Whether global income tax and capital gains tax may be imposed on the same unlisted stock transaction.

The taxation requirements of capital gains tax and global income tax are different from each other, and the assessment methods of stocks are different from each other, so even if they are the same transaction, they are not duplicate taxation.

Article 20 (Avoidance of Calculation by Wrongful Acts)

1. All of the plaintiffs' claims are dismissed.

2. All the costs of lawsuit are assessed against the Plaintiffs.

1. The imposition of securities transaction tax of KRW 18,247,920 on February 2, 2003 by Defendant ○○○○ with respect to the Plaintiff ○○○○○, and the imposition of KRW 22,604,440 on Apr. 11, 2003 against the Plaintiff ○○ on April 11, 200 and the imposition of KRW 22,604,440 on global income tax for the year 197;

2. On March 31, 2003, the head of ○○ Tax Office imposed a tax amount of KRW 540,972,080 on the Plaintiff ○○ Industry Co., Ltd. for the year 1997.

3. On March 31, 2003, the head of ○○ Tax Office imposed a tax amount of KRW 13,277,000 on the Plaintiff ○○ Industrial Co., Ltd. for the year 1997.

4. On March 15, 2003, the head of ○○ Tax Office imposed a tax amount of KRW 131,479,920 on the Plaintiff ○○ Development Co., Ltd. for the year 197.

5. On March 19, 2003, the head of ○○ Tax Office imposed a tax amount of KRW 22,638,000 on the Plaintiff ○○○ Co., Ltd. for the year 1997.

Each cancellation shall be revoked.

1. Basic facts

A. On February 20, 1997, the Plaintiff ○○ transferred 279,225 shares in the aggregate of ○○ Construction Co., Ltd. (hereinafter “○○ Construction”)’s non-listed shares (hereinafter “instant shares”) (hereinafter “instant shares”) that had been held in title trust with ○○○, etc. on February 20, 1997 as follows.

Two persons; and

Number of stocks (unit: note)

Price per share (cost)

○ Industrial Co., Ltd.

210,847

6,000

○ Distribution Corporation

10,000

6,000

○ Development Co., Ltd.

49,803

6,000

○○ Incorporated Company

8,575

6,000

B. (1) The director of ○○ Regional Tax Office conducted a regular investigation of corporate tax in 1997 on ○○ Construction and an investigation of changes in stocks, and assessed the value per share of the instant stocks as 16,709 won under the Income Tax Act, and notified the head of ○○ Tax Office of the assessment base date ( December 31, 1996).

(1) On February 2, 2003, Defendant 2: (a) reported the actual transferor, who transferred the instant shares to Plaintiff 2 through 5, to Plaintiff 2 through 5; (b) issued a disposition of imposition of securities transaction tax of KRW 25,660,630 in 197 (the National Tax Tribunal’s decision on ○○○○○○, verified that KRW 6,738,820 in total, 18,247,920, was reduced to KRW 18,247,920).

(3) In addition, the head of Defendant ○○○ Tax Office assessed the instant shares as KRW 0 per share by the wrongful calculation panel under the Corporate Tax Act, and assessed the instant shares as KRW 1,675,00,000 equivalent to high-priced purchase to Plaintiff 1 ○○○○. On April 11, 2003, he issued a disposition imposing global income tax amounting to KRW 22,604,440 (the amount of additional tax notified to the Plaintiff 22,604,440 (the amount of tax assessed to be paid) for the year 197.

C. The head of the ○○○ Tax Office and the head of the ○○ Tax Office deem that they purchased the instant shares from Plaintiff 2 through 5 (major shareholder) and disposed of the instant shares by being recognized as high-priced purchase amount pursuant to the provisions on the unfair calculation report under the Corporate Tax Act. The head of the ○○ Tax Office, on February 15, 003, notified Plaintiff ○○ Industry Co., Ltd. of changes in KRW 1,265,082,000 for the year 1997, and notified Plaintiff ○○ Distribution Co., Ltd. of changes in KRW 60,000 for the income amount corresponding to the year 197, and Defendant ○○ Tax Office notified Plaintiff ○○ Development Co.,, Ltd. of changes in KRW 298,818,000 for the income amount corresponding to the year 197, KRW 150 for the year 197, KRW 100 for the year 195,050 for each of the following reasons.

