The early appellate court 2013Gu 3675

Whether gift tax may be levied where the stock evaluation value has increased due to reasons such as the implementation of the development project of the corporation after the donation of unlisted stocks.

After the donation of unlisted stocks, a juristic act such as acquisition of real estate was involved in the implementation of the development project, etc., and the increased stock value was not calculated immediately after the occurrence of the reason for the increase of the property value.

The donation of other gains under Article 2(3) of the Inheritance Tax and Gift Tax Act, Article 42 of the Inheritance Tax and Gift Tax Act.

2015Guhap20611 Revocation of Disposition of Imposition of Gift Tax

1. AA and 1

2. ○ director of the tax office.

December 23, 2015

February 3, 2016

1. The Defendant’s imposition of gift tax of KRW 134,574,060 on December 3, 2012 and KRW 1,704,832,50 on gift tax of KRW 2009 shall be revoked.

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

Cheong-gu Office

The same shall apply to the order.

1. Facts of recognition;

A. On May 1, 2004, CCC established ○○ Enterprise Co., Ltd. (hereinafter “instant company”) for the purpose of creating ○○○ Industrial Complex (hereinafter “instant industrial complex”) in a single unit of ○○○○ (hereinafter “instant industrial complex”).

B. On July 3, 2004, the ○○○○○ branch, on which the instant company was designated as the implementer of the instant industrial complex development project, and on July 8, 2004, publicly notified (○○○-4-○○) on the designation and development plan of the instant industrial complex as follows, and approved the implementation plan on December 21, 2004.

C. Acquisition of shares by the plaintiffs

1) Around the end of 2005, CCC held 22,000 shares issued by the instant company, DD, the wife of CCC, 16,500 shares, CCC’s EE and its wife FF each 5,500 shares, and CCC’s private village GG owned 5,500 shares.

2) At the time of January 1, 2006, the Plaintiffs acquired 8,250 shares of the instant company from EE, FF, and GG and reported and paid gift tax to the Defendant on April 2007, on the premise that the purchase price was 82,50,000 won (a note 10,000 won) was donated by CCC.

D. Amendment to the development plan of the industrial complex of this case

1) On October 6, 2005, 2005, the ○○○○ branch changed the area of the instant industrial complex to 991,740 square meters (stage 1, 784, 291 square meters, 2, 207, 449 square meters) (hereinafter “○○○○○○○”). On July 10, 2006, the 00 square meters (stage 738,149 square meters, 2 phase 558,851 square meters) were changed to the 00 square meters (stage 1, 738,149 square meters, 2 phase 551 square meters), and on March 26, 2007, the 007 public announcement was made by adding the detailed report on the land, etc. expropriated or used in the instant industrial complex development plan to the public announcement on July 10, 2006 (No. 2007 square meters).

2) On August 3, 2009, the head of ○○○○○ Branch expanded the area of the instant industrial complex into 1,871,244 square meters (1 phase892, 314 square meters, 2 phase 418, 203 square meters, 3 phase 560,727 square meters), and publicly announced a development plan (209-2000 square meters publicly announced) by adding a detailed report on the land, etc. to be expropriated or used.

3) The part relating to the instant case in the course of expanding the area of the instant industrial complex is summarized as follows.

E. From January 26, 2012 to March 9, 2012, the head of ○○○○ National Tax Service: (a) conducted a gift tax investigation on the Plaintiffs; and (b) notified the Defendant of the taxation data to impose gift tax by applying Article 42(4) of the Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter the same) and Article 31-9(5) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22042, Feb. 18, 2010; hereinafter the same) by deeming the date of each public notice of the instant case where the development area of the instant industrial complex was expanded and the tax item protocol on land, etc. to be expropriated and used was additionally designated as an industrial complex.

F. On December 3, 2012, the Defendant calculated the value of donated property as indicated below pursuant to Articles 2(3) and 42(4) of the Inheritance Tax and Gift Tax Act, and then determined and notified each of the Plaintiffs of KRW 134,574,060, and KRW 1,704,832,50, which reverts to the year 2009 (hereinafter “instant disposition”).

