Cho High Court Decision 201Do3038 ( November 24, 2011)

If the stock value has increased by donation from a person with a special relationship, it shall be applicable to a comprehensive donation.

If the net assets of the party is increased from the value of donated stocks less corporate tax and resident tax, and the stock value has increased by donation from a person with a special relationship, it shall be deemed an universal donation.

2012Revocation of revocation of disposition imposing gift tax

ChoA 2 other

The Head of the District Tax Office and two others

March 29, 2013

May 24, 2013

1. The Defendants’ imposition of each gift tax against the Plaintiffs as shown in the separate sheet No. 1 shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. BB Human Investment Co., Ltd. (hereinafter referred to as the “instant company”) is a company that engages in real estate leasing business, etc., and the plaintiffs are shareholders of the instant company [the shareholders of the instant company [the plaintiffs 300 shares (3%), plaintiffs DoD 300 shares (3%), plaintiffs E 9,400 shares (94%). (B)", and ParkF, the father and father of the plaintiff Park E and the head of DoD, the plaintiff Cho Jae-A, and the head of DoD, were the instant company, and on May 29, 2007, the Gangnam-gu OOO2.4m2 and 4m2.4m2 above ground (hereinafter referred to as the “instant real estate”), and on September 21, 2007, 2000 shares and 400 shares donated to each of the instant companies (hereinafter referred to as “BB shares”) and 500 shares and 400 shares donated to them.

D. The director of the Seoul Regional Tax Office conducted an investigation of stock fluctuation with respect to the instant company and BB machinery, etc., and notified the Defendants of taxation data so that the instant company may impose gift tax on the Plaintiffs pursuant to Articles 2(3) and 42(1)3 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter referred to as the “Act”) by deeming that the Plaintiffs donated the instant real estate and the stocks of this case from ParkF to be donated to ParkF.

E. Accordingly, on May 1, 201, the director of the regional tax office of the defendant 1, 200 won (including additional tax of KRW 000) with respect to the donation of the real estate of this case, and the gift tax of KRW 000 (including additional tax of KRW 000) with respect to the donation of the stocks of this case, and KRW 000 (including additional tax of KRW 000) with respect to the donation of the real estate of this case, and KRW 000 (including additional tax of KRW 000) with respect to the donation of the stocks of this case, and KRW 00 (including additional tax of KRW 00) with respect to the donation of the stocks of this case, and KRW 200 (including additional tax of KRW 00) with respect to the donation of the real estate of this case, the director of the regional tax office of the defendant Danam-do included the gift tax of KRW 000 (including additional tax of KRW 000) with respect to the donation of the real estate of this case.

F. The Plaintiffs were dissatisfied with the request for a trial to the Tax Tribunal on August 10, 201, but the former was dismissed on November 24, 2011.

[Based on Recognition] The non-contentious facts, Gap evidence 1 to 5 (including each number, hereinafter the same shall apply), Eul evidence 1 to 3, and the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiffs' assertion

1) Taxation based on Article 2(3) of the Act

Article 2(3) of the Act provides that gift tax can be imposed on a comprehensive basis, and Article 2(3) does not provide for specific methods of calculating taxable objects and tax bases, and Article 2(3) of the Act provides that gift tax can be imposed on a specific basis. Therefore, the provisions of Article 2(3) of the Act alone cannot be imposed on the principle of legal principle of taxation requirements and the principle of clarification of taxation requirements.

2) A taxation based on Article 42(1)3 of the Act

The instant real estate and the instant shares donation do not fall under the “acquisition and transfer of business” stipulated in Article 42(1)3 of the Act, “transfer of business”, and “corporate organizational changel, etc.,” and the instant company should apply Article 41(1)1 of the Act to the donation to the instant company, which is a corporation with deficits, and each of the instant dispositions against which gift tax is imposed by applying Article 42(1)3 of the Act is unlawful.

3) Purport of Article 2(2) of the Act

Article 2 (2) of the Act provides that the rate of gift tax shall not be imposed in the case of a for-profit corporation, and in the case of a for-profit corporation, Article 2 (1) of the Act provides that the entity is not already liable to pay the gift tax, but there is no reason to provide that the entity bears the corporate tax again under Article 2 (2) of the Act. In light of Article 2 (2) of the Act, if the corporate tax is imposed on the corporation for the donated property, the entity expressed its intent not to pay the gift tax to its shareholders when the corporate tax is imposed on the donated property.

