Seocho 207west 5234 ( October 16, 2008)

Donation due to capital increase;

The profits earned by being allocated new stocks in the event of capital increase and the largest shareholder of the corporation and specially related to the corporation is not a shareholder of the corporation.

The contents of the decision shall be the same as attached.

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of KRW 219,004,80 against the Plaintiff on August 1, 2007 is revoked.

1. Details of the disposition;

A. On December 23, 200, EPP Co., Ltd. (hereinafter “instant corporation”) allocated 100,000 shares to 7 shareholders with the first capital increase for new shares as well as the second capital increase on December 28, 200. On February 28, 200, 15,000 shares per share (hereinafter “instant shares”) were allocated to the Plaintiff, other than the shareholders of the said corporation, including allocating 10,000 shares totaling KRW 150,000 per share to KRW 10,000,000.

B. On August 1, 2007, the Defendant rendered a disposition of imposition of gift tax of KRW 39,508,960 on the Plaintiff’s donation under Article 31-4(1)3(a) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Act No. 6301, Dec. 29, 2000; hereinafter referred to as the “Act”); Article 42(2) of the former Inheritance Tax and Gift Tax Act; Article 31-4(1)3(a) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17039, Dec. 29, 200; hereinafter referred to as the “Enforcement Decree”); the Defendant issued a disposition of imposition of gift tax of KRW 399,50,960 on the Plaintiff’s largest shareholder of the instant corporation; the Defendant thereafter calculated the gift tax of this case on October 16, 2007; the Defendant issued a disposition of imposition of KRW 1080,504.7.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) The number of shares involved

Of the shares in this case, benefits arising from the allocation of 2,250 shares shall not be deemed to have been donated to the Plaintiff. In accordance with Article 42(2) of the Act, only transactions between this title, abnormal, and Kim Training, which are shareholders having a special relationship with the Plaintiff, shall be deemed to have been deemed to have been donated to the Plaintiff. Since KimB, the currentCC, and KimD, which are shareholders holding 15% of the shares of the corporation in this case, are not specially related to the Plaintiff, KimB, the currentCC, and KimD, which are shareholders holding 15% of the shares of the corporation in this case, are not related to the Plaintiff, they shall not be deemed to have been donated to the Plaintiff

(2) As to the method of stock price assessment

Although Article 63 (1) 1 (c) of the Act provides that the value of unlisted stocks shall be assessed in consideration of all the assets and earnings of the relevant corporation, Article 54 of the Enforcement Decree, which was delegated by the above Act, provides that the appraised value shall be excluded by the net asset value if the net asset value is higher than the net asset value. Therefore, the above provision of the Enforcement Decree is in violation of Article 42 (2) and Article 63 (1) 1 (c) of the Act, which is the mother corporation. Therefore, the disposition of this case, which was assessed solely on the basis of the "net value of profit and loss" under Article 54 (1) of the Enforcement Decree of the Act, is unlawful.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) As to the first argument

"(A)" Article 42 (2) of the Act and Article 31-4 (1) 3 (a) of the Enforcement Decree of the Act are deemed to be a provision regarding the donation of "profit acquired from all new stocks to a person who is not a shareholder of the relevant corporation and has a special relationship with the largest shareholder". This is different from Article 39 (1) 1 (a) of the Act regarding "profit acquired by a person who has forfeited stocks as a result of the waiver of the right to allocate stocks in whole or in part from the largest shareholder of the relevant corporation" (Article 42 (2) of the Act excludes cases of Articles 33 through 41-4 of the Act). (b) The plaintiff is not a shareholder of the relevant corporation and is not a shareholder of the relevant corporation of the relevant corporation, and there is no dispute between the parties to the second capital increase, and thus, the plaintiff's assertion that the above profits acquired from the entire donation of stocks in accordance with Article 42 (2) of the Act is justified.

(2) On the second argument

(A) The ideology of the no taxation without the law, the core contents of which are the legal principle of taxation requirements and the clarity of taxation requirements, is to ensure the property rights of the people and the legal stability and predictability of the people’s lives by clearly stipulating the taxation requirements by law. However, there may be cases where the purpose of fair taxation can not be achieved due to the ability to pay taxes because it is difficult to capture taxable objects and compute adequate tax base by coping with the complicated and constant changing economic situation even though it is intended to thoroughly implement the no taxation without the law. As such, even if the essential contents of the tax liability are related to the fair taxation according to the economic reality and to cope with the unlawful act of tax evasion, it is necessary to delegate it to subordinate laws, such as Presidential Decree with the ability to cope with changes in the economic reality or the development of professional technology (see Constitutional Court en banc Decision 94Hun-Ba40, 95Hun-Ba13, Nov. 30, 1995).

(B) In the case of unlisted stocks, even if they were traded in an over-the-counter market, if the transaction price is formed by the general and regular transaction price and reflects the objective exchange value of stocks properly, the price of the stocks can be assessed by considering the market price. However, since the market price is difficult to calculate, the value of the stocks in this case must be assessed by the supplementary evaluation method. As to such supplementary evaluation method, Article 63(1)1(c) of the Act provides that the stocks and equity shares that are not listed on the Korea Stock Exchange shall be assessed by the method prescribed by the Presidential Decree after being aware of the corporation's assets and profits, etc., and Article 54 of the Enforcement Decree of the Act provides that the valuation of the value of the unlisted stocks shall be based on the net asset value if the "net profit or loss value" is less than the "net asset value," the valuation method under Article 54 of the Enforcement Decree shall be considered as the "net asset value" and the "net profit or loss value" of the non-listed stocks shall not be considered as the "illegal asset value."

(C) On the other hand, Article 54 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the value of unlisted stocks shall be assessed as the average value increased by the proportion of 1:1 in the past, but only by the net asset value in certain cases. ② On December 31, 1999, as amended by Presidential Decree No. 16660 on December 31, 199, Article 54 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the "net value" and "net value" shall be assessed as the average value increased by the proportion of 2:3, as amended by Presidential Decree No. 1817 on December 30, 203. This provision provides that the "net value" and "net asset value" shall be assessed as the average value increased by the proportion of 2:3, in consideration of the assets and earnings of the relevant corporation as delegated by Article 63(1)1(c) of the Inheritance Tax and Gift Tax Act, but it is only a flexible provision that otherwise provides for the evaluation method of unlisted stocks in accordance with the current economic reality.

(D) Therefore, it is lawful for the Defendant to assess the gift value on the basis of “net profit and loss value” under Article 54(1) of the Enforcement Decree in rendering the instant disposition, and the Plaintiff’s above assertion is without merit.

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.