Whether a duplicate investigation is made and whether a title trust is held;

(Procedural Illegality) According to the following factual relations, the document confirming the change of the shares of this case is not a tax investigation, but (whether the real illegality is actually illegal) also according to the following factual relations, the shares of this case are the shares held in title trust.

Article 81-4 of the Framework Act on National Taxes (Prohibition of Abuse of Right of Tax Investigation)

2018Guhap2259 Revocation of Disposition of Corporate Tax Imposition

SS Corporation

BB Director of the Tax Office

on October 30, 2019

on July 25, 2019

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s disposition of imposing corporate tax of KRW 3,694,316,080 (including additional tax) on the Plaintiff on March 2, 2017 shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a company established for the purpose of manufacturing and selling new products parts and finished products, and Chang △ Maeng (hereinafter “ Chang Maeng”) is a company established for the purpose of export and import business. The 94.4% of the issued stocks of the Plaintiff are Maeng, Maeng, Maeng, the representative director of Chang Maeng, and 4.6% of the issued stocks of the Plaintiff, respectively.

B. From December 6, 1986 to November 1, 2005, KimD worked as the head of an overseas legal entity, etc. However, from July 23, 1987 to August 25, 1998, Hoi acquired the total of 32,00 shares issued on a creative agreement (hereinafter “instant shares”) under the name of KimD as follows.

C. On December 24, 1999, KimD acquired shares of 12,000 won per share of 5,000 won per share of 5,000 won.

D. On February 2013, KimD sold to the Plaintiff KRW 2,500,00 in total amount of KRW 44,000 per share 2,50,080,000 per share of KRW 56,820 per share) and attached a sales contract on October 29, 2012, KimD made a preliminary return of capital gains tax pursuant to the above sales contract to the head of ○○ Tax Office (i.e., applying the capital gains tax rate of 10%; hereinafter referred to as “the instant return of capital gains tax”), and accordingly reported and paid capital gains tax of KRW 43,826,040 for the year 2012.

E. From September 7, 2016 to January 4, 2017, the director of the Seoul Regional Tax Office conducted an integrated tax investigation (hereinafter “instant tax investigation”) regarding the period from January 1, 2012 to December 31, 2015 with respect to the Plaintiff and creative terms (the extension from January 5, 2016 to December 5, 2016). The Defendant’s 44,000 shares that were sold to the Plaintiff on October 29, 200, among the shares that were reported to be sold to the Plaintiff by GimD, were nominally trusted to the KimD. Accordingly, the shares sold to the Plaintiff by GimD are merely 12,00 shares, and the shares of this case should be charged to the Plaintiff free of charge with the assessment method of the Plaintiff’s 30,000 won per share, 301, 301, 305, 301, 305, 2013.

F. Accordingly, on March 2, 2017, the Defendant issued a correction and notification of corporate tax of KRW 3,694,316,080 (including additional tax) for the business year 2012 to the Plaintiff (hereinafter “instant disposition”).

G. On May 30, 2017, the Plaintiff filed an administrative appeal with the Tax Tribunal on the instant disposition, but the Tax Tribunal dismissed the Plaintiff’s claim on March 16, 2018.

[Ground of recognition] Facts without dispute, Gap 1 through 6, 9, 10, 11, Eul 1, 2, and 6, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Procedural illegality assertion

From September 10, 2013 to October 21, 2013, the Busan regional tax office investigated the Plaintiff, KimDD, and Changsung in relation to the instant stock title trust. At the time, the Seoul regional tax office conducted a substantive tax investigation by visiting KimD’s home home and by summonsing GG at least twice as an executive officer of Chang GG, and exercising the right to ask questions and investigations. As a result, the Seoul regional tax office concluded that there was no suspicion of title trust regarding the instant stocks. However, the Seoul regional tax office conducted a secondary tax investigation on the same issue in 2016, and disposed of the instant stocks on the premise that the instant stocks are title trust stocks. Accordingly, the instant tax investigation constitutes a prohibition under Article 81-4(2) of the former Framework Act on National Taxes (Amended by Act No. 11873, Jan. 1, 2013; hereinafter “former Framework Act on National Taxes”). Thus, the instant disposition was unlawful.

