Cho Jae-2017-west-972 (Law No. 25, 2017)

The profit accrued from the transfer of the preemptive rights acquired in excess of the equity ratio shall be subject to gift tax, and the share of interest loss among the gift profits shall be deducted.

The "value of shares issued or to be issued by convertible bonds, etc. under the Inheritance Tax and Gift Tax Act" can be deemed as the profit calculated on the basis of the value of the shares that were not realized at the time of transfer, but at the time of the assumption of conversion. The interest loss of bonds with warrants issued at an interest rate lower than the appropriate discount rate is deemed as reflected in the value of the preemptive right and thus it is necessary to deduct

Article 40 of the former Inheritance Tax and Gift Tax Act (Donations of Interest Following Conversion of Convertible Bonds, etc.) and Article 58-2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (Ponvertible Bonds, etc.)

2017Guhap75569 Action Demanding revocation of a disposition rejecting gift tax

aa

AA Commissioner of the Regional Tax Office and 1

December 13, 2018

February 21, 2019

1. The plaintiff's action against the defendant BB director shall be dismissed.

2. On October 26, 2016, the Commissioner of the Regional Tax Office’s disposition rejecting correction of KRW 0,000,000,000, which was rendered to the Plaintiff on October 26, 2016, the part exceeding KRW 0,000 shall be revoked.

3. The plaintiff's remaining claims against the Director of the Regional Tax Office are dismissed.

4. Of the costs of lawsuit, the part arising between the Plaintiff and the Defendant BB director shall be borne by the Plaintiff, and the 19/20 of the part arising between the Plaintiff and the Plaintiff and the Director of the Regional Tax Office shall be borne by the Plaintiff, and

Cheong-gu Office

In the first place, Defendant AAB Director’s refusal to correct the gift tax amounting to KRW 0,00,000,000, which was reverted to the Plaintiff on October 26, 2016, shall be revoked. In the second place, Defendant BB Director’s refusal to correct the gift tax amounting to KRW 0,000,000,000, which was reverted to the Plaintiff on October 26, 2016, shall be revoked.

1. Details of the disposition;

A. On March 29, 2012, a KOSDAQ-listed corporation, BB (hereinafter referred to as “Nonindicted Corporation”) issued 10 billion won separately from bonds with warrants through private placement. Three Co., Ltd. (hereinafter referred to as “Nonindicted Corporation”) acquired them by three companies, such as Co., Ltd. (hereinafter referred to as “Nonindicted Corporation”). The Plaintiff was the largest shareholder who owned 0,000,000 shares equivalent to 27.82% out of the outstanding shares of Nonparty Corporation 0,000,000 shares. On March 29, 2012, 2012, the Plaintiff acquired 1,709,623 out of the outstanding shares of KRW 6.5 billion from among the bonds with warrants at KRW 10 billion as above, and acquired 1,709,623 shares from among the bonds with warrants at KRW 325,00,000 (per 190.

B. On April 2, 2015, the Plaintiff transferred 986,320 out of the above warrant certificates to dinvestment securities, etc. totaling 00,00,000 won (0,000 won/pers) in d investment securities, etc., and converted the remaining 723,303 of the preemptive rights on April 3, 2015 into stocks by exercising 3,802 won per share.

C. The Plaintiff: (a) transferred 564,125 of the warrant certificates that were transferred on April 2, 2015, and KRW 0,000,000,000 (hereinafter “the gains of this case”) that were acquired by transferring 986,320 of the total number of shares issued on April 2, 2015 and KRW 413,693 of the gains of preemptive rights that were exercised on April 3, 2015, exceeding his/her share ratio; (b) the Plaintiff notified the Plaintiff of the tax base of KRW 0,00,000,000,000 as the value of donated property on April 2, 2015 and April 3, 2015; and (c) as the result, the Commissioner of the Regional Tax Office notified the Plaintiff of the said tax base of the gift tax return and payment of KRW 0,000,000,000 as the amount of gift tax reported on July 31, 2015.

