Seoul Administrative Court-2015-Gu Partnership-7019 ( October 10, 2016)

shares issued by a Chinese corporation shall not be recognized as a share donation, and the appraisal of shares issued by a Chinese corporation shall be inappropriate

There is no evidence to acknowledge that shares have been donated, and it is reasonable to deem that only the right to distribute profits has been acquired, and the low-price acquisition is not proven, and the evaluation of issued shares by a Chinese corporation is inappropriate.

Article 31 of the Inheritance Tax and Gift Tax Act

Article 58-3 of the Enforcement Decree of Inheritance Tax and Gift Tax Act

Seoul High Court 2016Nu52431

○ ○

○ Head of tax office

Seoul Administrative Court Decision 2015Guhap70119 decided June 10, 2016

August 18, 2017

September 15, 2017

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

The Defendant’s disposition of imposing gift tax of KRW 000 (including additional tax) against the Plaintiff on November 4, 2013 shall be revoked.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Details of the disposition;

This part of the reasoning of the judgment of the court of first instance is identical to the part of two to three pages 5, and thus, it shall be quoted in accordance with Article 8(2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act.

2. Whether the instant disposition is lawful

A. The parties' assertion

1) Plaintiff

A) The Plaintiff did not acquire the instant shares under the instant contract, but acquired the right to profit distribution at a certain ratio as consideration for the business activities of CCC and DD injury. Thus, the instant disposition, based on the premise that the instant shares were donated, should be revoked as it is unlawful.

B) Even if the instant shares were acquired, it cannot be deemed as a gift since it was not paid without compensation as remuneration for business activities, and it cannot be deemed as a gift, and since the Plaintiff cannot present a reasonable price to be paid, the remainder excluding a justifiable price cannot be deemed as a gift.

C) Since the instant shares are shares issued by unlisted companies located in China, they cannot be assessed by applying a supplementary assessment method under the Inheritance Tax and Gift Tax Act, the instant method of assessment is unlawful.

2) Defendant

A) In light of the language and text of the instant contract, the Plaintiff acquired the instant shares from AA without compensation, and thus, the instant disposition is lawful.

B) Even if the instant shares were paid as compensation for damages for nonperformance of profit distribution under a joint venture agreement, since the parties to a joint venture agreement are SS, not the Plaintiff, the Plaintiff is donated the instant shares.

C) In addition, even if the instant shares were paid as remuneration for business activities, such remuneration is limited to the dividend portion of the instant shares, so the instant shares themselves shall be deemed donated, and at least the portion exceeding the reasonable price to be paid by the Plaintiff shall be deemed as donation.

(b) Fact of recognition;

This part of the judgment is identical to the above part, except for the modification of part of the three to four pages 5 and 14 of the judgment of the court of first instance as follows. Thus, this part of the judgment is cited in accordance with Article 8(2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act.

○○ 4th 7th 7th 7th 7th m ", suspended" (hereinafter referred to as "CCC's ex post income has decreased from approximately KRW 1.1 billion in 2008 to KRW 800 million in 2009, and she returned to the enemy in 2010."

The following shall be added to the 4th 4th 10 pages "..........."

"The plaintiff demanded AA to increase its capital to the CCC. At the request of the plaintiff, AA increased its capital of USD 200,000 on October 25, 2010, USD 300,000 on November 5, 2010, USD 50,000 on November 24, 2010, USD 2 million on January 7, 201, and USD 2 million on January 7, 201."

○ 4.12 pages 12. The following shall be added:

"7) Under the instant contract, the right to receive dividends (1.1), transfer of shares (1.2), voting rights in subsidiaries (1.3), cumulative relief measures, existence (2.5), etc. In other words, the beneficial owner has absolute rights to receive sales gains or gains from transfer arising from the transfer of shares, along with the absolute right to receive dividends and interests, and formal shareholders shall obtain approval of the beneficial owner in advance regarding matters subject to approval by resolution. The beneficial owner is entitled to exercise the voting rights granted to the shares of subsidiaries from all respects, and neither party shall transfer the rights or obligations under the instant contract without written consent of the other party.

8) AA increased USD 700,000 from March 1, 2011 to January 14, 2013, which was after the instant contract, and SS invested USD 450,000 in the PP Hong Kong on October 15, 2013, and acquired 18% of total shares.

○○ 4th 13th 13th / [based on recognition] column added “Evidences, Evidence No. 38, Evidence No. 25th /” to “the witness”, and read “the witness” to “the witness of the first instance trial.”

