Article 31(6) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act cannot be deemed null and void because the delegation provisions of the mother law newly become invalid.

Article 41(1) of the Inheritance Tax and Gift Tax Act provides that “The purpose of Article 41(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act is to delegate not only the calculation of shareholder’s profit but also the calculation of shareholder’s profit.” Ultimately, Article 31(6) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that

Article 41 of the Inheritance Tax and Gift Tax Act

2015Guhap1069 Revocation of Disposition of Imposition of Gift Tax

1. AA;

000 0000 0000,0-00 (00, 000000)

2. BB

000 00000 0000,000 (00, 00000)

Plaintiffs (Law Firm 00)

Attorney 000

00. Head of tax office

Litigation performers 000

July 17, 2015

August 28, 2015

1. All of the plaintiffs' claims are dismissed.

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

Cheong-gu Office

The Defendant’s imposition of gift tax on Plaintiff AA on August 6, 2013, KRW 621,241,183, KRW 607,864,757, KRW 107,393, KRW 291, KRW 1,336,49,231, KRW 231, and KRW 2,474, KRW 616, KRW 180,087, KRW 461, KRW 39,74, KRW 2276,821, and KRW 2276,821, for the year 2012, shall be revoked.

1. Details of the disposition;

A. Plaintiff BB and Nonparty CCC are married couple, and Plaintiff AAA is accompanied by them. On March 15, 2007, the Plaintiffs and CCC owned 35% of Plaintiff AA from March 7, 2010 to May 7, 2012 as a shareholder of Plaintiff AA Co., Ltd. (hereinafter referred to as “non-listed corporation”) established for the purpose of golf course facilities and ancillary operation business, respectively.

B. The losses from 2007. to 2012 of the non-party company are as follows:

C. CCC lent approximately KRW 53.5 billion in total to the non-party company from 2007 to 2012 (hereinafter referred to as “instant gratuitous loan”) (limited to loans from 2010 to 2012).

D. The director of the Seoul Regional Tax Office, upon conducting an integrated investigation of corporate tax against the non-party company from May 23, 2013 to July 5, 2013, deemed that the former Inheritance Tax and Gift Tax Act (Amended by Act No. 9916 for the portion reverted to year 201, Jan. 1, 2010; Act No. 11130, Dec. 31, 2011; Act No. 11609, Jan. 1, 2013; hereinafter referred to as the "former Inheritance Tax and Gift Tax Act") and Article 41 of the former Inheritance Tax and Gift Tax Act (Amended by Presidential Decree No. 23591, Feb. 2, 2012; Presidential Decree No. 23515, Feb. 2, 2011; Presidential Decree No. 235156, Feb. 15, 2014>

E. Accordingly, the Defendant: (a) based on the value of donated property calculated as follows (=a value calculated by multiplying the maximum amount of interest by the equity ratio); (b) on August 6, 2013; and (c) on January 10, 2010 through May 31, 2012, the Defendant rendered a decision to the Plaintiff AB on the aggregate of KRW 1,336,49,231 ( KRW 621,241,183, KRW 607,864,757, KRW 607,864,757, KRW 107, KRW 293,291, and KRW 107,393,291, and KRW 222,276,821, KRW 616, KRW 2010 for the said period; and (c) on the aggregate of the gift taxes for the said period to the Plaintiff AB (hereinafter “instant disposition”).

F. The Plaintiffs appealed and filed an appeal with the Tax Tribunal on October 24, 2013, but was dismissed on November 20, 2014.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 through 4 (including branch numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

1) The primary argument

The net asset value of an unlisted corporation, which has sustained losses within three years from the business year before the base date of appraisal, shall be based on net asset value (the net asset value of the relevant corporation ¡Àtotal number of shares issued), (Article 63(1)1 (c) of the Inheritance Tax and Gift Tax Act, and Article 54(1), (2), and (4)3 of the Enforcement Decree of the same Act). The net asset value shall be the value calculated by subtracting liabilities from the appraised value of the relevant corporation as of the base date of appraisal, and where the net asset value is not more than zero won, the net asset value shall be zero (Article 5(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act). In light of the foregoing, the non-party company is deemed to have suffered losses from the lending of this case without compensation (i.e., assets-liability) and the net asset value is equal to the value of the relevant stocks, and thus, the non-party company’s acquisition of profits from increase in the value of stocks by the shareholders of the non-party company is contrary to the principle of no taxation without law.

