Seocho 2013west0348 ( October 7, 2013)

Article 35 (2) of the Inheritance Tax and Gift Tax Act shall not apply where there is a justifiable reason for a transaction between a non-specially related persons.

In order for the taxation of gift tax under Article 35 (2) of the Inheritance Tax and Gift Tax Act to be lawful, not only the transferor transferred the property at a significantly higher price than the market price to a person other than the person having a special relationship, but also the tax authority must prove that there is no justifiable

Article 35 of the Inheritance Tax and Gift Tax Act

2013Guhap59828 Revocation of Disposition of Imposition of Gift Tax

DoAA

BB Director of the Tax Office

Seoul Administrative Court Decision 2013Guhap59828 decided December 05, 2014

October 17, 2014

December 05, 2014

1. The imposition of the gift tax of KRW 0,000,000 (including the penalty tax) on the Plaintiff on March 19, 2012 by the Defendant shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

가. 원고, 장△△, 김○○, 유□□, 주식회사 ◎◎◎ 및 김○○은 성체줄기세포사업을 영위하는 비상장회사인 주식회사 ◇◇바이오◇(이하 '◇◇'이라 한다)의 주주들로서 2006. 12. 12. 코스닥 상장회사인 주식회사□□□□(이하 '○○○○'이라 한다)과 사이에 ◇◇이 발행한 주식 0,000,000주(전체 발행주식의 100%, 그 중 원고의 주식은 000,000주이다. 이하 원고가 양도한 ◇◇의 주식을 '이 사건 주식'이라 한다)를 합계 00,000,000,000원(주당 00,000원, 그 중 원고의 양도대금은 0,000,000,000원)에 양도

The stock and management acquisition agreement to be made was concluded.

(b) △△△△△△△△ (hereinafter referred to as “△△△△△△△△△△”) shall be a non-standing in the education robot business

The shareholders of △○, a company, (hereinafter referred to as the "Plaintiff, etc." in total with the shareholders of △△△△△, etc.), are shareholders, shall be December 2006.

12. Between △△△ and △△△, a share and management acquisition agreement was concluded to transfer 56,400 shares (60% of the total outstanding shares) issued by △△△△ to KRW 00,000 per share (00,000 won per share) (hereinafter referred to as “instant acquisition acquisition agreement”).

C. On December 22, 2006, the Plaintiff received 7,228,611,380 won of the transfer price of the instant shares from △△△, and accordingly reported and paid KRW 00,000,000.

D. According to the supplementary assessment methods set forth by the former. The Head of the Central Regional Tax Office of △△△△ (amended by Act No. 8828, Dec. 31, 2007; hereinafter referred to as the “Inheritance Tax and Gift Tax Act”) conducted a tax investigation with respect to △△△, the share value of △△△△△△△ was 0,00 won per share and 0,000 won per share, but the shares value of △△△△△△△△△△△△△△△△ was 0,00 won and is 0,000 won per share, the △△△△△△△△

E. Accordingly, on March 19, 2012, the Defendant decided on the Plaintiff’s taxable value of the gift tax of KRW 0,000,000 [the taxable value of the gift tax of KRW 00,000 - 00,000 - 300 million] under Article 35 of the Inheritance Tax and Gift Tax Act and Article 26 of the Enforcement Decree of the same Act [the grounds for recognition] and notified the Plaintiff of KRW 0,00,00,000 (including additional tax, KRW 00,000,000,000) of the gift tax of January 1, 2007 (the amount of the gift tax of KRW 00,00,00,000). (hereinafter “the disposition of this case”) [the grounds for recognition]] without dispute, Gap evidence No. 1, 2-1, 2-1, 1-2, and 1-300, respectively, the purport of the entire pleadings and arguments.

2. The plaintiff's assertion

A. While making efforts to resolve the financial difficulties of △△△△△△, the Plaintiff, etc. transferred the stocks and management rights issued by △△△△△△△○○○ to △△△△○○ upon the proposal of Hong○○○, a shareholder of △△△△○○, who is a shareholder of △△△△△△△○○, while making efforts to resolve the financial difficulties of △△△△△△△△△△△△△, to acquire the stocks and management rights of △△△○○○○, and to acquire the stocks of ○○○○ on November 16, 2006, ① the △△△△△△△△△△ shares of △△△△△△△△△△△△△△△, a part of the △△△△△△△△ shares was transferred to 0 billion won, and ② the above acquisition amount was transferred to ○○○○○, a shareholder of the individual transferor of △△△△△△, and ④ the Plaintiff, etc. prepared a memorandum to acquire the stocks from ○○.

