Seoul High Court-201-Nu-35035 (Law No. 25, 2012)

Appropriateness of a disposition imposing a tax excluding the non-taxation provision by allocating securities to a public offering method other than a general public offering method;

The judgment of the court below which rejected the Plaintiff’s assertion without further examining whether the Plaintiff was allocated new shares through deemed public offering of new shares in this case. The ground of appeal pointing this out is with merit.

2012Du14866 For revocation of imposition of gift tax

a) Sa

b Head of the Tax Office

Seoul High Court-201Nu35035 (Law No. 25, 2012)

2014.03.13

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Article 39 (1) 1 (c) of the former Enforcement Decree of the Securities and Exchange Act (amended by Act No. 828 of Dec. 31, 207; hereinafter referred to as "the Inheritance Tax and Gift Tax Act") provides that if a person who is not a shareholder of the corporation obtains profits by directly receiving new shares from the corporation as the result of issuing the new shares at a price lower than the market price, it shall not be deemed that the value of the donated shares is donated to the corporation or the Association-registered corporation under the Securities and Exchange Act (amended by Presidential Decree No. 2004, Jan. 29, 714; hereinafter referred to as "the overall provision of this case") for the reasons that the new shares issued by the corporation would be less than 10,000 if the new shares were issued by the corporation under the same provision of Article 2 (1) 1 (c) of the former Enforcement Decree of the Securities and Exchange Act (amended by Presidential Decree No. 2065, Apr. 1, 2008).

In light of the legislative purport of Article 2-4(4) of the former Enforcement Decree of the Securities and Exchange Act and Article 2-4 of the former Enforcement Decree of the Securities and Exchange Act, the former Enforcement Decree of the Securities and Exchange Act does not stipulate that the issuance price of new shares shall be determined close to the securities market in principle (Articles 53 and 57 of the Securities and Exchange Regulations). Furthermore, the former Enforcement Decree of the Securities and Exchange Act provides that the issuance price of new shares may not be determined at a lower level than their market price by determining that the issuance price of new shares is lower than their market price through the offering of new shares under the former Securities and Exchange Act, and that the former Enforcement Decree of the Securities and Exchange Act does not stipulate that the issuance price of the new shares shall be determined based on the consideration of the legislative purport of Article 2-4(1) of the former Enforcement Decree of the Securities and Exchange Act and that the former Enforcement Decree of the Securities and Exchange Act does not apply to the issuance price of new shares for the purpose of the offering of new shares.