2) Preliminary assertion

Even if there is a gift interest that the plaintiffs obtained from the gratuitous lending of this case, the disposition of this case is erroneous as follows.

A) Article 41(2) of the former Inheritance Tax and Gift Tax Act delegates the scope of "a person who has a special relationship with the shareholders, etc. who have a special relationship with the shareholders, etc." under Article 31(5) of the same Act refers to "a person who has a special relationship with the shareholders, etc." under each subparagraph of Article 19(2) of the same Act. Therefore, it is reasonable to interpret Article 41(1) of the former Inheritance Tax and Gift Tax Act as imposing gift tax on the profits acquired by "the largest shareholder, etc." in cases where a person who has a special relationship with the shareholders, etc. of a specific corporation makes a certain transaction with the largest shareholder, etc." under Article 19(2) of the Enforcement Decree of the same Act, and the largest shareholder of the non-party company is the one who holds the shares, etc. of the person who has a special relationship with the shareholders, etc. falling under any subparagraph of Article 19(2) of the same Act, and thus, is unlawful by applying Article 20(1) of the former Inheritance Tax and Gift Tax Act.

B) The instant disposition, which applied the method of calculating profits for the provision of "property", is inconsistent with the principle of no taxation without law, because there is no method of calculating profits for the provision of "services" under Article 31 (6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, even though the instant gratuitous loan constitutes the provision of "services".

C) Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the scope of losses shall be limited to a corporation falling under Article 31(1)1 of the same Act, i.e., a corporation with losses, when determining the method of calculating the gains earned by a shareholder of a specific corporation. Since losses for the pertinent year can only be confirmed after December 31 of each year, which is not known during the fiscal term and is the standard of financial statements, the pertinent losses shall be deemed to refer only to losses carried forward in the previous year in the business year to which the date of donation belongs. However, the instant disposition interpreted and applied as the sum of losses carried forward

D) Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; Act No. 9916, Jan. 1, 2010; Act No. 9910, Jan. 1, 2010; Act No. 9910, Jan. 1, 2010; Act No. 9554, Jan. 1, 2010; Act No. 9955, Jan. 1, 2010; Act No. 9555, Jan. 1, 2010; Act No. 990, Jan.

E) The instant disposition, which calculated the gift profits of the following year without deducting the amount of the previous year even though it had already been applied to the limit of the amount of loss carried forward in the previous year when calculating the amount of the gift profits accrued to the Plaintiffs in 2010, is contrary to the principle of double taxation

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) As to the main argument

A) Whether Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act is invalid

(1) Article 41(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter referred to as the "former Inheritance Tax and Gift Tax Act") provides that "where a person who has a special relationship with a shareholder or investor of a specified corporation obtains profits from the shareholder or investor of the specified corporation through transactions falling under any of the following subparagraphs with the specified corporation, the amount equivalent to such profits shall be deemed the value of donated property to the shareholder or investor of the specified corporation." (2) Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 18177, Dec. 30, 2003; hereinafter referred to as the "former Enforcement Decree of the Inheritance Tax and Gift Tax Act") provides that "the profits that the shareholder or investor of the specified corporation is deemed to have received by multiplying the increased value of shares or contribution shares by the number of shares issued by the person under paragraph (5)" under Article 41(1) of the former Enforcement Decree shall be amended by Presidential Decree No. 316137.

(2) However, the Supreme Court en banc Decision 2006Du19693 Decided March 19, 2009 ruled that Article 41(1) and (2) of the former Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20062, Mar. 19, 2009) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 2006Du19693) stipulate that the calculation of the profit was delegated to the shareholder where the shareholder actually gained the profit by receiving the donation, but Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20068, Jan. 19, 2009) stipulates that the shareholder shall be deemed

(3) Article 41(1) of the former Inheritance Tax and Gift Tax Act amended by Act No. 9916, Jan. 1, 2010 (amended by Act No. 9916, Jan. 1, 2010) (hereinafter “the former Inheritance Tax and Gift Tax Act”) was amended to mean that “where a person with a special relationship with a shareholder, etc. of a specific corporation makes any of the following transactions with the specific corporation and the shareholder, etc. of the specific corporation