D. On September 2, 2016, the Plaintiff filed an application for correction of gift tax with the purport that “the head of the tax office having jurisdiction over the instant marginal profits can only be subject to the transfer income tax, but may not be subject to the gift tax. Therefore, the Plaintiff filed an application for correction of gift tax (hereinafter “instant application for correction”) with the purport that “the difference between KRW 0,000,000,000 and KRW 0,000,000, which is the amount of gift tax previously returned and paid by the Plaintiff, which is the difference between KRW 0,00,000,000, which is the amount of gift tax previously returned and paid by the Plaintiff and KRW 0,00,00,000, which is the difference between KRW 0,000,00

E. On October 21, 2016, Defendant AAA Commissioner of the Regional Tax Office notified the Plaintiff of the decision to dismiss the tax authority’s disposition that decided upon the investigation of gift tax is justifiable (hereinafter “instant disposition”).

F. The Plaintiff dissatisfied with the instant disposition and filed a request with the Director of the Tax Tribunal for a trial against Defendant AAA Commissioner, but was dismissed on May 25, 2017.

2. Whether the plaintiff's action against the defendant BB director is legitimate

The plaintiff is the defendant BB director of the tax office, and the above defendant did not give any notice within two months after receiving the claim for correction of this case. Thus, the plaintiff asserts that he can become the counterpart of this case pursuant to Article 45-2(3) of the Framework Act on National Taxes.

In light of the above facts, we examine ex officio the plaintiff's request for correction of this case within two months from the date of request for correction, and consider that the director of the regional tax office of defendant AA had the authority to take the disposition of this case against the above defendant as seen in paragraph (3) below. Thus, it cannot be said that the plaintiff was not notified of the claim for correction of this case, and the director of the regional tax office of defendant BB is not the party who made the disposition of this case.

Therefore, the plaintiff's lawsuit against the defendant BB director is unlawful.

3. Whether the instant disposition is lawful

A. The plaintiff's assertion

For the following reasons, the instant disposition is unlawful.

1) Article 45-2(3) of the Framework Act on National Taxes provides that "the head of a tax office may issue a disposition of refusal against a request for correction" to the head of a tax office. Since the head of a regional tax office of defendant AA is the head of a regional tax office, this disposition is an administrative act of a person who is not legally authorized and thus, its defect is serious and clear. Therefore, even if

2) Article 40(1)2(b) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 13557, Dec. 15, 2015; hereinafter “former Inheritance Tax and Gift Tax Act”) applies only to cases where benefits have been gained by converting into or exchanging shares or acquiring shares with convertible bonds, etc., and the Plaintiff only transferred the warrant certificates without exercising the preemptive right. Thus, inasmuch as item (e) of the same subparagraph is applicable, gift tax cannot be imposed based on the foregoing item (b). This is apparent in light of the fact that Article 40(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Act No. 1357, Dec. 15, 2015; hereinafter “former Inheritance Tax and Gift Tax and Gift Tax Act”) provides for the principle that the largest shareholder of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 2690, Feb. 5, 2016; hereinafter “former Enforcement Decree of the Inheritance Tax and Gift Tax and Gift Tax Act”).

3) Article 2(2) of the former Inheritance Tax and Gift Tax Act provides that gift tax shall not be imposed if a donee imposes income tax under the Income Tax Act on the donee.However, the instant gains arising from one act called “transfer of Plaintiff’s warrant certificates” shall meet the taxation requirements of capital gains under Article 94(1)3 of the former Income Tax Act (amended by Act No. 14389, Dec. 30, 2016); and there is no exception to excluding the principle of priority of income tax on the gift tax imposed under Article 40(1)2(b) of the former Inheritance Tax and Gift Tax Act; thus, gift tax shall not be imposed on the instant gains. Article 163(10) of the Enforcement Decree of the Income Tax Act cited by the Defendant does not apply to the Plaintiff and the transferor. Thus, the said provision cannot be a ground for excluding the principle of priority of income tax.

4) Article 30(5)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "interest loss portion" shall be deducted in calculating profits under Article 40(1)2 (b) of the former Inheritance Tax and Gift Tax Act, and it does not provide that "interest loss portion" shall be excluded, and in fact, there is a difference between bonds with warrant and bonds with warrant, and the interest rate on the issuance of bonds is different. As such, the difference is reflected in the evaluation of warrant certificates, the interest loss portion should be deducted even from the profits accrued from the transfer of warrant certificates. Meanwhile, the defendant asserts that the acquisition value of warrant certificates is unlawful when the plaintiff reported the gift tax on the gains of this case and calculated the profits accrued from the transfer of warrant certificates. However, the acquisition value of warrant certificates is naturally included in "the conversion value, etc." under Article 40(1)2 (b) of the former Inheritance Tax and Gift Tax Act, and the National Tax Service shall also interpret such rights. Accordingly, even if the claim that