2) The assertion of substantive illegality

The shares of this case were acquired in the name of KimD from July 23, 1987 to August 25, 1998, but all of the above shares were donated to KimD around December 24, 1999. Thus, the shares of this case are not owned by KimD nor owned by Jeong. Therefore, the disposition of this case, on the premise that the shares of this case were owned by Jeong, deemed that the shares of this case were gratuitously donated to the plaintiff, and that the gains of this case were included in the Plaintiff’s gross income, was unlawful.

B. Relevant statutes

The entries in the attached statutes are as follows.

C. Facts of recognition

1) Progress the procedure for confirming the stock change in writing

From September 10, 2013 to October 21, 2013, the director of the Busan Regional Tax Office had conducted the following procedures on the title trust of shares and the suspicion of free donation to the plaintiff, etc. of MaD, the following procedures were conducted for the verification of documents on stock change (hereinafter referred to as the "verification in this case").

① The director of Busan Regional Tax Office issued 'information on the submission of explanatory data on stock fluctuations' to the plaintiff, i.e., Changsung, and KimD, including the following:

As a result of reviewing the detailed statement on changes, such as stocks submitted by the issuing company on the details of changes in the stocks or equity shares held by your company, the following supplementary data shall be submitted by September 24, 2013 to confirm the unclear facts of stock transactions.

- Insufficient or unclear matters: A suspicion of title trust in relation to the acquisition of shareholder KimD’s shares, capital increase with consideration, and transfer, and a suspicion of free donation in title trust.

- Documents requiring supplementation: Reasons for stock acquisition related to 44,00 shares on October 26, 2012, which the Plaintiff acquired from KimD, and the stock acquisition fund (including all the evidence of the source and related documents of the acquisition fund, and financial evidence).

It is known that if the requested data is not submitted or the data submitted is insufficient, it is possible to conduct an investigation for confirmation of facts. The request for the submission of supplementary data is to seek cooperation from the earer without the fluent procedure of the on-site investigation to confirm specific transaction details of stock changes.

② On October 1, 2013, the public official in charge of the Busan regional tax office visited the house of KimD on October 1, 2013. The confirmation letter in the name of KimD, which was drafted at the time, is briefly indicated in paragraphs (1) through (9) on the creative terms working conditions of KimD, and the process of accepting and transferring the instant shares.

③ The director of Busan Regional Tax Office confirmed the explanatory data, etc. submitted by EGG that was a director of KimD and Chang YG, and concluded that KimD’s transaction data of KRW 60,000,000,000, which was purchased on December 24, 1999 were confirmed, but the data on the remaining shares were not confirmed, and that the total amount of the transfer proceeds was used by KimD, and that it constitutes a case where it is acknowledged that there was no suspicion of tax evasion due to the Plaintiff’s confirmation that the Plaintiff acquired shares for investment purposes, and that it constitutes a case where there was no suspicion of tax evasion.

2) Progress of the instant tax investigation, etc.

The director of the Seoul Regional Tax Office has conducted the tax investigation of this case from September 7, 2016 to January 4, 2017.

From October 13, 2016 to December 5, 2016, a tax investigation of gift tax for the year 2012 on KimD was also conducted on the ground of the investigation of the part entrusted in the name of shares owned by the GovernmentA from October 13 to December 5, 2016. The investigation completion report prepared at the time of the above tax investigation includes the following:

① On November 18, 2016, the AA made a statement in the course of the instant tax investigation as follows.

- A. On December 24, 1999, GJ, HK, and L L under a title trust with respect to the remaining shares, other than 12,000 shares, for which KimD paid the amount of capital increase in the amount of settlement of retirement pay, among the shares under the name of KimD. Although it reported that all 4,00 shares were transferred by KimD at the time of reporting the transfer income tax of this case, the transfer price of KRW 2,500,000 is the transfer price for the above 12,00 shares owned by the KimD except for the shares in this case. As a result, the shares in this case were transferred to the Plaintiff without compensation by A.A.

- Around 98, KimD, at the time of the cancellation of the joint and several sureties related to the company, made a separate oral promise to offer a written joint and several sureties in lieu of KimD to Chomm (from around 2010 to February 2017, working as vice-chairperson). The shares acquired under the name of Chom-M were donated to Chom-M.

② At the time of the investigation, the executives, etc. of regular terms and conditions were made a statement that, in addition to the instant shares, regular terms and conditions, a majority of the shares of regular terms and conditions were trusted in trust to relatives and executives.