(4) In full view of the purport of the Supreme Court’s decision under Article 41(2) and the language and text of Article 41(1) of the former Inheritance Tax and Gift Tax Act, it is reasonable to deem that the purport of Article 41(1) of the former Inheritance Tax and Gift Tax Act is the delegation of the Presidential Decree on the issue of whether not only the shareholder’s profit but also the shareholder’s profit is deemed to have been gained. Ultimately, Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax

B) Article 2(1) of the former Inheritance Tax and Gift Tax Act provides that “The gift tax shall be imposed on another person’s donated property under Article 41(1) of the former Inheritance Tax and Gift Tax Act.” Article 2(3) provides that “The gift” refers to a transfer of tangible or intangible property (including a transfer for remarkably low prices) to another person without compensation or an increase in the value of another person’s property by direct or indirect means that the act or transaction’s name, form, and purpose, etc. is inconsistent with the concept of gift tax,” and Article 31(1) of the former Inheritance Tax and Gift Tax Act provides that “The donated property under Article 2 includes all things belonging to the donee and having economic value that can be realized in money and all de facto or de facto rights with property value,” and it is difficult to see that the scope of delegation or donation under Article 2(3) of the former Inheritance Tax and Gift Tax Act is sufficiently modified to impose gift tax on the transferred or increased value of property without compensation that has not been predicted.” Article 14(1) of the former Inheritance Tax and Gift Tax Act does not clearly change the scope of delegation.

C) Whether the substance over form principle is violated

Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "the benefit that the shareholder, etc. of a specific corporation is deemed to have been donated pursuant to Article 41(1) of the same Act shall be calculated by multiplying the increased value of shares or equity shares by the number of shares of those prescribed in paragraph (5) due to the following profits equivalent to one of the following profits," so it is possible to interpret the same as the plaintiffs. However, Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which applies to this case, provides that "the benefit under Article 41(1) of the same Act shall be calculated by multiplying the profit falling under any of the following subparagraphs by the ratio of shares or equity shares of those prescribed in paragraph (5)." In conclusion, the value of the gift tax shall not be calculated by the defendant in the same way as that of the non-listed corporation, regardless of whether the largest shareholder, etc. actually obtained the benefit of the non-listed corporation, such as free provision of property with the specific corporation, and thus, it shall not be deemed that the benefit of taxation of the non-listed corporation is unlawful.

D) Sub-determination

Therefore, the primary argument of the plaintiffs is without merit.

2) As to the conjunctive argument

A) Under Article 41(1) of the former Inheritance Tax and Gift Tax Act, Article 41(1) of the former Inheritance Tax and Gift Tax Act on Plaintiff BB does not limit the subject of gift income to the 'large shareholder, etc.'. Article 31(5) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act is a provision on the scope of specially related persons with the shareholders, etc. who provide property to a specific corporation without compensation. Nevertheless, it goes against the purpose of delegation of the former Inheritance Tax and Gift Tax Act by limiting the 'large shareholder, etc.' to the 'large shareholder, etc. of Article 41(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which is a subordinate provision, based on Article 31(5) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act. In light of the legislative intent of Article 41(1) of the former Inheritance Tax and Gift Tax Act, even if the largest shareholder does not have any reasonable reason to impose tax on only one largest shareholder, it is reasonable that Article 41(1)B of the former Inheritance Tax and Gift Tax Act applies to the Plaintiff B's.

B) Whether the principle of no taxation without law is violated

The term "services" means all other services and acts having property value other than goods (see Article 2 subparagraph 2 of the Value-Added Tax Act). It is difficult to regard the lending of money as a service or act having property value.

Therefore, as to whether the free loan of this case can be seen as a "transaction that provides property free of charge", Article 41 (1) 1 of the former Inheritance Tax and Gift Tax Act only contains the expression "providing" instead of "transfer or provision", unlike the case of Article 41 (1) 2 and 3 of the same Act. The "free provision of property" seems to include not only the donation of the original meaning of transferring the ownership of the property itself, but also the donation of property that does not correspond thereto. It is basically consistent with the concept of donation.

