Division 2014-001 (2014.06.02)

It is reasonable to view that the secondary liability for tax payment under the rehabilitation plan succeeds to the succession.

In accordance with the rehabilitation plan, it is reasonable to view that the new corporation that received the transfer of assets and liabilities related to the construction business sector, including stocks, as the construction business sector was divided and newly established pursuant to the rehabilitation plan, has succeeded to the secondary tax liability related to such assets together with stocks from the corporation

Article 39 (Secondary Liability to Pay Taxes by Investor)

2014Guhap66267 Such revocation as comprehensive real estate holding tax

AAA Corporation

Head of Seocho Tax Office

April 17, 2015

May 1, 2015

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of comprehensive real estate holding tax on December 18, 2013 against the Plaintiff on December 18, 2013 is revoked each disposition of OO of comprehensive real estate holding tax and OO of special rural development tax on the Plaintiff.

1. Details of the disposition;

(a) BB(hereinafter referred to as “BB”)’s primary tax liability establishment and division, the status of the oligopolistic shareholder of the CCC prior to its establishment and division, the BB purchased 12 lots of land from DD on January 22, 2008, the total of 13 lots of land in the same Dong from EE, the total of 13 lots of land in the same Dong from EE, and the total of 5 lots of land in the same Dong from FF.

2) BB paid the full purchase price to DD, EE, and FF on August 24, 2009, but BB did not complete the registration of ownership transfer by June 1, 201, which is the assessment basis date of comprehensive real estate holding tax for 201.

3) On November 16, 2011, the Defendant: (a) deemed that BB actually owns a total of 28 parcels of land among each of the lands listed in paragraph (1) as of the tax base date; and (b) designated the payment deadline for BB as of December 15, 201; and (c) issued a disposition of imposition of OO of the comprehensive real estate holding tax for 201 and the special rural development tax for which it is the principal tax (hereinafter referred to as “principal tax liability”).

4) Meanwhile, on June 1, 201, which was the date on which BB’s main tax liability becomes effective, CCC Co., Ltd. (hereinafter “CCC”) owned 80.46% of the shares issued by BB (hereinafter “instant shares”).

B. Division of the CCC before division and the establishment of the plaintiff following such division

1) However, on August 10, 201, the Seoul Central District Court rendered a decision to commence the rehabilitation procedure (hereinafter “instant rehabilitation procedure”) under the Debtor Rehabilitation and Bankruptcy Act (hereinafter “DR”) as the Seoul Central District Court 2011 Gohap105 (hereinafter “ Debtor Rehabilitation Act”).

2) In the instant rehabilitation procedure, the rehabilitation plan submitted by the CCC’s administrator on December 9, 201 was approved prior to the division (hereinafter “instant rehabilitation plan”).

3) Pursuant to Articles 212 and 272(1) of the Debtor Rehabilitation Act, the instant rehabilitation plan includes: (a) the division of CCC prior to the division by the method of existence, establishment, and human division (hereinafter “instant corporate division”) pursuant to Articles 212 and 272(1) of the same Act (i.e., division and surviving division depending on whether the company prior to the division is extinguished or not; (b) the division of a company is a newly incorporated company or an existing company depending on whether the transferee company is a newly incorporated company or an existing company; and (c) the division and merger of shares of a company newly incorporated due to the division are owned by the divided company or whether the shares of the

4) Specifically, the instant corporate division separates the bus sales business division and the construction business division from the CCC’s business division before division. The bus sales company and the new bus construction company transferred the assets and liabilities of the CCC prior to division related to each of the relevant business sector. The surviving corporation continued the GG development business. The instant shares, which are assets owned by the CCC prior to division, were transferred to the construction company.

5) The trade name of each of the said new corporations and surviving corporations was changed to “CC Co., Ltd.” (hereinafter “CCC, regardless of whether it was before or after the division; hereinafter “CCC”), and the construction company was designated as “AA (the Plaintiff in this case),” and the surviving corporation was designated as “III Co., Ltd.” on December 19, 201, and the CCC and the Plaintiff completed the registration of each establishment on December 20, 201, and the CCC completed the registration of change to “CCC Co.,, Ltd.” (hereinafter “CF”) on December 20, 201.

C. Disposition of this case

1) However, BB did not perform its duty to pay taxes until December 15, 201, which is the due date for the main tax liability designated by the Defendant.

2) On May 22, 2012, the date on which the principal liability for tax payment was established, the Defendant: (a) deemed that the rehabilitation company, a surviving company of the CCC, owned the instant shares as of June 1, 201; (b) constituted “a person who actually exercises the rights to shares exceeding 50/100 of the total number of outstanding shares of the pertinent corporation or the total amount of investment in the relevant corporation” under Article 39(1)2(a) of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 21, 2011; hereinafter the same) and accordingly, designated the rehabilitation company as the secondary taxpayer; and (c) imposed a disposition imposing comprehensive real estate holding tax for the year 201 on the custodian of the rehabilitation company and the special rural development tax for the special rural development tax.

