Transfer rate of shares transferred by a major shareholder of an emergency small and medium enterprise;

It cannot be interpreted that a "large stockholder" referred to in the above provision is limited to a large stockholder of a stock-listed corporation in consideration of the ratio of stocks held and the total market value of stocks held by the stock-listed corporation as a stock-listed corporation under the Financial Investment Services and Capital Markets Act.

Article 114 of the Income Tax Act

2018Gudan8461 Disposition rejecting capital gains tax rectification

ancient 00

000 director of the tax office

Litigation performers height00

April 24, 2019

May 1, 2019

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

Defendant’s correction of KRW 000,000,000 for the transfer income tax of January 12, 2018 for the Plaintiff for the year 2016

The rejection disposition shall be revoked.

1. Details of the disposition;

A. On May 12, 2006, the Plaintiff acquired 00,000 shares ( approximately 19.17% of total shares issued, hereinafter referred to as “instant shares”) issued by a small and medium enterprise owner, a small and medium enterprise owner, a small and medium enterprise owner (hereinafter referred to as “instant company”) on May 11, 2016, but transferred the instant shares to the instant company at KRW 0 billion on May 11, 2016, and reported and paid KRW 00,000,000 for the transfer income tax for the year 2016 by applying the tax rate of 20% to the Defendant on August 30, 2016.

B. On November 21, 2017, the Plaintiff filed a request for correction to reduce the capital gains tax rate of KRW 485,750,000 on the ground that the instant shares constitute unlisted shares, even if the shares are transferred by a major shareholder, since they constitute unlisted shares, the instant shares constitute 10% of capital gains tax rate.

C. On January 12, 2018, the Defendant rendered a disposition rejecting capital gains tax correction against the Plaintiff on the ground that the tax rate of 20% under Article 104(1)11(c) of the former Income Tax Act (amended by Act No. 14389, Dec. 20, 2016; hereinafter the same) is applied to the shares transferred by a major shareholder of a non-listed small and medium enterprise (hereinafter “instant disposition”).

D. On February 26, 2018, the Plaintiff appealed to the instant disposition and filed a request for a trial with the Tax Tribunal, but the decision to dismiss the request for a trial was rendered on May 24, 2018.

Facts that there is no dispute for recognition, Gap evidence 1, 2, and 3, Eul evidence 1-2, and Eul evidence 1-2, before oral pleadings.

The purpose of body

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

Article 104 (1) 11 (b) of the former Income Tax Act provides that "10/100 of the tax base of capital gains of small and medium enterprises (limited to cases where a non-large stockholder transfers stocks, etc.)" shall be defined as "large stockholder" in the above provision, and "large stockholder" in Article 94 (1) 3 (a) of the former Income Tax Act is defined as "large stockholder" in the above provision. Thus, the "large stockholder" in Article 94 (1) 3 (a) of the former Income Tax Act

Therefore, even though the tax rate of 10% under Article 104 (1) 11 (b) of the former Income Tax Act shall apply to the plaintiff, the disposition of this case applying 20% of the tax rate under Article 104 (1) 11 (c) of the former Income Tax Act on the premise that the plaintiff is a major shareholder is unlawful.

B. Relevant statutes

1) As shown in the separate sheet.

2) Article 94(1)3 of the former Income Tax Act provides that "income generated from the transfer of stocks or investment shares (including preemptive rights to new stocks, and securities depository receipts prescribed by Presidential Decree; hereafter referred to as "stocks, etc." in this Chapter) falling under any of the following items as capital gains tax subject to capital gains tax, and provides that "stocks, etc. of a corporation which is not a stock-listed corporation under the Financial Investment Services and Capital Markets Act (hereinafter referred to as "stock-listed corporation") shall be transferred by major shareholders prescribed by Presidential Decree (hereafter referred to as "major shareholders" in this Chapter) in consideration of the ratio of stocks owned, total market value, etc. of stocks owned, and transfer of stocks, etc. of a corporation which is not a stock-listed corporation in the securities market (hereinafter referred

3) In addition, Article 104 (1) 11 of the former Income Tax Act provides for the transfer income tax rate of stocks, etc. of a corporation other than small and medium enterprises prescribed by Presidential Decree (hereafter referred to as "small and medium enterprises" in this Chapter), 30/100 of the tax base of transfer income of stocks, etc. owned by its large stockholder for less than one year, 10/100 of the tax base of transfer income of its stocks, etc. (limited to cases where a person other than its large stockholder transfers such stocks, etc.) and 20/100 of the tax base of transfer income of its out of such stocks, etc. under item (c) thereof.On the other hand, Article 94 (1) 3 (a) of the former Income Tax Act (amended by Act No. 14389 of Dec. 20, 201) provides for "stocks, etc. of a corporation less than 10/100 of the total market price of the former stock-listed corporation" in Article 94 (1) 3 (b) of the Income Tax Act).

C. Determination

1) In determining the capital gains tax rate on the capital gains of stocks issued by the instant company, which is a small and medium-sized company, an unlisted company of the instant company, the concept of "large stockholder" under Article 94 (1) 3 (a) of the former Income Tax Act is examined.

