Cho High Court Decision 201Do5183 (Law No. 112, 04.30)

It is reasonable to regard the dividend income as the avoidance of comprehensive taxation through indirect transactions and impose it as income.

Since it is sufficiently recognized that the dividend income has been subject to cumulative taxation through bypass transaction even though it is a dividend through substantial capital reduction, the initial disposition imposed on the dividend income by deeming it as income according to its substance is legitimate.

2012Guhap24320 Disposition of revocation of imposition of global income tax, etc.

Seoul High Court Decision 201

The Director of Gangnam District Office

November 23, 2012

January 25, 2013

1. The plaintiffs' claims are dismissed.

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

The Defendant’s imposition of global income tax of KRW 000 and global income tax of KRW 000 on July 1, 201 to the Plaintiff-gu, Seoul Special Metropolitan City and the Plaintiff New ○○ on July 1, 201 is revoked.

1. Details of the disposition;

A. On May 22, 2008, the plaintiffs owned 10,000 shares issued byCC Co., Ltd. (hereinafter "CC") (hereinafter "CC") (the shares in this case, including 6,000 shares, and 4,000 shares, and hereinafter referred to as "the shares in this case"). On June 12, 2008, the plaintiffs transferred the shares to DD Co., Ltd. (hereinafter "DDR") at 00 won (hereinafter "one transfer"), and on June 12, 2008, transferred the shares in this case to the defendant under the articles of incorporation of 104(1)4(b) of the Income Tax Act (amended by Act No. 9270, Dec. 26, 2008; hereinafter the same) and paid the transfer income tax by applying the tax rate of 10% under Article 104(1)4(b) of the Commercial Act to 300,000 shares acquired from CC Co. 200.

C. The director of the Seoul Regional Tax Office conducted a survey on stock changes toCC, and notified the Defendant of the taxation data that judged that the purchase price of the instant stocks is a dividend through substantial reduction ofCC’s capital, and that the Plaintiffs transferred the instant stocks to DDC in order to apply 10% of the transfer income tax rate to small and medium enterprises.

D. The Defendant calculated the acquisition of constructive dividend by applying Article 17(2)1 of the Income Tax Act in accordance with the foregoing taxation data, and on July 12, 201, the Plaintiff issued a correction and notification of KRW 000 of the global income tax for the year 2008 and KRW 000 of the global income tax for the year 2008 to the Plaintiff ○○○○○, respectively (hereinafter “instant disposition”). The Plaintiffs are dissatisfied with the instant disposition and filed a request with the Tax Tribunal for a trial on December 2, 201.

B. The claim was dismissed on April 30, 2012.

[Reasons for Recognition] The entire purport of the arguments, as described in the facts without dispute, Gap 1, 2, 3, 11, and 23

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

On April 22, 2002,CC entered into a business agreement with DDC and KOSDAQ listing, and DDC acquired the instant stocks through the first transfer instead of receiving a separate advisory fee, thereby having common interests withCC. Since BBC deposit was carried out by the CC, it was difficult to select an appropriate company, and the requirements for DBC listing were met, and accordingly, it was abandoned by the bypass listing and transferred by the second transfer. Accordingly, CCC, which acquired the instant stocks, was conducted for a separate purpose and cannot be deemed divided into two acts to receive unfair benefits under tax law, and thus, Article 14(3) of the Framework Act on National Taxes cannot be applied, and the instant disposition based on a different premise is unlawful.

B. Relevant statutes

Paper in the Appendix

(c) Fact of recognition;

1)CC was a corporation established on May 7, 1986 to engage in the business of manufacturing and selling clothes, and the Plaintiff-gu Seoul Special Metropolitan City and Do in Seoul Special Metropolitan City had been employed as a representative director from May 7, 1992 to May 19, 2008, and the Plaintiff New ○ was employed as an auditor from March 31, 1994 to May 19, 2008.

2) Prior to the instant stock retirement, the Plaintiff-gu Seoul Special Metropolitan City owned 6,000 shares issued in 20,000 shares, the Plaintiff New ○○○, 7,000 shares, and 3,000 shares, respectively, and the shareholders ofCC after the instant stock retirement were 0,000 shares. The capital ofCC did not change to 00 won before and after the instant stock retirement.

3) DDRs are legal entities established to conduct economic research and development business and management consulting business on April 30, 2007, and the plaintiffs' door-gu Dozoo is working as joint representatives (50% shares).

4) On May 23, 2008, DDR paid 000 won deposited in the GGG Savings Bank as collateral, and agreed on the loan period of three months, and received 000 won from the GGG Savings Bank from the Plaintiffs, and acquired the said shares. On August 26, 2008,CC paid 00 won as the second transfer price to DG Savings Bank.

5) On the other hand, CCTV’s 2007 and earned surplus settlement details in 2008 are as follows:

(Omission of Details of Settlement of Accounts)

[Reasons for Recognition] The non-contentious facts, Gap evidence 3, Eul evidence 2, 3, and 4, and the purport of the whole pleadings

D. Determination

1) Whether Article 14(3) of the Framework Act on National Taxes can be seen as a general anti-tax avoidance provision

Since there is no provision excluding the application of Article 14(3) of the Framework Act on National Taxes in the Income Tax Act, there is no room to apply the proviso of Article 3(1) of the Framework Act on National Taxes, and in the situation where the act of tax avoidance is gradually advanced and complicated, it seems that the legislative intent of Article 14(3) of the Framework Act on National Taxes is to enhance transparency in taxation by clarifying that the provisions of tax avoidance under the laws on international taxation are applied not only to international transactions but also to domestic transactions. In addition, in the application area of the above provisions, it is clearly suggested that the intent of the actor "for the benefit of tax law, it is limited to the specific form of tax avoidance, such as multi-stage or bypassing act, and it is limited to the act of tax avoidance, and it is limited to the act of tax avoidance in the application area of the above provisions, and it is clearly suggested that "the party is considered that the party has made a direct transaction."

Therefore, it is reasonable to interpret Article 14(3) of the Framework Act on National Taxes as a general anti-tax avoidance provision, and in accordance with the above provision, it is reasonable to interpret the first transfer between the plaintiffs and DDC and the second transfer between DDC and CC as a direct transaction between the plaintiffs and CC, and determine whether to impose comprehensive income tax on the plaintiffs.

2) Whether the first and second transfers are aimed at unfairly receiving benefits under tax law;

The issue of interpreting legal act is whether shares are transferred as assets transaction or capital transaction, and the decision should be made on the basis of the contents of the transaction and the intent of the parties. However, under the substance over form principle, it is not simply dependent on the intent or form of the parties, the methods of concluding the contract, and the progress of the transaction (see, e.g., Supreme Court Decision 2008Du19628, Oct. 28, 2010). In light of the above legal principles, it is possible to recognize the difference between the above facts and the entire arguments, and (1) the plaintiffs were working for a long time as the representative director and auditor ofCC, and (2) the plaintiffs were transferred for 0 years only after the plaintiffs resigned and auditor, and (3) the co-representative members ofCC did not appear to have been used for 20 years after the expiration date of 20 years, and (2) the plaintiffs were used for 20 years after the expiration date of 30 years after the transfer of funds and 30 months after the transfer of funds.

3. Conclusion

Then, the plaintiffs' claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.