The recipient corporation and the related corporation are in the relationship of the complete controlling corporation.

Since the beneficiary corporation and the related corporation fall under the nominal trust shares, they are not subject to the regulation on deemed donation of profits through transactions with the related corporation.

Deemed donation of profits through transactions with a specially related corporation under Article 45-3 of the Inheritance Tax and Gift Tax Act;

2015Guhap64893 Disposition of revocation of refusal to correct gift tax

AA

The director of the tax office

October 23, 2015

November 20, 2015

1. On November 6, 2014, the Defendant’s disposition rejecting to rectify gift tax against the Plaintiff is revoked. 2. Costs of lawsuit are assessed against the Defendant.

The same shall apply to the order.

1. Details of the disposition;

A. The non-party 0000 corporation (hereinafter referred to as the "beneficiary corporation") located in the non-party 0000,000 located in the non-party 00-Gu 0000 in the non-party 00-Gu 000 and the non-party 0000 corporation located in the Seoul 00-Gu 000-00 (hereinafter referred to as the "special relation corporation") are each engaged in the drug wholesale business, and the special relation corporation is being supplied with all products produced by the beneficiary corporation and sold them.

B. On December 31, 2014, the current status of shareholders as of December 31, 2014, as the controlling shareholders of a beneficiary corporation and a special relationship corporation, are as follows. On July 31, 2013, the Plaintiff: (a) calculated gains on deemed donation under Article 45-3 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11609, Jan. 1, 2013; hereinafter “former Inheritance Tax and Gift Tax Act”); (b) reported and paid KRW 00,000,000 for gift tax for the year 2012. Since then, the Plaintiff sought a request for correction of the said gift tax on September 17, 2014 on the grounds that the beneficiary corporation is not a beneficiary corporation for the period of sunset under the said provision; and (c) the Defendant rejected a request for correction of the gift tax on the grounds that it does not fall under the criteria for rejection of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 21254, Nov. 25, 2014, 2014.

E. The Plaintiff appealed and filed an appeal with the Tax Tribunal on January 28, 2015, but the Tax Tribunal dismissed the Plaintiff’s appeal on March 26, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 6, 11, and 12 (including each number, if any) and the purport of the whole pleadings

2. The plaintiff's assertion

A. The Plaintiff’s birth and spouse, which are registered as shareholders of 1% of each of the beneficiary corporations and the special relation corporations, are all limited to the title trustee, and the Plaintiff is 100% of each of the above corporations. As such, the special relation corporation constitutes the complete controlling corporation under Article 34-2(10)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act. Therefore, the pertinent refusal disposition is unlawful, since the profit deemed donation calculated under the above provision is “0”.

B. In order to protect the patent of the manufacturing technology of medicines owned by the recipient corporation, the entire quantity of the pharmaceutical products supplied and sold through the related corporation is not subject to the sunset cycle for the donation of irregular benefits among specially related persons for the lack of the purpose of tax avoidance. Thus, the instant rejection disposition is unlawful in violation of the intrinsic purport of the aforementioned system.

3. Relevant statutes;

It is as shown in the attached Form.

4. Determination

A. Whether a title trust is made with shares held by a related corporation

1) The fact of ownership of shares should be proven by the tax authority through data, such as a shareholder registry, a detailed statement of the status of the transfer of shares, or a certified copy of the corporate registration registry, etc. However, even in cases where a shareholder appears to be a single shareholder in light of the above data, where there are circumstances, such as where the shareholder was stolen or registered in a name other than the real shareholder registry, the relevant name alone cannot be deemed as a shareholder, but the nominal owner who asserts that he is not a shareholder should prove that he is not a shareholder (see, e.g., Supreme Court Decision 2003Du1615, Jul.

2) Based on the above legal principles, the Plaintiff’s 9% shares on the list of stockholders as of December 31, 2014, on the list of stockholders as of December 31, 2014, stated that the Plaintiff’s 99% shares and the qq, the Plaintiff’s spouse, are in possession of the remainder of 1%. However, the above facts of recognition, the evidence mentioned above, and evidence set forth above, and evidence set forth in Gap’s 7 through 10, 13, 15 through 18, and Eul’s 2 (including each number number), each set of evidence set forth in Gap’s 7 through 10, 13,

In light of the following circumstances, it is reasonable to view that the Plaintiff arbitrarily used the name qq with respect to 1% of the shares of the specially related juristic person notwithstanding the above list of shareholders or acquired the shares by borrowing the said name at least.

