Cho-2016-China-1614 (2016.08)

In cases where it is unreasonable to adopt the weighted average amount of net profit and loss per share even though it has not been specified in Acts and subordinate statutes, it shall be evaluated as an estimated profit per share.

Although the net profit and loss value stipulated in Article 17-3(1) of the Enforcement Rule of the Inheritance Tax and Gift Tax Act does not constitute unreasonable cases, in cases of temporary and preferential cases where the company's future profit and loss value cannot be properly reflected in the company's future profit and loss, it is reasonable to evaluate it as an estimate

Article 54 (Appraisal of Listed Stocks) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act

The method of calculating net profits and losses for the last three years per share of Article 17-31 of the Enforcement Rule of the Inheritance Tax and Gift Tax

2016Guhap51540 Revocation of Disposition of Imposition of Gift Tax

AA and one other

BB Director of the Tax Office

June 9, 2017

July 7, 2017

1. On January 14, 2016, the Defendant revoked each imposition disposition on Plaintiff CCC in excess of KRW 81,004,660 of gift tax for the year 201, and KRW 35,792,130 of gift tax for the year 201 and KRW 71,068,350 of gift tax for the year 201 for Plaintiff AA.

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

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. On November 21, 201, 201, the Plaintiffs respectively acquired 36,00 shares of EEE (Plaintiff CCC) and 12,00 shares (Plaintiff AA), respectively, from DD, the spouse of Plaintiff CCC and the father of Plaintiff AA (hereinafter “instant shares”).

B. On January 14, 2016, the Defendant deemed the Plaintiffs to have donated the instant shares to DD, and calculated the appraised value of the instant shares as KRW 25,034 per share pursuant to Article 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 23527, Jan. 25, 2012; hereinafter “former Enforcement Decree of the Inheritance Tax and Gift Tax Act”). On January 14, 2016, the Defendant issued a disposition imposing KRW 81,004,660 on Plaintiff CCC and KRW 71,068,350 on Plaintiff AA (hereinafter “instant disposition”).

C. On April 18, 2016, the Plaintiff filed an appeal with the Tax Tribunal, but was dismissed on July 8, 2016.

[Ground of recognition] Facts without dispute, Gap evidence 2, 6 evidence, Eul evidence 1 to 3 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

The instant company disposed of tangible assets in 2009 and obtained profits from 273,525,915 won, which is the case where the net profit and loss for the recent three years increases normally due to the temporary emerculation circumstances. Therefore, it is unreasonable to calculate the value per share based on the weighted average amount of net profit and loss for the recent three years pursuant to Article 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.

B. Relevant statutes

It is as shown in the attached Form.

C. Relevant legal principles

Article 63(1)1 (c) and Article 54 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201; hereinafter referred to as the "former Inheritance Tax and Gift Tax Act"), which provides for the supplementary evaluation method of unlisted stocks, provides that the value per share of unlisted stocks shall, in principle, be the net value per share (the rate determined and announced by the Minister of Strategy and Finance in consideration of the weighted average value of net profits and losses for the latest three years per share ± net value of bonds with three years maturity) and net asset value per share (the total value of issued stocks of the relevant corporation ±) calculated by the weighted average value of profits and losses per share in the latest three years under Article 63(1)1 (c) and Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201); the weighted average value of profits and losses per share in the preceding three years 】 (the net value of profits and losses per share before the evaluation base date 】

Meanwhile, it is desirable to calculate the net value of unlisted stocks by the method of assessing the current value after estimating the expected future profits of the stocks. However, Articles 54(1) and 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provide that the net value of the profits and losses per share shall be calculated by applying the weighted average amount of the net profits and losses per share for the last three years, which is the past performance, in principle. As such, substitution of future expectation profits with the past performance is premised on the premise that the past performance will continue in the future (see, e.g., Supreme Court Decision 2011Du9140, May 24, 2012). If it is deemed unreasonable to evaluate the profits and losses per share for the preceding three years because the "average average amount of the profits and losses for the preceding three years" is not adequately reflected in future earnings and thus, it does not constitute grounds for exception under Article 17-3(1) and 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act [see Article 2616(1) of the Daejeon High Court Decision]

(d) Facts of recognition;

The following facts are acknowledged according to the facts without dispute, Gap evidence Nos. 1, 8, Eul evidence Nos. 4 and 5, and the purport of the whole pleadings.

(1) The instant company is a company engaged in interim treatment business specializing in crushing of construction wastes, collection and transportation business, recycling business, etc.

