2013west 2247

It is reasonable to view that the instant shares were acquired without justifiable reasons at a price significantly lower than the market price in light of transactional practices.

It is reasonable to deem that the Plaintiff acquired the instant shares at a price significantly lower than the market price without justifiable grounds in light of the transactional practice, and the mere fact that it is difficult to find out whether there was a gift interest on the date of conclusion of the sales contract of the instant shares cannot be deemed to have any justifiable ground for the Plaintiff not

Article 35 of the Inheritance Tax and Gift Tax Act

2014Guhap53049 Revocation of Disposition of Imposition of Gift Tax

EO

head of Sung Dong Tax Office

June 20, 2014

July 22, 2014

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of gift tax of KRW 141,614,550 against the Plaintiff on October 4, 2012 is revoked.

1. Details of the disposition;

A. The Plaintiff, on April 27, 2009, is an Omercar Co., Ltd. (hereinafter referred to as “Omercar”) that is a corporation listed on KOSDAQ from Em-ro.

'Omerck's 300,000 shares (hereinafter referred to as "the shares of this case") were purchased in over-the-counter trading for KRW 1,529,90,000 (the purchase price per share will be KRW 5,09.66 if the purchase price per share is calculated; hereinafter referred to as "the purchase price per share for convenience would be KRW 5,099).

B. On July 2012, the director of the tax office of this case reviewed the changes in stocks of Omercar and notified the Defendant of the taxation data by deeming that the market price of the instant stocks is calculated as a supplementary assessment method under the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “Inheritance Tax and Gift Tax Act”), assessed as KRW 7,783 per share, and the Plaintiff received the instant stocks from a person other than the specially related person at a price considerably lower than the market price without justifiable grounds in light of transactional practices.

C. Accordingly, on October 4, 2012, the Defendant decided and notified the Plaintiff of KRW 141,614,550 (including additional tax of KRW 50,114,550) pursuant to Article 35 of the Inheritance Tax and Gift Tax Act (hereinafter “instant disposition”).

D. The Plaintiff appealed and filed an appeal on April 29, 2013. However, the Tax Tribunal dismissed the Plaintiff’s appeal on December 5, 2013.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case is unlawful for the following reasons.

(1) Article 63(1)1 (a) and (b) of the Inheritance Tax and Gift Tax Act (hereinafter “the instant legal provision”) which is the basis of the instant disposition is unconstitutional since it violates Articles 59, 11(1), 23(1), and 37(2) of the Constitution of the Republic of Korea. The instant disposition based on the unconstitutional law is unlawful.

(2) The Plaintiff did not acquire the shares of this case from EO at a remarkably lower price than the market price without justifiable grounds. The Defendant’s disposition of this case is unlawful against Article 35 of the Inheritance Tax and Gift Tax Act.

(3) Even if the Plaintiff’s acquisition of the instant shares constitutes a gift under the tax law, the Plaintiff’s failure to pay gift tax within the period prescribed by the tax law on the date of acquisition of the instant shares due to the Plaintiff’s failure to know the existence of the gift tax on the date of acquisition of the shares

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

(1) Omercar is established on August 6, 1982 and OOOO OO 00-00, OOOO 00-00, and the Plaintiff is a KOSDAQ-listed corporation that runs the business of manufacturing medical appliances. The Plaintiff is a parent of Omercar, the representative director of OOO.

(2) The changes in the shares of Omercar in 2008 and 2009 are as follows:

(3) According to a share sales contract between the Plaintiff and EOO, which was concluded on April 27, 2009, the Plaintiff purchased and sold 00,000 shares of Omercar as OOO per share. However, if the Plaintiff entered into a transfer contract prior to the payment date of the remainder under the special contract, the Plaintiff paid KRW 00,000 by adding 7% of the intermediate interest rate to the remainder from the day after the transfer date until the payment date of the remainder.

(4) On May 8, 2009, the board of directors decided to divide the face value per share from KRW 500 to KRW 100, and the total number of outstanding shares from KRW 000 to KRW 000. On September 8, 2009, the board of directors resolved to increase the face value per share from KRW 500 to KRW 100 without compensation.

