National Tax Service Review and other 2011-0059 ( October 13, 2012)

The Plaintiffs are oligopolistic stockholders prescribed in Article 39(1) of the former Framework Act on National Taxes.

The issue of whether a stockholder is an oligopolistic stockholder shall be determined by whether a group owned by the majority of the stocks is a member of the group. In the event that there are circumstances, such as where the tax authority proves the ownership of stocks through a detailed statement of changes in stocks or the register of corporate register, etc., and where it has been stolen by the shareholder’s name or registered in a name other than the real owner’s name,

Article 39 of the Framework Act on National Taxes

2012Guhap14941 Revocation, etc. of revocation of designation as a person liable for secondary tax payment.

Republic of Korea, Republic of Korea and one other

Head of Seocho Tax Office

September 6, 2012

October 11, 2012

1. All of the plaintiffs' claims are dismissed.

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

On August 24, 2011, the Defendant: (a) designated the Plaintiffs as secondary taxpayers for tax payment under XX; (b) revoked each disposition imposing value-added tax of 2000 won for the second term portion of 2007, value-added tax of 2009, value-added tax of 2000 won for the second term portion of 2007, value-added tax of 2000 for the second term portion of 2009, value-added tax of 000 won for the second term portion of 2009; and (c) revoked each disposition imposing value-added tax of 00 won for the second term portion of 2009 for the second term portion of 2009 for the Plaintiff’s complaint (the second term portion of 2009 for the Plaintiff’s complaint appears to be each clerical error of 2007).

1. Details of the disposition;

A. XX Co., Ltd. (OO Co., Ltd. prior to the alteration; hereinafter referred to as “non-party company”) is a non-party corporation established with the purpose of urban maintenance business, specialized management business, etc. on April 20, 204 and with the total number of issued and outstanding shares of 60,000 won and total amount of capital of 00 won.

B. As of the date of establishment of each of the above tax liability of the non-party company, the defendant is an oligopolistic shareholder who owns 80% of the total number of shares issued by the non-party company (the mother of the plaintiff head of the plaintiff headB, 45%, 235% of the total number of shares issued by the plaintiff head of the non-party company (the plaintiff head of the plaintiff head of the plaintiff headB) as the non-party company's relative under Article 20 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 21937, Dec. 31, 2009) and 00 won of value-added tax for the second term of 2007 and 200 won of value-added tax for the second term of 200, 2000 won for the second term of 200, 2000 won of value-added tax for the second term of 200, 2000 won of value-added tax for the second term of 200.

C. The Plaintiffs dissatisfied with the instant disposition and filed a request for examination with the Commissioner of the National Tax Service on November 17, 201, but the Commissioner of the National Tax Service dismissed the said request for examination on February 13, 2012.

D. Meanwhile, the details of stocks owned by each shareholder on the list of the changes in stocks, etc. submitted by the non-party company to the Defendant at the end of 2004-2005 are as follows (no share change was made until the business year 2004-2005).

Business year

Name of shareholders

Number of Stocks

Ratio of Shares

Above 2004 up to 2005

O

27,000 Shares

45%

MaximumO

21,000 Shares

35%

D Kim D Kim

12,000 Shares

20%

Total

60,000 Shares

100%

[Reasons for Recognition] Evidence Nos. 3, 6, and 7 (including branch numbers, hereinafter the same shall apply), Evidence Nos. 1 and 2, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

ThisCC established a non-party company on April 20, 204 for the purpose of conducting an urban improvement project, along with the Plaintiff LB Y Co., Ltd. (hereinafter “YY”). At the time, thisCC borrowed from a bondholder, and the Plaintiffs and KimD, which were listed as the shareholder at the time, were merely the shareholders of the non-party company. On April 2005, 2005, thisCC requested the Plaintiffs to transfer the shares of the non-party company under the Plaintiffs’ name to the effect that Y does not need to maintain the relationship with Y in fact. Accordingly, thisCC concluded a contract with the Plaintiffs on stock acquisition (the Plaintiff merely was a nominal shareholder, and did not receive the stock acquisition price) and operated the non-party company. However, when the tax agent’s business error, the Plaintiffs did not register this case’s oligopolistic shareholder under the name of the non-party company as the shareholder under the name of the non-party company. Accordingly, the Plaintiffs did not have any tax liability under the premise that the non-party company did not register this case’s oligopolistic shareholder.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) According to Article 39(1)2(a) of the Act, a person who actually exercises the rights to shares exceeding 50/100 of the total number of issued and outstanding shares of the relevant corporation among oligopolistic shareholders shall be subject to secondary tax liability. Determination as to whether a person falls under an oligopolistic shareholder under the above provision shall be made based on whether it is a member of a group of stocks owned by the majority, and the tax authority must prove the ownership of shares through the data, such as the statement of changes in stocks or the register of corporate register, etc. of the relevant company. However, even in cases where a shareholder appears to be a single shareholder in light of the above data, if there are circumstances, such as by using the name of the shareholder or by registering the name in the name other than the real owner, it cannot be deemed as a shareholder only in the name of the oligopolistic shareholder, but this must be proved by the nominal owner who asserts that he is not a shareholder (see Supreme Court Decision 200

2) Regarding the instant case, as seen earlier, during the period when the Plaintiffs were liable to pay the unpaid tax amount of the non-party company since the incorporation of the non-party company, the Plaintiffs were registered as shareholders on the statement of changes in stocks, etc. of the non-party company. The Plaintiff head-A as the mother of the Plaintiff head-B, the Plaintiff, as the mother of the non-party head-B, was related to the non-party company under Article 20 of the former Enforcement Decree of the Framework Act on National Taxes, constitutes more than 51/100 of the total number of outstanding stocks, and the Plaintiffs constitute an oligopolistic shareholder under Article 39(1) of the former Framework Act on National Taxes.

The plaintiffs asserted to the effect that since they were not only nominal shareholders since the incorporation of the non-party company, but also transferred all of the instant shares to thisCC around April 2005, the non-party company did not constitute an oligopolistic shareholder with the secondary tax liability, since they did not attend the shareholders' general meeting of the non-party company or exercise rights to shares.

On the other hand, the statement of evidence Nos. 1 through 5 alone is difficult to acknowledge the fact that the plaintiffs are merely nominal shareholders at the time of the incorporation of the non-party company, and there is no other evidence to acknowledge it. Rather, according to the witness's testimony of the non-party company, the non-party company was established by the plaintiff lowestB to conduct agency business in relation to the Y's reconstruction business. Thus, thisCC's establishment of the non-party company and the plaintiffs' assertion that the non-party company is merely the nominal shareholders from

Furthermore, the Plaintiffs’ above assertion that Non-Party 2 did not report changes in the YB statement since they were transferred to Non-Party 5 in April 205, and that Non-Party 1 did not participate in the non-Party 2’s management of the instant shares, and that Non-Party 1 did not appear to have been aware that Non-Party 2 did not have a right to the instant shares or that Non-Party 3’s shares were merely a nominal shareholder. According to the above facts and circumstances, i.e., the Plaintiffs’ assertion that Non-Party 2’s shares were transferred to Non-Party 4 to Non-Party 5’s office at the time of the request for review, and that Non-Party 2’s shares were transferred to Non-Party 5’s office to Non-Party 1, the Plaintiff did not have any consistency in the assertion that Non-Party 1’s shares were transferred to Non-Party 2 and Non-Party 3’s shares, and that Non-Party 1’s shares were transferred to Non-Party 2.

3. Conclusion

The plaintiffs' claims are dismissed for lack of reasonable grounds.