3) However, on August 1, 2013, a custodian of a rehabilitation company, who is dissatisfied with the above disposition, filed a lawsuit seeking revocation of the above disposition by this Court 2013Guhap19837.

4) On November 22, 2013, this Court rendered a judgment revoking the above disposition on the grounds that the rehabilitation company cannot be deemed a secondary taxpayer, and the above judgment became final and conclusive on December 17, 2013.

5) On December 18, 2013, following the day following the day when the above judgment became final and conclusive, the Defendant: (a) designated the Plaintiff as an oligopolistic shareholder of BB as the secondary taxpayer; (b) imposed the Plaintiff a disposition of imposition of OOwon of comprehensive real estate holding tax and a special agricultural and fishing villages tax for the year 201 on the Plaintiff (hereinafter “instant disposition”); and (c) “tax claims indicated in the said disposition” and “tax obligations corresponding thereto,” respectively.

6) The Plaintiff dissatisfied with the instant disposition and filed a request for review with the Commissioner of the National Tax Service on March 7, 2014, but was dismissed on June 2, 2014.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 6, Eul evidence 1 to 5, the purport of the whole pleadings

2. Whether the instant disposition is lawful

(a) Related Acts and subordinate statutes;

It is as shown in the attached Form.

B. Determination on the assertion that the disposition constitutes a disposition after the right to impose tax was extinguished

1) Summary of the Plaintiff’s assertion

Article 118 subparag. 1 of the Debtor Rehabilitation Act provides that a claim on property arising before the rehabilitation procedures commence for a debtor constitutes a rehabilitation claim (Article 118 subparag. 1 of the Debtor Rehabilitation Act). However, since the date on which the main liability for tax payment was established on June 1, 201, the pertinent tax claim corresponding to the secondary liability for tax payment exists at that time. The instant tax claim constitutes a rehabilitation claim based on the property claim arising prior to the commencement date of the rehabilitation procedures ( August 10, 201), and the instant tax claim constitutes a rehabilitation claim based on the property claim arising prior to the commencement date of the rehabilitation procedures. However, in the instant rehabilitation procedures, the Defendant failed to file a report on the instant tax claim by the deadline provided for in Article 152(3) of the Debtor Rehabilitation Act, and accordingly, the instant tax claim was forfeited according to the authorization of the instant rehabilitation plan under the

2) Determination

First, we examine whether the pertinent taxation claim constitutes a rehabilitation claim. Whether a taxation claim constitutes a rehabilitation claim under Article 118 of the Debtor Rehabilitation Act is determined on the basis of whether the taxation requirements prescribed by the Act have been met before the commencement of rehabilitation procedures (see, e.g., Supreme Court Decision 2012Du23365, Feb. 28, 2013). The secondary tax liability of oligopolistic shareholders is established after the occurrence of shortage in collection due to the principal tax delinquency of the principal taxpayer. Thus, the establishment time of the instant tax liability is at least after the lapse of the payment time limit (see, e.g., Supreme Court Decisions 2003Du13083, Apr. 15, 2005; 2010Du13234, May 9, 2012). In light of the aforementioned legal principles, it can not be deemed that the instant tax liability is established before the commencement of rehabilitation procedures, which corresponds to the aforementioned tax payment period under the Act.

Therefore, without any need to examine the remaining points of view, the Plaintiff’s assertion on a different premise is without merit.

C. Determination as to the assertion that the Plaintiff did not have room for exercising shareholder rights as a shareholder of BB due to the Plaintiff’s failure to complete registration of incorporation at the time of establishment

1) Summary of the Plaintiff’s assertion

In order to fall under an oligopolistic stockholder prescribed in Article 39(1)2(a) of the former Framework Act on National Taxes, at least a number of stockholders must be in the position to exercise shareholders’ rights with respect to the shares held as at the date of establishment of the tax liability. However, since the Plaintiff completed the registration of incorporation on December 19, 201, which was after the date of establishment of the principal tax liability (the date of June 1, 201), the Plaintiff was unable to exercise shareholders’ rights with respect to the instant shares at the time of establishment of the principal tax liability, and therefore the Plaintiff

2) Determination

The issue of whether a second taxpayer is an oligopolistic shareholder of a corporation shall be determined on the basis of the date on which the principal liability for tax payment arises (see Supreme Court Decision 85Nu405, Dec. 10, 1985); hereinafter, whether the Plaintiff was an oligopolistic shareholder of BB as of June 1, 201, the date on which the principal liability for tax payment arises. Article 272(4) of the Debtor Rehabilitation Act provides that, in cases of corporate split-off under the Debtor Rehabilitation Act, Articles 237 through 240, 374(2), 522-3, 527-5, and 529 of the Commercial Act shall not apply to the matters concerning corporate split-off, which are not subject to the application of the provisions on corporate split-off under the Debtor Rehabilitation Act, are limited to Article 272(4) of the Debtor Rehabilitation Act, and that the provisions on corporate split-off under the Commercial Act, other than the above provisions on corporate split-off or the provisions on corporate split-off, are deemed to exist.

