Requests for complementary data on the acquisition, transfer, etc. of stocks are not subject to a tax investigation.

It shall not be deemed that re-investigation is prohibited even if a taxpayer has no duty to answer or accept and the taxpayer’s freedom of business, etc. is not likely to infringe on the taxpayer’s freedom of business or be abused by the right to conduct a tax investigation.

Article 812-4 (Prohibition of Abuse of Tax Investigation Authority)

Busan District Court 2018Guhap23214 Revocation of Disposition of Imposing capital gains tax

Kim 00

00. Head of tax office

May 9, 2019

July 25, 2019

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of capital gains tax of KRW 79,943,680 (including additional tax) against the Plaintiff on July 13, 2017 shall be revoked.

1. Details of the disposition;

A. A000 (hereinafter referred to as "a") is a company established for the purpose of export and import business, etc., and BB (hereinafter referred to as "bb") is a company established for the purpose of the manufacture and sales business of new and finished products, and 94.4% of shares issued by B is dd, e e , and 4.6%, which are children of cc c c c c s of the representative director of Aa.

B. From December 6, 1986 to November 1, 2005, the Plaintiff served as the head of an overseas corporation, etc., and cc from July 23, 1987 to August 25, 1998, acquired a total of 32,00 shares (hereinafter “instant shares”) issued under the Plaintiff’s name as follows:

C. On December 24, 199, the Plaintiff acquired shares of KRW 12,000 per share of KRW 5,000 per share of KRW 60,00,000.

D. Around February 2013, the Plaintiff: (a) attached a sales contract on October 29, 2012, stating that the Plaintiff sold KRW 2,500,000 (one share of KRW 56,820 per share) to B in total; (b) reported and paid KRW 43,826,040,040, capital gains tax for the year 2012, to the head of the Suwon Tax Office by filing a preliminary return of capital gains tax pursuant to the said sales contract (the application of capital gains tax rate of 10%; hereinafter referred to as “instant return of capital gains tax”); and (c) accordingly, reported and paid to B the head of the Suwon Tax Office for the preliminary return of capital gains tax pursuant to the said sales contract.

E. From October 13, 2016 to December 5, 2016, the director of the Seoul Regional Tax Office conducted a tax investigation on gift tax for the year 2012 (hereinafter “instant tax investigation”) on the Plaintiff’s share 4,00 shares that the Plaintiff reported that he/she sold to the Plaintiff after conducting a tax investigation on the gift tax for the year 2012 from October 13, 2016 to December 5, 2016, the head of the Seoul Regional Tax Office notified the Plaintiff of the taxation of KRW 79,697,920 of the transfer income tax on the share 12,00 shares that the Plaintiff sold to B is merely 12,00 shares that the Plaintiff sold to B, and accordingly, it was determined that the transfer income tax should be calculated based on the acquisition price of KRW 60,000,000.

F. The Plaintiff filed a request for pre-assessment review with the Commissioner of the National Tax Service, but the Commissioner of the National Tax Service decided not to adopt the same on June 23, 2017, and the Defendant notified of the above findings of the investigation, notified the Plaintiff of KRW 79,697,920 for the transfer income tax for the year 2012 (hereinafter “instant disposition”).

G. On September 28, 2017, the Plaintiff filed an administrative appeal with the Tax Tribunal on the instant disposition, but the Tax Tribunal dismissed the Plaintiff’s claim on May 14, 2018.

[Ground of recognition] Unsatisfy, Gap 1 to 8, and 11 each entry (if any)

Serial number, including number, hereinafter the same shall apply), the purport of the whole pleading

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Procedural illegality assertion

From September 10, 2013 to October 21, 2013, the Busan Regional Tax Office investigated the Plaintiff, BB, and A with respect to the instant stock title trust crime. At the time, the Plaintiff’s home visit and summoned thefff, an executive officer of Aa, at least two times, and conducted a substantial tax investigation, such as exercising the right to ask questions and investigate. As a result, the Seoul Regional Tax Office concluded that there was no suspicion of title trust on the instant stock. However, the Seoul Regional Tax Office again conducted the instant tax investigation on the same issue in 2016, and issued the instant disposition on the premise that the instant stock is a title trust share. Therefore, the instant tax investigation constitutes a double tax investigation prohibited under Article 81-4(2) of the former Framework Act on National Taxes (amended by Act No. 11873, Jan. 1, 2013; hereinafter “former Framework Act on National Taxes”).