2) According to Article 104(1)11 of the revised former Income Tax Act, the tax rate of 10% shall apply to the stocks, etc. of small and medium enterprises prescribed by Presidential Decree, which are transferred by a person who is not a major shareholder (hereafter in this Chapter, referred to as the "major shareholder"), taking into account the ratio of stocks owned, the total market value thereof, etc., while the tax rate of 30% shall apply to the stocks, etc. of a corporation, other than a small and medium enterprise, which is owned by a major shareholder for less than one year, and the tax rate of 20% shall apply to other stocks, etc., and the concept of a major shareholder under the above provision itself is clearly defined as a "major shareholder prescribed by Presidential Decree (hereafter in this Chapter, referred to as the "major shareholder") considering the ratio of stocks owned, the total market value thereof,

On the other hand, Article 104 (1) 11 of the former Income Tax Act provides that the tax rate of 30% shall apply to the stocks, etc. of a corporation other than small and medium enterprises prescribed by the Presidential Decree, which are less than one year owned by the large stockholder (limited to the transfer by a person other than the large stockholder), the tax rate of 10% shall apply to the stocks, etc. of small and medium enterprises (limited to the transfer by a person other than the large stockholder), and the tax rate of 20% shall apply to other stocks, etc. (c) and that it is not clear whether the ‘large stockholder' mentioned in the overall subparagraph (b) above is a person without permission or not.However, Article 94 (1) 3 (a) of the former Income Tax Act provides that Article 104 (1) 14 (b) of the former Income Tax Act shall be applied to the concept of ‘large stockholder' as prescribed by the Presidential Decree in consideration of the ratio of stocks held as a stock-listed corporation under the Financial Investment Services and Capital Markets Act (hereinafter in this Chapter 3).

3) Article 157 (4) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26982, Feb. 17, 2016; hereinafter the same shall apply) which was enforced as at the time of the transfer of stocks shall provide for the concept of major shareholders under each subparagraph of Article 94 (1) 3 of the former Income Tax Act as follows. (1) One stockholder or investor (including preemptive rights and securities depository receipts under paragraph (1); hereafter the same shall apply in this Chapter) of a corporation's stocks or investment shares (hereafter referred to as "one stockholder" in this Chapter) and a specially related person under Article 1-2 (1) and (3) 1 of the Enforcement Decree of the Framework Act on National Taxes (hereafter referred to as "other stockholders" in this Chapter) who owns not less than 2/100 of the total amount of stocks of the corporation listed on the KOSDAQ market as at the end of the business year immediately preceding the date of transfer of stocks, etc. [referring to the KOSDAQ-listed corporation as at least 100/1/100 of the Enforcement Decree of the Act.

Meanwhile, Article 157 (4) 2 of the former Enforcement Decree of the Income Tax Act provides for the concept of "large stockholder" in accordance with the total market value of stocks, etc., and Article 157 (6) 1 of the former Enforcement Decree of the Income Tax Act provides for the evaluation of total market value as of the end of the business year immediately preceding the business year in which the transfer date of stocks, etc. is included (the final market value as of the end of the immediately preceding business year if there is no final market value as of the end of the immediately preceding business year), and Article 165 (4) 2 of the former Enforcement Decree of the Income Tax Act provides that "in case of stocks, etc. other than those referred to in subparagraph 1, the appraised value under Article 165 (4) 2 of the former Enforcement Decree of the Income Tax Act shall be the average weighted value of the net profit and loss and the net asset value, respectively."

2) However, according to Article 1 of the Addenda of the Enforcement Decree amended by Presidential Decree No. 26982, Feb. 17, 2016, “cases falling under stocks, etc. of a corporation which is not a stock-listed corporation under the Financial Investment Services and Capital Markets Act” in Article 157(4) of the Enforcement Decree of the amended Enforcement Decree refers to cases falling under stocks, etc. of a corporation which is not a stock-listed corporation under the Financial Investment Services and Capital Markets Act on January 1, 2017; and “cases falling under stocks, etc. of a stock-listed corporation under the Financial Investment Services and Capital Markets Act” refers to cases falling under stocks, etc. of a stock-listed corporation on April 1, 2016. Therefore, Article 157(4) of the former Enforcement Decree of

Where a corporation owns stocks or investment shares not exceeding 10/100 of the total number of stocks issued or total amount invested by a corporation that issued other unlisted stocks, etc., the evaluation of such other unlisted stocks, etc. may comply with acquisition value under Article 74 (1) 1 (e) of the Enforcement Decree of the Corporate Tax Act, notwithstanding subparagraph 1, by providing that the evaluation of the other unlisted stocks, etc. may comply with acquisition value under Article 74

In this regard, Article 94 (1) 3 (a) of the former Income Tax Act provides that "large stockholder prescribed by Presidential Decree taking into account the ratio of stocks held and the total market value of stocks held by a stock-listed corporation under the Financial Investment Services and Capital Markets Act" shall not be interpreted as limiting the scope of stocks held by a stock-listed corporation to a large stockholder.

4) As seen earlier, the Plaintiff held approximately 19.17% of the shares issued by the instant company as of December 31, 2015, which was the end of the business year immediately preceding the business year to which the transfer date belongs, and therefore, the Plaintiff falls under a major shareholder under Article 157(4) of the former Enforcement Decree of the Income Tax Act, and thus, the tax rate of 20% under Article 104(1)11 (b) of the former Income Tax Act, not the tax rate of 10%, but the tax rate of

3. Conclusion

Therefore, the plaintiff's claim cannot be accepted, and it is dismissed as per Disposition.

shall be ruled.