Cho High Court Decision 2009Da1571 (Law No. 25, 2009)

between executives of a corporation shall not constitute a special relationship.

Inasmuch as two executives have acquired shares owned by one executive officer, but do not constitute an employee relationship among the executives, it is obvious that such shares are not in an employee relationship, and thus, it does not constitute a special relationship.

The contents of the decision shall be the same as attached.

1. The Defendant’s disposition of KRW 276,746,670 of the gift tax imposed on Plaintiff BranchB on December 8, 2008 and the disposition of KRW 276,746,670 of the gift tax imposed on Plaintiff Kim Young-gu shall be revoked in entirety.

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

The same is as the order (the date of the written disposition of the complaint on December 26, 2008 seems to be a clerical error).

1. Details of the disposition;

A. Plaintiff BranchB is the representative director of Nonparty CCB Co., Ltd. (hereinafter referred to as “non-party company”) and Plaintiff Kim Young-gu, and Nonparty A was registered as a director of the non-party company until October 5, 2005 (However, thisA retired from the non-party company as of September 30, 2005, however, it is deemed that it retired from the non-party company as of October 5, 2005 as an injury to the registration of the corporation).

B. On October 7, 2005, the plaintiffs acquired 824,000 shares of the non-party company (hereinafter "the shares of this case") from thisA to 824,000,000 shares of the non-party company (hereinafter "the shares of this case"). At the time of acquisition, the shares of the non-party company were totaling 136,00 shares, and the plaintiffs held 60,000 shares (each 4.1%) among them, each 60,00 shares of the non-party company (each 4.1%) and this 16,00 shares (1.8%) were registered to the KOSDAQ on May 22, 2007.

C. The defendant deemed that the acquisition of the plaintiffs' shares of this case constitutes "the donation of profits from the listing of shares or equity shares" under Article 41-3 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007, hereinafter "the Inheritance Tax and Gift Tax Act"). On August 22, 2007, when the shares of the non-party company were registered on August 22, 2007, the value of donated property was calculated as KRW 901,405,00, respectively, and on December 8, 2008, the defendant decided and notified each of the plaintiffs of KRW 276,746,670 for the gift tax of 207 (hereinafter "each disposition of this case").

D. The Plaintiffs were dissatisfied with each of the dispositions of this case and filed an objection on January 15, 2009, and filed an appeal on March 4, 2009, but the said claim was dismissed on May 25, 2009.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 7, Eul evidence Nos. 1 through 8 (including paper numbers), the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The parties' assertion

(1) The plaintiffs

The defendant and the plaintiffs made each disposition of this case under Article 41-3 of the Inheritance Tax and Gift Tax Act only that they were shareholders and executives of the non-party company until immediately before the transfer of the shares. The above provision of the Inheritance Tax and Gift Tax Act has a background to prevent a sudden change in the division and management right, and to prevent the donation of profits from the market price in advance based on the internal information of the company relating to the considerable amount of the donor and the seller. However, this case inevitably retired from the non-party company due to the character, and it was transferred to the non-party company without any choice to raise enormous medical expenses, and the plaintiffs also purchased the shares in this case from a favorable point of view. In addition, this case's shares were administered one year prior to the transfer of the shares in this case, so it was not in a position to use non-party company's non-public information related to management such as the listing of the non-party company, and in particular, this case's shares also did not meet the requirements for taxation under Article 41-3 of the Inheritance Tax and Gift Tax Act.

(2) Defendant

At the time when the plaintiffs acquired the shares of this case, the plaintiffs held 44.1% of the shares of the non-party company and 11.8% of the shares of this case, and this case and this case were in an employee relationship under Article 4 of the Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance of the Ministry of Strategy and Finance, Apr. 30, 2008; hereinafter referred to as the "Enforcement Rule of the Inheritance Tax and Gift Tax Act"), so this case's disposition constitutes "large shareholder, etc. under Article 41-3 of the Inheritance Tax and Gift Tax Act" and "large shareholder under the former part of Article 19 (2) 2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20621, Feb. 22, 2008; hereinafter referred to as the "Enforcement Rule of the Inheritance Tax and Gift Tax Act"), and the transferee of this case's shares constitute "a person with a special relationship under Article 31-6 (1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act."

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) Issues

Article 41-3(1) of the Inheritance Tax and Gift Tax Act applies to the case where the largest shareholder under Article 22(2) of the "a person in a special relationship with the largest shareholder, etc. (hereinafter referred to as the "large shareholder, etc.") receives a donation of stocks or equity shares of the corporation, or acquires them with compensation," and in order to apply the above provision to this case, this case shall first fall under "large shareholder, etc.". This case held 11.8% of the shares of the non-party company at the time, and since this case held 44.1% of shares of the non-party company, since this case independently held 4.1% of shares of the non-party company and the plaintiffs held 4.1% of shares of the non-party company, it is evident that this case does not meet the requirements of the largest shareholder, etc. of the non-party company independently, as alleged by the defendant, whether this case can aggregate shares held by the plaintiffs pursuant to Article 19(2) of the Enforcement Decree of the non-party company.

