The meaning of the amount required by a stockholder under Article 26 (1) 1 of the Income Tax Act for acquiring the stocks concerned.

Article 26 (1) 2 of the Income Tax Act and the current tax law impose only securities transaction tax on capital transactions such as stock transactions within the very limited scope, except in cases where taxes are imposed on such capital transactions. Article 26 (1) 2 of the same Act excludes deemed dividend, and in cases where free stock is issued in accordance with the capital transfer of revaluation reserve fund, the amount of investment originally made shall be deemed to be merely revaluated of the total value of the stock including the free stock. In light of the purport of Article 26 (1) 1 of the same Act, the amount required for acquiring stocks retired under subparagraph 1 of the same Article shall be deemed to be the value of the total stock including the free stock, and the excess amount may be deemed to be deemed to be a dividend only if the money, etc. paid to the stockholders exceeds the fixed stock value.

Article 26 of the Income Tax Act

Plaintiff

Head of Yongsan Tax Office

1. The Defendant’s disposition of imposition of global income tax of KRW 115,885,00 against the Plaintiff on February 3, 1989 (the amount reverted to year 1986) and the amount of KRW 22,584,000 on that defense tax shall be revoked.

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

The same shall apply to the order.

1. Details of the imposition;

According to the facts that the non-party company is a corporation operating real estate rental business, the non-party who is the plaintiff's wife twice until April 13, 1973 acquired 6,40 shares (1,00 won per share) of the above company, but the above company capitalizing the revaluation reserve fund for 4 times and issued free shares (1,000 won per share) without compensation (1,00 won) on December 27, 1980, the total number of shares, including non-party 80,000, including the above 40,000 won, was 80,000 won and 40,000 won, and the above non-party 9,000 won was 60,000 won and 40,000 won, and the above non-party 9,000,000 won and 9,00 won, which were 60,000 won and 9,000 won.

2. The legality of a disposition of imposition.

The defendant asserts that the disposition of this case is lawful on the grounds of the above disposition, and the plaintiff argues that the above disposition of this case is unlawful since the plaintiff did not receive dividends through capital reduction, since the plaintiff did not receive dividends in the same way.

Article 26 (1) of the Income Tax Act provides that "the value of the property received by the shareholder due to the retirement of shares or the reduction of capital, or the value of the property received by the shareholder, employee or other investor at his share due to retirement or retirement, withdrawal or reduction of investment, exceeds the amount required for acquiring the shares of such shareholder, employee or other person who has reduced, or for investing in such corporation (paragraph (1))" shall be deemed to have been distributed to such shareholder, employee or other investor.

Article 341 of the Commercial Act provides that where a company can acquire its own shares through the retirement of shares only for the person who has lost the status of a shareholder or a shareholder due to the retirement of shares (Article 341 of the Commercial Act), it shall be limited to the time when it is intended to retire shares (Article 341 of the Commercial Act) or when it is necessary to achieve its purpose in executing the company's rights (Article 34 of the Commercial Act) or when it is necessary to dispose of shares (Article 342 of the Commercial Act). Article 342 of the Commercial Act provides that where a company acquires its own shares, it shall without delay take the procedure of acquiring shares in the case of subparagraph 1 of the same Article and dispose of shares at a reasonable time. In light of the above provisions, the company cannot arbitrarily attempt to dispose of shares of its shareholders in another place, and the company cannot arbitrarily choose to dispose or retire shares so acquired, and thus, it shall not be deemed that the company has received the aforementioned amount of shares in advance pursuant to subparagraph 1 of the above Article 41 of the Commercial Act.

However, in the application of the above provision, where the revaluated reserve fund is issued without compensation as a result of the transfer of stocks, the first provision on the legal fiction of dividends is to prevent the company from avoiding the legal provisions on dividends by means of de facto reducing dividends instead of paying dividends. Second, the current tax law provides that securities transaction tax shall be imposed only on capital transactions such as the transaction of stocks (Article 23 (1) 3 of the Income Tax Act and Article 44-2 of the Enforcement Decree of the Income Tax Act). Thus, if the company disposes of the above stocks, it shall be subject to no particular tax burden except for securities transaction tax, but it shall be subject to high-rate income tax separately for the company to acquire the above stocks, and if the company sells the above stocks at the same price as the capital stock of the third party or other shareholders without compensation, and if the company sells them at the same price as the previous net asset reserve fund without compensation, it shall be deemed that there is no difference between the value of the company's capital stock transferred without compensation and the net asset value without compensation.

3. Conclusion

Thus, since the disposition of this case is unlawful, the plaintiff's claim of this case seeking its revocation is legitimate, and the costs of lawsuit are assessed against the losing defendant. It is so decided as per Disposition.

Judges Jeong Ho-ho (Presiding Judge) Kim Yong-ju