(iv) double taxation;

The instant company has already paid corporate tax on the instant real estate and the instant shares donated, and the Plaintiffs are liable for the dividend income tax in the event of receiving dividends from the instant company, and for transferring the instant shares, capital gains tax. Nevertheless, imposing gift tax on the Plaintiffs in relation to the instant real estate and the instant shares donation constitutes double taxation on income throughout the process.

5) Retroactive taxation

Even after the full universalism was introduced, the tax authorities have authoritative interpretation to the effect that the provisions of Articles 41 and 42 of the Act shall not apply in cases where corporate tax is imposed in cases where a corporation, other than an OO corporation, receives a donation of property from a person with a special relationship. However, on May 29, 2007, the tax authorities changed the previous attitude to the effect that "in cases where a corporation, other than a specific corporation, receives a donation of property, whether it is possible to apply Article 42 of the Act to the increased value of stocks is a matter of private determination."

6) Violation of imposition of additional tax

Even if each disposition of this case (this part of this case) is lawful, in the case of taxation on the donation of the real estate of this case and the stocks of this case, it is unreasonable to believe that the duty to pay taxes cannot be determined because there is a conflict of opinion due to significance in the interpretation of tax-related Acts, and thus, it is not unreasonable to know the duty to pay taxes.

B. Relevant statutes

Attached Form 2 shall be as listed in attached Table 2.

C. Determination

(i) taxation based on Article 2(3) of the Act;

A) Introduction and purport of the complete comprehensive gift taxation

Since the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010 of Dec. 30, 2003, hereinafter referred to as the "former Act") did not provide for the definition of donation, "donations" in order to clarify which act constitutes donation, and the other party expresses his/her intention to confer property to the other party without compensation, and it takes effect upon the other party's consent, borrowed the concept of donation under the Civil Act. However, the concept of donation alone does not have a way to prevent the phenomenon in which donation takes place through the transfer of property beyond the form of donation under the Civil Act while avoiding thirthrity through the transfer of property beyond the form of donation under the Civil Act, so the tax authorities did not arrange the type of donation transfer without compensation as it is deemed to be included in the concept of donation under the Civil Act, and provided for the concept of donation and calculation method of donation under the Civil Act (Article 32 through 42 of the former Act) so that gift taxes can be imposed on it, and it did not change the concept of gift tax in the form of donation transfer without compensation.

B) Contents of the complete comprehensive gift tax

Article 2(3) of the Inheritance Tax and Gift Tax Act amended by Act No. 7010 on December 30, 2003 considered "a free transfer of any tangible or intangible property, regardless of its name, form, purpose, etc., to another person without compensation, or an increase in the value of another person's property by the contribution," and considered "a free transfer of any tangible or intangible property without compensation, or a free transfer of any tangible or intangible property without compensation, or the transfer of any tangible or intangible property without using any method of contribution, all cases where the value of the other party's property increases due to one's act are subject to a gift under the tax law. Accordingly, the various donated donations provided for in Articles 32 through 142 of the former Act, and the transfer of property or increase in value due to such type of transaction or act is included in the concept of donation provided for in Article 2(3) of the Inheritance Tax and Gift Tax Act."

C) Whether gift tax may be imposed pursuant to Article 2(3) of the Act

(1) As such, ① to impose gift tax on the transfer or increase in value of various forms of gratuitous property that have not been predicted by legislators, the introduction of the belief of complete comprehensive gift under Article 2(3) of the Act has been changed to the calculation rules of the value of donated property; ② accordingly, the existing regulations on deemed donation have been changed to the calculation rules of the value of donated property; and ② to enhance predictability as to whether the existing regulations on deemed donation include the concept of donation in any case as an example of an irregular donation behavior, and if any similar donation occurs, it appears to be the intention of presenting the method of calculating the specific value of donated property (it is limited to cases where the existing provisions on deemed donation are listed in the relevant provisions, not as an example provision, and only where the transfer form of property exceeds the concept of donation under the Civil Act is indicated in the relevant provisions, the existence of Article 112(3) of the Act shall be unlimited, and Article 2(3) of the Act shall be comprehensively defined as above, and if it is obviously possible to impose gift tax on the donated property of another person, it shall be subject to Article 2(3).