(5) As of April 27, 2009, which was the date of the conclusion of the instant sales contract, the value per share of the Omerdicar calculated on the average market price at the Korea Securities and Futures Exchange for two months before and after the date of the conclusion of the instant sales contract is KRW 000,000. The market price calculated on the basis of the value per share calculated as above is KRW 00,000 (=000 x00) if the acquisition price of the instant shares is deducted by the deduction of KRW 000.

shall become a member.

(6) Korea Securities Futures Trading on April 27, 2009, which was the date of the conclusion of the instant sales contract.

The final market price was KRW 000,000, which was the final market price before and after the conclusion of the instant sales contract.

The final market price was 000 won, and the final market price on July 10, 2009 was 000 won.

D. Determination

(1) As to the Plaintiff’s first argument

(A) Whether the legal provision of this case violates the principle of no taxation without law and the principle of no taxation without law

The principle of no taxation without law declared under Articles 38 and 59 of the Constitution refers to the principle that the State is unable to impose and collect taxes without any legal basis, and citizens are not required to pay taxes. Such principle of no taxation without law is the core content of the principle of no taxation without law that the content of the provision should not be clear and meaningful so as not to cause arbitrary interpretation and enforcement by the tax authorities (see Constitutional Court Order 89Hun-Ma38, Jul. 21, 1989).

However, the legal provision of this case provides that the shares of a KOSDAQ-listed corporation shall be appraised at the average amount of the Korea Securities and Futures Exchange (hereinafter “Korea Securities and Futures Exchange”) (hereinafter “Korea Securities and Futures Exchange”) that is published every two months before and after the base date of appraisal, and the method of assessing the shares of a KOSDAQ-listed corporation shall be deemed to be arbitrary interpretation and enforcement by the tax authorities, and it shall not be deemed that the legal provision of this case violates the principle of no taxation without law and the principle of clear taxation requirements.

Therefore, we cannot accept the Plaintiff’s assertion that the legal provision of this case violates the principle of no taxation without law and the principle of no taxation without law.

(B) Whether the legal provisions of this case violate the principle of equality

Article 11(1) of the Constitution declares that all citizens shall be equal before the law, and the principle of equality is the same as that of the above principle of tax law. Such principle of tax equality is a principle of realizing tax justice in the legislative process or enforcement process of tax law by treating differently the same, (see, e.g., Supreme Court Order 89Hun-Ma38, Jul. 21, 1989). However, today, three members are extremely diverse, and there are many differences in the number of people who are liable for tax payment, and taxes are imposed for various policy purposes other than the classic purpose of securing national financial resources, and thus, a wide range of right is granted to legislators in the area of tax law (see, e.g., Constitutional Court Order 92Hun-Ba46, Aug. 29, 1996). Accordingly, the legislators has broad legislative freedom as to how to calculate the value of donated property in relation to the imposition of gift taxes (see, e.g., Supreme Court Order 96Hun-Ba2, supra.

The Inheritance Tax and Gift Tax Act stipulates that the value of listed stocks shall be assessed on the average daily market value ( regardless of whether there is a transaction record) of the Korea Securities and Futures Exchange every two months before and after the evaluation base date (Article 63(1)1 (a) and (b) of the Inheritance Tax and Gift Tax Act). However, with respect to unlisted stocks, the average weighted value of the net profit and loss per share and the net asset value per share shall be assessed on the average weighted value of 3 and 2, respectively. The net profit and loss per share shall be calculated by dividing them by the interest rate publicly notified by the Commissioner of the National Tax Service in consideration of the distribution profit ratio of the corporate bonds with maturity of 3 years guaranteed by the financial institution, and the net asset value per share shall be calculated by dividing the net asset value of the relevant corporation by the total asset value (Article 63(1)(c) of the Inheritance Tax and Gift Tax Act and Article 54(1) and (2)