Meanwhile, the division of a company takes effect upon the completion of the registration of incorporation at the place of the principal office (Articles 530-11 and 234 of the Commercial Act). Succession to the rights and obligations of the divided company that occurred prior to the date of registration of incorporation is natural in view of the interpretation of Article 530-10 of the Commercial Act (see Supreme Court Decisions 2010Da44002, supra; 2012Du11782, supra). The Plaintiff’s assertion that the rights and obligations and legal relations of the divided company prior to the registration of incorporation are excluded from those subject to succession is nonexistent, and there is no rights and obligations and legal relations that are practically subject to succession, and the legislative intent of Article 530-10 of the Commercial

In the instant case, the Plaintiff succeeded to the instant shares, which are assets related to the construction business sector of the CCC prior to the division, pursuant to Articles 212 and 272(1) of the Debtor Rehabilitation Act, Article 530-10 of the Commercial Act, and the rehabilitation plan of this case, as seen earlier. In light of the legal principles as seen earlier, the Plaintiff succeeds to all the rights, obligations and legal relations of the said shares and shareholders derived therefrom, and as a matter of course, the rights, obligations and legal relations succeeded to are included in BB’s oligopolistic shareholder status as of June 1, 201 of the CCC prior to the division. Accordingly, the Plaintiff is deemed to have been an oligopolistic shareholder status as of June 1, 201, and the Plaintiff’s assertion on a different premise is without merit.

D. The Plaintiff did not agree with the CCC prior to the division to succeed to the pertinent tax claim, and the judgment on the allegation that such agreement is null and void even if it was concluded.

1) Summary of the Plaintiff’s assertion

Although the Defendant rendered the instant disposition on the premise that the Plaintiff agreed to succeed to the instant tax liability with the CCC prior to the division, the Plaintiff did not reach such agreement. Moreover, the tax liability is only able to succeed as prescribed by Articles 23 and 24 of the Framework Act on National Taxes, and does not have the nature that can be succeeded by a private agreement.

2) Determination

As seen earlier, the Plaintiff succeeded to the status of oligopolistic shareholders BB as of June 1, 201, held by CCC prior to the division. Such succession to the status of oligopolistic shareholders is not by private agreement between the Plaintiff and CCC prior to the division, but by legal provisions, namely, Articles 212 and 272(1) of the Debtor Rehabilitation Act, and Article 530-10 of the Commercial Act (see, e.g., Supreme Court Decision 2001Da44352, Nov. 26, 2002). Accordingly, the Plaintiff’s assertion on this part is without merit.

E. Determination as to the assertion that the instant taxation claim is not included in the list of rehabilitation claims, rehabilitation security rights, and public interest rights that are transferred to the Plaintiff

1) Summary of the Plaintiff’s assertion

The taxation claim of this case constitutes rehabilitation claims, rehabilitation security rights, and public interest claims, and it is not included in the list stating rehabilitation claims, rehabilitation security rights, and public interest claims that are transferred to the plaintiff.

2) Determination

According to the evidence No. 3-1 of this case, the fact that the CCC prior to the division of this case has a separate list of rehabilitation claims, rehabilitation security rights, and public-interest claims that are transferred to the Plaintiff, and the fact that the pertinent tax liability is not indicated in the above list is recognized. However, we examine whether the instant tax claim falls under rehabilitation claims, rehabilitation security rights, and public-interest claims.

First of all, the taxation claim of this case cannot be deemed to have been established by satisfying all the taxation requirements before the commencement of rehabilitation procedures. Thus, the taxation claim of this case does not constitute rehabilitation claims and rehabilitation security rights.

Next, we examine whether the instant tax claim constitutes a public-interest claim. It is reasonable to view that the instant tax claim falls under any of the subparagraphs of Article 179(1) and Articles 58(6), 59(2), 108(3)2 and 4, 121(2), 177, and 256(2) of the Debtor Rehabilitation Act as the type of public-interest claims, and that it is limited. However, with respect to the establishment of the instant tax claim, the instant tax claim is the primary tax liability of a third party (BB) who is not the custodian after the commencement of the instant rehabilitation procedure. As such, the instant tax claim does not constitute a public-interest claim under Article 179(1)5 of the Debtor Rehabilitation Act, namely, a public-interest claim arising from the act performed by the custodian after the commencement of the rehabilitation procedure. Ultimately, the instant tax claim does not fall under any of the public-interest claims, public-interest claims, and thus, does not constitute a property claim after the commencement of rehabilitation procedure.

