[1] The purpose of Article 120 (6) 2 of the Restriction of Special Taxation Act, which excludes the application of Article 105 (6) of the Local Tax Act, where a person becomes an oligopolistic stockholder by acquiring stocks or shares from an insolvent financial institution in accordance with timely corrective measures

[2] The taxable object of acquisition tax

[3] The case affirming the liability to pay acquisition tax on real estate held by an affiliated company, although a comprehensive financial corporation acquired shares of its affiliated company inevitably during the process of a merger in accordance with the management normalization plan submitted to the Financial Supervisory Commission to avoid disadvantages in timely corrective measures

[1] Article 120(6)2 of the Restriction of Special Taxation Act, which provides for the exclusion of the application of Article 105(6)(2) of the Local Tax Act, where a person becomes an oligopolistic stockholder by acquiring stocks or shares from an insolvent financial institution in accordance with timely corrective measures, is an exception clause prepared to the purport that applying the above provision to a case where the acquisition of stocks by a corporation is enforced in accordance with administrative measures, not based on voluntary intent, is excessively harsh for taxpayers.

[2] Acquisition tax is a kind of distribution tax, based on the fact that it is the transfer of the original goods, and it is a kind of distribution tax that recognizes and imposes the tax-bearing capacity. Since it is not imposed by the acquisitor on the profits that can be gained by using, earning, or disposing of the goods, acquisition tax is a taxable object regardless of whether the acquisitor acquires the ownership of the substance substantially complete, so a tax liability is established as long as acquisition is recognized as a tax requirement.

[3] The case affirming the liability to pay acquisition tax on real estate held by an affiliated company in light of the circumstance of acquiring stocks and the fact that it is deemed that the affiliated company becomes an oligopolistic stockholder in the process of inevitably acquiring stocks of an affiliated company in accordance with the management normalization plan submitted to the Financial Supervisory Commission in order to avoid the disadvantage of timely corrective measures

[1] Article 120(6)2 of the Restriction of Special Taxation Act, Article 105(6) of the Local Tax Act / [2] Article 105 of the Local Tax Act / [3] Articles 105(6) and 110 subparag. 4 of the Local Tax Act, Article 120(6)2 of the Restriction of Special Taxation Act

[2] Supreme Court Decision 98Du14228 delivered on December 8, 1998 (Gong1999Sang, 167) Supreme Court Decision 2003Du7453 Delivered on December 24, 2004

Dongyang Integrated Financial Securities Co., Ltd. (Law Firm Ha & Yang, Attorneys Gyeong-Gyeong et al., Counsel for the plaintiff-appellant)

Head of Jung-gu, Daejeon Metropolitan City (Attorney Kim Jong-soo et al., Counsel for the defendant-appellant)

Daejeon District Court Decision 2005Guhap1048 Delivered on August 24, 2005

June 1, 2006

1. The part against the defendant among the judgment of the court of first instance is revoked, and the plaintiff's claim corresponding to the revoked part is dismissed.

2. The plaintiff's appeal is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

Each disposition of imposition of acquisition tax of KRW 519,080,560 against the Plaintiff on March 16, 2005 and special rural development tax of KRW 51,908,050 shall be revoked.

2. Purport of appeal

A. The plaintiff: the defendant's disposition of imposition of KRW 51,908,050 against the plaintiff on March 16, 2005 is revoked.

(b) Defendant: as set forth in paragraphs (1) and (3) of this Article.

1. Facts of recognition;

A. The Plaintiff’s acquisition of shares

(1) The Plaintiff is a comprehensive financial corporation aimed at the sale and purchase of securities, consignment sale, brokerage of sale and purchase, or acting as an agent, and the same original original ion investment securities company (hereinafter “foreign company”) was an investment trust company as the Plaintiff’s affiliated company, which was the first investment trust company, but was converted into a securities company under the government-led initiative around June 200, since the failure was caused by the end of 1997.