G. The Plaintiffs filed an objection with the Commissioner of the National Tax Service on February 26, 2013, but dismissed on April 5, 2013. The Plaintiffs filed an appeal with the Director of the Tax Tribunal on July 3, 2013, but dismissed on November 27, 2014.

Each entry and the purport of the whole pleadings of the evidence of subparagraphs 1 through 5 of the Grounds for Recognition, and of the evidence of subparagraphs 1 through 5 of the Eul (including each number);

2. The plaintiffs' assertion

A. Whether Article 42(4) of the Inheritance Tax and Gift Tax Act is applicable

(1) The Plaintiffs received cash donation from CCC and purchased the instant shares, and do not fall under Article 42(4)1 of the Inheritance Tax and Gift Tax Act, since the instant shares were not donated. Moreover, the instant industrial complex development plan is the information already published on January 1, 2006, and thus, does not fall under Article 42(4)2 of the Inheritance Tax and Gift Tax Act.

(2) The expansion of the development area due to each public notice of the instant case does not constitute grounds for an increase in the asset value of unlisted stocks as stipulated under Article 42(4) of the Inheritance Tax and Gift Tax Act and Article 31-9(5) of the Enforcement Decree

“(3) Article 42(5) of the Inheritance Tax and Gift Tax Act and Article 31-9(7) of the Enforcement Decree of the same Act on the calculation of the value of donated property are stipulated on the premise that the value of the pertinent property will be increased immediately due to the pertinent cause. The increase in value of the instant shares due to the expansion of the development area of the industrial complex in the manner prescribed by the said provision cannot be calculated by the method prescribed by the said provision. In addition, when calculating the "pro rata of ordinary value", the Defendant calculated the amount of net profit per share by the end of the immediately preceding business year of the instant company without calculating it according to the method prescribed by Article 31-9(7)3 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, without simply calculating it by the method prescribed by Article 31-9(

(1) The Defendant asserted that Article 42(4) of the Inheritance Tax and Gift Tax Act can be inferredly applied to the donation by means of “the donation from the time limit under Article 2(3) of the Inheritance Tax and Gift Tax Act” after the Plaintiffs acquired the instant shares and then increased the development area of the instant industrial complex with the efforts of CCC. However, ○○○○ branch’s expansion of the development area of the instant industrial complex cannot be deemed as the act of contributing to CCC’s contribution. Since there were circumstances such as the instant company’s state of deficit due to depression and increase in raw materials prices after the expansion of the area of the instant industrial complex, it cannot be deemed that the value of the instant shares increases.

(2) With respect to the calculation of the value of donated property, there was no provision on the calculation method of the value of donated property in the case of increasing the value of another person’s property by means of the contribution under Article 2(3) of the Inheritance Tax and Gift Tax Act at the time when the taxation requirement of this case was established, and even if Article 32 subparag. 3(b) of the Inheritance Tax and Gift Tax Act newly established upon the amendment of the Inheritance Tax and Gift Tax Act on January 1, 2013 is applied pursuant to Article 24-2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, the calculation method of the value of donated property is applied in the case of applying Article 42(4) of the Inheritance Tax and Gift Tax Act. As seen earlier, even though it is impossible to calculate the increase in value of the shares due to the expansion of the development area of the industrial complex of this case, calculating the value of donated property pursuant to the above provision is remarkably infringing on the taxpayer’s predictability or equity of taxation. Even if

3. Whether the instant disposition is lawful

(a) Related statutes;

Article 2 (1) of the Inheritance Tax and Gift Tax Act provides that gift tax shall be imposed on the donated property of another person; Article 2 (3) provides that "the actual increase in the value of the relevant property by the title, form and purpose, etc. of the relevant act or transaction shall be free of charge (including a case of transfer for substantially low value) or an increase in the value of another person's property by the contribution," and Article 31 (1) of the Inheritance Tax and Gift Tax Act provides that "the value of the relevant property shall include all things belonging to the donee and de facto or de facto rights with economic value which can be realized by money," and Article 42 (4) of the Inheritance Tax and Gift Tax Act provides that "the increase in value of the relevant property by a person, such as a minor, acquires the property for reasons falling under each of the following subparagraphs and obtains profits from the increase in value of the relevant property by the reasons prescribed by the Presidential Decree," and Article 42 (2) of the same Act provides that "the value of the relevant property which is donated to another person shall be more than the value of the relevant property."