Agency

Persons subject to imposition;

Date of Disposition

Amount of taxation (won)

○ Head of tax office

○ Industrial Co., Ltd.

March 31, 2003

540,972,080

○ Distribution Corporation

March 31, 2003

13,277,00

Defendant ○ Head of tax office

○ Development Co., Ltd.

March 15, 2003

131,479,920

○○ Incorporated Company

March 19, 2003

2,638,000

2. The assertion and judgment

A. The plaintiffs' assertion

(1) With respect to the transfer of the instant shares to Plaintiff 2 through 5 by Plaintiff 2, applying the provision regarding unfair acts deeming the transfer income tax to fall short of the market price at the time of imposing the transfer income tax, and applying the provision regarding unfair acts as exceeding the market price at the time of imposing the comprehensive income tax to the same taxpayer is unlawful, since the same taxpayer is subject to double taxation.

(2) Since the head of ○○○ Tax Office and the head of ○○ Tax Office did not notify Plaintiff 2 through 5 of the decision on the revision of the tax base of corporate tax, the decision on the correction of the tax base of corporate tax is null and void, and the subsequent decision on the notification of each Class A earned income tax was made without any ground.

(3) The Defendants assessed the price of the instant shares as KRW 16,709 per share in the case of capital gains tax, and assessed the price per share in the case of global income tax and Class A earned income tax as KRW 0 per share in the case of global income tax and Class A earned income tax, on the sole basis of the fact that the value of the same shares differs each time of taxation, each of the instant dispositions

(4) When evaluating the price of the instant shares, the Defendants did not consider the depreciation costs of the completed house and building for rental housing held by ○○ Construction, so the price of the instant shares was unlawfully assessed, and each of the instant dispositions based thereon was unlawful.

B. Relevant provisions

(1) The former Income Tax Act (amended by Act No. 5493 of Dec. 31, 1997)

Article 20 (Earned Income)

(1) Earned income shall be the following income generated in the relevant year:

1. Class A:

(c) Amount treated as a bonus under the Corporate Tax Act;

Article 127 (Liability for Withholding)

(1) Any person who pays the following income or revenue amount to a resident or nonresident in Korea shall withhold the income tax on such resident or nonresident pursuant to the provisions of this Section:

4. Employment income amount of Class A;

Article 128 (Payment of Withholding Tax) A withholding agent shall pay withheld income tax at source to the competent tax office, the Bank of Korea, or a postal agency by the 10th of the month following the month in which the date of collection falls, as prescribed by Presidential Decree: Provided, That a withholding agent prescribed by Presidential Decree, in consideration of the number of regular employees, type of business, etc., may pay withheld income tax by the 10th of

Article 135 (Fictitious Payment Date of Labor Income)

(1) When a withholding agent, who is to pay any earned income, fails to pay the wages for January through November by December 31 in the current year, the wages shall be deemed to have been paid on the 31st of December.

(2) If a withholding agent fails to pay wages for December by January 31 of the following year, the wages shall be deemed to have been paid on the 31st of January.

(3) If a corporation fails to pay any bonus to be paid by a disposal of any profits or surplus, within three months of the determination of the disposal, the bonus shall be considered to have been paid at the expiration of such three months: Provided, That in case where the disposal is determined between November 1 and December 31, if the bonus is not paid by January 31 in the following year, it shall be considered to have been paid on the 31st of January.

(4) Any bonus disposed of under the Corporate Tax Act shall be deemed paid on the date determined by the Presidential Decree.