F. Determination as to the assertion that the instant taxation claim is not specified in the instant rehabilitation plan as transfer to the Plaintiff

1) Summary of the Plaintiff’s assertion

The instant rehabilitation plan provides that the newly incorporated company shall not be succeeded to the remainder of its obligations other than those specified as transferred by the company before the division. The instant tax obligations are not specified as transferred to the Plaintiff in the instant rehabilitation plan.

2) Determination

As seen earlier, the Plaintiff’s obligation to pay the instant tax is not due to the Plaintiff’s transfer of the said obligation to the Plaintiff, but due to the Plaintiff’s transfer of the instant shares to the Plaintiff. As a incidental effect therefrom, the Plaintiff succeeded to the status as an oligopolistic shareholder of BB as of June 1, 2010 of the CCC before division (this Court Decision 2013Guhap19837 states that “it is reasonable to deem that the secondary obligation to pay taxes of CCC prior to division was succeeded to AAA corporation,” but it is reasonable to deem that the taxation requirements of the said tax claim have not yet been met until the date of the authorization decision which is the date of the validity of the above rehabilitation plan, and that the secondary obligation to pay taxes has succeeded to the status of oligopolistic shareholder, not the second obligation to pay taxes itself. Therefore, the issue of whether the instant tax claim itself was transferred to the instant rehabilitation plan is beyond the inherent nature of the case. However, the Plaintiff’s argument as above should also be determined as to the legitimacy of the assertion itself.

According to the above evidence, "A and B" are referred to as "CCC newly incorporated in the rehabilitation plan as "B" and "B shall bear only the obligations (including the obligations) transferred to A and B from among the obligations of the company before the division, and shall not be jointly and severally liable for other obligations not transferred to B and B." It shall be acknowledged that the contents that the claims of this case are transferred to the Plaintiff are not separately stipulated in the rehabilitation plan. However, if the purport of the contents of the rehabilitation plan is unclear, it shall be clearly stated by the interpretation of legal act, and the interpretation of legal act shall be clearly decided to the effect that the rights and obligations of the Plaintiff were assigned to the Plaintiff by the agreement of the parties, and it shall be interpreted that the provisions of the above 20-year rehabilitation plan are not effective in accordance with the principles of logic and equity as stated in the above 20-year rehabilitation plan (see, e.g., Supreme Court Decision 70Da27820, Jul. 27, 2007).

G. If the rehabilitation company did not bear the instant tax liability, the Plaintiff’s above liability is against the foregoing obligation.

Judgment on the assertion that joint and several tax liability cannot be borne

1) Summary of the Plaintiff’s assertion

Article 25(4) of the former Framework Act on National Taxes provides that, where a corporation establishes a new company pursuant to Article 215 of the Debtor Rehabilitation and Bankruptcy Act, any national tax, additional dues and expenses for disposition on default imposed on or established by the existing corporation shall be jointly and severally liable for payment by the new company. Thus, a new company established pursuant to Article 215 of the Debtor Rehabilitation Act may only be jointly and severally liable for national tax, additional dues and expenses for disposition on default imposed on or established by the existing corporation. However, the Plaintiff falls under a new company established pursuant to Article 215 of the Debtor Rehabilitation Act, and the rehabilitation company of the CCC established before division falls under an existing corporation provided for in Article 25(4) of the former Framework Act on National Taxes, and thus, if the rehabilitation company does not bear secondary liability for payment by the previous corporation pursuant to this Court Decision 2013Guhap19837, the Plaintiff may not be jointly liable for payment.

2) Determination

As seen earlier, the Plaintiff’s assumption of the instant tax liability is due to the Plaintiff’s succession to the status of the oligopolistic shareholder as of June 1, 2010 of the CCC prior to the split-off following the transfer of the instant shares to the Plaintiff in the instant rehabilitation plan. It is not because the Plaintiff is not obligated to jointly pay the tax liability of the CCC prior to the split-off pursuant to Article 25(4) of the former Framework Act on National Taxes (In addition, whether the instant tax liability constitutes “national tax, additional dues, and expenses for disposition on default imposed on an existing corporation” or “national tax, additional dues, and expenses for disposition on default imposed on an existing corporation” under Article 25(4) of the former Framework Act on National Taxes shall be determined at the time of the entry into force of the rehabilitation plan. The instant tax liability was not constituted until the date the rehabilitation plan becomes effective, and was not imposed on the CCC prior to the split-off. Accordingly, the Plaintiff’s assertion

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.