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) Determination as to the subject of the instant disposition

Unless otherwise expressly provided for in other Acts, an administrative litigation seeking the revocation or invalidity of an administrative disposition is to be the defendant with an administrative disposition, etc., conducted in his/her name externally, which is the subject of the lawsuit, and is not different from that conducted by the instruction or notification of the superior administrative agency or other administrative agency. The delegated administrative agency upon delegation or entrustment of authority does not mean any disposition conducted in its name under its legitimate authority, and the delegated administrative agency merely received internal delegation or delegation of authority, and without disclosing the original administrative agency’s name or representation relationship, it is merely an administrative agency having no authority to make a disposition under its name without disclosing the name of the original administrative agency or the administrative agency’s name (see, e.g., Supreme Court Decision 95Nu14688, Dec. 22, 195).

Article 45-2 (1) and (3) of the Framework Act on National Taxes stipulate the other party to a request for correction and the subject of the decision of correction or rejection thereof as "head of the competent tax office." However, as seen earlier, the instant disposition was made in the name of the director of the regional tax office of defendant AA, and thus, the director of the regional tax office of defendant AA as the subject of

Furthermore, Article 6 (1) of the former Inheritance Tax and Gift Tax Act provides that "the inheritance tax shall be levied by the head of a tax office having jurisdiction over the domicile of the inheritee (the head of a regional tax office having jurisdiction over the domicile of the inheritee; hereinafter referred to as the "head of a tax office, etc."), and Article 76 (2) of the same Act provides that "the head of a tax office, etc. having jurisdiction over the domicile of the donee shall determine the tax base and tax amount based on the return of the inheritance tax and gift tax;" Article 76 (1) of the same Act provides that "the head of a tax office, etc. shall determine the tax base and tax amount within the statutory deadline from the date on which the report is filed pursuant to paragraph (1)." Article 6 (4) provides that "if the head of a tax office, etc. fails to determine the tax base and tax amount or finds any omission or error after the determination of the tax base and tax amount, he shall immediately investigate, determine or correct it." In full view of the above provisions, the former granting authority to the head of a regional tax office, etc.

Therefore, since the director of the regional tax office of defendant AA recognizes that he/she has the authority to take the instant disposition, the plaintiff's assertion that the instant disposition was made by a person without authority is illegal.

2) Whether the taxation requirement under Article 40(1)2 (b) of the former Inheritance Tax and Gift Tax Act is satisfied

Article 40 (1) of the former Inheritance Tax and Gift Tax Act provides that "where convertible bonds, bonds with warrant (referring to the warrant certificates if the warrant certificates are separated) or other bonds are converted into or exchanged for the stocks, or where bonds with the right to underwrite the stocks are acquired any of the following profits by converting into or exchanging with the stocks with the convertible bonds, etc. or accepting the stocks with the convertible bonds, etc., an amount equivalent to such profits shall be deemed the value of donated property of the person who has acquired such profits." Paragraph 2 of the same Article provides that "the profits falling under any of the following items acquired by converting into or exchanging the stocks with the convertible bonds, etc. or by transferring the convertible bonds, etc. with the convertible bonds, etc. by the largest shareholder of the corporation or his/her specially related person who has issued the convertible bonds, etc. exceeds the market value of the stocks issued or delivered with the convertible bonds, etc. under equal conditions in proportion to the number of stocks held, etc." Paragraph 1 of the same Article provides that "the profits acquired by the person with special interest who has acquired them more than the market value of the convertible bonds, etc."

B) The Plaintiff, as the largest shareholder of the non-party corporation, transferred the warrant certificates acquired in excess of the number of shares to be allocated under equal conditions in proportion to the number of shares held, thereby gaining profits as much as the value of shares that can be issued by the preemptive rights in the future exceeds the converted value, etc. Accordingly, this constitutes a benefit under Article 40(1)2 (b) of the former Inheritance Tax and Gift Tax Act.

