Changwon District Court 201Guhap2819 ( October 17, 2012)

To the extent that public officials in charge take different opinions, there are legitimate grounds for recognition.

The subject of gift tax based on the listing, etc. includes new shares with capital increase, and if public officials in charge of tax investigation take different opinions in the interpretation of the conflicting statutes, it is reasonable to deem that there is a justifiable reason that the Plaintiff is not liable to pay gift tax on the above listing marginal profits.

Gift of profits from listing stocks, etc. under Article 41-3 of the Inheritance Tax and Gift Tax Act.

(C)The revocation of the disposition imposing gift tax

- Appellants

The AA

Head of tax office

Changwon District Court Decision 201Guhap2819 Decided May 17, 2012

May 9, 2013

September 1, 2013

1. The plaintiff's appeal and the defendant's appeal are all dismissed.

2. The costs of appeal shall be borne by each party.

"The part exceeding the OO personnel among the imposition of the gift tax imposed by the Defendant on July 7, 2010 by the Plaintiff on July 1, 2010 shall be revoked," and the part exceeding the OO personnel among the imposition of the penalty tax imposed by the Defendant on the Plaintiff on July 1, 2010 shall be revoked," respectively, and the 1/3 of the disposition in paragraph (3) shall be corrected to 2/3, respectively."

1. Purport of claim

"The defendant's disposition of OOO on July 1, 2010 (as stated in the complaint on July 7, 2010) is revoked in excess of the OOO personnel among the disposition of OOOOO personnel and the disposition of OOO personnel of additional tax imposed on the plaintiff."

A. Plaintiff: The part against the Plaintiff falling under the order to revoke under the judgment of the first instance court shall be revoked. The Defendant’s disposition on July 1, 2010 on the imposition of gift tax OOO as to the Plaintiff on July 1, 2010, exceeding KRW OO.

B. Defendant: The part against the Defendant in the judgment of the first instance is revoked, and the Plaintiff’s claim corresponding to the revoked part is dismissed.

1. Details of the disposition;

A. The plaintiff was an employee of BB (hereinafter referred to as BB), and on December 8, 2004, the plaintiff acquired OOO's shares issued by BB (hereinafter referred to as the "OO's shares acquired at the time from the reductionCC, which falls under the largest shareholder, etc. under Article 41-3(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter referred to as the "former Inheritance Tax and Gift Tax Act").

D. After conducting an integrated tax investigation with respect to BB from August 10, 2009 to September 30, 2009, the Busan Regional Tax Office imposed the Plaintiff a gift tax OOO or additional tax OOO on the profits accrued from the listing of the first acquired stocks. However, the gift tax was not imposed on the profits accrued from the listing of the instant paid new stocks.

E. On January 25, 2010, the Board of Audit and Inspection issued a request to audit the business of the Busan Regional Tax Office to impose a tax on an OOO member on the listing of the instant shares for consideration. On July 1, 2010, the Defendant rendered a disposition to correct and determine the gift tax as an OO member increased by OOO member, and the penalty tax on the gift tax as an OO member increased by OOO member (hereinafter referred to as “the disposition of this case, including the increased imposition of gift tax and penalty tax”), and (f) on September 17, 2010, the Plaintiff filed a request with the Tax Tribunal for a trial on September 17, 2010, but the Tax Tribunal dismissed the said request on June 30, 201.

[Reasons for Recognition] Unsatisfy, Gap evidence 1, 2, Eul evidence 1 and 2

2. Whether the instant disposition is lawful

A. The plaintiff's assertion is as follows.

1) Article 41-3(6) of the former Inheritance Tax and Gift Tax Act applies only to the shares that are donated by the largest shareholder or acquired with compensation by the largest shareholder, and it should be interpreted that it does not apply to the shares that are purchased with compensation. Therefore, it is unlawful to impose gift tax on the shares that were acquired by the Plaintiff based on the initial shares that were acquired by the Plaintiff from the

2) Under Article 41-3(1) and (6) of the former Inheritance Tax and Gift Tax Act, the legislative purpose of Article 41-3(6) of the former Inheritance Tax and Gift Tax Act is to be achieved by excessively imposing marginal profits from listing on the stocks received with capital increase. As such, Article 41-3(6) of the former Inheritance Tax and Gift Tax Act is contrary to the principle of excessive prohibition under the Constitution by impairing the propriety of means, the minimum degree of damage, and balance of legal interests. ② The value of donated shares should be at least five years after the date when the shares were initially received from the largest shareholder, and the amount of donated shares can be known, which infringes on the legal stability and predictability of the taxpayer. The method of calculating profits from listing is not to impose gift tax on the profits, but to impose gift tax on the donated shares by deeming the value of donated shares to be at the price after listing, and thus, to impose gift tax on the shares received with capital increase from the 6th anniversary of the date when the shares were listed.

