early 208west2979 ( October 28, 2010)

In the application of the provision on denial of unfair act due to capital transactions, the margin margin is not limited to the corporate shareholders.

In the case of a corporation’s capital increase, the profit received by the corporation, regardless of whether the person with the profit is a corporation or a shareholder or a private shareholder, shall be included in its gross income in the case of a waiver of all or part of the right to receive new shares or acceptance of new shares at a price higher than the market price of the new shares. It is applied from the beginning to the case of

2010Guhap40885 Revocation of Disposition of Corporate Tax Imposition

Dognaz Co., Ltd.

O Head of tax office

April 28, 2011

May 19, 2011

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposing corporate tax of KRW 13,292,420 against the Plaintiff on April 15, 2008 shall be revoked.

1. Circumstances of dispositions;

A. Status of stockholding of the Plaintiff in 2004

Of the total number of the Plaintiff’s outstanding shares 198,000 shares 65,340 shares (33%) 50,760 shares (25.64%) 0,760 shares (25.64%) 00 shares (20.91%) 00 shares (20.91%) 40,50 shares (20.45%) of 00 shares with 0,50 shares (20.45%).

B. The FF Industry Co., Ltd. (hereinafter referred to as the "FF Development Co., Ltd.") held 1,476,000 shares (93%) among FF Co., Ltd. (hereinafter referred to as the "FF Co., Ltd. in 2004; 1,602,00 shares issued by the company outside the country; 846,00 shares out of 1,476,00 shares issued by the company outside the country (93%) YCC held 72,00 shares (4%) and 00 shares held 54,00 shares (3%).

C. Capital increase issued by Nonparty Company and acquisition of Plaintiff Company’s shares

“The shareholders of the non-party company were held on June 24, 2005 at a general meeting of shareholders of the non-party company, within the limit of 1,700,000 won for common shares and redemption priority shares, and decided to issue one share within the limit of 1,70,000 won for each share and distribute to the plaintiff all of them to the plaintiff. The board of directors of the non-party company decided to issue the shares of this case on June 29, 200 for 382,00 common shares and 660,000 common shares for redemption priority shares (the minimum dividend rate of 1:1 convertible shares for common shares between one and five years after issuance, 8% per annum per annum), total of 1,042,00 shares per share (hereinafter “the shares of this case”) to the plaintiff. Accordingly, the non-party company issued the shares of this case on the same day and allocated them to the plaintiff on the same day, and the plaintiff acquired the shares of this case to the plaintiff as corporate tax of the plaintiff.”

"Defendant: (a) deemed that BB, etc. renounced the right to receive new shares for capital increase with consideration of the non-party company and acquired the shares at a price lower than their market price; and (b) deemed that the above profits were distributed among the Plaintiff; (c) Article 15(1) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 201; hereinafter the same shall apply); (d) Article 11 subparag. 9 and Article 88(1)8 (b) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 19328, Feb. 9, 2006; hereinafter the same shall apply); (d) Article 89(6) of the former Enforcement Decree of the Corporate Tax Act; (e) Article 206 subparag. 4 of the former Enforcement Decree of the Corporate Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter the same shall apply); and (e) Article 1608(1) of the former Enforcement Decree.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) To include profits distributed by a person with a special relationship pursuant to Article 11 subparagraph 9 of the former Enforcement Decree of the Corporate Tax Act in a corporation’s profit, the requirements under Article 88(1)8 of the above Enforcement Decree must be met. However, Article 88(1)8 of the above Enforcement Decree limits the subject who distributes profits to a corporation’s shareholders. Since the person with a special relationship is 0B, etc., the person with a profit-sharing interest in the case is a private shareholder, there is no room to apply

(2) In order to improve the financial structure, the non-party company did not allocate new shares to the existing shareholders but directly distribute the forfeited shares to the plaintiff to improve the financial structure, which is not the type of capital transaction scheduled under Article 88 (1) 8 (b) of the former Enforcement Decree of the Corporate Tax Act, and therefore, Article 11 subparagraph 9 of the above Enforcement Decree cannot be applied.

(3) Where assets are purchased at a low price under the Corporate Tax Act, corporate tax should be imposed on marginal profits between the transfer value and the acquisition value at the time of transfer of the relevant assets. Therefore, it cannot be deemed that the marginal profits between the market price and the issue value of the instant stocks are reverted to the business year 2005, when the Plaintiff purchases the instant stocks.