C) On the contrary, the Plaintiff asserts to the effect that the Plaintiff can only be taxed on the benefit acquired by the “transfer” under the language and text of Article 40(1) of the former Inheritance Tax and Gift Tax Act only when it satisfies the requirements under Article 40(1)2 (e) of the former Inheritance

However, inasmuch as Article 40(1) of the former Inheritance and Gift Tax Act (amended by Act No. 4065, Jan. 2, 2011; Act No. 2024, Jan. 21, 2011; Act No. 2014, Jan. 21, 2011; Act No. 2014, Jan. 22, 2011; Act No. 2010, Jan. 22, 2011; Act No. 2010, Jan. 22, 2011; Act No. 2010, Jan. 2, 2011; Act No. 2010, Jan. 2, 2011; Act No. 2010, Jan. 2, 2012; Act No. 2010, Jan. 2, 2011).

In addition, Article 40 (1) 2 (b) of the former Inheritance Tax and Gift Tax Act only provides that "the value of the stocks which are received or are to be received by convertible bonds, etc." is "the value of the stocks which is to be received by conversion, exchange or acceptance", and it does not limit the taxable amount only to the profits acquired by the method of conversion, exchange or acceptance, or excludes the profits acquired by the transfer from the taxable amount. Rather, "the profits to be received by delivery" means the profits calculated on the basis of the value of the convertible bonds, etc. which are not realized at the time of transfer, but when the conversion is assumed, it does not go against the language and text that the profits acquired by the "transfer" under subparagraph 2 (b) of the above Article 30 (4) 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act should not be included in the value of the convertible bonds, etc. In addition, Article 40 (5) 2 of the same Act provides that the profits acquired by the convertible bonds, etc. shall not be deducted from the transfer value of the convertible bonds, etc.

Meanwhile, the Plaintiff asserts that Article 40 (1) 2 of the former Inheritance Tax and Gift Tax Act before the amendment cannot be deemed as having been subject to taxation on the grounds that the “transfer” under Article 40 (1) 2 of the Inheritance Tax and Gift Tax Act (amended by Act No. 1357, Dec. 15, 2015) was not explicitly stated. However, Article 30 (1) 2 and Article 30 (5) 2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 26960, Feb. 5, 2016) of the amended Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 26960) are still stipulated in the premise that the transfer is subject to taxation on the same purport. Accordingly, there is controversy about the interpretation of the amended Inheritance Tax and Gift Tax Act, as it is not applicable to the disposition of this case, it is not subject to direct consideration in determining the legality of the disposition of this case.

D) The Plaintiff’s assertion on this part is without merit.

3) Whether the income tax priority principle has been violated

Since gift tax and transfer income tax differ from each other, in cases where the tax authority imposes gift tax and transfer income tax, it is necessary to independently determine in accordance with the respective taxation requirements in accordance with each taxation requirements. If both are all the taxation requirements, it is not possible to impose only one gift tax unless there is a special provision excluding double application thereof. Meanwhile, Article 2(2) of the former Inheritance Tax and Gift Tax Act provides that “where income tax is levied on the donee on the donated property under paragraph (1) of the same Article, gift tax shall not be levied if it is levied on the donee.” However, in light of the language and content thereof and the nature of the gift tax as a supplement tax, where gift tax is imposed on the donee, gift tax does not fall under a special provision excluding double application of the provision on transfer income tax as gift tax (see, e.g., Supreme Court Decision 2013Du1524, Oct. 29, 2015). Article 163(10)1 of the Enforcement Decree of the Income Tax Act provides that gift tax shall not be imposed on the gift tax or transfer value calculated pursuant to Article 17(2).6).

Therefore, even if gift tax is imposed on the instant marginal profits by deeming them as “interest arising from the conversion of stocks, etc. of convertible bonds, etc., which are donated property under Article 40(1) of the former Inheritance Tax and Gift Tax Act,” as prescribed by Article 163(10)1 of the Enforcement Decree of the Income Tax Act, capital gains tax is not imposed repeatedly on the portion corresponding to the donated property. Thus, the instant disposition does not violate Article 2(2) of the former Inheritance Tax and Gift Tax

4) Whether the portion of interest loss and the acquisition value of warrant certificates are deducted

A) Whether the amount of interest loss is deducted

Article 30 (5) 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "for profits under Article 40 (1) 2 (a) through (c) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, the amount calculated by subtracting the interest loss (limited to cases where the relevant amount is 100 million won or more) calculated as determined by Ordinance of the Ministry of Strategy and Finance from the value calculated by multiplying the value under item (a) less the value under item (b) (in cases of transfer, the conversion value per stock) by the number of stocks to be issued under item (c) (the conversion value per stock): Provided, That in cases of transfer of convertible bonds, etc., it shall not exceed the amount calculated by subtracting the acquisition value from the transfer value of convertible bonds, etc.: Provided, That the interest loss under the main sentence of Article 30 (5) 2 (a) of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act shall refer to the value at the time of acquisition under subparagraph 1 of Article 30 (5) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, etc.

