Seoul Administrative Court-2015-Gu Partnership-6479 ( August 19, 2016)

The provisions for major shareholders under Article 94 (1) 3 of the Income Tax Act and Article 157 of the Enforcement Decree of the same Act do not violate the Constitution.

In light of the fact that the jurisdiction of the Constitutional Court exceeds the scope of a request for tax trial, the disposition that the disposition agency notified the decision as declared after the deadline of the plaintiff is not erroneous.

Article 94 of the Income Tax Act

Seoul High Court 2016Nu63790 Revocation of Disposition imposing capital gains tax

Doese 00 4

00 Other 1

Seoul Administrative Court Decision 2015Guhap6479 decided August 19, 2016

203.22

April 19, 2017

1. The plaintiffs' appeals against the defendants are all dismissed.

2. The costs of appeal are assessed against the Plaintiffs.

The judgment of the first instance shall be revoked. Each defendant entered in the attached Table 1 of the judgment of the first instance shall revoke all the imposition of capital gains tax and local income tax on each plaintiff on the date of each disposition.

1. Quotation of judgment of the first instance;

This court's reasons are as follows: Article 8 (2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act are as follows: (a) adding "additional part of the relevant Acts and subordinate statutes" to the corresponding part of the attached Acts and subordinate statutes (12-14 pages) of the judgment of the court of first instance; and (b) adding the judgment like paragraph (2).

2. Additional determination

A. Whether the amended Enforcement Decree of the Income Tax Act applies retroactively

(1) Summary of the plaintiffs' assertion

The Enforcement Decree of the Income Tax Act amended by Presidential Decree No. 27074 on March 31, 2016, which was amended by Presidential Decree No. 27074, to exclude the major shareholder who is not the largest shareholder from the list of lineal ascendants and descendants, spouse, and natural parents adopted through full adoption to another person, and relatives other than his spouse and lineal ascendants and descendants from the list of total market values. Such amendment was made in favor of taxpayers in order to resolve unconstitutional elements. The amended Enforcement Decree of the Income Tax Act retroactively applies to the transfer of shares of this case. According to the amended Enforcement Decree of the Income Tax Act, the provisions of the amended Enforcement Decree of the Income Tax Act should retroactively apply to the transfer of shares, and according to the amended Enforcement Decree of the Income Tax Act, the relevant part of the disposition of this case is unlawful

(2) Determination

In principle, an administrative disposition is governed by the amended Act and subordinate statutes enforced at the time of the disposition, unless otherwise specified in the transitional provision (see, e.g., Supreme Court Decision 2008Du9324, Sept. 10, 2009): Provided, That even if the statute is retroactively applied, where there is no direct relation to the interests of the general public, the application of the statute is exceptionally allowed only in exceptional cases where there are special circumstances, such as where the benefit is promoted, where disadvantage or pain is removed (see, e.g., Supreme Court Decision 2004Da8630, May 13, 2005).

Even if the above revised provision is applied retroactively on the ground as alleged by the Plaintiffs, if there is no direct relation to the interests of the general public, it may not be deemed that there are special circumstances, such as promoting the benefit, or removing disadvantages or pains. Article 157(4) of the Enforcement Decree of the Income Tax Act is effective from April 1, 2016 according to the transitional provision of the Addenda, and it is only applicable to the transfer of shares after its enforcement date. The Plaintiffs’ assertion is without merit.

B. Whether the delegation scope exceeds the delegation scope

(1) Summary of the plaintiffs' assertion

Although the Income Tax Act limits the transfer margin of listed stocks to the "large stockholder", the Enforcement Decree of the Income Tax Act, which was delegated to the large stockholder, expanded the scope of the "large stockholder" to the large stockholder who is in a special relationship with the large stockholder by setting the requirements of the "large stockholder", and it was unlawful to include the large stockholder to the individual investors who are not the large stockholder by setting the criteria of the total market

(2) Determination

In order to prevent modified donation using listed stocks which are one of the legislative purposes of the instant legal provisions, it is necessary to identify and taxation as a whole the shares of not only one shareholder who transfers the relevant shares, etc., but also the shares of his/her relatives and other persons with special relationship. In light of the provision of Article 1-2 of the Enforcement Decree of the Framework Act on National Taxes, the scope of a person with special relationship is clearly defined. In light of the major shareholder’s corresponding criteria under the Enforcement Decree of the instant case and the accessibility of information about the status of stockholding of major shareholders, etc., a shareholder who owns listed stocks can anticipate whether he/she is subject to taxation of stock transfer income tax if he/she pays attention and attention to the extent that he/she is subject to taxation pursuant to the provision of the Enforcement Decree of the instant case. In full view of these factors, the enforcement decree of the instant case is properly prescribed within the scope of delegation to achieve the legislative purpose of the instant legal provision, and therefore, the provision of the Enforcement Decree of the instant case cannot be deemed invalid beyond the scope of delegation of the mother law (see Supreme Court Decision 2006Du4394.

3. Conclusion

The judgment of the first instance is justifiable. The plaintiffs' appeals against the defendants are all dismissed.

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