392, May 28, 2004).

As seen earlier, in order for a donee to be subject to the gift tax under Article 42(4) of the former Inheritance Tax and Gift Tax Act, the donee shall be “a person who is deemed unable to perform the relevant act on his/her account in view of his/her occupation, age, income and property status, such as a minor

In general, the term "self-reliance" means a case where an actor is the subject of legal effect of the act, that is, a person who is not the subject of the legal effect of the act, but the person who is not the subject of the legal effect of the act. Therefore, it is consistent with the objective language and text of the above provision to interpret that the act does not fall under this. Meanwhile, the above provision is to specify the "an act of increasing the value of another person's property by the contribution of another person, not the owner of the property," and to impose gift tax if the value of property increases by the contribution of another person, not the owner of the property.

In full view of the language, legislative intent, etc. of the above provision, the term "a person who is deemed unable to perform the act on his/her own account" as stipulated in the above provision refers to a person who is deemed unable to perform the act on his/her own account in view of his/her occupation, age, income, and property status as stipulated in Article 42(4) of the former Inheritance Tax and Gift Tax Act and Article 31-9(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.

B) The following facts can be acknowledged according to the respective descriptions of Gap evidence 2 and Eul evidence 2 through 11 (including paper numbers) and the purport of the whole pleadings.

(1) At the time of the establishment of the instant legal entity (GG 209. XX. and FF. 2012), the Plaintiff, as the representative director of H, had worked for II Co., Ltd. for the period during which the instant legal entity’s business is underway (EE date of the sale of x. and DD business x. 2012) and the instant legal entity’s subscription to new shares and the period during which the instant business is carried out (P. 2012. 200). The Plaintiff was unable to engage in the selection, feasibility review, sale, and approval of the instant legal entity’s business site related to the instant business.

The draft project plan of this case was established under the direction of GG by H (EE projects, XX., and in the case of DD projects, x., 2011), the project site selection, land purchase, sale, and approval, etc. also performed by HG executives and employees under the direction of GG. The business site of this case was the same as the business site of HH, and there was no separate office space.

According to the proposal of the business plan concerning the business of this case (No. 7 No. 1 and No. 7-2), it was analyzed that at the time of the analysis, the benefit exceeding 10 billion won is anticipated to be the pre-sale profit at the time of the implementation of the business of this case, the annual housing supply and the number of houses unsold in lots was significantly decreased, and the apartment trading volume also increased.

C) According to the above facts, the Plaintiff was serving in Section II at the time of the establishment of the instant legal entity and the process of the instant legal entity, and the plan and implementation of the instant legal entity were conducted by the Plaintiff’s employees under the direction of H, the representative director of H. As such, it is reasonable to deem that the Plaintiff constitutes a person who is unable to conduct the instant legal entity’s own account in light of his occupation, etc.

3) Determination on the requirements for property acquisition

Under the premise that the Plaintiff acquired the shares of the instant corporation by being provided with the internal information that was not published regarding the management, etc. of the company from GG, which was the representative director and the representative director of H, the Defendant issued the instant disposition as seen earlier.

Article 42 (4) 2 of the former Inheritance Tax and Gift Tax Act provides for the grounds for acquisition of internal information that is not published in relation to the management, etc. of an enterprise by a person with a special interest as the object of taxation by blocking the general public's access to the relevant information and allowing the person with a special interest to enjoy benefits through internal information.

In light of the following circumstances, i.e., ① there is no evidence to deem that the plan and detailed implementation plan of the instant project made by the employees of H under the direction of the Plaintiff’s Plaintiff’s Plaintiff’s representative director, HH, had been planned to implement the instant project. In particular, the Plaintiff appears to have been in the instant corporation to have been in charge of implementing the instant project, and such internal information was not disclosed. ③ The instant project was carried out by H after obtaining approval of the project plan, and the Plaintiff acquired stocks of the instant corporation through capital increase with capital increase. In light of the fact that the instant corporation acquired stocks of the instant corporation in the process, it is reasonable to deem that the Plaintiff acquired information that “the instant corporation implements the housing construction project under the implementation of the housing construction project under the supervision of the Plaintiff’s representative director, who is the Plaintiff’s HaH’s representative director, and that there was no external disclosure of the plan.”