2) The assertion of substantive illegality

Cc acquired the instant shares under the Plaintiff’s name from July 23, 1987 to August 25, 1998, and thereafter donated all the said shares to the Plaintiff on or around December 24, 1999. As such, the instant shares were not owned by the Plaintiff, cc owned by the Plaintiff. Therefore, under the premise that the instant shares are owned by cc, the shares sold to b are merely 12,000 shares except for the instant shares, and thus, the instant disposition that calculated capital gains tax based on its acquisition value of KRW 60,00,000 is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Facts of recognition

1) Progress the procedure for confirming the stock change in writing

From September 10, 2013 to October 21, 2013, the director of the Busan Regional Tax Office followed the procedure of confirming the documents on stock change (hereinafter referred to as the "written confirmation of this case") for the plaintiff, bb and A as follows with respect to the title trust of cC shares and the suspicion of free donation to bB against the plaintiff.

① The director of Busan Regional Tax Office issued to the Plaintiff, bb, and A the following information to inform the Plaintiff, b, and A of the submission of explanatory materials for changes in stocks, etc.:

As a result of reviewing the detailed statement on changes, such as stocks submitted by a corporation on the details of changes in the stocks or equity shares held by the company of issuance of stocks, the following supplementary data shall be submitted by September 24, 2013 to confirm that the factual relations of stock transactions are unclear.

- Insufficient or unclear matters: the Plaintiff’s suspicion of title trust in relation to the Plaintiff’s acquisition of shares, capital increase with consideration, and transfer; the grounds for supplementing free donation due to title trust; and documents to be submitted: (a) the grounds for acquiring shares related to 44,000 shares acquired from the Plaintiff on October 26, 2012; (b) the grounds for acquiring shares related to 44,00 shares (including all the evidence of the source and related documents of the acquisition fund; and (c) the

It is known that if the requested data is not submitted or the data submitted is insufficient, it is possible to conduct an investigation for confirmation of facts. The request for the submission of supplementary data is to seek cooperation from the earer without the fluent procedure of the on-site investigation to confirm specific transaction details of stock changes.

② On October 1, 2013, public officials in charge of Busan regional tax office ○○, and △△△△△△ were visited the Plaintiff’s house, and written confirmation of the Plaintiff’s name at the time include the Plaintiff’s work details in paragraphs (1) through (9) and the process of acquiring and transferring the instant shares.

③ As a result of checking explanatory materials, etc. submitted by the plaintiff and the director of the Busan Regional Tax Office from fff, it was confirmed that the plaintiff's transaction price of KRW 60,000,000 for paid-in capital increase that was purchased on December 24, 1999 was confirmed, but data on the remaining shares were not confirmed, and the plaintiff used the full amount of the transfer price, and it constitutes a case where B is confirmed that shares were acquired for investment purposes and that there was no suspicion of tax evasion and thus constitutes a case where B is confirmed to have no suspicion of tax evasion.

2) Progress of the instant tax investigation, etc.

In conducting the instant tax investigation, the director of the Seoul Regional Tax Office conducted an integrated tax investigation on B and A with regard to the period from January 1, 2012 to December 31, 2015, from September 7, 2016 to January 4, 2017 (which is extended from December 5, 2016 to the beginning date). The report on the completion of the investigation prepared at the time of the said tax investigation includes the following:

① On November 18, 2016, CC made a statement in the process of the above integrated tax investigation as follows.

- A. Of the shares under the Plaintiff’s name, the remaining shares other than 12,000 shares that the Plaintiff paid for the capital increase by the settlement amount of the retirement allowance in December 24, 1999 are held in title by cC. Although the Plaintiff reported that all of 44,00 shares were transferred by the Plaintiff at the time of the instant report on the capital gains tax, the transfer proceeds of 2,500,000 shares to the Plaintiff’s shares other than the shares in this case are the transfer proceeds of 12,00 shares owned by the Plaintiff, except for the shares in this case. As a result, the shares in this case were transferred by cC to b without compensation.

- Around 98, at the time of the cancellation of the joint and several sureties with respect to the company, the Plaintiff made a separate oral commitment to thej (from around 2010 to February 2017 to work as Vice-Chairperson in A) to offer a written share of joint and several sureties in lieu of the Plaintiff, and thereafter, the shares acquired in the name ofj was subsequently donated to the j.

