In regard to the secondary tax liability of oligopolistic stockholders, the requirements to constitute “exercise of the right to shares exceeding 50/100” as prescribed by Article 39(1)2(a) of the former Framework Act on National Taxes, and in a case where there was no possibility of exercising the shareholder’s right as of the date of establishment of the tax liability, whether the secondary tax liability under the said provision has been imposed (negative)

In light of the legislative intent and amendment process of Article 39(1)2(a) of the former Framework Act on National Taxes (amended by Act No. 9263 of Dec. 26, 2008), in order to constitute “the exercise of rights to shares exceeding 50/100,” the aforementioned provision must have the status of exercising shareholder rights to at least the shares owned as of the date of establishment of tax liability, even if the actual exercise of shareholder rights does not have the actual exercise of shareholder rights. Therefore, in cases where there is no possibility of exercising shareholder rights at the time of establishment of tax liability, the secondary tax liability under the said provision is not held.

Article 39(1)2(a) (see current Article 39 subparag. 2) of the former Framework Act on National Taxes (Amended by Act No. 9263, Dec. 26, 2008)

Supreme Court Decision 2008Du983 Decided September 11, 2008

Plaintiff

The director of the Southern Incheon District Office

Seoul High Court Decision 2010Nu29064 decided April 7, 2011

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

Article 39(1)2(a) of the former Framework Act on National Taxes (amended by Act No. 9263, Dec. 26, 2008) provides that “A person who actually exercises the rights to shares exceeding 50/10 of the total number of issued and outstanding shares of the relevant corporation” among oligopolistic shareholders shall have secondary tax liability.

In light of the legislative intent, amendment process, etc. of the above provision, in order to constitute “exercise of rights to shares exceeding 50/100” as referred to in the above provision, there must be at least the status of exercising shareholders’ rights to the shares owned as of the date of establishment of tax liability, even if the actual exercise of shareholders’ rights is not possible (see Supreme Court Decision 2008Du983, Sept. 11, 2008). Therefore, in cases where there is no possibility of exercising shareholders’ rights at the time of establishment of tax liability, the secondary tax liability under the above provision should not be held.

The court below acknowledged the facts as stated in its reasoning after compiling the evidence of employment, and determined that since from August 24, 2006, when the plaintiff transferred the shares of this case to the non-party, and thereafter, from August 24, 2006, the plaintiff and the non-party agreed to cancel the transfer or takeover contract of the shares of this case based on the judgment of related civil procedure, etc., the non-party did not exercise the shareholder's right to the shares of this case as to the shares of this case and the non-party was not in a position to exercise the shareholder's right to the shares of this case, the plaintiff did not constitute an oligopolistic shareholder who bears the secondary tax liability for the value-added tax of this case as of December 30, 207 or December 31, 2007.

In light of the above legal principles and records, the above judgment of the court below is just and there is no error in the misapprehension of legal principles as to the requirements of oligopolistic shareholders who are liable for the second tax liability as otherwise alleged in the ground of appeal.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Yong-deok (Presiding Justice)