Suwon District Court-2015-Gu Partnership-61888 ( January 12, 2016)

The proviso of Article 56 (2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act that provides for the method of reflecting the dilution effect at the time of capital increase for capital increase.

The proviso of Article 56(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which regulates the calculation of net profit and loss per share in a manner that does not reflect the expected profit of the future following the increase in net assets, shall be deemed to apply only to capital increase without compensation. It cannot be deemed that the proviso of Article 56(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act is applicable

Article 56 (2) of the Enforcement Decree of the former Inheritance Tax and Gift Tax Act

2016Nu35931 Revocation of Disposition of Imposition of Gift Tax

Appellant-Appellants

○ Kim

Appellant-Appellant

Head of △ District Office

Suwon District Court Decision 2015Guhap61888 Decided January 12, 2016

September 2, 2019

October 16, 2019

1. The part against the defendant in the judgment of the court of first instance shall be revoked, and the plaintiff's claim corresponding to the revoked part shall be dismissed;

2. The plaintiff's appeal is dismissed.

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

1. Purport of claim

The Defendant’s imposition of gift tax of KRW 728,251,030 (including additional tax) against the Plaintiff on December 15, 2014 that exceeds KRW 126,337,430 (including additional tax) shall be revoked.

2. Purport of appeal

A. The plaintiff

The judgment of the first instance shall be modified as stated in the purport of the claim.

B. Defendant

The provisions of paragraph (1) shall apply.

1. Details of the disposition;

This Court's use of this part is consistent with the reasoning of Paragraph (1) of the first instance court's judgment except for the case where " August 201, 201" in Section 3, Section 16 of the first instance court's decision is " March 201", and therefore, it is also acceptable in accordance with Article 8 (2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

2. Whether the instant disposition is lawful

The reason why the court uses this part of the reasoning of the judgment of the court of first instance is as follows, and this part of the reasoning of the judgment of the court of first instance is as stated in Paragraph 2 of the judgment of the court of first instance, except for adding the following judgment to the corresponding part as to the contents asserted by the plaintiff in the court of first instance. Thus, it is acceptable in accordance with Article 8(2) of the Administrative Litigation Act and Article

[Supplementary Use]

○ The 17th 17th 10th 10th 10th 10th 10th 10th 10th 10th 206.

○ The 10th 10th 10th 10th 10th 10th 10th 10th 201 “Wolh 201” is “Wolh 201”.

○ Article 2-6(f) of the Reasons for the Judgment of the first instance court shall be followed as follows.

F. Determination on the Plaintiff’s assertion as stated in the Plaintiff’s above A-4

In the case of assessing the net asset value of the instant shares only, there is no evidence to view that there is a reason under each subparagraph of Article 54(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20621, Feb. 22, 2008; hereinafter “former Enforcement Decree of the Inheritance Tax and Gift Tax Act”), which is the case of assessing the value of the instant shares. It is also difficult to view that the method of evaluating the value of the instant shares should be applied mutatis mutandis just because it is unreasonable to evaluate the net asset value of the instant shares by the weighted average ratio of 3:2 of the net asset value and the net asset value in accordance with Article 54(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act from 202 to 2004. The Plaintiff’s assertion in this part is unacceptable.

○ To delete Section 2-g of the Reasons for the Judgment of the first instance court.

【Additional Judgment Matters】

A. The plaintiff's assertion

In light of the fact that there is no particular difference in the case of free capital increase and capital increase, and that the Enforcement Decree of the Inheritance Tax and Gift Tax Act added the content that reflects the dilution effect like free capital increase even in the case of capital increase with the amendment on July 25, 2011, the value per share of the instant shares cannot be calculated in accordance with the net asset value method, even if the value per share cannot be calculated in accordance with the net asset value method, the value per share of the instant shares should be calculated by applying mutatis mutandis the proviso of Article 56(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which provides for the method of reflecting the dilution effect at the

B. Determination

In full view of all the following circumstances revealed by the content of the relevant Acts and subordinate statutes, the value per share of the instant shares cannot be calculated in accordance with the method stipulated in the proviso of Article 56(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which provides for the method of reflecting the dilution effect at the time of capital increase without compensation. The Plaintiff’s

Article 56 (2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 579 of Oct. 29, 2007) provides that "the number of stocks converted to stocks shall be calculated based on the number of stocks issued for each business year as of the end of each business year as of the end of each business year before the base date of appraisal x (the number of stocks issued for free increase ＋ the number of stocks issued for free increase ± the number of stocks issued for free increase ± the number of stocks issued for free increase ± the number of stocks issued for free increase ± the number of stocks issued for free increase ± the number of stocks issued for free increase ± the number of stocks issued for free increase ± the number of stocks issued for free increase ± the number of stocks issued for free increase ± the number of stocks issued for free increase ± the number of stocks issued for free increase ± the number of stocks issued for free increase ± the number of stocks issued for free increase ± the number of stocks issued for free increase in the business year:

