Seoul High Court 2016Nu77652 (Law No. 16, 2017)

(C) If a corporation established through a special relationship acquires shares from a corporation established through a special relationship, the shares are subject to a wrongful calculation.

(In the original instance) If shares acquired by a corporation established by a person with a special relationship were traded at a low price at the time of acquisition of the shares, taxation on the actual partner at the time of the donation of title trust to a foreign corporation constitutes a wrongful calculation, and the taxation on the actual partner is just and fair, and capital increase for the stocks held in title trust also constitutes deemed donation

Article 52 of the Corporate Tax Act

2017du5003 Disposition of revocation of imposition of corporate tax, etc.

AA Corporation

BB Head of tax office et al.

on October 02, 2017

on 28, 2017

1. All appeals filed by the plaintiffs and the appeals filed by the Director of the Defense Acquisition Program Office are dismissed.

2. The costs of appeal between the Plaintiff A and the director of the tax office are assessed against the Plaintiff A and the director of the tax office. The costs of appeal between the Plaintiff A and the director of the tax office are assessed against the respective parties.

Purpose of appeal and appeal

1. Purport of claim

Defendant BB director of the tax office’s imposition of KRW 00,00,000 of corporate tax for the business year 2010 on October 0, 2010, and KRW 0,000,000 of securities transaction tax for the business year 2010, and the notification of change of income for the business year 2010, respectively, and the notification of change of income for the business year 2010, respectively are revoked. The imposition of KRW 00,00,000 of gift tax for the business year 2010, which was made against Plaintiff DD on October 0, 201, is revoked in all.

2. Purport of appeal

A. The plaintiffs

Of the judgment of the first instance court, the part against Plaintiff AA and the part against Plaintiff DD lost shall be revoked. The judgment that the head of Defendant BB Tax Office revokes all the imposition of KRW 00,000,000, gift tax for the year 2010, which was imposed on Plaintiff DD on October 0, 201 by the head of DefendantCC Tax Office and the head of DefendantCC Tax Office for each disposition against Plaintiff AD on each of the respective dispositions against Plaintiff AA.

B. DefendantCC director

In the judgment of the first instance court, the part against the director of the defendantCC is revoked and the plaintiff's claim corresponding to the revoked part is dismissed.

1. Quotation of judgment of the first instance;

The reasoning for this Court’s reasoning is that the plaintiffs and the defendantCC director’s assertion on this case.

In addition to the following judgments, the reasoning of the judgment of the first instance is the same as that of the judgment.

It shall be quoted in accordance with Article 8 (2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act.

2. Additional Judgment

A. As to the plaintiff company (as to the 4-A-3 of the judgment of the court of first instance)

1) The assertion

Even if the transfer was made at a low price based on the calculation, if the economic rationality was not lost in the determination of the transaction, it does not constitute the object of rejection of unfair calculation. The Plaintiff Company and the transferee of this case concluded an agreement on the transfer of this case on October 0, 201, which was at the time of the establishment of a corporation established by division, and concluded a share sales contract on October 00, 201 with the notice of confirmation of the financial statements of a corporation established by division on October 0, 201 and the approval of the board of directors on October 00, 201 of an evaluation specialized institution based on the notice of stock evaluation on October 00, 201, and with the approval of the board of directors on October 00, 201. At the time of the transfer, it was practically impossible to expect the Plaintiff Company and the transferee of this case to make a transaction as an assessment amount based on the financial statements on October 00, 201. Therefore, the transfer of this case cannot be deemed to lack economic rationality in light of social norms and commercial practices.

2) Determination

A corporation established through division is equipped with approximately KRW 00 billion at the time of its establishment. A corporation established through division additionally acquired approximately KRW 00 billion on October 0, 201, prior to the transfer of this case. Since sales have rapidly increased thereafter, sales amount of KRW 2010,000,000,000 in annual sales amount of KRW 200,000 (Evidence 4,5,77). Such additional acquisition of KRW 00,000 in the annual sales amount of KRW 201,000 constitutes a serious increase in major assets of the corporation (i.e.,, increase in net asset value of KRW 00,000,000,000) in terms of social norms and economic rationality. A corporation established through division cannot be deemed to have been identical before and after the acquisition of the Plaintiff’s stocks, the representative director, holding 100% of the Plaintiff’s stocks at the time of its establishment, and the transferee’s 10,000,000 in the instant case.