B. Whether the acquisition of shares of this case constitutes Article 42 (4) of the Inheritance Tax and Gift Tax Act

(1) Requirements for application of Article 42(4) of the Inheritance Tax and Gift Tax Act

In order to apply Article 42 (4) of the Inheritance Tax and Gift Tax Act, ① a minor or any other person prescribed by the Presidential Decree (hereinafter referred to as the “requirements for the acquisition of property”), ② a person acquired property from another person by donation of property from another person ( subparagraph 1), or acquired property related to the relevant information (hereinafter referred to as “requirements for the acquisition of property”), ③ within five years from the date of acquisition of the property due to such reasons as prescribed by the Presidential Decree, such as implementation of development projects, change of form and quality, partition of co-owned property, authorization and permission of business, listing and merger of stocks and investment shares, etc. (hereinafter referred to as “requirements for the increase of property value”), ④ The increase in property value is more than three hundred million won, or the acquisition value of the relevant property, the ordinary increase in value, and the contributory portion in value are more than 30/100 of the total amount (hereinafter referred to as “requirements for increase in property value”).

(2) The subject requirements and acquisition requirements

At the time of the acquisition of the instant shares, the facts that Plaintiff BB was 16 years of age and Plaintiff AA was 8 years of age as seen earlier, and according to the overall purport of the entry and pleadings in the evidence No. 4, CCC established the instant company and held title trust with the EE, FF, his wife, and private village GG, each of the instant companies’ shares of 5,500 shares, and the Plaintiffs received shares acquisition funds from CCC and acquired shares from EE, etc.

According to the above facts, CCC only donated the shares of this case to the plaintiffs who were minors at the time of January 1, 2006, and made them purchase the shares of this case by donating cash to the plaintiffs. Thus, CCC can be evaluated as a donation with the same economic substance as the donation of the shares of this case to the plaintiffs. Accordingly, the subject requirement and the property acquisition requirement under Article 42 (4) 1 of the Inheritance Tax and Gift Tax Act are recognized.

(3) Requirements for increase in property value

(A) In disposing of the instant case, the Defendant appears to have considered the “execution of the development project” as the reason for the increase in the property value, but the “execution of the development project” cannot be the reason for the increase in the property value. The Plaintiffs did not acquire the real estate itself, which is the object of the development project, but acquired the shares of the instant company. The main text of Article 42(4) of the Inheritance Tax and Gift Tax Act provides for the increase in the value of the pertinent property due to the “acquisition of the property + execution of the development project.” Thus, if the instant company had previously owned the real estate which is the object of the development project at the time the Plaintiffs acquired the shares, it may be the reason for the increase in the property value, but there is no proof on this. On January 1, 2006, the date of acquiring the Plaintiffs’ shares, the instant company owned the said 305,260 square meters in advance, which is an increase in the land value of the instant real estate by the first public notice, but can only be deemed the acquisition value of the instant property + the acquisition value of the Plaintiff’s.

(B) The main text of Article 42(4) of the Inheritance Tax and Gift Tax Act also provides that "the approval and permission of a business shall be deemed as the grounds for increase in the value of property." Since each of the instant notices has the same legal nature as the approval and permission of a business, it can be deemed as the grounds for increase in the value of property under the above provision. However, as the execution of a development project, it is limited to the cases where the real estate owned by the company of this case, when the plaintiffs acquired the stocks of this case, increases its value due to the authorization and permission of a business, or where there is a short-term increase in value due to the authorization and permission of a business (such increase in value can be calculated through the revaluation of real estate value, the revaluation of business rights, etc.), and it shall be excluded from cases where the value of stocks increases according to the result of the implementation of the project by implementing the long-term project. On the other hand, the approval and permission of a development project only provides that "the increase in value of the project shall be deemed as an increase in the value of the project without delay."