③ In the course of the investigation, the following facts were revealed: (a) in the process of the investigation, i.e., keeping and managing the actual share certificates of the shares in the name of executive officer in the depository; (b) KimD was in the presence of a general meeting of shareholders at the general meeting of shareholders; and (c) in the report prepared by an accounting firm upon the request of i.e., the statement on the transfer of the shares in this case to the family or welfare foundation of i.e., the ii).

3) Progress of the relevant disposition

① After conducting a tax investigation on gift tax for 2012 of KimD’s 2012, the head of the Seoul Regional Tax Office determined that the instant shares out of 44,00 shares, which were reported by KimD sold to KimD, should be calculated on the basis of KRW 60,000 of the acquisition price for 12,00 shares, and accordingly, the transfer income tax should be assessed on the basis of KRW 12,000 of the shares sold to the Plaintiff. On January 20, 2017, the head of the Seoul Regional Tax Office notified the Commissioner of the National Tax Service of the imposition of capital gains tax of KRW 79,697,920. While the Commissioner of the National Tax Service requested the Commissioner of the National Tax Service for a pre-assessment review on the gift tax for 2017, the Director of the Korea National Tax Tribunal rejected a non-adopted decision on June 23, 201; on July 13, 2017, the Korea Tax Tribunal dismissed the aforementioned request for administrative appeal of KimD 29, 297.7.7.98.

(2) The director of the Seoul Regional Tax Office, from October 6, 2016 to December 5, 2016, 2015 against ChoM

After investigating the change of shares, on April 7, 2015, PP intended to sell the shares held in title by PP to the Plaintiff on April 7, 2015 (i.e., 18,534,112,230 won (i.e., 31,454 shares x 389,245 won) for the remainder of 14,419,442,984 won, excluding taxes such as capital gains tax, etc., to the Plaintiff, and (ii) notified the Plaintiff of the imposition of the gift tax amount of KRW 9,274,117,329 on the donation on April 7, 2015. In light of the fact that PP would have made a request for pre-assessment review to the Plaintiff on February 17, 2017, the Commissioner of the National Tax Service, who appears to have received the said shares from PPM’s general meeting of shareholders for the reason that the said shares were returned to the Plaintiff on May 26, 2017,

[Reasons for Recognition] Facts without dispute, Gap 12, 14 evidence, Eul 6, 9, 15, 16, 23, 24 and 25 evidence, and the purport of the whole pleadings

D. Determination

1) Determination as to the assertion of procedural illegality

A) As a form of an administrative investigation to realize the State’s right to impose taxation, a tax investigation refers to an inquiry to determine or correct the tax base and amount of national tax and any act of inspecting, investigating, or ordering the submission of books, documents, and other articles. In the case of a tax investigation for which the tax authority’s right to ask questions to a taxpayer or a person, etc. who is deemed to have a transaction with the taxpayer (hereinafter “taxpayer, etc.”) bears the legal obligation to allow a tax official to answer questions and undergo an inspection for the collection of taxation data. Meanwhile, the repeated tax investigation for the same tax item and taxable period may seriously infringe not only on the taxpayer’s freedom of business or legal stability, etc. but also lead to the abuse of the right to impose tax investigation. Therefore, it is necessary to be prohibited except in exceptional cases that seriously contravene the

In light of the nature and effect of such a tax investigation, the purport of prohibiting duplicate tax investigations, etc., if a tax official’s investigation practically affects taxpayers’ freedom of business by having taxpayers answer questions and undergo an inspection, it shall be deemed a “tax investigation prohibited from re-audit” even if it follows the procedure, such as “local confirmation” as stipulated by the Regulations on the Management of Investigations, which is the instructions of the National Tax Service. However, in cases where it is deemed that all investigation conducted by the tax authority for the purpose of the collection of taxation data or the verification of accuracy of the details of the report constitutes a tax investigation prohibited from re-audit, the tax authority should always commence a regular tax investigation in sufficient cases only with the confirmation of facts, and the taxpayer, etc. must also respond to an indefinite tax investigation. As such, it does not constitute a “tax investigation prohibited from re-audit” even if the taxpayer, etc. has no duty to answer or accept, and the taxpayer, etc. does not have any possibility of infringing