Meanwhile, Article 31(3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (Article 31(3) of the above Act has not been amended after December 31, 199) provides that the difference between the market price of the property that is transferred, provided or invested and the service and the market price is at least 30/100 of the market price or the difference is at least 100 million won. In this case, the provision of Article 41-4 of the above Act provides that where money is loaned or loaned, it shall be the benefit calculated by applying the provisions of Article 41(1)2 and 3 of the above Act to the "transfer and provision of property" and Article 41(1)2 and 41 of the previous Enforcement Decree of the Inheritance Tax and Gift Tax Act (Article 31(3) of the above Act shall be amended since December 31, 199) shall be clearly low or high, and Article 41(1)2 and 40 of the previous Addenda of the Inheritance Tax and Gift Tax Act shall be applied to the above provision without compensation.

Therefore, the act of CCC lending money to the non-party company without compensation constitutes a transaction that provides the property free of charge under Article 41 (1) 1 of the former Inheritance Tax and Gift Tax Act, and on a different premise, this part of the claim by the prior plaintiffs is without merit without further review.

C) Interpretation of Article 31(6) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act

Article 31 (6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that benefits under Article 41 (1) of the former Enforcement Decree shall be the amount calculated by multiplying the profits falling under any of the following subparagraphs (in cases of a corporation falling under paragraph (1) 1, such losses shall be limited to the relevant losses) by the ratio of shares or equity shares of the persons under paragraph (5) of the same Article (limited to cases where the relevant amount is at least 100 million won). Therefore, in interpreting the meaning of "relevant losses", it is inevitable to consider Article 31 (1) 1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act as soon as possible. In this case, losses under Article 18 (1) 1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act shall be included in the calculation of losses for the pertinent business year including the donation of property pursuant to Article 41 (1) of the Act, and the defendant shall not be deemed to have carried forward losses for the pertinent business year including 30 years prior to the date of donation.

D) Whether it violates the principle of retroactive taxation prohibition

The principle of non-payment of tax statutes or the principle of prohibition of retroactive taxation is not to restrict the application of new statutes, etc. to the facts of taxation requirements which are closed prior to the occurrence of the validity in cases where the enactment or amendment of tax statutes, or the interpretation or amendment of the laws and regulations by the tax authorities on the grounds of the amendment of the relevant laws and regulations, or to the facts of taxation requirements that have arisen thereafter (referring to Supreme Court Decision 96Nu9423 delivered on October 29, 196).

Article 41(1) of the former Inheritance Tax and Gift Tax Act and Article 31(1)1 and (6) of the Enforcement Decree of the same Act have meaning as a requirement for taxation to constitute a specific corporation and as a limit applicable in the process of calculating the gains of donation. Since there is no problem that the non-party company constitutes a specific corporation because it continues to have losses after the amendment, it shall be deemed that the non-party company had suffered losses from the non-party company from January 1, 2010 to January 1, 2009, which was the previous amendment of Article 41(1) of the former Inheritance Tax and Gift Tax Act before the amendment, is not the taxation requirement that has already been closed at the time of the amendment of the above Act, but the fact that the non-party company had been pending before this amendment rather than the taxation requirement that has already been closed at the time of the amendment of the above Act. Accordingly, in this case, it cannot be deemed that Article 41 of the amended Inheritance Tax and Gift Tax Act was retroactively applied since the non-party company calculated the gains of donation to the extent

This part of the plaintiffs' assertion is without merit.

E) Whether it violates the principle of double taxation prohibition

As seen earlier, the legislative intent of Article 41 of the former Inheritance Tax and Gift Tax Act is to regulate variable evidence which actually gives profits to the shareholders, etc. of the specified corporation by offsetting the receipt and loss of assets and offsetting the amount of the gift by the donation. The deficit is not a taxation requirement but a taxation requirement in the application of Article 41 of the former Inheritance Tax and Gift Tax Act. Even if the money is given to a specified corporation without compensation, it is merely a passive benefit that the principal can be counted as the debt of the specified corporation, and it does not affect the carried forward of the specified corporation, because it is merely a passive benefit that is exempted from the expenditure equivalent to the appropriate interest and the equivalent amount, and if the money is given without compensation, the profit equivalent to the appropriate interest and the amount of the donation will be accumulated every year, while the carried forward loss will not be accumulated as long as it is not deducted from the income of the business year. Therefore, it is difficult to conclude that the calculation of the gift profits like the defendant's method violates the double taxation prohibition principle.

3. Conclusion

Therefore, all of the plaintiffs' claims of this case are dismissed. It is so ordered.

shall be determined as above.

Judges Kim Jong-young

Judges Roster

Judges Kim Jae- Jae