Plaintiff (Law Firm Davia, Attorney Park Sung-sung et al., Counsel for the plaintiff-appellant)

The head of Ansan-si;

January 9, 2018

1. The Defendant’s imposition of acquisition tax of KRW 10,364,730 (including additional taxes) and special rural development tax of KRW 859,520 (including additional taxes) on June 28, 2017 shall be revoked in entirety.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff is the representative director of the movables Co., Ltd. established on January 13, 1997 (the name of the company prior to the change: the establishment of a movable metal design for the company; hereinafter referred to as “ movable property design”).

B. The Defendant conducted a local tax investigation on movables, and as a result, determined that on December 30, 2015, the Plaintiff, as an oligopolistic shareholder of the movables, acquired shares 11,400 shares (hereinafter “instant shares”) from Nonparty 1 on December 30, 2015, and increased the shares from 40.0% to 59.0%, thereby, the total share ratio held by the Plaintiff and its related parties (spouse Nonparty 2) increased from 81.0% to 96.97%.

C. On June 28, 2017, the Defendant imposed acquisition tax of KRW 10,364,730 (including additional tax of KRW 2,645,980) and special rural development tax of KRW 859,520 (including additional tax of KRW 107,40) on the Plaintiff’s tax base by multiplying the book value of the object of taxation of acquisition tax owned by movables by 15.97% by the increase in the Plaintiff’s equity ratio (hereinafter “instant disposition”).

[Reasons for Recognition] Unsatisfy, Gap evidence 10 (including virtual number), Eul evidence 1, 2 and 3, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant shares were held in title by the Plaintiff to Nonparty 1, an employee of the movables, and the Plaintiff terminated a title trust agreement with Nonparty 1 on December 30, 2015 and received the refund of the instant shares. Therefore, the instant shares owned by the Plaintiff did not substantially increase. Therefore, the instant disposition based on the premise that the Plaintiff acquired the instant shares was unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Legal principles

The principle of taxation on the beneficial owner under Article 17(1) of the Framework Act on Local Taxes, in cases where there is another person to whom the actual owner belongs, unlike the nominal owner, with respect to the subject matter of taxation, such as income, profit, property, act, or transaction, is not the nominal owner for the reason of form or appearance, but the person to whom the actual owner belongs is the taxpayer. Furthermore, the main text of Article 7(5) of the former Local Tax Act (amended by Act No. 13636, Dec. 29, 2015; hereinafter the same shall apply) imposes acquisition tax on an oligopolistic shareholder of a corporation by deeming that the acquisition of the corporation’s property is deemed an oligopolistic shareholder, if it is deemed that the oligopolistic shareholder actually disposes of or is in a position to manage and operate the corporation’s property and actually owns the assets directly. Thus, the determination of whether the oligopolistic shareholder is an oligopolistic shareholder who is liable to pay acquisition tax under the above Article 17(1) should be made based on whether the ownership of the corporation is substantially controlled by exercising voting rights, such as a voting right.

2) Whether the Plaintiff trusted the instant shares to Nonparty 1

In light of the following circumstances, comprehensively taking account of each of the statements in Gap evidence Nos. 1, 3 through 9, and 11 through 15 (including virtual numbers), and the purport of the entire pleadings, the plaintiff was deemed to have cancelled the above title trust agreement on December 30, 2015, and have restored the name of the shareholder on the shareholder registry of the instant shares in the name of the plaintiff. Thus, the plaintiff cannot be deemed to have increased the share ratio that the plaintiff actually exercised the shareholder's rights.

① On December 24, 2014, the Plaintiff and Nonparty 1: (a) drafted an agreement on termination of title trust with respect to the instant shares trusted by the Plaintiff to Nonparty 1; (b) on December 11, 2017, Nonparty 1 commissioned Nonparty 3, his/her agent, Nonparty 3, to prepare a letter of certification that the instant shares were held in title trust by the Plaintiff (hereinafter “instant letter of certification”); (c) on December 11, 2017, Nonparty 3, a joint office, etc. of ○○○○ notary public, etc., without having paid the instant shares price; and (d) Nonparty 1 commissioned Nonparty 3, a false letter of termination or written certification.

② In the Incheon District Court Decision 2015Da200752, the Plaintiff filed against Nonparty 1 in the lawsuit for confirmation of the shareholder, the Plaintiff rendered a favorable judgment with no pleading that confirms that the shareholder of the instant shares is the Plaintiff, and the said judgment becomes final and conclusive. In this regard, the instant certificate contains the part on which Nonparty 1 stated that the instant shares were not disputed in the said lawsuit, since the instant shares were trusted in title.

③ Upon the final and conclusive judgment on February 12, 2016, the Plaintiff voluntarily paid KRW 32,658,610 to Nonparty 1 in Seocheon Tax Office, which was incurred from the title trust of the instant shares with respect to Nonparty 1. In light of the fact that the amount of the gift tax is larger than the acquisition tax resulting from the instant disposition, it is difficult to view that the Plaintiff merely asserted that the title trust of the instant shares was made with Nonparty 1 in the motive to avoid the payment of acquisition tax.

④ Although there is no evidence to acknowledge that Nonparty 1 exercised shareholder rights by paying the share price of this case or attending a general meeting of shareholders of the movable property thesis, considering the fact that the amount of the share price for acquiring shares in the name of the Plaintiff and Nonparty 1 was withdrawn from the account under the Plaintiff’s name at the time of the establishment of the movable property thesis and the capital increase, the share price for acquiring shares in the name of Nonparty 1 appears to have been borne by the Plaintiff.

Therefore, the instant disposition taken on the premise that the Plaintiff acquired the instant shares from Nonparty 1 on December 30, 2015, and increased the Plaintiff’s share ratio, should be revoked as unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.

[Attachment]

Judges Park Jong-dae (Presiding Judge)