② At the time of the investigation, executives, etc. of cc and Aa made a statement that ccc had title trust with relatives and officers of a majority of shares of ccc in addition to the shares of this case.

③ In the process of the investigation, the fact that aa keeps and manages the actual share certificates of the shares in the name of executive officer in a lump sum, the Plaintiff was staying in China on the date of the general meeting of shareholders recorded in the minutes of the general meeting of shareholders, stating that the Plaintiff exercised the share certificates, and the report prepared by an accounting firm pursuant to a request by aa was confirmed as containing review details on the transfer of the shares in this case to the cc family members or welfare foundation.

3) Progress of the relevant disposition

① After conducting an integrated tax investigation on B and A as above, the director of the Seoul Regional Tax Office: (a) notified the director of the Seosan District Tax Office of the results of the investigation that “the shares of this case 4,000 shares that the Plaintiff reported to sell to B on October 29, 2012 were held in title trust by cC to the Plaintiff; (b) shares that the Plaintiff sold to B are merely 12,00 shares; and (c) the shares of this case were donated to B free of charge by cC to b. Therefore, the head of the Seosan Tax Office dismissed the claim for the administrative appeal on March 21, 2017, 200 shares that were appraised pursuant to the supplementary assessment method under Article 63(1)1(c) and (3) of the Inheritance Tax and Gift Tax Act, 339,133 won per share, the assessed value pursuant to the supplementary assessment method under Article 63(1)1(c) and (3) of the Inheritance Tax and Gift Tax Act should be included in gross income in B.

② From October 6, 2016 to December 5, 2016, the Seoul Director of the Seoul Regional Tax Office conducted an investigation of the change of shares in 2015 with respect to jj, and then notified the shareholders of the above 18,534,112,230 won (=31,454 shares x 389,245 won) of the price received by the due date from the Plaintiff on April 7, 2015, that the above 14,419,42,984 won, other than the capital gains tax, were donated in cash, and that the cj on January 20, 2017, which was approved by the National Tax Service on April 7, 2015, that the cj on the gift and the cj on January 27, 2017, which was approved by the National Tax Service that the said cj on the gift and the cj on January 2017.

[Ground of recognition] Facts without dispute, Gap 9, 10, 12, 14 evidence, Eul 5 to 11, the purport of the whole pleadings

D. Determination

1) Determination as to the assertion of procedural illegality

A) As a form of an administrative investigation to realize the State’s right to impose taxes, a tax investigation refers to an inquiry to determine or correct the tax base and amount of national tax and any act of inspecting, investigating, or ordering the submission of books, documents, and other articles. In the case of a tax investigation for which the tax authority’s right to inquire and examine for a disposition is exercised, a taxpayer or a person, etc. who is deemed to have a transaction with the taxpayer (hereinafter “taxpayer, etc.”) bears the legal duty to answer questions for tax officials to collect the taxation data and to allow them to undergo an inspection. Meanwhile, a repeated tax investigation for the same tax item and taxable period may seriously infringe not only on taxpayers’ freedom of business or legal stability, but also lead to the abuse of the authority to investigate. Thus, it is necessary to be prohibited except in exceptional cases that

In light of the nature and effect of such tax investigation, the purport of prohibiting duplicate tax investigations, etc., if a tax official’s investigation practically affects the taxpayer’s freedom of business by having the taxpayer answer questions and undergo an inspection, it shall be deemed as a “tax investigation prohibited from re-audit” even if it follows the procedure, such as “local confirmation” as stipulated by the Regulations on the Management of Investigations, which is the instructions of the National Tax Service. However, where it is deemed that all investigation conducted by the tax authority for the purpose of the collection of taxation data or the verification of accuracy of the details of the report constitutes a tax investigation prohibited from re-audit, the tax authority should always commence a regular tax investigation in sufficient cases only with the confirmation of facts, and the taxpayer, etc. must also respond to an indefinite tax investigation. As such, it does not constitute a “tax investigation prohibited from re-audit” even if the taxpayer, etc. has no duty to answer or accept, and the taxpayer, etc. is not obligated to answer