3) Even if the Defendant conducted a tax investigation on BB around August 10, 2009, and did not impose gift tax on the exchange marginal profits of the instant new stocks, the Defendant imposed tax according to the opinion of the Board of Audit and Inspection after being pointed out by the Board of Audit and Inspection on January 25, 2010. The issue of imposing gift tax on the exchange marginal profits of the stocks issued with new stocks constitutes a matter of conflict among the tax authorities. Therefore, since the Plaintiff cannot expect the return and payment of gift tax with the knowledge that the exchange marginal profits of the instant new stocks were subject to taxation from the beginning, it cannot be expected that the Plaintiff would have reported and paid gift tax with the knowledge that the exchange marginal profits of the stocks issued with new stocks were subject

Even if there is no justifiable reason for domestic affairs, the defendant notified the wrong tax investigation result on August 10, 2009 that the shares issued with capital increase are not subject to taxation. Since the plaintiff's failure to pay gift tax on the exchange marginal profits of the new shares issued with capital in this case is due to the defendant's notification entirely of the wrong tax investigation result, the part of the additional tax paid after August 10, 2009 of the disposition in this case is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination on the part of the Plaintiff’s assertion

1) The Inheritance Tax and Gift Tax Act amended by Act No. 7010 of Dec. 30, 2003 was amended, which was subject to the gift tax prior to the amendment, stipulated the agenda of the listed donation in addition to the general donation premised on the contract between the parties as the subject of the gift tax prior to the amendment. However, the issue of non-taxation for the new type that is not listed above was introduced, such as: (a) even if the type of taxation is not listed on a daily basis, if it falls under the transfer of property without compensation, the gift tax may be levied; and (b) the provision on the

Therefore, Article 2 (3) of the same Act was newly established, regardless of the name, form, purpose, etc. of the act or transaction, a provision was newly established to the effect that the act or the transfer of tangible and intangible property free of charge (including the transfer of property at a remarkably low price) or the increase of the value of another person's property by the contribution is made. In case where it is deemed that the gift tax has been unjustly reduced by indirect method through a third party, or by a method of two or more acts or transactions, it is deemed that the party directly trades according to the economic substance or that the provision of paragraph (3) is applied by deeming the act or transaction as a continuous single act or transaction.

2) The legislative intent of Article 41-3 of the former Inheritance Tax and Gift Tax Act is to: (a) where the largest shareholder, etc. donates unlisted stocks to a related party, such as his/her children, or transfers them for consideration by using inside information that is not disclosed to the public on the business management, with the aim of obtaining enormous market profits arising from the listing of the securities market; and (b) impose gift tax on the profits that have increased due to the listing of stocks in order to prevent the change of large amount of assets by imposing taxation on the listing marginal profits.

In addition, Article 41-3(6) of the former Inheritance Tax and Gift Tax Act was newly established by the amendment on December 18, 2002. The reason for the amendment is that Article 41-3 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 651, Dec. 18, 2002) is to be subject to taxation in cases where only the listed marginal profits acquired directly or with compensation from the largest shareholder were subject to taxation, and it can be abused as a means of tax avoidance by being excluded from taxation even if the same economic effect is identical. In other words, the largest shareholder recognized as having a status to use non-disclosure information on corporate management, even if he/she did not directly donate or transfer his/her shares to the specially related person, is to donate funds for acquiring shares (this part was added to those subject to taxation by revising by Act No. 41-3(1) of the former Inheritance Tax and Gift Tax Act at the time of the amendment). Thus, the purpose of legislation is to add cases where the specially related person obtains listed marginal profits by issuing new shares through the exercise of management.

3) Comprehensively taking account of the following various circumstances, it is reasonable to interpret Article 41-3(6) of the former Inheritance Tax and Gift Tax Act that the said provision applies not only to the new stocks donated by the largest shareholder or acquired at a cost from the relevant corporation, but also to the new stocks for consideration based on

① Article 41-3(6) of the former Inheritance Tax and Gift Tax Act provides that “The acquisition of stocks, etc. includes new stocks that a corporation issues upon the issuance of new stocks in order to increase its capital (including the amount of investments).” Thus, the same applies regardless of whether new stocks are new stocks with or without consideration, whether it is a third party allocation method in the case of paid-in new stocks, or whether the capital increase is paid with or without consideration.”

