Seocho 2014west 1575 ( August 18, 2014)

whether it falls under the case of allocating by means of public offering of securities

It is reasonable to view that the method of public offering of new securities, which was made in the state that the securities registration statement is not accepted, does not constitute a case where the former Securities and Exchange Act does not allow it to do so, and it does not constitute a case where the securities

Inheritance Tax and Gift Tax Act Article 39 (Donation of Benefits)

2014Guhap21752 Revocation of Disposition of Imposition of Gift Tax

AA

BB Director of the Tax Office

July 3, 2015

August 19, 2015

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

The Defendant’s gift tax on August 16, 2007 against the Plaintiff on December 2, 2013 (additional tax levied on the gift)

b) Each disposition of KRW 00,000,000,000,000,000,0000 shall be revoked in entirety.

1. Details of the disposition;

A. The Plaintiff, a corporation listed on the KOSDAQ market, participated in the third party allocation method of CCC (CCC, hereinafter “instant company”) and acquired 000 shares of new shares per share (hereinafter “instant shares”) by acquiring 000 shares per share (hereinafter “instant shares”).

B. BB director of the regional tax office conducted an investigation on the change of shares from April 30, 2012 to June 8, 2012. On August 16, 2007, the Plaintiff acquired the instant shares by the method of the third party allocation at the time of issuing new shares of the instant company, regarding the acquisition of the instant shares by the method of the Plaintiff’s offering of new shares by the third party, the Plaintiff acquired the instant shares by being allocated KRW 00,000 per share under the Inheritance Tax and Gift Tax Act (hereinafter “Inheritance Tax and Gift Tax Act”), and notified the Defendant of the taxation data by deeming that the benefits of KRW 00,000 per share (=000 x 000) were donated to the existing shareholders.

C. Accordingly, on December 2, 2013, the Defendant decided and notified the Plaintiff of the total amount of KRW 000,000,000 as follows (hereinafter “instant disposition”).

D. The Plaintiff appealed and filed a request for a trial with the Tax Tribunal, and the Tax Tribunal rendered a request on 2014.

9. 18. The Plaintiff’s claim was dismissed.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 1 (including each number, if any) and the purport of the whole pleadings

2. The plaintiff's assertion

A. In light of the fact that the solicitation for subscription to capital increase with consideration of this case exceeds 50 persons, there was solicitation for subscription such as an investment presentation, and it should not be affected to determine whether the obligation to report to the Financial Supervisory Commission is an offering of securities. Even if the company did not fulfill its duty to report to the Financial Supervisory Commission, the capital increase with consideration of this case constitutes capital increase with consideration by a third party under Article 2 (3) of the former Securities and Exchange Act (amended by Act No. 8635 of Aug. 3, 2007), and thus, it should be excluded from the gift tax assessment pursuant to Article 39 (1) 1 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007; hereinafter referred to as the "former Inheritance Tax and Gift Tax Act").

B. Article 39(1)1 of the former Inheritance Tax and Gift Tax Act provides that the issue price of the instant shares shall be subject to gift tax in cases where new shares are issued at a price lower than the market price. The issue price of the instant shares constitutes “market price formed in a normal and free transaction between unrelated parties in accordance with the Regulations on Issuance and Public Disclosure, etc. of Securities (amended by the Financial Services Commission Notice No. 2008-8 of April 7, 2008, hereinafter “securities provision”), and thus, the said provision on the Inheritance Tax and Gift Tax Act does not apply to capital increase for new shares.”

It is as shown in the attached Form.

4. Determination

(a) Facts of recognition;

1) On February 12, 1991, the company of this case was listed on the KOSDAQ market (hereinafter “CCC”) on February 12, 1991, and the company changed its trade name from “CCC” to “CCC on June 2007,” “CCC on September 3, 201,” and Non-Party DD agreed to take over management rights of the company from “E,” the existing major shareholders of the company of this case, EE on May 3, 2007. The company of this case decided to take over 00% of the shares of FFF company, which is the oil developing company located in RD, in order to enter into the development business such as genetic exploration and extraction, and decided to grant capital increase for the purpose of raising the fund.