B. The acquisition agreement of this case was concluded in accordance with the above memorandum of understanding, and the transfer price of the stocks of this case 0,000,000,000 won received by the Plaintiff is merely limited to the external amount of appearance created formally by Hong○○ in the course of promoting the restructuring related to △○, and cannot be deemed as the actual transfer price.

C. Cruelly, even if the Plaintiff received KRW 0,00,000 as the price for the transfer of the instant shares, it is reasonable to deem that there exists a justifiable reason in light of transactional practice, since it is the amount agreed upon between △△△△ and unrelated parties in accordance with the purpose of resolving the financial difficulties of △△△△△ and promoting the restructuring related to △△△△△, and thus,

D. In addition, the Plaintiff merely lent the name of the account in accordance with the above memorandum of Understanding, but did not belong to the Plaintiff from the beginning, and the Plaintiff does not actually enjoy economic benefits equivalent to the above money. Therefore, in relation to the transfer of the shares in this case, there is no gift tax or gift tax, which is subject to gift tax.

E. Nevertheless, the instant disposition, which took place on a different premise, was unlawful as it was conducted without examining the overall developments and purposes of the transaction conducted between persons without a special relationship.

3. Relevant statutes;

Attached Form is as shown in the attached Form.

4. Determination

(a) Article 35 (2) of the Inheritance Tax and Gift Tax Act;

Article 35(2) of the Inheritance Tax and Gift Tax Act provides that where a property is transferred to a person other than a specially related person at a price substantially higher than the market price without any justifiable reason due to transactional practice, the transferor of such property shall be presumed to have received a donation of the amount equivalent to the difference between the price and the market price, and then the amount equivalent to profits prescribed by the Presidential Decree shall be deemed to be the value of donated property to the person who has acquired such profits. Article 26(6) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act of the same Act provides that the amount substantially higher than the market price is the value of donated property

The legislative purport of Article 35(2) of the Inheritance Tax and Gift Tax Act is to: (a) where profits equivalent to the difference between the price and the market price are, in fact, transferred without compensation through abnormal means that manipulates the transaction price for the benefit of the transaction partner; (b) thereby coping with and promoting fair taxation by imposing gift tax on the profits earned by the transaction partner. However, since the transaction between unrelated parties does not coincide with each other; (c) it is difficult to deem that the difference was donated to the transaction partner solely on the basis that there is a difference between the price and the market price; (d) it is difficult to deem that the transaction between unrelated parties was donated to the transaction partner. In full view of these points, Article 35(2) of the Inheritance Tax and Gift Tax Act added taxation requirement that “the transaction between unrelated parties, unlike the transaction between related parties, should have no justifiable reason in light of the transaction practice.” In addition, it is reasonable to deem that the transferee’s transfer of property at a higher price has reasonable reason to believe the transaction price at a reasonable price reflecting the objective exchange value; and even if there was an objective reason to deem that the transferee’s acquisition of property at the transaction price from a reasonable economic perspective (see.

In addition, in general, in light of the fact that the tax authority bears the burden of proving the fact of taxation requirement in a lawsuit seeking revocation of taxation and the language, content, and form of provision under Article 35(2) of the Inheritance Tax and Gift Tax Act, the tax authority should prove not only that the transferor transferred the property to a person other than the person having a special relationship at a significantly higher price than the market price, but also that there is no justifiable reason in light of transaction practices (see Supreme Court Decision 2011Du2075, Dec. 22, 2011).

B. Details of the instant acquisition agreement, etc.

As to the instant case, the following facts can be acknowledged in full view of the purport of the entire pleadings in the descriptions of health care units, Gap evidence Nos. 5 through 30, Gap evidence Nos. 44, Eul evidence Nos. 5 and 6 (including the number of each branch number):

1) △△△ was established around July 2005 by the head of △△△△△, a financial director from the Plaintiff, the U.S., the Kim○○, and the securities company, who studies the sexual stem cell. The Plaintiff and Kim○○, a science and engineering doctor, performed research, and the representative director was in charge of the management of the company, and supported △△△△△△△△△△△.

2) Around November 2006, Da○○○ held approximately 00.07% of the shares issued by Da○○○○○, and at the same time, Red○○ secured management rights as one shareholder who holds 100% of the shares issued by Do○○○○.