(2) Despite the efforts to normalize the management of the non-party company, the Financial Supervisory Commission urged the plaintiff to take measures to normalize the management of the non-party company around November 2003, and delayed timely corrective measures against the non-party company pursuant to Article 10 of the Act on the Structural Improvement of the Financial Industry (hereinafter “the Financial Industry Act”) until December 11, 2004.

(3) On November 2004, the Plaintiff submitted to the Financial Supervisory Commission a “the comprehensive plan for normalization of the so-called the so-called “the so-called “the so-called Non-Party Company” (hereinafter “the so-called “the business normalization plan”) with the main content that “the Plaintiff, after investing approximately KRW 130 billion in the Non-Party Company, converted the net assets of the Non-Party Company to acquire from drinking water to dispose of the excess of debts, putting the net assets of the Non-Party Company back to acquire from drinking water, and then merge the Non-Party Company into the Plaintiff within the business year of 2005 (ever late March 2006).”

(4) On November 26, 2004, the Financial Supervisory Commission notified the Plaintiff of the above management normalization plan that “the implementation of capital reduction without compensation among the management normalization plan of the company outside the lawsuit, the implementation of the Plaintiff’s investment in kind to the non-party company, and the timely corrective measures for the non-party company shall be postponed until September 30, 2005, subject to the implementation of the merger with the Plaintiff and the non-party company.” At the time, the Financial Supervisory Commission presented the conditions of postponement of the timely corrective measures, along with the implementation of capital reduction and the implementation of the merger, to the non-party company as a condition of postponement of the timely corrective measures, takes into account the registration example of the Supreme Court that it is impossible to register the non-party merger with the non-party company in excess of the debt, and the authorization conditions stipulated in Article 4(3) of the Financial Services Commission Act. Accordingly, the Financial

(5) On February 14, 2005, the non-party company received 23,711,712 shares free of charge (100% in case of the largest shareholders including the plaintiff and related parties, and 50% in case of major shareholders) out of 36,00,00 shares issued on February 14, 2005 in accordance with the management normalization plan. In other words, on February 16, 2005, the non-party company received 135,707,50,000 shares by investing in kind the shares in excess of KRW 98,280,000 in the market price and the securities equivalent to KRW 37,427,50,000 in the market price.

(6) On August 8, 2005, the plaintiff applied for authorization of merger between the Financial Supervisory Commission on August 16, 2005 after entering into a merger agreement with the non-party company that "the plaintiff continues to exist as a result of the merger of the non-party company, and the non-party company is dissolved." On October 4, 2005, the plaintiff was notified by the Financial Supervisory Commission on September 30, 2005 pursuant to Article 4 of the Geumsan Act and Article 35 of the Securities and Exchange Act. Further, on October 6, 2005, the plaintiff completed the registration of merger or dissolution with the non-party company on October 7, 2005, thereby failing to take timely corrective measures by implementing a merger normalization plan with respect to the non-party company.

(7) The timely corrective measure is a system that imposes a corrective measure on a financial institution whose management status has deteriorated after classifying its grades based on the standards of management status such as equity capital ratio, and then imposes a corrective measure upon the supervisory authority at the stage of insolvency. If the timely corrective measure is taken based on Article 10 of the Financial Industry Act, the financial institution is subject to various sanctions such as restrictions on the increase of assets, establishment of branches and new business, restriction on deposit interest, and restriction on the re-approval of central bank, as part of the measure related to management, and the financial institution is subject to retirement if it fails to comply with such measures.

(b) Details of disposition;

(1) The Plaintiff was only the largest shareholder with 30.23% shares in the non-party company before the above capital reduction without compensation, but became an oligopolistic shareholder with 68.8% shares due to the above capital reduction without compensation and capital increase.

(2) Accordingly, the Plaintiff: (a) pursuant to the main sentence of Article 105(6) of the Local Tax Act, the Plaintiff: (b) as an oligopolistic shareholder of the company, the Plaintiff is deemed to have acquired the real estate, vehicle, mechanical equipment, standing timber, aircraft, vessel, mining right, fishery right, golf membership, condominium membership, or membership right to use athletic facilities complex; (c) on March 16, 2005, the Plaintiff reported the amount of tax of KRW 519,080,560, special rural development tax, KRW 51,08,050, and KRW 51,90,050 (hereinafter “each disposition of this case”); and (d) on March 18, 2005, as an oligopolistic shareholder of the company, the Plaintiff paid the tax amount of KRW 519,080,560, and KRW 51,908,050 (hereinafter “instant disposition”).