A) According to the corporate register of a special relationship and the details of deposit account of the Plaintiff (the national bank’s total amount of 0000-0000 - 0000000) and the Plaintiff’s account transaction details, the special relationship corporation established on December 29, 2005 as capital of 00 million won (10,000 shares issued) and increased on January 26, 2006. The Plaintiff’s above accounts opened shares worth KRW 00,000 (200,000 shares issued) with the total amount of KRW 60,000,000 shares issued on December 29, 2005 x 2,000,000 won deposited on the above bank account of the special relationship corporation’s x 6,000,000 won deposited on January 11, 2006 x 2,000,000 won deposited on the cashier’s account under the above special relationship.

B) According to the corporate register of the special relation corporation, it is recognized that theqq was selected as the auditor of the special relation corporation on March 20, 2008 and was registered as the auditor of the special relation corporation on March 7, 2014. However, according to the qq's statement, the qq was registered as the auditor of the special relation corporation on March 5, 201 with children and children on March 5, 201, and the facts registered as the above as the auditor were subsequently known from the plaintiff, and there was no work or remuneration as the auditor in the special relation corporation, and in light of the relationship between the plaintiff and the qq and the time of 00 immigration, the plaintiff seems to have been registered as the auditor of the special relation corporation using only that name without the consent of the qq's separate consent.

C) On August 20, 1990, the Plaintiff registered its business with the trade name "000" and operated a private company engaged in wholesale and retail business such as medicine. On December 29, 2005, the Plaintiff closed down its business on September 30, 2006 after establishing a special-related corporation with the same business purpose as the above "000". According to the witness witness witness witness witness witness witness witness witness witness witness witness witness witness witness witness's testimony, the Plaintiff was established with a special-related corporation to convert the above "000" into a corporation. In this process, it does not seem that qq was involved in the management of the company or there was a need to change the composition of other substantial shares of the company.

D) According to the report on the performance of withholding at source submitted by the specially related corporation to the Defendant on April 25, 2011, the specially related corporation paid dividends of KRW 200 million to the shareholders on March 2011, but there is no evidence to acknowledge that theqq was paid dividends, and there is no other evidence to acknowledge that it was present at the general meeting of shareholders of the specially related corporation or that it was exercising the rights as shareholders.

E) As seen earlier, the shareholder composition of a beneficiary corporation also consists of 99% of the Plaintiff’s shares and 1% of the Plaintiff’s shares for www. According to the corporate register of beneficiary corporations, the deposit account details, and the Plaintiff’s account transaction details, it appears that all of the Plaintiff’s capital KRW 00 million was paid out of the Plaintiff’s funds. www was registered as the auditor of beneficiary corporations until November 1, 2012, but it appears that there was no actual role or exercise of shareholder’s rights as the auditor, and www also made statements corresponding thereto in this court. According to this, the Plaintiff appears to have taken a way that constitutes a shareholder or executive officer by borrowing the name of the beneficiary corporation and his family members, such as his/her spouse, mother, etc., which is a small and medium enterprise of approximately KRW 0 billion of annual sales, and a related corporation.

B. Whether the instant refusal disposition is lawful

Therefore, since the special relation corporation is a corporation with 100% of the Plaintiff's 100% investment, which constitutes "the complete control corporation" under Article 34-2 (10) 1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, and "the ratio of sales to the special relation corporation out of the business year's 2012 sales to the 2012 beneficiary corporation (10%)," "0" is "the ratio of sales to the complete control corporation out of the sales of the business year's 10% of the beneficiary corporation's 2012 business year's business year's sales to the beneficiary corporation", the plaintiff's profits calculated by multiplying it pursuant to the above provision also become "0". Therefore, the rejection disposition of this case which rejected the plaintiff's request for correction of gift tax is unlawful, and the plaintiff's assertion in this part is with merit (this part of this case's rejection disposition

5. Conclusion

The plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.