In addition, whether an investigation conducted by a tax official constitutes a "tax investigation prohibited by re-audit" can only be determined individually in specific cases by comprehensively taking into account the purpose and process of the investigation, subjects and methods of the investigation, data acquired through the investigation, size and period of the investigation, etc. However, it is difficult to view it as a "tax investigation prohibited by re-audit in principle where a taxpayer, etc. is expected to easily respond to the investigation or where it does not have a big impact on the taxpayer's freedom of business, etc., such as confirmation of the status of a place of business, simple confirmation of bookkeeping, confirmation of specific sales, confirmation through the issuance of administrative civil petition documents, receipt of data voluntarily submitted by the taxpayer, etc., and thus, it is difficult to regard it as a "tax investigation prohibited by re-audit" in principle, unless there are special circumstances. However, where an investigation is conducted for the purpose of determining or correcting the tax base and amount of tax and the taxpayer, etc. directly contact the taxpayer on a considerable date at the office, workplace, factory or domicile of the taxpayer, etc., or for inspection and investigation for a certain period (see, etc.).

B) In light of the following circumstances, it is difficult to view that the instant written confirmation constitutes an “tax investigation prohibited from duplicate investigation” in light of the following circumstances acknowledged by the respective descriptions of evidence, evidence as mentioned above, evidence as well as evidence Nos. 14 and 15 and the purport of the entire pleadings.

① Pursuant to Article 34(2) of the former Regulations on the Management of Inheritance Tax and Gift Tax (amended by the National Tax Service Directive No. 1992, May 1, 2013), the director of Busan Regional Tax Office shall select Plaintiff A, and B related to the instant shares as the subject of confirmation of documents for investigation of stock fluctuation through the review of data on stock fluctuation pursuant to Article 34(2) of the former Regulations on the Management of Inheritance Tax and Gift Tax (amended by the National Tax Service Directive No. 1992, May 1, 2013). The head of Busan Regional Tax Office shall provide that the Plaintiff, Aa, and B related to the instant shares shall be the subject of confirmation of documents for investigation of stock fluctuation

② The fact that the officialqqq of the Busan regional tax office and the www visited the Plaintiff’s residence on October 1, 2013 and submitted the confirmation document under the Plaintiff’s name is recognized. However, in light of the following: (a) the public official in charge visited the Plaintiff’s residence one time at the Plaintiff’s request of the Plaintiff with inconvenience; (b) the Plaintiff’s work details and the circumstances leading up to the acceptance and transfer of the instant shares; and (c) the face-to-face confirmation is simply written out; and (d) there was no evidence to prove that the separate investigation procedure other than the aforementioned confirmation document was being conducted, the public official in charge appears to have been in face-to-face verification, meeting the Plaintiff for the convenience of the Plaintiff.

③ In addition to the above written confirmation, the public officials in charge of Busan regional tax office did not take the procedure of examining documents or related data submitted by the persons subject to written confirmation, and did not visit the site, including the workplace, to inspect and investigate books, documents, and articles for a certain period, or to ask questions to the persons subject to confirmation for a considerable period of time.

④ Since the Plaintiff collected financial data, etc. required to be requested to a financial institution through a taxpayer through the procedure in principle, the instant written confirmation may be asserted as a real tax investigation. However, in light of the fact that Article 3 subparag. 2(f) of the former Regulations on the Management of Investigation Affairs (amended by National Tax Service Directive No. 2105, Jul. 1, 2015) classify “on-site confirmation” as “on-site confirmation,” rather than “on-site verification,” it is difficult to view it as a substantial tax investigation solely on the basis that the public official in charge of the Busan regional tax office received and confirmed financial data submitted voluntarily by the person subject to written confirmation without undergoing a separate procedure.

⑤ In the instant written confirmation procedure, Fff, an executive officer of a A, appears to have visited the Busan Regional Tax Office and submitted relevant data. However, in light of the fact that a letter of answer onfff was not prepared, and thefff also visited the Busan Regional Tax Office to mainly submit data, and the public official in charge was asked questions in the process, it is difficult to deem that a substantial investigation was conducted other than mere factual verification in the process of submitting data, and there was no other material to deem that the Plaintiff et al.’s goodwill was infringed during the instant written confirmation process.

C) Therefore, we cannot accept this part of the Plaintiff’s assertion.