2) In order to offer 2 billion won or more under the former Securities and Exchange Act (amended by Act No. 8635 of Aug. 3, 2007, Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act; hereinafter referred to as the "former Securities and Exchange Act"), an issuer shall submit a securities registration statement to the Financial Supervisory Commission in accordance with Article 8 of the former Securities and Exchange Act and Article 2 of the Enforcement Rule of the same Act (amended by Ordinance of the Prime Minister No. 885 of Aug. 4, 2008; hereinafter referred to as the "Enforcement Rule of the former Securities and Exchange Act"). On May 3, 2007, the company of this case submitted a securities registration statement on the issuance of new stocks to a third party, but received an order from the Financial Supervisory Commission to submit a corrective registration statement twice. Ultimately, the company of this case withdrawn the issuance of securities registration statement on Aug. 1, 2007, subject to the acceptance of securities for one year or more.

3) The Plaintiff participated in the issue of new shares offering and acquired 00,000 shares of the instant company

had been.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 3-1 to 10, purport of the whole pleadings

B. Whether the issue of this case’s capital increase with new stocks constitutes capital increase with new stocks offered by a third party under the method of offering new stocks

1) Article 39(1)1 (c) of the former Inheritance Tax and Gift Tax Act provides that “Where a corporation issues new stocks at a price lower than the market price and obtains profits from a corporation other than its shareholders by directly obtaining allocation of such new stocks from the relevant corporation, the amount equivalent to such profits shall be the value of property donated.” The overall subparagraph of Article 39(1)1 (a) of the former Inheritance Tax and Gift Tax Act excludes a listed corporation or an Association-registered corporation under the Securities and Exchange Act (amended by Act No. 7114 of Jan. 29, 2004, whose name is changed to the KOSDAQ-listed corporation; hereinafter referred to as a “listed corporation”) from “where the corporation distributes new stocks through a public offering method of new stocks under Article 2(3) of the same Act, the corporation’s issuance price of new stocks shall be determined not only by the public offering method of new stocks under the former Securities and Exchange Act but also by the public offering method of new stocks at a price lower than the market price under Article 208(2) of the former Securities and Exchange Act.

Article 2 (3) of the former Securities and Exchange Act provides that "public offering of new securities" in this Act shall be recommended to acquire securities under the conditions as prescribed by the Presidential Decree, and Article 2-4 (1) of the former Enforcement Decree of the Securities and Exchange Act (amended by Presidential Decree No. 20947 of July 29, 2008; hereinafter referred to as the "former Enforcement Decree of the Securities and Exchange Act") shall be 50 persons or more who are recommended to acquire new securities in the public offering of new securities under Article 2 (3) of the Act. Article 2 (4) of the former Securities and Exchange Act provides that the public offering of new securities shall be made within 150 persons or more if the number of persons who are solicited to subscribe for securities as a result of the calculation under paragraph (3) of the same Article is less than 50 persons and it shall not be made within 150 years from the date of the public offering of new securities and shall not be made within 20 years from the date of the public offering of new securities by an issuer (the issuer's offering of new securities).

According to the relevant provisions of the former Securities and Exchange Act, where a listed corporation issues new stocks of at least 2 billion won through a securities offering method, it shall first submit a securities registration statement meeting certain requirements to the Financial Supervisory Commission, and make it possible to offer securities only after the report is received after reviewing the report. Accordingly, the acceptance of the report is naturally premised on the allocation of new stocks through a securities offering. Even after the receipt of the report, the strict procedures and methods are demanded for the offering of new stocks, and supervision and punishment for the violation are imposed. In light of the purport of the overall provision of Article 39(1)1 (a) of the former Inheritance Tax and Gift Tax Act, where a listed corporation issues new stocks of at least 2 billion won under the former Securities and Exchange Act, where the listed corporation issues new stocks through a securities offering method, it does not constitute a case where the former securities offering method conducted without the acceptance of the registration statement is not allowed, and thus, it does not constitute a case where the former securities offering method is not deemed an object of gift tax under the former Securities and Exchange Act.