[Reasons for Recognition] Facts without dispute, Gap evidence 1-1-5, Gap evidence 2-1 through 6, Gap evidence 3-1, 2, and Gap evidence 4-9, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) Article 120(6)2 of the Restriction of Special Taxation Act

Article 120(6)2 of the Restriction of Special Taxation Act provides that “Where an insolvent financial institution acquires stocks or equity shares from an insolvent financial institution through a third party’s acquisition, transfer of contracts, or transfer of contracts pursuant to Article 10 of the Financial Industry Act and becomes an oligopolistic stockholder, the provisions of Article 105(6)(2) of the Local Tax Act shall not apply.”

In this case, although the Financial Supervisory Commission was not a timely corrective measure, the Plaintiff’s acquisition of capital increase stocks by investing in kind in the non-party company is a series of procedures that are conducted to be postponed by the Financial Supervisory Commission, and therefore there is no reason to discriminate in terms of its purpose or effect.

Therefore, it is against the principle of tax equality to impose acquisition tax only on the following cases by acquiring stocks, etc. in accordance with the timely corrective measures by the Financial Supervisory Commission and acquiring stocks, etc. in order to be postponed the timely corrective measures by the Financial Supervisory Commission.

(2) Article 110 subparag. 4 of the Local Tax Act applies

Article 110 Subparag. 4 of the Local Tax Act regards the acquisition by the "merger of corporations" as the acquisition of formal ownership and excludes acquisition tax subject to imposition.

However, the Plaintiff’s act of acquiring the capital increase shares of the Nonparty Company and becoming an oligopolistic stockholder was one of the series of procedures that the Plaintiff proceeds for the ultimate purpose of the merger of Nonparty Company according to the management normalization plan (the reduction of capital and capital increase of Nonparty Company 1 ? Plaintiff’s investment in kind ? Plaintiff’s merger between the Plaintiff and Nonparty Company) obtained prior approval from the Financial Supervisory Commission. Therefore, the Plaintiff’s act of acquiring the capital increase does not include only

Therefore, it is against the principle of substantial taxation and the principle of tax equality if the acquisition tax, etc. is imposed on the real estate owned by the non-party company to the plaintiff.

B. Relevant statutes

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

C. Determination on imposition of acquisition tax

(1) Whether Article 120(6)2 of the Restriction of Special Taxation Act is applied

Article 120 (6) 2 of the Restriction of Special Taxation Act, which provides for the exclusion of the application of Article 105 (6) of the Local Tax Act to cases where an oligopolistic stockholder becomes an oligopolistic stockholder by acquiring stocks or shares from an insolvent financial institution in accordance with timely corrective measures, applies the above provision to cases where the acquisition of stocks by a corporation is enforced according to administrative measures, not based on the voluntary intention, shall be an exception provided to the purport that taxpayers are excessively harsh.

However, the fact that the plaintiff submitted a management normalization plan to the Financial Supervisory Commission in order to avoid disadvantages in timely corrective measures and thereby inevitably acquired the shares of the non-party company in the course of conducting a merger in accordance with the management normalization plan by extending the grace period for timely corrective measures

However, the plaintiff's establishment of a management normalization plan of the non-party company and acquisition of the shares of the non-party company accordingly was not subject to the order of the Financial Supervisory Commission, and even if it was intended to avoid disadvantages due to the timely corrective measures, it is based on the voluntary decision that it would be favorable for the plaintiff to suffer disadvantages due to the voluntary management normalization plan rather than to

Therefore, the Plaintiff’s refusal to apply Article 120(6)2 of the Restriction of Special Taxation Act in the case of the Plaintiff cannot be deemed to contravene the principle of tax equality. Therefore, the Plaintiff’s assertion on this cannot be justified.

