Seoul Administrative Court 2016Guhap58673 ( November 10, 2016)

Tax Tribunal 2015Seoul Northern3455 ( December 30, 2015)

Since it is confirmed that it is the actual owner of the instant shares, applying the net profit and loss value (similar profit and loss value) for two years as the legal fiction of title trust donation and the certificate evaluation of the largest shareholder is legitimate.

It is recognized that the person who is not the actual owner and the contents of the statement are specific, and the remaining shareholders have withdrawn cash in the same way as the plaintiff, and that the ownership was entrusted by deeming that the ownership was exceeded the shares under the direction of the actual owner, and the application of the net profit and loss (similar profit and loss value) and the certificate of the largest shareholder is legitimate.

The method of calculating the net profit and loss amount for the last three years per share of Article 56 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act

Seoul High Court 2016Nu76901 Revocation of Disposition Imposing Gift Tax

O KimO

○ Head of tax office

November 10, 2016

August 24, 2017

September 14, 2017

1. The plaintiff's appeal is dismissed.

2. Costs of appeal shall be borne by the Plaintiff.

the Gu Office's place of service and place of service

The judgment of the first instance shall be revoked. The imposition of each gift tax (including additional tax) on May 1, 2015 by the defendant against the plaintiff on May 1, 2015 shall be revoked.

1. Quotation of judgment of the first instance;

The reasoning of the judgment of this court is to change some of the following, and it is identical to the reasoning of the judgment of the court of first instance except for the addition of the judgment of the plaintiff's appellate court under Paragraph (2) below. Thus, it is to be cited in accordance with Article 8 (2) of the Administrative Litigation Act and the main sentence of

○ The 5th sentence of the first instance court is replaced by the following contents: (a) No. 13 and 14th sentence.

E) On December 10, 2014, the Plaintiff appeared at the ○○ District Public Prosecutor’s Office and made a statement before the session ( October 4, 2014).

All of the facts are true at the time of interrogation. The plaintiff, together with the plaintiff, has served as the representative director of AA.

BB also holds 10% of the AA shares, and the AA shares held by BB are also known to the same cases as the Plaintiff. On January 2014, the Plaintiff stated that CCC and DD under the direction of ○○○○○○, and that BB and GG made the Plaintiff, like the Plaintiff, use the AA shares to EE and FF in excess of the future, and return all documents related to the transfer of shares due to tax issues.”

[Ground of Recognition] Unsatisfy, Gap evidence 4-1, 2, Gap evidence 9-1, 2, Eul evidence 12, 13, 15

Each entry of evidence 17, 18, and the purport of the whole pleadings

[Evidence Evidence] Evidence No. 7-1, 2, Gap evidence No. 8, Gap evidence No. 10-1

2. Judgment on the Plaintiff’s additional argument

A. The plaintiff's assertion

1) Since AA was established on September 21, 200 and transferred 5,200 shares issued by the above company (hereinafter “2 shares”) on August 21, 2002, it was subject to transfer of 5,200 shares issued by the above company (hereinafter “2 shares”), a corporation less than three years after commencement of the business or a corporation for which three years have passed before the base date of appraisal was included in lump-sum contingent cases with capital increase for the last three years from the commencement date of the business year to the base date of appraisal, and thus, it cannot seek an weighted average amount of net profits and losses for the last three years by the method prescribed in Article 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act. Since there is no average amount of net profits and losses for each share calculated by a credit rating institution or accounting corporation prescribed in subparagraph 2, the value per share cannot be assessed on the basis of net value of profits and losses by applying mutatis mutandis Article 54(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.

2) The Plaintiff’s shares acquired between August 21, 2002 and August 21, 2001, which were the assessment base date of the second shares of this case, are the reasons for the second shares. Since the shares ratio of the second shares is 10%, it is unlawful that the Defendant added 30% of the premium rate for the largest shareholder under Article 63(3) of the former Inheritance Tax and Gift Tax Act while evaluating the value of the second shares of this case.

B. Relevant statutes

Attached Form 3 is as listed in the relevant statutes.

(c) Fact of recognition;

In full view of the above quoted evidence and Eul evidence No. 19, the defendant evaluated the value of the second stocks of this case as net value per share calculated on the basis of the weighted average amount of net profit and loss for the last two years from the evaluation base date of the gift tax base, and deemed that ○○○ and KK in a special relationship with ○○ and its largest shareholder hold in excess of 50/100 of the total number of outstanding stocks of AAAA, and evaluated the value per share of the second stocks of this case as 291,863 won by adding 30% of the total number of outstanding stocks of this case under Article 63(3) of the former Inheritance Tax and Gift Tax Act. AAA established on September 21, 200 as of September 21, 200, which was the evaluation base date of the gift tax base, and the plaintiff did not report on the second stocks of this case within the time limit of the gift tax base. The defendant calculated the net value of the second stocks of this case by the method prescribed in the former Inheritance Tax and Gift Tax Act.

D. Determination

1) Whether evaluation based on net profit and loss value is legitimate

A) The method of calculating net profit and loss for the last three years per share under Articles 54(1) and 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17828, Dec. 30, 2002; hereinafter “former Enforcement Decree of the Inheritance Tax and Gift Tax Act”) which provide for the evaluation of unlisted stocks may not apply to corporations with less than three years after the commencement of the business. The method of calculating the average value of the presumed profit and loss per share under Article 56(1)2 of the same Decree is applicable to cases where a return is filed within the deadline for the return of the gift tax base. The "net asset value" under Article 54(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act has a supplementary meaning only when the net profit and loss falls short of the net asset value.

B) In light of the relevant statutes and the following circumstances revealed in the facts of recognition, it cannot be deemed that the Defendant’s method of evaluating the value of shares No. 2 in the instant case is unlawful or objective and reasonable in violation of the purport of the former Inheritance Tax and Gift Tax Act and its Enforcement Decree.

① There was no statutory provision applicable at the time to the appraisal of the value of shares 2. The Defendant calculated the value per share by applying mutatis mutandis the same method as Article 54(1) and (2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.

② Under the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, only the net value of the shares is to be determined based on the net value of the shares, and the net value of the shares is to be supplementaryly applied only when the net value of the shares is below that of the preceding three years. Therefore, by applying Article 54(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, it would be reasonable to calculate the value per share by the defendant for a corporation with two business years before the base date of appraisal [in cases of calculating the value of non-listed shares donated in the imposition of gift tax, it would be based on the supplementary method of assessing the value of the shares used by the defendant (net value). However, Article 54(1) and (2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which was amended by Presidential Decree No. 18177, Dec. 30, 2003; Article 54(1)1 and (2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the net asset value of the relevant corporation shall be less than the net asset value per share.

2) Whether an increase in the number of shares held by the largest shareholder is legitimate

In full view of the purport of the entire argument among the above quoted evidences, it can be recognized that the largest shareholder ○○ and shareholders with a special relationship with the shareholder KK held more than 50/100 of the total number of outstanding shares of AA based on Article 19 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act from the time of the establishment of AA to the date of the transfer of the second shares. Thus, it is legitimate that the Defendant calculated by adding 30% of the total number of outstanding shares to the largest shareholder under Article 63(3) of the

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed as it is without merit, and it is so decided as per Disposition.

[Attachment 1]

List of Impositions

(unit: source)

Year

Principal Gift Tax

Additional Tax on negligent tax returns

Additional Dues

Total Tax Amount

200

2,600,000

520,000

520,000

3,640,000

202

454,875,040

90,975,008

90,975,008

636,825,050