C. Determination

1) Whether the instant shares were donated

A) Relevant legal principles

The issue of whether a gift tax is subject to gift tax should be determined by the agreement between the donor and the donee with respect to the donation of stocks and whether the status as a de facto shareholder has been acquired by acquiring them as a shareholder. For example, in a case where there exists an agreement between the donor and the donee with respect to the donation of stocks, and a transfer of ownership in the name of the donee as well as a transfer of ownership in the register of shareholders is made in the name of the donee, the determination that there was a gift as a gift subject to gift tax on the said ground is just and acceptable, and the mere fact that the share certificate was not issued is not different (Supreme Court Decision 2004Do817 Decided June 29,

On the other hand, in cases where the parties to a contract prepare in writing a disposition document, if the objective meaning of the text is clear, the existence of the parties’ expression of intent and its contents should be recognized unless there are special circumstances. However, in cases where the objective meaning of the text is not clearly expressed, regardless of the parties’ internal intent, the contents of the text and the motive and background leading up to the conclusion of the contract, the purpose and genuine intent to be achieved by the parties through the contract, transaction practices, etc. shall be comprehensively considered, and the contents of the contract shall be reasonably interpreted in accordance with logical and empirical rules, general common sense, and transaction norms so as to fit social justice and equity ideology. In particular, if the contents of the contract alleged by one party imposes a serious liability on the other party, the more strict interpretation of the contents of the text shall be made (see Supreme Court Decision 93Da3103, Oct. 26, 1993).

B) Specific determination

Based on the above legal principles, in full view of the facts and quoted evidence as seen earlier, and the following circumstances revealed by adding up the purport of the entire pleadings in the statement No. 13, it is insufficient to deem that the Plaintiff received the instant shares from AA, and there is no other evidence to acknowledge otherwise. Rather, it is reasonable to deem that the Plaintiff acquired only the right to share the profit, i.e., the right to receive 80% of the profit arising from the future movement and 60% of the profit arising from DD injury as remuneration for business activities in the future.

① Both the Plaintiff and AAA, a party to the instant contract, claim that the Plaintiff acquired the instant contract is not the instant shares but the right to share profits for CCC and DD injury. In particular, the Plaintiff asserted that the National Tax Service had not continuously donated the instant shares from the investigation to the instant lawsuit.

② The Plaintiff and AA do not have any grounds to deem that the Plaintiff had a close personal relationship other than those in business cooperative relations, and there is no special reason to believe that AA has a special relationship with the Plaintiff to donate the instant shares. The Board of Audit and Inspection also held that even though the PEP Hong Kong did not have a special relationship with the Plaintiff to donate the instant shares to the Plaintiff, it is difficult to deem that the disposition based on the instant contract existed,

Furthermore, at the time of the instant disposition, the Defendant assessed the value of the instant shares as approximately KRW 9.4 billion. However, considering the circumstances that the Plaintiff had been in charge of the sales business at the time of the Plaintiff’s business operation, it is difficult to present any circumstance to donate the instant shares to the Plaintiff, which was merely a mere business knowledge of about KRW 1.1 billion, to pay the Plaintiff a certain percentage of interest arising from the Plaintiff’s business activity in return for the resumption of its business activity in the future.

③ Since the Plaintiff suspended the sales of the CCC’s business, and the Plaintiff was in a sudden decrease in the sales volume of the CCC, it is difficult to view that AA, as a matter of course, may transfer a part of the share to the Plaintiff from the purport that it would give motive to the Plaintiff by again requesting its business activities, and that it also donated an excessive share of 80% in the case of CCC and 60% in the case of DD injury.

④ After and after the conclusion of the instant contract, AAA increased USD 2 million in CCC and USD 700,000 in DDR injury. If AA had been aware that at the time of each of the above capital increase, 80% of the CCC shares owned by it and 60% of DDR shares were to be transferred or transferred to the Plaintiff according to the instant contract, AAA would not have made a large amount of capital increase only with its own funds.