(1) The former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 15604 of Dec. 31, 1997)

Article 192 (Fictitious Payment Date of Dividend, Bonus and Other Incomes Obtained by Disposal of Income)

(1) In determining or revising the corporate income amount pursuant to the Corporate Tax Act, the chief of the tax office, who makes the determination or correction of the corporate income amount, shall notify the corporation concerned of the change notice of income amount as determined by the Ordinance of the Prime Minister within 15 days from the date of the determination or correction, within 15 days from the date of the determination or correction: Provided, That in case where the location of the corporation concerned is unclear or it is impossible to serve the said notice, he shall notify the

(2) In cases falling under paragraph (1), dividends, bonuses and other income shall be deemed paid or recovered on the date when the notice is received.

(3) In filing a return on the income amount of a corporation, the dividend, bonus and other incomes disposed of pursuant to Article 94-2 of the Enforcement Decree of the Corporate Tax Act shall be deemed to have been paid by the corporation on the date of report

(1) The former Enforcement Rule of the Income Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 631 of Apr. 23, 1997)

Article 81 (Assessment of Standard Market Price of Assets Other Than Land and Buildings)

(2) Stocks, etc. not listed on the Korea Stock Exchange shall be appraised in accordance with the following subparagraphs:

1. For stocks of a registered corporation under subparagraph 2 of Article 22 of the Decree, the amount appraised under Article 5 (6) 1 (b) of the Enforcement Decree of the Inheritance Tax Act; and

2. For stocks other than subparagraph 2, the value appraised under Article 5 (6) 1 (c) of the Enforcement Decree of the Inheritance Tax Act. In this case, the time of evaluation and the following items shall apply:

(a) The value per share appraised by the value per stock = (the net price of the relevant corporation / the total number of issued stocks + 15/100) ± (the net profit and loss per share) ± 2;

(b) The net asset value in the formula of item (a) shall be the book value (standard market price in cases of land) of the relevant corporation as of the closing date of the business year immediately preceding the business year whereto the transfer date or the acquisition date (hereafter referred to as "transfer date, etc." in this paragraph) belongs, and the net profit or loss per share shall be the value appraised by the net profit or loss amount of the business year immediately preceding the business year whereto the transfer date, etc. belongs: Provided, That with respect to stocks of a corporation whose business period in the immediately preceding business year immediately preceding the business year whereto

(1) The former Corporate Tax Act (amended by Act No. 5581 of Dec. 31, 1998)

The Government may, under the conditions as prescribed by the Presidential Decree, calculate the income amount of a domestic corporation for each business year of the concerned corporation in case where it is deemed that the tax burden on the income amount of the concerned corporation has been unjustly reduced in the transaction with a related party as prescribed by the Presidential Decree.

(1) The former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970, Dec. 31, 1998)

Article 46 (Unfair Conduct or Calculation of Juristic Person)

(1) "Person in a special relationship" in Article 20 of the Act means a person in any of the following relationships:

1. Contributors (excluding minority shareholders; hereinafter the same shall apply) and their relatives;

(2) "Where it is deemed that the tax burden has been unjustly reduced" in Article 20 of the Act means cases falling under any of the following subparagraphs:

4. Where assets are purchased from investors, etc. in excess of the market price, or assets are transferred to investors, etc.

(1) Enforcement Rule of the former Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 12 of March 22, 1998)

In applying Article 12 (1) 10, Article 37-3 (9), Article 40 (1) and Article 46 of the Decree, and Article 116 (2) and (4) of the Decree of the Decree, if the market price is unclear, it shall be based on the appraised value by a certified public appraisal corporation under the Public Notice of Values and Appraisal of Lands, etc. Act, and if there is no appraised value, it shall be based on the appraised value by applying mutatis mutandis Articles 61 through 64 of the Inheritance Tax and Gift Tax Act: Provided, That shares not listed on the Stock Exchange shall be based on the appraised value by applying mutatis mutandis Article 63 of the Inheritance Tax and Gift Tax Act.

