Whether a person who was not a shareholder of a corporation is subject to the deemed acquisition tax in case where the person who was not a shareholder of the corporation was transferred all or part of the stocks from the existing oligopolistic stockholder when forming a relative or a special relationship with the existing oligopolistic stockholder and became a new oligopolistic stockholder, but there is no change in the ratio of the total stocks

Article 105(7) of the former Local Tax Act provides that a joint tax liability shall be imposed on an oligopolistic stockholder who is liable to pay deemed acquisition tax by applying mutatis mutandis Article 18 of the same Act with respect to the oligopolistic stockholder’s stocks owned by a group of oligopolistic stockholders, rather than on the basis of the increase in stocks owned by a specific oligopolistic stockholder. The purport of this provision is to jointly understand the capacity to pay taxes in consideration of the fact that a relative or a person with a special relationship who forms a group of oligopolistic stockholders is substantially able to exercise the right to manage and dispose of the assets of the corporation in question in the capacity of joint business or co-owners with respect to the assets of the corporation in question, so the rights and duties on the assets can also be jointly owned by the oligopolistic stockholder in substance and economically. Therefore, in addition to the imposition of the deemed acquisition tax in relation to the real estate, which is deemed to be newly owned by the oligopolistic stockholder group, the existing oligopolistic stockholder group cannot be deemed to have been transferred from the existing oligopolistic stockholder group to a new group or group of oligopolistic stockholders, or a new one cannot be interpreted from the existing oligopolistic stockholder.

Articles 18 (see current Article 44 of the Framework Act on Local Taxes), 22 Subparag. 2 (see current Article 47 Subparag. 2 of the Framework Act on Local Taxes), 105(6) (see current Article 7(5)) and (7) (see current Article 7(5)) of the former Local Tax Act (wholly amended by Act No. 1021, Mar. 31, 2010)

Supreme Court Decision 2002Du1144 Decided February 27, 2004 (Gong2004Sang, 563) Supreme Court Decision 2007Du10297 Decided August 23, 2007 (Gong2007Ha, 1482) Supreme Court Decision 2006Du19501 Decided October 23, 2008 (Gong2008Ha, 1615)

Benwon Chionion et al. (Law Firm Name Ratio, Attorneys Lee Sung-sung et al., Counsel for the plaintiff-appellant)

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Daejeon High Court (Cheongju) Decision 2011Nu533 decided May 10, 2012

The judgment of the court below is reversed, and the case is remanded to Daejeon High Court.

The grounds of appeal are examined.

The main text of Article 105(6) of the former Local Tax Act (wholly amended by Act No. 10221, Mar. 31, 2010; hereinafter the same) provides that, when an oligopolistic stockholder becomes an oligopolistic stockholder by acquiring stocks of a corporation with respect to the liability to pay deemed acquisition tax, such oligopolistic stockholder shall be deemed to have acquired the real estate, etc. of the relevant corporation. Here, the term “ oligopolistic stockholder” refers to one stockholder and his relatives and other persons having special relations with him as prescribed by the Presidential Decree, whose total amount of stocks owned exceeds 50/100 of the total number of stocks issued by the relevant corporation.

The issue of whether a person is an oligopolistic shareholder who is liable for tax payment of deemed acquisition tax is determined based on the increase in the total stocks owned by a group of oligopolistic shareholders rather than on the basis of the increase in the number of stocks owned by a specific oligopolistic shareholder. Article 105(7) of the former Local Tax Act provides that a joint and several tax liability shall apply mutatis mutandis to an oligopolistic shareholder who is liable for tax payment of deemed acquisition tax. The purport of this provision is to jointly understand the capacity to pay taxes in consideration of the fact that a relative who forms a group of oligopolistic shareholders or a person with a special relationship can actually exercise the right to manage and dispose of the assets of the corporation in question in the capacity of joint business or co-owners (see Supreme Court Decision 2006Du19501, Oct. 23, 2008; 207Du19501, etc.). Thus, the existing oligopolistic shareholder cannot be deemed to have been newly owned by the existing oligopolistic shareholder or a group of oligopolistic shareholders with no special relationship with the existing oligopolistic shareholder.

According to the reasoning of the judgment below, the court below found that the Plaintiff: (a) formed the UNM on April 7, 2008, a non-listed corporation, and owned all outstanding shares; and (b) formed a share swap agreement with the Plaintiff on December 1, 2009 to exchange all the UNM shares and new shares issued by the Plaintiff through the offering of new shares; (c) concluded a share swap agreement with the Plaintiff on December 1, 2009; (d) accordingly, the Plaintiff acquired 72.5% of the UNM shares and acquired 70% of the shares issued by the Plaintiff; and (e) the Plaintiff acquired 72.5% of the shares issued by the Plaintiff; and (e) the Plaintiff did not have a special relationship with Article 22 subparag. 2 of the former Local Tax Act with the oligopolistic shareholder mobilization of the Plaintiff, etc., but only owned the UNM shares due to the share swap; and (e) the Plaintiff was obligated to pay the acquisition tax for the first time in accordance with Article 60(1)5 of the former Local Tax Act.

However, examining the facts acknowledged by the court below in light of the legal principles as seen earlier, although the plaintiff was not the UNC shareholders, the plaintiff was not the oligopolistic shareholder of the UNC but formed a special relationship under Article 22 subparagraph 2 of the former Local Tax Act with the mobilization, which is the existing oligopolistic shareholder of the UNC, and became a new oligopolistic shareholder after being transferred all of the shares of the UNC from the mobilization. There is no change in the ratio of the total shares of the UNC, which the plaintiff and the mobilization held before and after the share swap, and therefore, it cannot be subject to the imposition of the

Nevertheless, the lower court, on a different premise, deemed that the Plaintiff was liable to pay deemed acquisition tax following the acquisition of MC shares, and determined that the instant disposition was lawful, and thus, it erred by misapprehending the legal doctrine on deemed acquisition tax for oligopolistic shareholders as stipulated in Article 105(6) of the former Local Tax Act, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of appeal

Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim So-young (Presiding Justice)