3) On November 16, 2006, 2006, on which the Plaintiff claimed that the Hong○○ and the △△△△△△△△ prepared a memorandum of understanding, the head of the relevant △△△△△△△ paid KRW 100 million as a check. On November 29, 2006, the head of the △△△△△△△△△△△ prepared a contract with the Red○○ on the following terms

Article 1 (Purpose) The purpose of this Agreement is to carry out as a principle of mutual trust and good faith each other, the two memorandums signed on November 16, 2006 between the largest shareholder and Red ○○○. Article 2 (Amount) The head of the △△△△△△△△△△ shall pay the contract performance guarantee money to the Hong○○○ in order to faithfully carry out the memorandum of understanding:

1) The payer: the principal shareholder of △△△△△ of △△△△; and

2) Recipient: Red ○○○ largest shareholder.

(iii) Amount: 0 billion won;

(4) Date of payment: November 29, 2006

5) Other: Red ○○ shall guarantee the school of 00,000 shares of △△△△ as a security for performance guarantee.

Provision of authorized lending and lending stocks as securities

Article 3 (Implementation of Contracts) The head of △△△△ and the Hong○○○○ shall, when the payment of the transfer price and the delivery of share certificates under Article 4 of the MOU as a smooth implementation of the MOU, settle the amount prescribed in the preceding Article with an intermediate payment and pay it to the △△△△△△△△△△△△ upon settling accounts in the share certificates of delivery of the △△△△△△’s stocks offered by

4) On November 29, 2006, △△△△ lent KRW 000 million to △△△△△ on the said contract’s performance guarantee, and the head of △△△△△△△ was withdrawn from the check and paid all to ○○ on the same day.

5) After December 12, 2006, the Plaintiff, etc. entered into the instant transfer agreement with the △△△△△△△△ on the purport that the entire shares of △△△△△ and the shares of △△△△△△△△ were transferred.

6) On December 13, 2006, ○○○ Investment Company (hereinafter referred to as “○○ Investment Company”) has transferred KRW 0 billion to the account of the head of △△△, KRW 0 billion to the account of the head of △△△△, KRW 0 billion in total, KRW 00 billion to the account of the head of △△△△△△△, and KRW 00 billion. On the same day, the head of △△△△△△, and KRW ○○ has transferred the amount of KRW 00 billion among them to the ○○ Investment Company (hereinafter referred to as “○○ Investment Company”).

7) On December 13, 2006, ○○○○○○ entered into an agreement on a loan for consumption with a monthly lending of KRW 00 billion between the Plaintiff and ○○○○○○○○ on the same day, and remitted KRW 00 billion to ○○○○○ on the same day. On the same day, ○○○○ transferred KRW 00 billion to ○○○○○○○○ upon the participation in the capital increase with new shares issued by △△△ (0 million). Of these days, ○○ transferred KRW 00 billion to ○○○○○. The remaining KRW 0 billion was paid to

8) On December 21, 2006, △△△ transferred KRW 0 billion to the account of the head of △△△△, KRW 0 billion, and KRW 0 billion in total to the account of the head of △△△△△, under the pretext of the acquisition price under the instant transfer agreement. The head of △△△△△ on the same day, the head of △△△△△△ paid KRW 0 billion out of that day as a check to Hong○ on the same day.

9) On December 22, 2006, 100,000 shares issued by Hong○○○○, which are all issued by Hong○○○○○○, were taken over at least KRW 00 billion as follows, and △○○ Co., Ltd. (hereinafter referred to as ○○○, a listed company held by △△△△△ (hereinafter referred to as ○○), with a view to transferring the shares to Hong○○○, etc. of KRW 00 billion.

Article 2 (Limit on Transfer of Stocks)

1. Transferred shares: 0,000,000 common shares issued by Ra○○○ shares, and 0,000 common shares issued by Ma○○○○ shares; and

2. Transferor: Red ○; and

3. The transferee: Do governor; and

4. Transfer value: 00 billion won.

5. Terms of transfer: A transfer of 0,000,000 common shares of the above ○○○, owned by △△△, to a person designated by ○○ or Red ○○, who is owned by △△.

Article 4 (Payment of Transfer Price, Delivery of Stock Certificates, etc.)

1. He shall pay the full amount of the transfer price to Red ○○ on the date of conclusion of this contract;

Article 5 (Guarantees by Red○○)

3.For the implementation of this Agreement, Hong○ shall guarantee:

1) Red ○○ is owned by △△ at the time of the conclusion of this contract for the transfer of the target company

of 0,000,000 registered common shares shall be accepted in 00 billion won.