③ In light of the fact that the so-called complete comprehensive taxation has been declared since the amendment on December 30, 2003, and that Article 41-3(6) of the former Inheritance Tax and Gift Tax Act ought to be interpreted in accordance with the purport of the amendment, it is reasonable to interpret the said provision as imposing gift tax on the person with special interest by evaluating that all gains arising from the listing of new stocks issued by the relevant corporation have been donated by the largest shareholder, etc. and acquired funds from the largest shareholder, etc. on the basis of stocks donated or acquired with compensation from the largest shareholder, etc.

(4) If it is interpreted that Article 41-3 (6) of the former Inheritance Tax and Gift Tax Act applies only to new stocks without compensation, a person with special interest may be exempted from imposing gift tax on capital increase with capital increase at a significantly low price.

⑤ Since the language and text of Article 41-3(6) of the former Inheritance Tax and Gift Tax Act includes the fact that the issuer of new shares is a corporation (the fact that shares are acquired from a corporation), it is reasonable to view that the part “the largest shareholder under Article 31-6(1) of the same Act that is contradictory thereto is not applicable to the application of the above provision.” 6(5) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, and Article 10-4(1) of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 74 of Apr. 23, 2009; hereinafter the same shall apply) provides that in calculating profits from substantial increase in corporate value, the sum of the net profits per share shall be calculated as the net profit amount calculated pursuant to Article 56(3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act for the assessment of unlisted shares. In calculating the listed profits directly donated by the largest shareholder, even if there are changes in corporate value due to capital increase from the date.

B. Determination on the part of the Plaintiff’s assertion

1) As seen earlier, Article 41-3 of the former Inheritance Tax and Gift Tax Act provides that, in cases where the largest shareholder, etc. donated or transferred for a fee to a specially related person prior to listing, etc., stocks are subject to taxation, not only the stocks themselves but also the stocks that the largest shareholder donated and received for a fee, but also the stocks that are transferred for a fee, shall be included. Even if new stocks are acquired for a fee by a specially related person who has paid for the price for the acquisition of new stocks, such price is only the price for the stocks themselves, not the price for the listing marginal profits. Where a specially related person, such as the largest shareholder, etc. obtains listed marginal profits above the standard prescribed in the Enforcement Decree of the Inheritance Tax and Gift Tax Act, the substance that is subject to taxation on the listing marginal profits is the same as where the largest shareholder directly donated or received the stocks acquired from

Article 41-3(1) of the former Inheritance Tax and Gift Tax Act limits the scope of donee’s specially related persons such as the largest shareholder, etc. who is in the position of using information that is not open to the public regarding the company’s management, etc., to the degree that the size of listing marginal profits subject to taxation should meet or exceed the standard prescribed in Article 31-6 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act. In the case of listing stocks, the said provision limits the scope of donee’s specially related persons to five years in consideration of

Therefore, it cannot be deemed that the provision on the inclusion of new shares received as a result of the reason of Article 41-3(6) of the former Inheritance Tax and Gift Tax Act violates the principle of excessive prohibition or the principle of equality.

2) The taxation requirement under Article 41-3 of the former Inheritance Tax and Gift Tax Act provides that ① a person having a special relationship with the largest shareholder, etc. of an unlisted corporation shall donate or obtain for consideration the stocks of the unlisted corporation from the largest shareholder, etc., or obtain new stocks within five years from the date of donation or acquisition; ② the relevant stocks shall be listed within five years from the date of donation or acquisition; ③ a person having a special relationship shall obtain profits above the standard prescribed in Article 31-6 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act due to an increase in the value of stocks under the listing. Therefore, all taxation requirements are satisfied only when a person having a special relationship with the listed corporation obtains profits from the listing of stocks. As such, Article 41-3(2) of the former Inheritance Tax and Gift Tax Act provides that the listed profits shall be calculated on

Article 41-3(1) of the former Inheritance Tax and Gift Tax Act provides that a gift tax shall be imposed by calculating the profits acquired by the listing under Article 31-6 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act. However, Article 41-3(3) of the former Inheritance Tax and Gift Tax Act provides that a person who gains from the listing shall calculate the tax base of gift tax and the amount of tax in addition to the original taxable amount of gift tax on the listing, as well as the listing of shares in preparation for the decline of the share price. Accordingly, Article 41-3(6) of the former Inheritance Tax and Gift Tax Act provides that the gift tax on the shares itself and the gift tax on the profits accruing from the listing of the shares shall not be deemed to contravene the principle of clarity of taxation requirements, and Article 41-3(3) of the former Inheritance Tax and Gift Tax Act shall be subject to taxation on the profits acquired by the listing only after the listing has been actually made. Thus, it cannot be deemed that there is any discrimination against property of any other type or contrary to the principle of ability to respond.