(d)Smallness;

ParkF-F transferred the profits equivalent to the increase in the value of the shares of the company of this case to the plaintiffs by donating the real estate of this case and the shares of this case to the company of this case, and it constitutes "donation" as stipulated in Article 2 (3) of the Act. Therefore, the plaintiffs' assertion on this part is without merit.

2) The meaning of Article 42(1)3 of the Act as to the calculation of value of donated property

Article 2(3) of the Act only provides for the taxable object subject to the "total comprehensive taxation of gift tax" and does not provide for the method of calculating the value of gift acquired through the donation. This seems to be due to the fact that Article 2(3) of the Civil Act directly provides for the method of calculating the value of gift with respect to various and new types of gift without the form of donation under the Civil Act is impossible in the legislative form of the "total taxation of gift tax". As seen earlier, the legislators adopted the complete comprehensive taxation of gift tax; while expanding the scope of taxation of gift tax; and when calculating the value of donated property (based on this, tax base shall be calculated) under the title of Section 2 of Chapter 3 of the Act, the existing provision on individual donation (Article 32 through 42 of the former Act) is converted to the example of the value of donated property; in light of the background and purport of the introduction of the comprehensive taxation of gift tax; and in light of the legislative purport of the legislation, it cannot be said that the legislation does not violate the legal framework of the specific taxation of gift tax and the specific type of gift tax.

B) Relationship under Articles 41(1)1 and 42(1)3 of the Act

In addition to donations under Articles 33 through 41, 41-3 through 41-5, and Articles 44 and 45, Article 42(1) of the Act provides that "if profits falling under any of the following subparagraphs, other than donations under Articles 33 through 41, 41-3 through 41-5, are acquired above the standard prescribed by Presidential Decree, such profits shall be deemed the value of donated property of the person who has acquired such profits." In addition, Article 43(1) of the Inheritance Tax and Gift Tax Act amended by Act No. 10411 on December 27, 2010, amended by Act No. 10411 on December 27, 2010, Article 33(1) of the Inheritance Tax and Gift Tax Act (amended by Act No. 399, Feb. 39, 39-2, 49-3, 41-3 through 41-5, and Articles 44 and 45 are applied at the same time, only one provision applicable to each provision shall be interpreted.

C) Whether Article 41(1)1 of the Act is applied

Article 41 (1) 1 of the Act provides that a person who has a special relationship with a stockholder of a corporation (hereinafter referred to as a "specific corporation") who has losses, or who has been under business suspension or closure, with property free of charge, shall be the value of the donated property to the stockholder of the specific corporation concerned. Paragraph (2) of the same Article provides that "where the stockholder of the specific corporation gains profits, the amount equivalent to such profits shall be the value of the donated property of the specific corporation concerned", and Paragraph (2) of the same Article shall be calculated as prescribed by the Presidential Decree, and Paragraph (1) 1 of Article 31 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 20621 of Feb. 22, 2008) shall be 0,000 won, and that the corporation shall be 0,000 won, and that the corporation shall be 10,000 won, and that the corporation shall be 10,000 won, more than 0,000 won, before the date of donation.

According to Article 41 of the Act, and Article 31 (6) of the Decree, the defendants shall impose taxes when the shareholders of a corporation with deficits receive 00 won or more. The losses for the business year 2007 of the company, and (2) the Supreme Court Decision 2006Du19693 Decided March 19, 2009 stated that Article 31 (6) of the Decree is invalid because it is beyond the delegation scope of the mother Act, so it is impossible to calculate the value of donated property through the above provision because it is invalid, and that Article 41 of the Decree is not applicable to the shareholders of the corporation, and that Article 31 (6) 1 of the Decree does not apply to the specific provision, and that the provision is not applicable to the shareholders of the corporation, 00 won or more (in the case of a corporation with losses, 100 won or more).

(e)smallity;

Therefore, as long as Article 41(1)1 of the Act should apply to the instant real estate and the instant shares donation, Article 42(1)3 of the Act, which is a supplementary provision, cannot be applied. Thus, each of the instant dispositions taken in the entire part, is unlawful without need to further examine the remaining arguments of the Plaintiffs.

3. Conclusion

Then, the plaintiffs' claims of this case are reasonable, and all of them are accepted, and they are decided as per Disposition.