In addition, whether an investigation conducted by a tax official constitutes a "tax investigation prohibited by re-audit" shall be determined individually in specific cases by comprehensively taking into account the purpose and details of the investigation, the object and method of the investigation, the data obtained through the investigation, the scale and period of the investigation, etc. In addition, it is difficult to regard it as a "tax investigation prohibited by re-audit in principle where it is anticipated that a taxpayer, etc. can easily respond to the investigation, or there is no substantial impact on the taxpayer's freedom of business, etc., such as confirmation of the status of a place of business, simple confirmation of bookkeeping, confirmation of specific sales, confirmation through the issuance of administrative civil petition documents, receipt of documents, etc., and so it is difficult to regard it as a "tax investigation prohibited by re-audit" in cases where a tax official's investigation is conducted for the purpose of determining or correcting the tax base and amount of tax in substance and directly contact the taxpayer, etc. on a considerable period of time, or where a tax official inspects or investigates books, documents, goods, etc. for a certain period of time, barring special circumstances (see, e.

B) In light of the following circumstances, the instant written confirmation is difficult to be deemed to constitute a “tax investigation prohibited from duplicate investigation,” in view of the following circumstances acknowledged by the following: (a) the evidence as mentioned above, the witness leF testimony, and the witness leF testimony and the purport of the entire pleadings.

① Pursuant to Article 34(2) of the former Regulations on the Management of Inheritance Tax and Gift Tax (amended by the National Tax Service Directive No. 1992, May 1, 2013), the head of Busan Regional Tax Office shall select Plaintiff, YI, and Kim DD related to the instant shares as a person subject to written verification of the change of stocks through the review of data on the change of stocks through the transaction of the instant shares, and shall proceed with the instant written verification procedure. The content that the submission of explanatory data on the change of stocks, etc. issued for the progress of the procedure is required to request supplementary data on the acquisition, transfer, etc. of the instant shares, and that the head of Busan Regional Tax Office seeks cooperation without the procedure on the spot investigation.

② It is recognized that the public official in charge of the Busan regional tax office visited the residence of KimD on October 1, 2013 and submitted a written confirmation under the name of KimD. However, in light of the following: (a) the public official in charge of the Busan regional tax office visited the residence of KimD on one-time basis at the request of KimD with the inconvenience of SD; (b) the public official in charge visited the residence of KimD on one-time basis; (c) the official in charge of the said confirmation clearly stated the following: (a) the creative terms and conditions of the duties of KimD; (d) the process of accepting and transferring the shares of this case; and (e) the process of face-to-face verification is not submitted, and (e) the public official in charge did not submit any data that can be recognized that separate investigation was conducted other than the written confirmation.

③ In addition to the above written confirmation, the public officials of the Busan regional tax office did not follow the procedures for examining documents or related data submitted by the persons subject to written confirmation, and did not visit the site of the workplace to inspect and investigate books, documents, and articles for a certain period of time, or ask questions to the persons subject to confirmation for a considerable period of time.

④ Since the Plaintiff collected financial data required to request a financial institution through a taxpayer through the procedure in principle, the instant written confirmation is asserting that it is a substantial tax investigation. However, Article 3 Subparag. 2(f) of the former Regulations on the Management of Investigation Affairs (amended by National Tax Service Directive No. 2105, Jul. 1, 2015) classify the “financial transaction confirmation business, such as an account for verifying transaction facts, etc.” as “field verification” rather than “field verification”, it is difficult to view it as a substantial tax investigation solely on the ground that the public official in charge of the Busan Regional Tax Office received and confirmed financial data submitted voluntarily by the person subject to written confirmation without undergoing a separate procedure.

⑤ In the instant written confirmation procedure, this GG, an executive officer of Changsung, appears to have visited the Busan regional tax office and submitted relevant data. However, in light of the fact that this GG visited Busan regional tax office to mainly submit data, and the fact that this GG testified testified that the public official in charge was going to ask questions in the process, it is difficult to deem that a substantive investigation other than mere factual verification in the process of submitting data was conducted with respect to this GG, and there was no other material to deem that the Plaintiff et al. violated the business rights of the verified persons during the instant written confirmation process.

C) Therefore, we cannot accept this part of the Plaintiff’s assertion.

