Examination Donation 2010-0081 ( September 02, 2010)

Gift tax is legitimate for a gift tax on the grounds that there is no justifiable reason following high-priced transfer.

From the beginning, such as embezzlement of public funds of a company, it seems that the company without equity capital acquired the company without an intention to create profit by normal management of the non-party company, and then obtained personal benefits by illegal means. This is not recognized as a justifiable reason to determine the acquisition price higher than the market price.

2011Guhap7366 Revocation of Disposition of Imposition of Gift Tax

New XX 2 others

Head of the Yongsan Tax Office and one other

August 12, 2011

September 2, 2011

1. All of the plaintiffs' claims are dismissed.

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

The disposition of imposition of gift tax of KRW 43,124,30 on June 14, 2010 by the director of the tax office of Yongsan Industrial Complex against the Plaintiff NewA, KRW 252,922,30 on June 10, 2010, and KRW 4,935,100 on gift tax against the Plaintiff headB, and KRW 4,935,100 on gift tax against the Plaintiff headB shall be revoked.

1. Details of the disposition;

The following facts do not conflict between the parties, or there is evidence No. 1-3, evidence No. 2-3,

the whole purport of the pleadings can be acknowledged in the statement of No. 1 of the evidence.

A. A. On September 2007, the Plaintiffs transferred to TRQs 599,49,490 shares (Plaintiff NewA 156,361 shares, Plaintiff headB 338,171 shares, Plaintiff headCC 104,958 shares) for 59,490 shares of ASEAN Co., Ltd. (hereinafter “Nonindicted Company”) that are KOSDAQ-listed corporations (hereinafter “Nonindicted Company”) and reported and paid the transfer income tax on KRW 6,962 per share.

B. The director of the Seoul Regional Tax Office, from March 8, 2010 to April 16, 2010, conducted an investigation of changes in the shares of the non-party company. As a result, on September 27, 2007, the director of the Seoul Regional Tax Office determined that the 1,149,143 shares were transferred to MadD, which is higher than the market price per share of 3,783 won (the KOSDAQ closing price on September 27, 2007) and notified the Defendants.

C. On June 14, 2010, the director of the tax office of Yongsan imposed gift tax amounting to KRW 43,124,30 on Plaintiff Shin, and KRW 252,922,30 on the Plaintiff headB on June 10, 2010, and KRW 4,935,100 on the Plaintiff headCC respectively (hereinafter “each disposition of this case”).

2. Whether the disposition is lawful;

A. The plaintiffs' assertion

The purpose of management right is to acquire the shares of the non-party company owned by the plaintiffs, etc., who are the superior power of the former representative director of the non-party company, for the purpose of acquiring the right of management. Accordingly, since the non-party company's share transfer price of the non-party company against the plaintiffs' rights is included in the price for transfer of management rights in addition to the exchange value of shares, it constitutes a case where the plaintiffs' transfer of the non-party company's shares to the non-party company 6,962 won at a price higher than the market price of the non-party company to the non-party company

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Whether there is a justifiable reason as stipulated in Article 35(2) of the Inheritance Tax and Gift Tax Act should be determined by comprehensively taking into account the details of the transaction in question, the relationship between the parties to the transaction, the transaction value, etc. The assertion and burden of proof are on a person who asserts that there is a justifiable reason.

2) However, in light of the following circumstances, each of the statements in the evidence Nos. 2, 3, 4, 7, and 8, it is difficult to view that the materials submitted by the Plaintiffs alone constitutes a case where the transfer of the Plaintiffs’ shares constitutes a justifiable ground for transactional practice. Accordingly, the Plaintiffs’ assertion is without merit.

In light of the fact that the transfer of shares, which entails the management right, is likely to increase the price of shares, but the price cannot be formed at a higher level without any restriction, and that if the process of price formation is not based on specific and reasonable grounds, the mere fact that the transfer of management right is a transfer of management right, it is difficult to view that there is a justifiable reason to create the price of shares at a higher level, and that Article 26(7) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act does not consider the adequate level of management right premium and uniformly calculates the amount calculated by deducting 300 million won from the difference between the price and the market price as the profit from the transfer of management right at a higher level without considering the reasonable level of management right, the plaintiffs should not assert only the general theory that the price of shares was increased due to the transfer of management right, but also present specific and reasonable grounds that the price of shares was formed at a higher level of 6,962 won per share due to the transfer of management right.

D. Around September 13, 2007, when acquiring the management right of KRW 2,00,000 ( KRW 850,857 ownership, Plaintiffs, etc.) and shares of KRW 15 billion from the original EE and the Plaintiffs, etc., it borrowed approximately KRW 14.3 billion from others and paid the above transfer price. Daehan, around September 13, 2007 and around October 4, 2007, in collusion with the original EE, embezzled the above loan amount of KRW 7.9 billion from the public funds of the non-party company kept by the original EE to repay part of the above loan amount, and it is difficult to view that the non-party company’s acquisition and acquisition of the management right of KRW 2,00,000 from the date of the embezzlement of the public funds held by the non-party company by embezzlement of KRW 14.3 billion from the market price of the above company, and it is also difficult to view that Nonparty company’s acquisition and acquisition of the company’s own profits, such as embezzlement.

O E and the Plaintiffs, etc. distributed 15 billion won for the transfer price of stocks and management rights (15 billion won per share) to 8 billion won for the purchase price of stocks and management rights (6,962 won per share), and 7 billion won for the Plaintiffs, etc. (6,962 won per share). There is no special reason to assess the price of stocks owned by the Plaintiffs, etc., who are the friendly forces of Maddd', lower than the price of stocks owned by the E. However, there is no objective data that calculated the price of each E and the Plaintiffs, etc. as above.

3. Conclusion

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