If the Plaintiff Company did not have such special relationship with the instant transferee, notwithstanding the increase in the inherent value of the newly established corporation, it does not seem that the transfer of the shares to the instant transferee by the instant transferee was made in net order according to the previous appraisal value. In light of the foregoing circumstances, the instant transfer is deemed to lack economic rationality in light of social norms and commercial practices. The Plaintiff Company’s allegation above is without merit.

B. The plaintiff DDR (as to the "paragraph 4(b) and Item 13(c) of the first instance judgment)

1) The assertion

A) For the purpose of the imposition of gift tax to be lawful, the imposition of gift tax must be imposed on the party who falls under the "person liable for payment" of the property, which is the object of taxation of

B) The acquisition of the instant 2 shares by GGG is for the purpose of improving the financial structure of a corporation established by a corporation established by a corporation established by a corporation established by a corporation established by a corporation established by a corporation. Since the existing shareholders acquired new shares in accordance with the previous shares ratio by avoiding complicated procedures, such as waiver of preemptive rights and forfeiture of forfeited shares, etc., the purpose of any tax

2) Determination

A) Article 2(1) of the former Inheritance Tax and Gift Tax Act does not include a for-profit corporation in the donee subject to gift tax because the profit-making corporation’s property or profit received without compensation through transactions is an asset increase profit and subject to corporate tax by constituting income for each business year of the profit-making corporation. However, in cases where a profit-making corporation is deemed as a trust property under the name of trust pursuant to Article 45-2 of the former Inheritance Tax and Gift Tax Act, it does not actually acquire without compensation, and there is no reason for not imposing gift tax on the profit-making corporation. In other words, a separate concept is that donation under Article 2 of the former Inheritance Tax and Gift Tax Act and a deemed donation under Article 45-2 are separate concepts, and in cases of a deemed donation for profit-making corporations, a tax liability for gift tax is imposed on the actual owner who is deemed a donor under the latter part of this case. Accordingly, even in cases of a deemed donation for title trust for a profit-making corporation, the above assertion by Plaintiff D is without merit.

B) The Plaintiff DDR paid KRW 000,000,000 to the Plaintiff 2’s shares in title trust with respect to the Plaintiff 1 shares in this case, which were trusted to GG, and held in title trust with the payment of KRW 00,000,000 as to the shares in this case. It cannot be deemed a mere alteration of the shares in this case as a separate new property that differs from the shares in this case and the cause of their acquisition. Since the corporation established a new establishment after the establishment of the Plaintiff 201, whose sales amount in the 2010,000, exceeds KRW 00,000,000,000,000,000 won, it seems that the above capital increase was made due to the increase in the business size (Evidence 12 evidence). Accordingly, the acquisition of shares in this case conforms to Plaintiff 2’s personal interest. Even if the above capital increase was made in the equal form in accordance with the shares held by the existing shareholders, Plaintiff D, an oligopolistic shareholder of the corporation, is merely a ground for tax avoidance of the Plaintiff 2D’s.

C. As to DefendantCC Head of the tax office (as to the 16th judgment of the first instance court)

1) The assertion

With respect to the stocks of this case that Plaintiff DD acquired in the name of GG, transfer of ownership is made in the name of GG and a statement of changes in stocks, etc. in the name of GG was prepared. This constitutes “False recording, manipulation of transaction, and concealment” under Article 27(2)1 and 5 of the Enforcement Decree of the Framework Act on National Taxes, and thus, Plaintiff DD without filing gift tax pursuant to the title trust Nos. 1 and 2 of this case. Accordingly, the unfair non-reporting penalty tax is an administrative sanction independent of the principal tax, and is not a double sanction that overlaps with the principal tax due to the donation of title trust.

2) Determination

The fact that the transfer of ownership was made in the name of GG with respect to the shares Nos. 1 and 2 of this case, or that the detailed statement on the state of changes in stocks, etc. in the name of GG was prepared is merely an act naturally incidental to the title trust itself and the shares held in the title trust itself. Therefore, it is difficult to deem that there was an active concealment and most active act subject to the unfair non-reported additional tax in the title trust. The above assertion by the head of DefendantCC is groundless

3. Conclusion

Therefore, the judgment of the first instance court is justifiable, and each of the appeals by the plaintiffs and the appeal by the defendantCC chief is dismissed as it is without merit.