In this regard, the defendant deemed that this case's shares owned by the plaintiffs were an employee relationship under the former part of Article 19 (2) 2 of the Enforcement Decree of the Act, and thus, the defendant did not take each disposition of this case by adding up the shares owned by the plaintiffs to the shares owned by this case. Therefore, we will examine whether the plaintiffs are the employees

(2) For the purpose of Article 19(2) of the Enforcement Decree, the term "major shareholder or largest investor as prescribed by the Presidential Decree" means a shareholder, etc. in the case where one shareholder or one investor (hereinafter a shareholder, etc.) and another person in a relationship falling under any of the following subparagraphs hold the largest stocks, etc., and the former part of Article 13(6)2 of the Enforcement Decree provides that "an employee as prescribed by the Ordinance of the Ministry of Finance and Economy (including an employee of a corporation under control by investment; hereinafter the same shall apply)", and Article 4 of the Enforcement Rule provides that "an employee as prescribed by the Ordinance of the Ministry of Finance and Economy" in Article 13(6)2 of the Decree refers to an employee, a commercial employee, and other persons in an employment contract relationship".

In full view of the above provisions of the laws and regulations, it is apparent that the plaintiffs are officers of thisA, commercial employees and other employees are not in employment relationship, and the plaintiffs are officers of the non-party company, and in this case, it is evident that they are officers of the non-party company, the way in which the plaintiffs can become employees of this case is only the case where thisA controls by investments in the non-party

(3) A corporation controlled by investment is stipulated in Article 13(8) of the Enforcement Decree. This case’s holding less than 30% of the shares of the non-party company, and the plaintiffs are not employees of this case’s employees, there is no ground to view the non-party company as a corporation controlled by this case’s investment.

The defendant asserts that the non-party company is a corporation controlled by the investment of thisA in accordance with the provisions of Article 13(8)1 and Article 19(2)6 of the Enforcement Decree. However, for this reason, in this case where the non-party company holds less than 30% of the shares of the non-party company, the plaintiffs should be the premise that the use of the non-party company constitutes the approval of use of the non-party company. Since there is no evidence to acknowledge this, the defendant's above assertion is without merit

[Before the resignation of directors, thisA was an officer of the non-party company, and since the plaintiffs were controlling the non-party company by making investments, this may be an employee of the plaintiffs, but this is not established. It is not interpreted as the defendant, etc. In this case, the interpretation of the plaintiffs as the plaintiffs' employees is also an income-based understanding of the meaning of "this is controlled by investment", and there is a risk of omission in the naval logic of Article 13 (8), Article 19 (2), and Article 13 (6) 2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, which is a provision which is a provision which is a donation for this interpretation, and it is in violation of the principle of no taxation without law due to lack of clarity in the application of the interpretation of Article 41-3 (1) of the Inheritance Tax and Gift Tax Act.

In other words, there is a question whether the director of the non-party company may resign from the position of director of the non-party company, and the non-party company may present the intention of donation for the large shareholder to the small shareholder who transfers the shares of the non-party company to the large shareholder in order to prepare treatment expenses. If it is not possible to present such intent of donation, it is doubtful whether the legislators enacted by assuming the contents which cannot be presented with the intention of donation

Ultimately, the non-party company cannot be deemed to be a juristic person controlled by the investment of thisA, and thus, the plaintiffs cannot be deemed to be the largest shareholder, etc. of the non-party company, by summing up the shares held by the plaintiffs to the shares held by the non-party company, because the plaintiffs cannot become an employee of thisA.

(4) Therefore, although thisA does not fall under the largest shareholder, etc. under Article 41-3 (1) of the Inheritance Tax and Gift Tax Act, each of the dispositions of this case based on the premise that thisA constitutes the largest shareholder, etc. is unlawful without further review (On the other hand, the provision on refund under the proviso of Article 41-3 (3) of the Inheritance Tax and Gift Tax Act is not applicable to this case with the value of shares as of the settlement base date, and each of the dispositions of this case is lawful merely because the plaintiffs can be deducted from the acquisition value of the gift tax when transferring the shares of this case later. Thus, the defendant's assertion on this point is without merit).

3. Conclusion

Therefore, the plaintiffs' claims of this case are justified, and all of them are accepted, and it is so decided as per Disposition.