10) In addition, the U.S. on the same day entered into a monetary loan agreement with the U.S. head of Hong○○ for a period of 5 months with a U.S. lending KRW 00 billion to Hong○○○. In the event that Hong○○ fails to repay the above money, the U.S. head of the U.S. shall transfer the entire stocks and the management rights of the Da○○○○.

11) Red ○○ did not repay the above loans KRW 22.5 billion to the U.S., and accordingly, the Plaintiff, the U.S. head of the △△△△△△△, and Kim ○○○ acquired the entire shares of Ra○○○○○ from each borrowed name. The shares acquired by each borrowed shareholder are 21% of this ○○ (the Plaintiff’s wife), Haak, and Kim○, respectively, and the old ○○○ (the wife of △△△△△△) is 00%.

12) On December 22, 2006, △△△△ transferred KRW 000,000,000, total amount of KRW 000,000,000 to the account of ○○○○○, the wife of Kim○○, as the acquisition price under the instant acquisition agreement. The head of △△△△△△△△ deposited all of these days on the same day, and paid KRW 00,00,000,000 in the name of the minority shareholders of △△△△△△△△△△△.

13) On the same day, △△△△ transferred KRW 0,000,000 to the Plaintiff’s account as the acquisition price under the instant acquisition agreement, KRW 0,000,000,000 to the Plaintiff’s account, KRW 0,000,000,00 in total, and KRW 00,000,000 in total, and KRW 00,000,000 in total to the Kim Tae-do’s account. The head of △△△△△△△△△ on the same day, withdrawn KRW 0 billion in check and paid to Hong○○.

14) On January 11, 2007, △△△ transferred KRW 0,00,000 to the account of the U.S. with the acceptance price under the instant transfer agreement, △△△△△,00,000 on the same day, and △△△ deposited KRW 0,000,000 on the following day, and paid to the △△△△ Company.

15) Meanwhile, the head of △△△△ was present at the related case where ○○ sought revocation of the disposition of gift tax, etc. against the head of the tax office (Seoul Administrative Court 2013Guhap59835), and the head of △△△△△ stated that the head of △△△△△ was unable to receive a memorandum of understanding as he left the U.S., while having been working in △△△△△, the head of △△△△ was present at the △△△△△△△, which led the Plaintiff to conduct the business. In March 2007, 207, while working in △△△△△, the head of △△△

C. Whether it is subject to gift tax

1) The existence and content of the memorandum of Understanding dated November 16, 2006

First of all, the following circumstances revealed by the above facts, i.e., ① △△△△△ and Hong○○ agreed to pay contract performance guarantee money in order to secure the faithful performance of the understanding note alleged by the Plaintiff in the contract prepared on November 29, 2006. Thus, the head of △△△△△△△ on the same day actually paid performance guarantee money of KRW 0 billion to Hong○○○, and ② on December 22, 2006, the head of △△△△△△△△△△△△△ was actually paying performance guarantee money of KRW 10 billion. ② The head of △△△△△△△△△△△△ agreed to transfer the above ○○○○’s shares, etc. held by ○○○○○ and other stocks held by ○○○○, instead of acquiring KRW 00 billion shares, according to the contents of the agreement on acquisition of this case’s shares and the implementation of the agreement, even if the Plaintiff did not present the Plaintiff’s shares to ○○○○○ and other shares.

(ii) the existence of justifiable reasons for transaction practices;

Furthermore, in determining the transfer price at the time of the transfer of the instant shares, the following circumstances are considered as follows: (a) whether the Plaintiff was aware of the fact that the Plaintiff transferred the instant shares at KRW 00,000 per share to △△△; (b) it is insufficient to conclude that there was no justifiable reason in light of the transaction practices; (c) there is no other evidence to acknowledge the fact that there was no other reason; (d) rather, in light of the following circumstances acknowledged by comprehensively taking into account the agreement between the parties concerned who were made before and after the transfer of the instant shares, a series of transaction details, and the purport of the entire oral argument as to November 16, 2006, the facts acknowledged as above, and the evidence revealed earlier, it is reasonable to deem that there was a justifiable reason in the transaction practices in transferring the instant shares to △△△△△△△.

A) At the end of 2005, the research paper manipulation case of Y0 doctoral degrees, which conducted stem cells, became known, and around 2000 doctoral degrees were indicted due to fraud, embezzlement, etc. around 2006, ○○○○○○, which conducted research on sexual stem cells, which were similar fields, was also difficult to attract investment funds. In light of the contents of the understanding angle inferred as above, the reasons why the Plaintiff et al. prepared the instant letter of understanding between Hong○ and Hong○○, etc., appears to be aimed at continuously running the sexual stem cell research project of ○○○○, by seeking ways to attract investment, and does not simply seem to have obtained profits by disposing of the shares of this case.