⑤ The instant contract does not include the Plaintiff’s acquisition of the instant shares from AA or AAP Hong Kong, but was written in the form of recognizing respective shares on the premise that the Plaintiff and AA are beneficial owners of PMF Hong Kong. In other words, the instant contract is written in writing to be a shareholder who is the nominal owner of PMF Hong Kong, in the case of Plaintiff and AA, as a beneficial owner of 8:2 and in the case of DD injury, the Plaintiff and AA shall be defined as a beneficial owner of 6:4 percent, in the case of CCC, and the main text is to confirm what the beneficial owner’s rights are, and it is difficult to regard the Plaintiff as

2) Whether a reasonable price exceeds the reasonable price (preliminary determination)

A) Even if the Plaintiff acquired the instant shares under the instant contract, it is reasonable to view that the Plaintiff acquired the instant shares with compensation as remuneration for business activities of CCC and DD injury, and therefore, it cannot be deemed that the Plaintiff received the instant shares without compensation.

B) Meanwhile, Article 35(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 2011; hereinafter “former Inheritance Tax and Gift Tax Act”) provides that, with respect to a person who acquires property from a third party at a price lower than the market price, the amount equivalent to the difference between the price and the market price at the time of acquisition of the relevant property shall be deemed as the value of donated property. In applying Article 35(2) of the same Act, where the property is acquired or transferred between the parties who are not the parties concerned, and where the property is acquired or transferred at a remarkably lower price than the market price under the transactional practice, it shall be presumed that the difference between the price and the market price is donated to the third party and that the amount equivalent to the benefits prescribed by the Presidential Decree is deemed as donated property. The legislative purport of Article 35(2) of the former Inheritance Tax and Gift Tax Act is to ensure that there is no justifiable reason to view that there is no special relationship between the two parties to the transaction as gift transaction without any justifiable reason.

C) However, as seen earlier, the Plaintiff and AA have no special relationship, and the Defendant asserts at least that the portion exceeding the reasonable price to be paid by the Plaintiff from the share price of this case constitutes a gift.

However, the defendant, who is a tax authority, is liable to prove that the plaintiff alleged to have acquired the shares of this case from AA without any special relation at a price significantly lower than the market price, that is, he/she acquired the shares of this case at a price significantly lower than the market price, and that there is no justifiable ground in light of transaction practices, but the evidence submitted by the defendant alone cannot be deemed to have been proven as above. Therefore, the

3) Whether the assessment methods of the instant shares are appropriate (preliminary determination)

A) Article 58-3(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that where it is inappropriate to apply the provisions of Articles 60 through 65 of the Act to an inherited or donated property in a foreign country, the country where the pertinent property is located shall be the amount appraised for the purpose of imposing capital gains tax, inheritance tax, or gift tax. In cases of stocks of an unlisted corporation in a foreign country, applying the supplementary evaluation method under Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act and Article 17(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act only when “it is not unreasonable to apply the supplementary evaluation method,” and the burden of proving that the above supplementary evaluation method is “unjustifiable to apply” lies with the tax authority (see, e.g., Supreme Court Decisions 2007Du5646, Jan. 14, 2010; 2016Do3143, Oct. 13, 2016).

나) 그런데 중국 소재 비상장법인인 CCC과 DDD상해의 이 사건 주식 가치를 평가함에 있어 상속세및증여세법상 보충적 평가방법을 그대로 적용하는 것이 부적당하지 않다고 인정할 만한 뚜렷한 근거는 찾아볼 수 없다. 오히려 CCC은 원고가 영업활동에 기여한 2008년에는 상당한 이익이 발생하였으나 원고가 2009. 6.경 영업 관련 업무를 그만둔 이후 2010년에는 적자를 기록하는 등 이익변동성이 커 과거 특정기간의 순손익이 미래에도 지속될 것임을 전제로 하는 상속세및증여세법상 보충적 평가방법의 가정과는 부합되지 않고, 2009년〜2010년경 중국 인민은행의 기준금리가 한국은행의 기준금리의 약 2.4배에 달할 정도로 높아서 3년 만기 회사채 유통수익율의 상당한 차이 등을 초래했으며, 거래 당사자인 원고가 국내 거주자라는 사정이 외국 소재 비상장법인의 주식에 대한 평가방법을 배제할 사유가 될 수는 없는 점 등에 비추어 보면, 이 사건 주식의 가치를 상속세및증여세법상 보충적 평가방법으로 평가하는 것은 부적당하다고 판단된다.

4) Sub-committee

Ultimately, the instant disposition, based on the premise that the Plaintiff received a donation of the instant shares, should be revoked as it is unlawful in view of what mother.

3. Conclusion

If so, the plaintiff's claim shall be accepted on the ground of its reasoning. The judgment of the court of first instance is just with this conclusion, and the defendant's appeal is dismissed as it is without merit.