2) Determination as to the assertion of substantive illegality

A) According to the statements in evidence Nos. 17 through 20, and evidence No. 24, KimD, from May 2012, prior to the filing of the transfer income tax report of this case, was promoted to sell 44,00 shares of this case, including the shares of this case, by preparing and delivering a letter of request for the report on the actual sales status of KimD's representative's last position, and a letter of request for stock dividends, as if the shares of this case were owned by KimD from May 2, 2012, prior to the filing of the transfer income tax report of this case, Kim Do. New terms and conditions have prepared and delivered written answers, etc. as to the settlement of accounts and stock dividends to KimD, without raising any objection to the above request. At that time, at the time of confirmation of the written statement of this case, the notice of completion of the sale of shares was submitted as a result of the submission of this data, which was indirectly written out that the entire director of the regional tax office of this case was not aware that the entire DD shares were transferred to the Plaintiff.

B) However, in light of the following circumstances acknowledged by the aforementioned evidence, Eul’s evidence Nos. 18, 19, and 22 and the purport of the entire pleadings, it is reasonable to deem that the instant shares were transferred free of charge to the plaintiff without any separate gift to KimD as the shares held in title by Jung-A to KimD, and that the instant shares were transferred free of charge to the plaintiff without any specific gift to KimD. The circumstances in the foregoing sub-paragraph (b) above, and that the instant shares were not trusted by this court, and that there were Gap’s evidence Nos. 16, 22, 23, and 25, and witnessG testimony, etc.

① As seen earlier, the Plaintiff stated that the Plaintiff did not have any shares in the instant shares and the ChoM’s name in the course of the instant tax investigation. In light of the structure of the Plaintiff’s statement, the circumstances and circumstances at the time, and the developments leading up to the Plaintiff’s disclosure, in particular, that the actual ownership and transfer relationship of the instant shares was an important issue in taxation at the time of the instant written confirmation, and that the Plaintiff made the said statement during the instant tax investigation even when the pertinent materials were submitted, and that the submission was made during the instant tax investigation, and that the pertinent materials supporting its rationality and credibility and related persons’ statements were made, it cannot be deemed that the written answer-type statement in which the Plaintiff’s statement was written against the free will of the Party, or that the content thereof lacks rationality and credibility

② On December 24, 1999, the Plaintiff asserted that he donated the instant shares that he had been trusted in the name of KimD to KimD on December 24, 199, by recognizing the KimD’s contribution to the company as a joint guarantor. However, in the course of the investigation of the instant case, the Plaintiff stated to the effect that, around 98 in the course of the investigation of the 20199, Jung has promised to offer a written joint and several surety instead of Kim DD to Cho in the course of the company’s joint and several liability cancellation, it is difficult to view that there was a special circumstance to donate the shares to KimD around December 199 ( even according to the evidence A of 13, it is not confirmed that KimD entered into an additional guarantee contract after 198), and KimD’s written confirmation procedure, it is difficult to view that the acquisition amount of the instant shares was the full amount of the shares paid to KimD funds and received the instant shares. In light of the fact that the Plaintiff did not have received the written confirmation of the donation.

③ The minutes of the general shareholders’ meeting held on March 23, 2001, which was after December 24, 1999, stating that KimD received the instant shares as a donation of the instant shares, stated that KimD held on March 23, 200, is present, and the seals of KimD are affixed. However, according to the certificate of the entry and departure of KimD, KimD is stated as having been staying in a foreign country, and it is difficult to view that KimD exercised its rights as a shareholder.

④ Changmo Accounting Corporation requested Anjin Accounting Corporation to provide consultation on the method of disposal of the shares of Changmo Accounting Corporation, including the instant shares, and the said Gomojin Accounting Corporation also proposed to transfer the shares of 33,000 shares to △△△ Foundation, which is the public interest foundation established by Changmo Accounting Corporation.

⑤ The Plaintiff alleged that KimD sold 4,00 shares, including the instant shares, to the Plaintiff at an amount of KRW 2,50,000 per share of KRW 56,820,000,000 per share. However, in light of the fact that the service report prepared around January 2012, stating that the market price of Changjin-jin’s shares is KRW 282,945 per share, and that the Plaintiff asserted that KimD refused to purchase KRW 5 billion per share of KRW 5 billion per share, it appears that selling shares at a low price would be an exception.

C) Therefore, the Plaintiff’s assertion on this part cannot be accepted.

3. Conclusion

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