(2) On March 30, 2009, the instant company sold 1 unit of construction equipment (Gwon00No000), 1 unit of construction equipment (Gwon00No000) on April 1 of the same year, 30 May 30 of the same year (Gwon00No000), 1 unit of construction equipment (Gwon000) on December 22 of the same year, and 1 unit of truck (00 week) on December 22 of the same year.

(3) The profits and losses before the annual corporate tax deduction from 2005 to 2016 of the instant corporation are as follows: (Omission)

(4) The gains or losses from the disposal of tangible assets by year from 2005 to 2016 of the instant company are as follows: (Omission)

(5) The present value of the instant company’s instant assets on the list of the total depreciation cost adjustment lists from 2005 to 2016 as of the end of the period is as follows.

(6) The Act from 2008 to 2010 as of the evaluation date of the instant company

The weighted average amount of profit or loss of profit or loss and disposal of tangible assets prior to the deduction of royalties shall be as follows:

E. Determination

(1) Whether the instant disposition is unlawful

According to the above facts, the weighted average amount of the profit and loss from disposing of tangible assets for the last three years is not less than 86,802,817 won, which is about 41% of the weighted average amount of the profit and loss before deducting corporate tax for the last three years, and thus, it does not fall under Article 17(1)6 of the Enforcement Rule of the Inheritance Tax and Gift Tax Act.

However, in light of the following circumstances recognized by the above recognition facts, it is anticipated that the net amount of profit and loss after the business year (201) to which the evaluation base date belongs, compared to the net profit and loss for the last three years (2008 to 2010) due to the temporary friendly situation that occurred before the evaluation base date of the instant case, would be significantly changed, and it is difficult to view the past performance to continue even thereafter, and the situation after the evaluation base date of the instant case also complies with the above presumption. It is unreasonable to calculate the value per share based on the weighted average amount of net profit and loss pursuant to Article 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act is not appropriate.

① The instant company did not have any profit from the disposal of tangible assets from 2005 to 2008, prior to 2009, and there was no profit from the disposal of tangible assets from 2010 to 2014 even after 2009, and thus, it appears that a large amount of profit from the disposal of tangible assets was generated in 2009.

② If a company engaged in the collection, crushing, recycling, etc. of construction wastes, and the company in this case sold construction equipment and trucks necessary for the collection, crushing, and recycling of construction wastes in 2009, it is difficult to view that the previous performance will continue to exist even before installing new construction equipment and trucks.

③ The profits and losses prior to the deduction of corporate tax in 2009 were reflected in KRW 260,435,567, which is the profits and losses accruing from the disposal of tangible assets in 2009, and KRW 500,519,572, but the profits and losses prior to the deduction of corporate tax have no particular profits and losses since they did not have any specific profits and losses from the disposal of tangible assets. Such profits and losses have been significantly decreased in KRW 25,143,574, KRW 24,247,486, KRW 201, KRW 11,227,212.

Therefore, although the shares of this case do not constitute an exception under Article 17-3 (2) 6 of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act, it is reasonable to calculate the net profit per share with the estimated profit under Article 56 (2) 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act because the "amount of net profit and loss per share for the last three years" does not reflect the future profit and thus it is unreasonable to apply it as it is reasonable to evaluate it as it is. Thus, the disposition of this case, which calculated the appraised value per share of the shares of this case pursuant to Article 56 (1) 1

(2) Scope of revocation

Whether a disposition is lawful in a lawsuit seeking revocation of disposition is determined depending on whether it exceeds a reasonable tax amount. The parties concerned may submit arguments and materials supporting the objective tax base and tax amount until the closing of pleadings in the fact-finding court. When calculating a legitimate tax amount to be imposed lawfully based on such materials, only the portion exceeding the reasonable tax amount should be revoked, but in such case, the entire taxation disposition should be revoked. In such a case, the court does not have a duty to calculate a reasonable tax amount to be imposed by finding a reasonable and reasonable method of calculating the reasonable and reasonable tax amount ex officio (see, e.g., Supreme Court Decisions 94Nu13527, Apr. 28, 1995; 2015Du622, Sept. 10, 2015).

In this case, since there is no evidence to calculate the presumption profit under Article 56 subparagraph 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, it is impossible to calculate the legitimate amount of gift tax to be imposed on the Plaintiffs, the entire disposition of this case is revoked

3. Conclusion

All of the plaintiffs' claims are reasonable, and it is so decided as per Disposition by admitting all of them.