(4) Requirements for an increase in property value

(A) As seen earlier, each notice of this case constitutes a reason for increase in the value of property as a business authorization and permission, but it should be a case where there is an increase in the value of property due to the business authorization and permission. Therefore, when the plaintiffs acquire the shares of this case, the real estate owned by the company of this case should be able to assert and prove the increase in value due to the respective notice of this case, or the increase in the value of business rights of the company of this case, etc., and there is no assertion and proof

(B) In addition to the increase in the value of business rights, even if it is possible to calculate the increase in property value by applying the provisions on the appraisal of non-listed stocks as stipulated in the provisions related to the Inheritance Tax and Gift Tax Act, it is clear that the amount calculated by the Defendant’s property value increase is not caused by each

① From January 1, 2006 to March 26, 2007, the Defendant calculated by the asset value increase of 5,870 won per share from March 1, 2007, which is 1st public notice; from the net asset value per share as of March 26, 2007 (198,802 won) to the net asset value per share as of January 1, 2006 (25,710 won); and from the net asset value per share as of January 1, 2006 (117,212 won) to the net asset value per share of 25,710 to 198,802 won; however, the net asset value per share of 25,710 won per share does not result from public notice. The Defendant’s net asset value increase of 199,740 square meters per share to the net asset value per share of 206,646,896,979,200 won per share.

② The Defendant’s 390,680 won per share calculated with an increase in property value by August 3, 2009, which is the second public notice date, is the amount obtained by subtracting the net asset value and net profit and loss value per share as of August 3, 2009 (77,010 won) from the weighted average average of the net asset value and net profit and loss value per share as of March 26, 2007 (198,802 won) and the net asset value per share as of March 26, 2007 (187,517 won + 39,630 won + 147,897 won) from the net asset value per share in 207,179,65,714, 2014, 2085, 37, 2081, 205, 2005, 397, 2005, 205, 201.

(C) Ultimately, the Defendant failed to prove that the amount of increase in property value arising from the respective notices of this case exceeds KRW 300 million, or that the sum of the acquisition value of the instant shares and the ordinary value increase exceeds 30%, and thus, the gift tax may not be imposed by applying Article 42(4) of the Inheritance Tax and Gift Tax Act.

(c) Whether the gift tax may be levied pursuant to Article 2 (3) of the Inheritance Tax and Gift Tax Act.

(1) In light of the fact that the Inheritance Tax and Gift Tax Act introduced a comprehensive gift concept unique to the tax law to cope with an irregular inheritance and donation and uniformly converting the previous provision into the regulation for calculating the value, in principle, where certain transactions and acts correspond to the concept of gift stipulated in Article 2(3) of the Inheritance Tax and Gift Tax Act, it shall be deemed that gift tax may be levied pursuant to Article 2(1) of the same Act. However, in a case where the separate provision for calculating the value limits only a certain transaction and act to be subject to gift tax and the scope of taxation can be deemed as setting the scope and limit of gift tax by limiting the scope and scope of taxation by prescribing the specific type of transaction and act, among the transaction and act governed by the regulation for calculating the value, even if the transaction and act excluded from the taxable subject to gift tax or scope of taxation conforms to the concept of gift under Article 2(3) of the Act (see Supreme Court Decision 2013Du13266, Oct. 15, 2015).

(2) Article 42(4) of the Inheritance Tax and Gift Tax Act and relevant provisions stipulate that gift tax shall be levied on the property value of a minor, etc., if the property acquired from another person by gift is increased due to the authorization, permission, etc. of his/her business within five years from the date of the acquisition of the property. As such, the amount of increase in the property value is at least KRW 300 million, or the acquisition value of the pertinent property, the ordinary value increase, and the increase in the value thereof is at least 30/100 of the total amount, so that gift tax shall not be levied on the below amount. Since there is no proof that the Plaintiffs acquired the shares of this case, and there is no proof that there was a increase in the property value of at least KRW 300 million due to each notice of this case, gift

4. Conclusion

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