(1) Enforcement Rule of the former Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 12 of March 22, 1998)

In applying Article 12(1)10, Article 37-3(9), Article 40(1), Article 46, and Article 116(2) and (4) of the Decree of the Decree, where the market price is unclear, it shall be based on the appraised value by an appraisal corporation under the Public Notice of Values and Appraisal of Lands, etc. Act, and where there is no appraised value, it shall be based on the appraised value by applying mutatis mutandis the provisions of Article 64 of the Inheritance Tax and Gift Tax Act: Provided, That stocks not listed on the Stock Exchange shall be based on the value appraised by applying mutatis mutandis the provisions of Article 63 of the Inheritance Tax and Gift Tax

(1) The former Inheritance Tax and Gift Tax Act (amended by Act No. 5582 of Dec. 28, 1998)

Article 60 (General Rules, etc. of Appraisal)

(1) The value of property on which an inheritance tax or gift tax is levied under this Act shall be the market price as of the date the inheritance commences or the date of donation (hereinafter referred to as the "date of appraisal"). In such cases, the value appraised by the method of appraisal stipulated in Article 63 (1) 1 (a) and (b) (excluding cases falling under the provisions of Article 63 (2))

(2) The market price referred to in paragraph (1) shall be the price which is deemed to be normal in cases of free trade between many and unspecified persons, and shall include the expropriation and public auction price, appraisal price, and others which are deemed to be the market price under conditions

C. Determination

(1) Global income tax, Class A tax on global income and capital gains tax vary between the requirements for the establishment of tax liability and the person liable for tax payment. Thus, in imposing each tax by the tax authority, it shall be judged independently in accordance with the substance according to the respective requirements for taxation. Unless there are special provisions excluding overlapping application if all the requirements of the above provisions are satisfied, only one taxation is possible (see Supreme Court Decision 2002Du12458, May 13, 2003).

In addition, wage and salary income is subject to comprehensive taxation. The Defendants imposed the Plaintiff’s wage and salary income generated from Plaintiff 2-5, while the wage and salary income tax withheld by Plaintiff 2-5 is subject to deduction as the payable tax amount when calculating the global income tax of Plaintiff 2-5.

Therefore, the Defendants’ imposition of each of the instant dispositions, which differs from the taxation requirements under each of the respective laws and regulations, cannot be deemed to have imposed double taxation on the same transaction.

(2) In applying the provisions on wrongful calculation under the Corporate Tax Act, the amount equivalent to the wrongful calculation panel is added to the gross income, and the securities are assessed as much as the same amount is, and thus, the amount is included in the deductible expenses. Therefore, the income tax base for each business year and the corporate tax base are not affected, and it is a problem whether the amount of income disposal belongs to anyone.

Therefore, although corporate tax does not have any influence on corporate tax, the plaintiffs' assertion that the details of corporate tax correction should be notified to the plaintiffs 2-5 is legitimate, is without merit.

(3) As seen above, the taxation requirements of the transfer income tax and the taxation requirements of the global income tax and the Class A earned income tax are different, and the assessment methods of the instant shares are different from each other, so the instant disposition cannot be deemed unlawful.

(4) As long as the Defendants assessed the value per share of the instant shares in accordance with the Corporate Tax Act as zero won, considering the depreciation costs of the instant shares, the value per share of the instant shares does not change to zero won, and thus, the Plaintiffs’ assertion regarding depreciation of rental housing is groundless.

(5) The instant shares transferred to Plaintiff 2-5 on February 20, 1997 are shares under Article 2(1)1 of the Securities Transaction Tax Act. As long as Plaintiff 2-5 transferred the shares as the actual owner of the instant shares, the imposition of KRW 18,247,920 against Plaintiff 2-5 on the securities transaction tax of 197 shall be lawful inasmuch as Defendant 3, Article 7 subparag. 3, Article 10, and Article 14 of the Securities Transaction Tax Act is imposed on Plaintiff 2-5.

3. Conclusion

Therefore, all of the claims of this case are dismissed, and it is so decided as per Disposition.