4) Therefore, Article 41-3(6) of the former Inheritance Tax and Gift Tax Act cannot be deemed as unconstitutional against the principle of excessive prohibition, the principle of clarity of the requirements for taxation, the principle of equality of taxation, and the principle of ability to respond. Therefore, the Plaintiff’s assertion on this part is without merit

C. Determination as to the Plaintiff’s assertion No. 2-A. 3

1) In order to facilitate the exercise of taxation rights and the realization of tax claims, additional tax under tax law is an administrative sanction imposed under the conditions as prescribed by individual tax law in cases where a taxpayer violates various obligations, such as a return and tax payment, without justifiable grounds, and it is unreasonable for the taxpayer to be unaware of such obligations, and thus, it is unreasonable for the taxpayer to be able to reasonably present or to expect the performance of such obligations to the party concerned, etc. (see Supreme Court Decision 2003Du4089, Apr. 15, 2005). If there are justifiable grounds for not misunderstanding of the obligation, the imposition may be exempted (see Supreme Court Decision 2003Du4089, Apr. 15, 2005). The tax law, which is subject to regulation on the original and changing economic phenomenon and transactions, is technically and thus it is extremely difficult to interpret it. Accordingly, there is a conflict of opinion due to the interpretation of the tax law beyond the scope of mere legal premises or misunderstanding, and in such cases, it is too harsh that the taxpayer constitutes a taxpayer subject to 2939.

However, penalty taxes may be imposed regardless of taxpayer’s intentional or negligent act, and the site, error, etc. of the law does not constitute justifiable grounds that do not constitute a violation of the duty (see, e.g., Supreme Court Decision 2005Du10545, Apr. 26, 2007). Even if a taxpayer hear a tax official’s wrong explanation and did not perform his/her duty, if it is evident that the taxpayer’s failure to report and pay it violates the relevant law, such reasons alone do not constitute a case where there is a justifiable reason (see, e.g., Supreme Court Decision 2003Du10350, Sept. 24, 2004).

2) Although the Busan regional tax office conducted a tax investigation on BB from August 10, 2009 to September 30, 2009, it did not impose gift tax on the Plaintiff on the profits arising from the listing of the stocks originally acquired by transfer, and the Plaintiff did not impose gift tax on the listing profits of the new stocks at issue. According to Gap 3 and 4, according to the records of Gap 3 and 4, it can be acknowledged that the public official of Busan regional tax office did not impose gift tax on the newly issued stocks at issue after careful legal review as to whether the listing profits of the new stocks at issue should be imposed on the Plaintiff at the time of the above tax investigation. In light of the above facts, it is unreasonable for the Plaintiff, who is the taxpayer, to believe that the Busan regional tax office did not have a duty to pay taxes on the listing profits with trust in the results of the tax investigation of Busan regional tax office, it cannot be deemed that there is a mere misunderstanding or legal ground, and if there is no opposing opinion on the interpretation of other relevant laws and regulations, it cannot be deemed that there is no justifiable reason to impose gift tax on the Plaintiff.

3) Therefore, the part of the disposition of this case, which exceeds the KRW OO of the disposition of this case, is unlawful, and the Plaintiff’s assertion is with merit.

3. Conclusion

"If so, the plaintiff's claim of this case is justified within the scope of the above recognition, and the remaining claims shall be dismissed as without merit. Since the judgment of the first instance court is just, the plaintiff and the defendant's appeal shall be dismissed as it is without merit. However, the part exceeding the OO won in the disposition of the gift tax OO on July 7, 2010 taken by the defendant of the first instance court against the plaintiff on July 1, 2010 shall be revoked." Since the defendant's disposition of the gift tax OOO as of July 1, 2010, the part exceeding the OOO won in the disposition of the gift tax levied as of July 1, 2010 by the defendant shall be revoked."