2) Determination as to the assertion of substantive illegality

A) According to the statement of evidence Nos. 17 through 20, Eul evidence No. 5, the plaintiff, from May 2012 to May 2012, before the report of the transfer income tax of this case, promoted the sale of shares A including the shares of this case, a (a) 44,000 shares including the shares of this case, by preparing and delivering a letter of request for the report on the actual sales status of the plaintiff's representative's last place, a written request for stock dividends, etc. as if the shares of this case were owned by the plaintiff, as if the shares of this case were owned by the plaintiff, from May 2, 2012, before the report of the transfer income tax of this case was filed. A (a) prepared and delivered a written reply on the settlement of accounts and stock dividends, etc. to the plaintiff's above request without raising any objection, and as a result, as at the time of the confirmation of the written statement of the transfer income tax of this case, "the plaintiff sold the entire shares of this case to b.

B) However, in light of the following circumstances that are acknowledged by the aforementioned evidence, evidence Nos. 3, 12, and 13 and the purport of the entire pleadings, it is reasonable to deem that the instant shares are shares owned by cC with the shares held in title by cC to the Plaintiff, and that the Plaintiff sold 12,000 shares, excluding the instant shares, to b., and that the instant shares were sold to c., and that the instant court had some of the evidence Nos. 16, 22, 23, and 14, which were not trusted by cC, cannot be viewed differently.

① In the course of the instant tax investigation, CC divided the shares of this case into those in the name of j and stated that the shares of this case were held in title trust by cC to the Plaintiff, and that there was no donation to the Plaintiff by cC as to the shares of this case. As seen earlier, cC knew that the existence of the above statements, the circumstances and circumstances at the time, and circumstances at the time, and in particular, cC knew that the actual ownership and transfer relationship of the shares of this case was an important issue in taxation at the time of the instant written confirmation, and cC submitted the materials related thereto, but in the course of the instant tax investigation, the said statements were made, and relevant materials supporting its rationality and credibility, it cannot be deemed that cC’s statement was prepared against the free will of cC or that its content was lacking rationality and credibility.

② On December 24, 1999, the Plaintiff asserts that CC recognized the Plaintiff’s contribution to the company as joint and several surety, and donated the instant shares trusted to the Plaintiff in the name of the Plaintiff to the Plaintiff. However, in the course of the instant tax investigation, CC made a statement to the effect that CC promised to offer a written joint and several surety to jj upon the cancellation of joint and several guarantee by the Plaintiff in the course of the instant tax investigation, around 98, at around December 1999, it is difficult to deem that there was a special circumstance to give shares to the Plaintiff (in accordance with A evidence 13, it is not confirmed that the Plaintiff entered into an additional guarantee contract after 1998). In view of the fact that the Plaintiff prepared a written confirmation that “the Plaintiff acquired the shares of this case by paying the entire amount of acquisition of the shares of this case with the Plaintiff’s funds,” and that there was no statement that the Plaintiff received the shares of this case, it is difficult to view that there was the Plaintiff’s donation.

③ The minutes of the ordinary shareholders’ meeting held on March 23, 2001, which was after December 24, 1999, alleged by the Plaintiff to have received the instant shares as gift, state that the Plaintiff, holding 44,000 shares, is present, and the seal of the Plaintiff is affixed thereto. However, according to the certificate of facts regarding entry and departure against the Plaintiff, it is difficult to view that the Plaintiff exercised its rights as a shareholder because the Plaintiff’s sojourn in a foreign country for the same period is stated as having

4. A has requested Majin Accounting Corporation to provide consultation on the disposal of the shares of A including the shares of this case, and the said Majin Accounting Corporation also suggested that a transfer without compensation be made to Ma which is a public interest foundation established by Aa on the shares of 33,000 among shares of the Plaintiff in the name of the Plaintiff.

⑤ The Plaintiff alleged that 44,00 shares, including the instant shares, were sold to bb in an amount of KRW 2,50,000 per share of KRW 56,820,000,000 per share. However, in light of the fact that the service report prepared around January 2012, stating that aa share price is KRW 282,945 per share price, and that the Plaintiff asserted that cc has refused to purchase the instant shares at a price of KRW 5,00,00 per share, it appears that selling shares at a low price is an exceptional.

C) Therefore, the Plaintiff’s assertion on this part cannot be accepted.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.

section 3.