(2) Whether Article 110 subparag. 4 of the Local Tax Act is applied

Acquisition tax is an object of taxation, regardless of whether a purchaser acquires ownership in a substantial manner, regardless of whether a purchaser acquires ownership (see, e.g., Supreme Court Decision 2003Du7453, Dec. 24, 2004). As such, a tax liability is established inasmuch as acquisition of ownership is recognized as a requirement of taxation, regardless of whether a purchaser gains profit from the use, profit-making, or disposal of goods, by taking advantage of the fact that the transfer of goods is the transfer of ownership (see, e.g., Supreme Court Decision 2003Du7453, Dec. 24, 200

Article 105(6) of the Local Tax Act provides that “When a person becomes an oligopolistic stockholder by acquiring stocks of a corporation, such oligopolistic stockholder shall be deemed to have acquired the real estate of the corporation concerned.” In addition, the act of comprehensively succeeding the real estate of another corporation due to the merger of another corporation constitutes an acquisition act.

Therefore, as seen earlier in the instant case, insofar as the Plaintiff acquired the shares of the non-party company and became an oligopolistic shareholder of the non-party company, the Plaintiff shall be deemed to have acquired the instant real estate, which is the assets of the non-party company, when becoming an oligopolistic shareholder pursuant to Article 105(6) of the Local Tax Act. The Plaintiff comprehensively succeeded to the real estate of the non-party company by combining the non-party company, and legally or practically acquires the complete ownership of the real estate. In this case, the act of deeming the acquisition by the former and the acquisition by the latter have the character

Therefore, even if Article 110 subparag. 4 of the Local Tax Act provides that "acquisition of real estate by a corporate merger" shall be exempted from acquisition tax, the acquisition of real estate by a merger of a non-party company shall be exempted from taxation under this provision, but it does not affect the acquisition tax liability established by satisfying the act of acquisition of real estate pursuant to Article 105(6) of the Local Tax Act before the merger.

This is because, under the principle of no taxation without the law, or under the principle of no taxation without the law, the interpretation of tax laws and regulations shall be interpreted in accordance with the law, barring any special circumstances, and it shall not be extensively interpreted or analogically interpreted without reasonable grounds. In particular, it is consistent with the principle of fair taxation with the principle of fair taxation (see Supreme Court Decisions 97Nu20090, Mar. 27, 1998; 2002Du9537, Jan. 24, 2003, etc.).

In addition, such interpretation shall be reasonable in light of the fact that the oligopolistic shareholder does not fully consider the process of acquiring the relevant real estate in Article 105(6) of the Local Tax Act, and whether the oligopolistic shareholder has an intention or ability to actually manage and dispose of the real estate subject to taxation, etc., and whether the oligopolistic shareholder has an intention or capacity to actually manage and dispose of the real estate subject to taxation, etc. (B).

In addition, as long as the Defendant’s disposition of acquisition tax in this case was conducted with respect to an independent taxable object, which is the acquisition deeming act under Article 105(6) of the Local Tax Act, it cannot be deemed that it violates the principle of substantial taxation or the principle of tax equality.

Ultimately, the Plaintiff’s assertion that the instant disposition of acquisition tax was unlawful as it violates Article 110 subparag. 4 of the Local Tax Act is without merit.

D. Determination on imposition of special rural development tax

As seen earlier, a person liable to pay acquisition tax under Article 3 subparag. 5 of the Act on Special Rural Development Tax is obligated to pay the special rural development tax, and the Plaintiff is liable to pay acquisition tax. Accordingly, the Defendant’s imposition of special rural development tax is legitimate.

3. Conclusion

Therefore, the plaintiff's claim seeking revocation of each of the dispositions of this case is dismissed as it is without merit. Since the part against the defendant in the judgment of the court of first instance which partially different conclusions is unfair, the plaintiff's claim corresponding to the cancellation part shall be revoked, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.

Judges Kim Chang-suk (Presiding Judge)