2) As to this case, since the company of this case withdrawn the submission of the securities registration statement to the Financial Supervisory Commission, it appears that it would abolish the method of securities offering under Article 2 (3) of the former Securities and Exchange Act. Rather, it does not constitute deemed public offering since it took protective measures against all outstanding shares under the private offering method for one year from the date of issuance. There is no punishment on the ground that it failed to perform its duty to report on subscription to new shares by the Financial Supervisory Commission. ② The securities registration statement can be submitted and accepted by the Financial Supervisory Commission, and the solicitation of subscription can be made only through the public offering procedure. Thus, even if the other party is 50 or more, the solicitation of subscription to new shares offering cannot be deemed as an offering of new shares pursuant to Article 2 (3) of the Securities and Exchange Act even if the other party is 50 or more, if there is solicitation of subscription to more than 50 persons without the securities registration statement as alleged by the plaintiff, it cannot be seen as excluding the Plaintiff’s offering of new shares offering from the presentation meeting.

C. Whether the issue price of the instant shares falls under the market price

1) Article 39(1)1 (c) of the former Inheritance Tax and Gift Tax Act provides that “In case where a corporation receives a benefit from the issuance of new stocks at a price lower than the market price of the new stocks by a person who is not the shareholder of the relevant corporation, the amount equivalent to such benefit shall be the value of donated stocks.” Furthermore, Article 29(3)1 and (4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20621, Feb. 22, 2008; hereinafter referred to as the “former Enforcement Decree of the Inheritance Tax and Gift Tax Act”) provides that the benefit may be calculated by subtracting the subscription price per stock from the smaller of the value of the new stocks calculated by the formula of “the total number of new stocks issued before the increase x the total number before the increase x the number of issued stocks)” ± (the number of stocks increased by the increase x the number of new stocks per stock after the increase increase x the amount of new stocks after subtracting the subscription price per stock.

2) Meanwhile, even if the issue value of new shares allocated to the Plaintiff at the time of issuing new shares is increased due to delegation of Article 192(1)1 of the Securities and Exchange Act and Article 84-25(1)1 of the Enforcement Decree of the same Act, the issue value of the new shares is lawfully calculated in accordance with the securities provision as to the issue value of the new shares and the Plaintiff did not have awareness of the profits deemed donated to the Plaintiff, the above provision has a certain limitation on the issue value of the new shares in order to ensure fairness and transparency in issuing new shares, and its legislative purpose differs from Article 39(1)1 of the former Inheritance Tax and Gift Tax Act. Thus, the issue value cannot be deemed as "market value" under Article 39(1)1 of the former Inheritance Tax and Gift Tax Act (see Supreme Court Decision 2013Du21670, Mar. 13, 2014). In addition, Article 39(1) of the former Inheritance Tax and Gift Tax Act does not require the value of the new shares to be calculated lawfully as 2080.

3) As seen earlier, the issue price of this case does not constitute a case where a listed corporation issues new shares through a public offering of new shares under Article 2(3) of the former Securities and Exchange Act, i.e., the issue price of this case does not fall under the price formed through a transaction among many unspecified people within the Korea Exchange or the Association brokerage market. As alleged by the Plaintiff, even if the issue price of this case was determined in accordance with the securities provision or there was no special relationship between the person who received the allocation of new shares and the largest shareholder, such circumstance alone does not constitute the “market price” under Article 39(1)1 of the former Inheritance Tax and Gift Tax Act, and there is no other evidence to acknowledge it. Accordingly, the Defendant did not err by calculating the market price and the appraised value of this case under Articles 39(1)1, 60, and 63(1)1 of the former Inheritance Tax and Gift Tax Act and Article 29 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act and imposing the same gift tax as the disposition of this case on the Plaintiff.

5. Conclusion

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