In addition, Article 58-2 (2) 1 (a) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the amount of redemption of bonds with warrants (including the amount equivalent to the interest accrued before maturity; hereafter the same shall apply in this subparagraph) calculated by subtracting the discounted value of bonds with maturity from the discounted value of bonds with maturity at the time of issuance according to the rate of interest on the issue of bonds at the rate of interest, according to the interest rate determined and publicly announced by the Minister of Strategy and Finance in consideration of the rate of distribution of bonds with maturity of three years which the financial company, etc. guarantees at the time of issuance of bonds. In such cases

The above-related Acts and subordinate statutes stipulate that the portion of interest loss shall be deducted with respect to the profits stipulated in Article 40 (1) 2 (a) through (c) of the former Inheritance Tax and Gift Tax Act. In the event of conversion, etc. by warrant certificates, the amount of the value of the warrant certificates appraised under Article 58-2 (2) 1 (a) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act shall be the portion of interest loss, and so there is no provision on whether to deduct the amount of interest loss with respect to the bonds with warrants should be separated or not depending on whether to separate the preemptive right. Furthermore, even if only the preemptive right is separated, the portion of interest loss with respect to the bonds with warrants issued at an interest rate lower than the appropriate discount rate should be deducted from the amount of the preemptive right. Accordingly, the plaintiff's assertion

B) Whether the acquisition value is deducted

The Plaintiff reported and paid gift tax on the instant marginal profits, and deducted the acquisition value of warrant certificates from the value of stocks to be deducted from the value of stocks when calculating the gains from convertible bonds, etc. pursuant to Article 30(5)2(b) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.

However, since Article 40 (1) 2 (a) of the former Inheritance Tax and Gift Tax Act provides that "the value of conversion, exchange, or acceptance" is "the value of conversion, exchange, or acceptance", it is difficult to see that the above wording includes the acquisition value of warrant certificates, and it is reasonable to see that it refers to "the value disbursed for conversion, exchange, or acquisition" as alleged by the defendant. In addition, as seen earlier, when calculating profits from the transfer of warrant certificates separated from bonds with warrants as alleged by the defendant, it shall be deemed that the portion of interest loss should be deducted. In this context, the interest loss portion is equivalent to the value of warrant certificates, and at the same time, deducting the acquisition value of warrant certificates from the deduction of the interest loss portion at the same time constitutes double deduction. The authoritative interpretation of the National Tax Service, which is submitted by the plaintiff, seems to the purport that the acquisition value should be deducted from

Therefore, as long as it is deemed that the amount of interest loss should be deducted in calculating the gains from the transfer of warrant certificates, the Plaintiff’s calculation of the amount of gift tax by deducting the acquisition value of warrant certificates is erroneous. Therefore, the Defendant’s assertion on

C) Sub-determination

Ultimately, among the amount of gift tax reported and paid by the Plaintiff regarding the instant marginal profits, the part on the deduction of interest losses should be reduced. As such, the Defendant’s refusal of the part on the deduction of interest losses among the amount of gift tax reported and paid by the Plaintiff, is unlawful, and the part on the deduction of interest losses (=00,000 per share interest losses x 564,125 share x 564,125 share) should be deducted. However, in a case where the Plaintiff deducts the acquisition value that was deducted at the time of the Plaintiff’s return and payment of gift tax on the instant marginal profits from 00,000,000 won, the corresponding amount of gift tax should be reduced. Accordingly, the part on the deduction of interest losses in excess of KRW 0,000,000 against the Plaintiff should be revoked. The Plaintiff’s assertion on the deduction of interest losses on the deduction of the acquisition value is with merit and without merit.

4. Conclusion

Therefore, the plaintiff's lawsuit against the director of the tax office is dismissed as illegal. The claim against the director of the tax office of defendant AAB against the director of the tax office is accepted within the scope of the above recognition. The remaining claim is dismissed as it is so decided as per Disposition.