The Inheritance Tax and Gift Tax Act regulates different appraisal methods of listed stocks and unlisted stocks as mentioned above. As listed stocks are traded on the securities market or the KOSDAQ market established by the Korea Securities and Futures Exchange, there is an objective standard for assessing their values. However, as listed stocks are stocks which have no record of transactions on the securities market, etc., the value of the listed stocks is not high. Therefore, it is understood that the value of the listed stocks is assessed uniformly and uniformly in accordance with the method as prescribed by the Inheritance Tax and Gift Tax Act

As such, the reasonableness of listed and unlisted shares is recognized as different evaluation methods depending on whether there exists "an objective exchange price formed through free trade among many unspecified persons," and such evaluation methods are not unfair. In the case of unlisted shares, the weighted average amount of net profit and loss per share for the last three years in calculating the net profit and loss per share in the case of unlisted shares, while in the case of listed shares, the average amount of net profit and loss per share for the last two months before and after the evaluation base date is assessed on the basis of the average amount of the closing market value of the Korea Securities and Futures Exchange every day published during two months after the evaluation base date. Thus, the legal provision of this case cannot be deemed as infringing on the right to equality of those who trade listed shares by calculating the average amount for a short-term period,

In addition, the Plaintiff asserts to the effect that this case’s legal provision on the appraisal of listed stocks causes unreasonable discrimination among persons who trade the same company’s stocks in accordance with the transaction period. However, as long as this case’s legal provision applies equally to persons who trade listed stocks of the same company, it cannot be deemed that any discrimination exists among them due to this case’s legal provision. Thus, the Plaintiff’s above assertion is without merit.

(C) Whether the legal provision of this case violates the principle of excessive prohibition, thereby infringing on property rights

원칙적으로 조세의 부과・징수는 국민의 납세의무에 기초하는 것으로서 재산권의 침해가 되지 않으나, 그에 관한 법률조항이 조세법률주의에 위반되고 이로 인한 자의적인 과세처분권 행사로 납세의무자의 사유재산에 관한 이용・수익・처분권이 중대한 제한을 받는 경우에는 예외적으로 재산권의 침해가 될 수 있다 �헌재 1997. 12.24. 선고 96헌가19, 96헌바72(병합) 결정 참조 �. 그런데 우리 헌법이 보장하는 재산권의 구체적 모습은 재산권의 내용과 한계를 정하는 법률에 의하여 형성된다. 증여세 부과와 관련하여 증여재산의 가액을 어떻게 산정할 것인가 등 증여와 관련된 법제나 증여의 내용과 관련된 문제는 입법자의 입법형성재량에 기초한 정책적 판단에 맡겨져 있다고 할 것이어서, 그 입법이나 과세당국 또는 법원의 해석 및 적용이 헌법상 규정된 기본권이나 기본 원칙, 기본권제한의 입법 한계, 그리고 당해 법률의 입법목적 등에 비추어 자의적이거나 임의적이 아닌 합리적 범위 내의 것이라면 이를 위헌이라고 할 수 없다(헌재 2010. 10. 28. 선고 2008헌바140 결정 참조).

The legal provision of this case does not have an aspect of undermining the legal stability and predictability of taxpayers since it takes account of the final market price of 2 months after the evaluation base date. However, the legislative purpose of this case is to promote balanced evaluation following the price fluctuation of listed stocks. ② Since listed stocks are property with an objective exchange price of the Korea Securities and Futures Exchange, there is a share price formed as of the donation date. However, there is a aspect that the value of listed stocks is difficult to properly grasp the value of listed stocks solely based on the prices formed on a specific date due to a move in the securities market. ③ In the case of listed stocks, it is unreasonable to evaluate only the closing average amount of 3 months before and after the donation, even though the nearest price fluctuation after the donation can be predicted, the legislative purpose of this case is to ensure balanced evaluation based on the above 2-month period and 2-month period after the evaluation base date, and thus, it cannot be deemed that there is no need for the return of property rights within 3-month period under Article 6 of the Inheritance Tax and Gift Tax Act to meet the requirement of return of donated stocks within the period.