(4) The issue price of redemption priority among the shares of this case is adjusted by taking into account the Plaintiff’s interest cost, preferential dividend, repayment interest, etc., and there is no profit earned by the Plaintiff in the event of redemption in the future. Moreover, it is unclear whether the redemption priority should be converted into an ordinary share because it is unreasonable and further, it is unclear whether the redemption priority will be converted into an ordinary share, and it should be imposed on the converted interest, etc. at the time of conversion into an ordinary share because it is unclear whether the redemption priority is converted into an ordinary share, even if there is a substantial difference between the redemption priority priority share and the ordinary share, it is against the principle of substantial taxation.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) Article 11 subparag. 9 of the former Enforcement Decree of the Corporate Tax Act to determine the Plaintiff’s first assertion

In addition, Article 88(1)8 of the Enforcement Decree provides that "for profits to be included in the calculation of earnings, the profits received by distribution from a person with a special relationship due to capital transactions under the provisions of each item of Article 88(1)8" and Article 88(1)8 of the Enforcement Decree provides that "if a corporation, which is a stockholder, etc., distributes profits to another stockholder, etc., who is a person with a special relationship, due to capital transactions falling under any of the following items", three types of capital transactions are subject to the denial of wrongful calculation in each item, and one of the three types of capital transactions include "where the right to receive new stocks or acquires new stocks at a price higher than the market

In full view of the above provisions, each item of Article 88(1)8 of the former Enforcement Decree of the Corporate Tax Act cited in Article 11 subparag. 9 of the former Enforcement Decree does not include "the case where a corporation, which is a shareholder, etc., distributes profits to other shareholders, etc., who are related parties," but does not include "the case where a corporation, etc., which is a shareholder, etc., distributes profits to other shareholders, etc., who are related parties," but it seems that only 3 types of capital transactions under each item of Article 8(1)8 of the Enforcement Decree of the former Enforcement Decree. In addition, there is no special reason to limit profit-sharing to corporate shareholders, which is related parties under Article 11 subparag. 9 of the former Enforcement Decree. Therefore, the plaintiff's assertion that "the case where the right to receive new stocks is renounced or acquires new stocks in the increase of capital of one of the types of capital transactions under each item of Article 88(1)8 of the former Enforcement Decree of the Corporate Tax Act is without merit."

(2) Judgment on the second argument by the Plaintiff

On the other hand, since a shareholder has a right to receive new shares according to the number of shares owned, it is identical in that the shareholder allocated the new shares to the shareholder, and then both shareholders waives the right to receive new shares from the beginning, regardless of whether the shareholder loses the preemptive right due to the waiver of acceptance, etc., by a third party. In addition, Article 88(1)8(b) of the former Enforcement Decree of the Corporate Tax Act only provides that the said provision shall be a case where the shareholder waives all or part of the right to receive new shares in the increase of the corporation’s capital. Accordingly, it is reasonable to view that the said provision applies not only to the case where the corporation acquires the forfeited shares arising from the waiver of acceptance, etc., but also to the case where the corporation distributes new shares to the corporation from the beginning by a third

(3) Judgment on the third assertion by the Plaintiff

On the other hand, Article 88(1)8 of the former Enforcement Decree of the Corporate Tax Act provides that where a corporation which is a stockholder, etc. makes an unfair reduction in tax burden by allocating profits to other stockholders, etc. who are a person with a special relationship due to three types of capital transactions under each item, it shall be included in the gross income of the corporation which denies the calculation of such act and distributes profits. Article 11(9) of the former Enforcement Decree of the Corporate Tax Act provides that where a person who received profits from a person with a special relationship due to the above three types of capital transactions is a corporation, such profits shall be included in the gross income as profits of the corporation. On the other hand, the Corporate Tax Act provides that the difference between market price and profits shall be included in the calculation of the income amount of the business year concerned (see Article 89(5) of the former Enforcement Decree of the Corporate Tax Act). Therefore, it is reasonable to deem that the time when the Plaintiff acquired the stocks of this case even if the Plaintiff continued to hold the stocks of this case, the Plaintiff's assertion in this part of the business year is without merit.

(4) Judgment on the plaintiff's fourth argument

However, according to Article 344(1) of the Commercial Act, the company may issue different classes of shares with regard to the distribution of profits or interests or the distribution of residual assets. The company is one of the several classes of shares issued by the non-party company, which are of value per itself; ② The conversion time to the redemption priority principle of this case comes within a relatively short period; ② the transfer time to the redemption priority principle of this case comes within a relatively short period; ③ the transfer of common shares and the redemption priority per share to the plaintiff tm is taken over at the same price as 41,30 won per share; ③ the inheritance tax and gift tax do not distinguish between the redemption priority share and the common share in determining the complementary evaluation method of the value of the stock. In light of the above, it cannot be said that the defendant calculated profits by deeming the redemption priority among the shares of this case as having the same value as the common share, without distinction from the redemption priority

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.