Seoul Administrative Court-2012-Gu -30134 ( October 25, 2013)

Cho Jae-2011-west-3194 (Law No. 11, 2012)

In the case of an all-inclusive share swap, the donation of profits from the transfer of low price and high price shall be applied.

In the case of an all-inclusive exchange of shares, it is reasonable to interpret that the gift of profits from a low price and high price transfer should be applied, and it cannot be deemed that the transfer of shares held under the exchange contract and the receipt of the shares in this case in return for the transfer constitutes acquisition of assets at a price considerably lower than the market price without justifiable grounds

Inheritance Tax and Gift Tax Act Article 35(1) of the Inheritance Tax and Gift Tax Act: Donations of profits from transfer at low prices

Article 26 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act: The method of calculating profits from a transfer of low-price or high-price.

2013Nu6871 Revocation of Disposition of Imposition of Gift Tax

1. The AA 2.B

The Director of Gangnam District Office

Seoul Administrative Court Decision 2012Guhap30134 decided January 25, 2013

October 1, 2014

November 5, 2014

1. All appeals by the defendant against the plaintiffs are dismissed.

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

1. Purport of claim

The Defendant’s imposition of the gift tax OOOO on February 2, 201 by the Plaintiff Han-A and the imposition of the gift tax OOOOOOB on January 10, 201 by the Plaintiff Cho Dong-B, respectively, shall be revoked.

2. Purport of appeal

The judgment of the first instance is revoked. All of the plaintiffs' claims are dismissed.

1. A part citing a judgment of the first instance;

This Court's reasoning is as follows: "The reasons why this Court should explain," "the plaintiff's assertion," "related Acts and subordinate statutes," and "the facts of recognition" are as stated in the second 4 to 61 of the judgment of the court of first instance; therefore, they are cited in accordance with Article 8 (2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

2. Determination on a new part

1) As to the provisions applicable to all-inclusive share swap

A) Article 35(1)2 and (2) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007; hereinafter referred to as the "Inheritance Tax and Gift Tax Act") provides that with respect to "the donation of profits from the transfer of property at a high price", Article 39(1)1 of the same Act provides that "the donation of profits from the issuance of new shares among the donations of profits from capital increase," and Articles 42(1) of the same Act provides that "the donation of other profits shall be made through 41, 41-3 through 41-5, 44 and 45 of this Act, where profits falling under any of the following subparagraphs are above the standard prescribed by Presidential Decree, such profits shall not be deemed the value of property donated to the person who has acquired such profits, and where profits are deemed to be changed from the conversion or exchange of shares due to changes in the value of property at the time of the conversion or exchange of shares (including changes in the value of shares)."

나) 한편 상법 제360조의2에 의하면, 회사는 주식의 포괄적 교환에 의하여 다른 회사의 발행주식의 총수를 소유하는 회사(이하 '완전모회사'라 하고, 다른 회사를 '완전자회사'라 한다)가 될 수 있는데(제1항), 주식의 포괄적 교환이 이루어지면 완전자회사가 되는 회사의 주주가 가지는 그 회사의 주식은 주식을 교환하는 날에 완전모회사가 되는 회사에 이전되고, 그 완전자회사가 되는 회사의 주주는 그 완전모회사가 되는 회사가 주식 교환을 위하여 발행하는 신주의 배정을 받음으로써 그 회사의 주주가 된다(제2항). 이처럼 상법상의 주식의 포괄적 교환은 완전자회사개 되는 회사의 주식이 완전모회사가 되는 회사에 이전되는 거래와 완전자회사가 되는 '회사의 주주가 완전모회사가 되는 회사로부터 완전자회사가 되는 회사의 주식과 대가관계에 있는 신주를 배정받아 완전모회사가 되는 회사의 주주가 되는 거래가 결합하여| 일체로 이루어진다. 따라서 완전자회사가 되는 회사의 주주가 주식의 포괄적 교환을 통하여 이익을 얻었는지 여부는 주식교환비율 산정의 기초가 된 완전자회사가 되는 회사 주식의 1주당 평가액이 상속세및증여세법상의 평가액보다 높은 가액이었는지 또는 완전모회사가 되는 회사로부터 배정받은 신주의 인수가액이 상속세및증여세법상의 평가액보다 낮은 가액이었는지 여부만에 의하여 결정되는 것이 아니라, 완전자회사가 되는 회사의 주주가 완전모회사가 되는 회사에 이전한 완전자회사가 되는 회사의 주식에 대한 상속세및증여세법상의 평가액과 완전모회사가 되는 회사로부터 배정받은 신주에 대한 상속세및증여세법상의 평가액의 차액, 즉 교환차익이 존재하는지 여부에 따라 결정된다.

C) In full view of the structure and characteristics of the comprehensive exchange transaction of shares under the Commercial Act, and the text, legislative purport, and system of the provisions related to the Inheritance Tax and Gift Tax Act including the aforementioned provisions, gift tax may not be imposed on profits acquired by the shareholders of a company becoming a complete subsidiary through an all-inclusive share swap under the Commercial Act by applying Article 35(1)2, 2, or 39(1)1(c) of the Inheritance Tax and Gift Tax Act on the donation of profits arising from the transfer of shares at a low price, and the gift tax shall be imposed by applying Article 42(1)3 of the Inheritance Tax and Gift Tax Act on the donation of profits arising from the transaction increasing corporate capital (see Supreme Court Decision 2011Du23047, Apr. 24, 2014).

D) Therefore, under Article 42(1)3, (2), and (3) of the Inheritance Tax and Gift Tax Act, the instant disposition based on Article 39(1)1(c) of the Inheritance Tax and Gift Tax Act is unlawful, without examining whether the Plaintiffs, who are the shareholders of the CCC, have a special relationship with DDR shareholders, and whether there are justifiable grounds for transaction practice.

2) Whether there is good cause for transaction practice

A) Furthermore, in the case of applying Article 42 (1) 3 of the Inheritance Tax and Gift Tax Act in this case, there is no evidence to acknowledge that the plaintiffs have a special relationship with the shareholders of DDR, and therefore, we examine whether there is "justifiable cause in light of the transaction practice" against the plaintiffs.

B) The following circumstances, which can be recognized by the overall purport of oral argument, are: (i) CCC and DD have assessed the stock price in accordance with the relevant laws and regulations, such as the Securities and Exchange Act; (ii) calculated the share exchange ratio with the opinion of the ZZ Accounting Corporation, an outside appraisal organization; (iii) even though the Plaintiffs, who received the allocation of DD shares under the instant exchange contract, received a donation from DD, a complete parent company, under the relevant laws and regulations, such as calculating the appropriate ratio of share swap, approval of the board of directors and the general meeting of shareholders, and granting appraisal rights to shareholders who oppose them, it is difficult to accept that DD’s shareholders received a donation from DD; and (iv) in light of the circumstances where DD’s share price sharply increased before and after the instant exchange contract, it cannot be readily concluded that CCC’s corporate value or share price was disadvantageous to DD’s shareholders; and (v) even if the price of shares transferred under the Securities and Exchange Act and the market price of DD’s shares was considerably lower than the market price.

C) Therefore, even if the fact that the Plaintiffs received the shares of DD is recognized to have justifiable grounds for transactional practice, the instant disposition imposing gift tax is unlawful in this respect.

3. Conclusion

Therefore, the plaintiffs' claim of this case shall be accepted in accordance with its reasoning, and the judgment of the court of first instance is just in conclusion, and all appeals against the plaintiffs are dismissed, and it is so decided as per Disposition.