B) After a series of shares transfer and financial transactions in accordance with the MOU have been completed, the Plaintiff et al. acquired shares in Do○○○○○○ as the price for the transfer of the instant shares. Since the Plaintiff et al. could control Do○○○○○ through Do○○○○○ through Do○○○○, and △△△△△△ in a phased manner, the Plaintiff et al. became able to easily raise business funds by means of public offering of shares by utilizing the △△, a listed company, even while maintaining the management right to △△△△△△△ in the instant case, not by transferring the instant shares held by the Plaintiff et al., but by changing corporate governance structure or by

C) The Hong○○ also became able to acquire cash of KRW 00 billion with the above ○○○ and KRW 0 billion with the stocks owned by △△△△△△ in return for the transfer of the stocks owned by ○○○○ in the Plaintiff, etc. through a series of transactions under the MOU, and the MOU also acquired not only the stocks and management rights of the two advanced venture businesses, which are △△△△△△△, but also the stocks paid in return for the acquisition of KRW 00 billion out of the share price paid in return for the acquisition of KRW 00 billion ( KRW 00 billion with the subscription price for convertible bonds, KRW 00 billion with the subscription price for convertible bonds, KRW 00 billion with the transfer price for the above ○○○○○○○, and KRW 00 billion with the transfer price for the above ○○○○ in return for a series of transactions under the MOU’s understanding. Therefore, it is deemed that there was an objective reason to deem such a series of transactions was based on the business judgment

It is difficult to do so.

D) The sum of the acquisition price of △△△△△△○○○○ shares, as stipulated in the instant acquisition agreement, is merely nominal, and thus, KRW 00 billion was immediately withdrawn, immediately after being deposited into the account of the Plaintiff, etc., and was returned to △△△○○. After undergoing a series of processes prescribed in the written agreement, the Plaintiff et al. received the shares of △△△△△△△△○ shares from Red○ in fact as the price for the transfer of △△△△△△△△△ shares, and thus, the Plaintiff et al. and Red○○, etc. came to bring about the same result as having entered into an agreement with △△△△△△ and △△△△△△△

E) Therefore, it is reasonable to view that the actual acquisition by the Plaintiff, etc. as the price for the transfer of the instant shares is determined based on the price of ○○○○ shares, and thus, the transfer value of the instant shares is determined based on the price of ○○○ shares. However, there are no materials to specifically calculate the value of ○○ shares received as the price for the transfer in addition to the shares held by Do○○○○○, and therefore, it is difficult to conclude that the Plaintiff, etc. transferred the instant shares at a price significantly higher

F) In addition, interpreting that there was no justifiable reason under the practice of transaction immediately on the ground that only the instant transfer agreement, which is a part of the entire transaction, was transferred at a price significantly higher than the market price without examining the purpose and circumstances of the entire transaction pursuant to the awareness of understanding as above, is unreasonable as it goes against the legislative intent of Article 34(2) of the Inheritance Tax and Gift Tax Act, which requires that there was no justifiable reason in light of the practice of transaction between the parties who

G) Most of all, red ○○ or △△ did not have any special relationship with the Plaintiff, etc., and there is no reason or motive to gratuitously transfer economic benefits from KRW 10 billion to the Plaintiff, etc. In light of the actual transaction’s results, the amount transferred as the transfer price of the instant shares was anticipated to be returned to △ and Hong ○ through a series of processes from the beginning, and thus, the Plaintiff was in a position to control the transfer price or enjoy its profit.

3) Sub-determination

Therefore, it is reasonable to deem that the Plaintiff had justifiable grounds for the transfer of the instant shares in 00,000 won per share to △△△, so the disposition of this case different from the premise is unlawful, and the Plaintiff’s assertion pointing this out is with merit (On the other hand, the Plaintiff already declared and paid the transfer income tax according to the transfer of shares, and the imposition of the gift tax on the Defendant’s transfer of shares is unlawful as it is against Article 2(2) of the Inheritance Tax and Gift Tax Act. However, as seen earlier, the Defendant calculated the transfer income tax amount of KRW 00,000 paid by the Plaintiff as the already paid tax amount in the course of the instant disposition, and thus, the Plaintiff’s assertion pertaining thereto is without merit).

5. Conclusion

The plaintiff's claim is accepted, and the costs of lawsuit are assessed against the losing defendant. It is so decided as per Disposition.