4) Determination on the grounds for an increase in property value

A) It is unclear whether the requirement for an increase in the value of property under Article 42(4) of the former Inheritance Tax and Gift Tax Act includes both cases where the value of property is increased directly or indirectly due to the reason for increase in the value of property under Article 31-9(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act. However, the reason for an increase in the value of property under Article 31-9(6)2 through 3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act is the one directly related to the pertinent property. Where the value of property is increased by another person’s contribution under Article 23(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, the acquisition date of each reason is the one directly related to the pertinent property. If Article 42(4) of the former Inheritance Tax and Gift Tax Act applies to cases where the value of property is increased indirectly due to the reason for increase in the value of property under Article 42(4) of the former Inheritance Tax and Gift Tax Act, and it is reasonable to view that there is an opportunity that a shareholder is an indirect benefit of the foregoing provision under Article 415 of the former Inheritance Tax Act.

B) In the instant case, as seen earlier, the Defendant deemed the instant project to be the implementation of the development project or similar, and deemed the cause of increase in the property value. However, even if the instant project falls under the implementation of the development project or similar thereto as alleged by the Defendant, it is the instant corporation that implemented the instant project. Accordingly, even if the Plaintiff acquired non-published information related to the instant project from GGG, etc. and thereby acquired the stocks value of the instant corporation, it shall be deemed that the Plaintiff was a shareholder of the instant corporation, and thus, the implementation of the instant project is not directly related to the increase in the stock value owned by the Plaintiff.

5) Sub-committee

Therefore, since the Plaintiff failed to meet the taxation requirements under Article 42(4) of the former Inheritance Tax and Gift Tax Act, the instant disposition that imposed gift tax on the basis of the said provision is unlawful.

B. Whether gift tax may be levied pursuant to Article 2 (3) of the former Inheritance Tax and Gift Tax Act

1) In light of the fact that: (a) a comprehensive gift taxation system was introduced in order to cope with an irregular inheritance and donation; and (b) a comprehensive gift taxation system was introduced under Article 2(3) of the Inheritance Tax and Gift Tax Act; and (c) the former provision on the calculation of donated property uniformly is converted into a provision on the calculation of donated property (hereinafter “the former provision on the calculation of donated property”); (c) in cases where a certain transaction and act constitutes the concept of gift under Article 2(3) of the Inheritance Tax and Gift Tax Act, taxation of gift tax shall be possible pursuant to Article 2(1) of the same Act. Provided, That in cases where a separate provision on the assessment of value limits only a specific transaction and act as gift tax while regulating a specific type of transaction and act in order to ensure the predictability of taxpayers and ensure the stability of tax law relations, and the scope of taxation may be deemed as setting the scope and limit of gift tax by prescribing the scope of taxation of gift tax limited to a certain type of transaction and act excluded from the subject or scope of taxation of gift tax cannot be imposed even if such transaction and act conform to the concept of gift tax (see, etc.

2) On the other hand, Article 42(4) of the former Inheritance Tax and Gift Tax Act provides that gift tax shall be imposed on the increased value of property only where the conditions of a certain subject, requirements for acquisition of property, and grounds for increase in the value of property are met. As seen above, among cases where the value of property increases by a third party’s contribution, it can be deemed that only a specific type of transaction and act is limited to that subject to gift tax, thereby setting the scope and limitation of gift tax imposition.

Therefore, the gift tax cannot be imposed on the increased value of shares excluded from the taxation subject to the above individual provisions pursuant to Article 2(3) of the former Inheritance Tax and Gift Tax Act.

5. Conclusion

Therefore, the plaintiff's claim is justified, and the judgment of the court of first instance is just, and the defendant's appeal is dismissed as it is without merit. It is so decided as per Disposition.