(2) As to the second argument of the Plaintiff

(A) Article 35(2) of the Inheritance Tax and Gift Tax Act provides that the transferee of the property shall be presumed to have received the donation of an amount equivalent to the difference between the price and the market price without any justifiable reason from a person other than the person having a special relationship, and the amount equivalent to the profits prescribed by the Presidential Decree shall be deemed to be the value of the property donated to the person who acquired the profits. Article 26(5) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22042, Feb. 18, 2010; hereinafter “Enforcement Decree of the Inheritance Tax and Gift Tax Act”) on delegation by Article 35(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22042, Feb. 18, 2010; hereinafter “the former Enforcement Decree of the Inheritance Tax and Gift Tax Act”). Article 35(7) of the same Act provides that “Where the value of the acquired property differs from 30/100 or more of the market price.”

The legislative purport of the above provision, etc. is to cope with an irregular act of donation and to promote fair taxation by imposing gift tax on the profits earned by the other party to the transaction in a case where profits equivalent to the difference between the price and the market price are actually transferred without compensation through an abnormal method manipulating the transaction price for the benefit of the other party to the transaction. However, since the interests of the other party to the transaction between the unrelated parties are different, it is difficult to view that the difference was donated to the other party to the transaction merely because there is a difference between the price and the market price. Thus, Article 35(2) of the Inheritance Tax and Gift Tax Act added taxation requirement that "for the transaction between unrelated parties, there is no justifiable reason in light of the transaction practice" in the case of the transaction between unrelated parties, unlike the transaction between unrelated parties. Considering these points, it is reasonable to view that the parties to the transaction who transferred or acquired the property at a low price had reasonable reason to believe the transaction price at a normal price reflecting the objective exchange value at a reasonable price, and even if there is no such reason, the transferee’s acquisition of property at a reasonable point of view.

(B) In light of the above legal principles, it is difficult to view that the Plaintiff’s acquisition of the instant shares from a sale price of this case at a significantly lower than the market price without a reasonable ground for transaction. The following circumstances are revealed in light of the overall purport of the pleadings. ① The market price of the instant shares calculated pursuant to Article 63(1) of the Inheritance Tax and Gift Tax Act is KRW 000,000, and the acquisition price of the instant shares is KRW 000,000, which is the price calculated by deducting the price from the market price of the acquired property (= 000,000,000) is 30/10 or more of the market price, and it is reasonable to view that the Plaintiff’s acquisition of the instant shares from a sale price of this case at a reasonable price of KRW 70,000,000,000 per share, which is less than the market price of this case. ② The Plaintiff’s acquisition price at a reasonable price of KRW 70,000,00,00.

(3) As to the third argument by the Plaintiff

(A) Under the tax law, where a taxpayer violates various duties, such as a return and tax payment, without justifiable grounds, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, the taxpayer’s intent or negligence is not considered. However, inasmuch as it is difficult to deem that the taxpayer was unaware of his/her duty, the taxpayer’s intentional intent or negligence is not considered. However, where there is a justifiable reason that the taxpayer cannot be mistaken for the failure to perform his/her duty, such as where there is a circumstance that it is reasonable for him/her to reasonably present or it is unreasonable for him/her to expect the fulfillment of his/her duty, etc. (see Supreme Court Decision 2011Du13842, Feb. 27, 2014).

(B) In light of the above legal principles, in full view of the fact that Article 68(1) of the Inheritance Tax and Gift Tax Act provides that the person liable to pay the gift tax shall report the taxable value and tax base of the gift tax to the head of the tax office having jurisdiction over the place of tax payment within three months from the end of the month to which the date of donation belongs as prescribed by the Presidential Decree, the mere fact that the market price of the shares of this case cannot be determined based on the average amount of the closing market price of the Korea Securities and Futures Exchange published every two months before and after the base date of appraisal pursuant to the legal provisions of this case cannot be deemed to have any justifiable ground for failing to prove that the Plaintiff was responsible for failing to perform his/her duty. Accordingly

3. Conclusion

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