In a case where capital reserve under the Commercial Act, such as an excess of the amount of stocks issued, and the revaluation reserve fund under the Assets Revaluation Act, are issued free of charge in accordance with the increase of capital as a result of the increase of capital in excess of the number of stocks issued or the amount of assets revaluation reserve, etc. reflected in the value of assets of the existing stocks, and thus allocated gratuitously to the existing stockholders according to the number of stocks held by them. As such, even though the company’s capital increase, there is no change in the net assets, and in principle, there is no difference in the ratio of the company’s total capital stock to the total amount of stocks held by it or the actual property value (see Supreme Court Decision 2007Du1361, Mar. 12, 2009). On the other hand, in a case of capital increase with respect to capital increase, it is reasonable to reasonably calculate the net assets value per share by applying the provisions of Article 56(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act as well as the net assets value per share.

It is desirable to calculate the net value of unlisted stocks by the method of assessing the current value after estimating the future expected profit of the stocks. However, Articles 54(1) and 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which is the past performance, provides that the net profit per share shall be calculated by discounting the weighted average amount of net profit for the last three years per share by the interest rate reflecting the rate on distribution of corporate bonds with three-year maturity. As such, substitution of future expected profit with the past performance is premised on the fact that the past performance continues to continue in the future. As such, when the net profit increases through capital increase with capital increase, it can be reasonably calculated the net profit per share by reasonably reflecting the future expected profit generated based on the increased net asset. However, even in the case of the proviso to Article 56(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which regulates the dilution effect of gratuitous capital increase without consideration, making it difficult to estimate the future profit and loss per share objectively calculated due to the increase of net asset.

The proviso of Article 56(3) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 23040, Jul. 25, 2011; hereinafter referred to as the “Enforcement Decree of the Inheritance Tax and Gift Tax Act”) stipulates that the number of outstanding stocks as of the end of each business year shall be calculated in the same manner as the case of a person with no compensation (the method prescribed by Ordinance of the Ministry of Strategy and Finance) even in cases of a person with no compensation. Meanwhile, Article 17-3(5)1 of the Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 223, Jul. 26, 2011) provides that the calculation of total number

However, the amended Enforcement Decree of the Inheritance Tax and Gift Tax Act does not simply stipulate that the net profit and loss value should be calculated by the same method as the gratuitous capital increase, but also reflect the future expected profit arising from the increase in net assets by newly establishing Article 56(5) as follows. In light of the amendment of the aforementioned statutes, the proviso of Article 56(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which regulates the calculation of net profit and loss per share in a manner that does not reflect the future expected profit arising from the increase in net assets at all, shall be deemed to apply only to the capital increase without compensation, and it shall not be deemed that the proviso of Article 56(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which

The Enforcement Decree of the Inheritance Tax and Gift Tax Act.

§ 56. Calculation method of net profit and loss per share for the latest three years

(3) In applying the provisions of paragraph (1) 1, the number of stocks for each business year shall be the total number of stocks issued as of the end of each business year: Provided, That where there is any reason of increasing or decreasing capital within three years before the business year which includes the record date for appraisal, the total number of stocks issued as of the end of each business year

(4) The net profit and loss amount under paragraph (1) 1 shall be the amount calculated by subtracting the amount under subparagraph 2 from the amount calculated by adding the amount under subparagraph 1 to the income amount for each business year under Article 14 of the Corporate Tax Act. In this case, where the reserves or reserves included in deductible expenses are temporarily returned in calculating the income for each business year in accordance with the provisions of tax-related Acts, the amount divided in proportion to the income amount for each business year to be returned shall be added to the income amount to

(5) In the calculation of net profits and losses under paragraph (4), where new stocks or equity shares (hereafter in this paragraph, referred to as "stocks, etc.") are issued (hereafter in this paragraph, referred to as "stocks, etc.") to increase the capital (including the amount invested; hereafter in this paragraph, the same shall apply) of the relevant corporation within three years before the business year including the evaluation base date, or where stocks, etc. are retired (hereafter in this paragraph, referred to as "equity capital increase") in order to reduce the capital of the relevant corporation, the net profit and loss for the business year during which capital increase or capital reduction has been made and the previous business year shall be the amount calculated by adding the amount calculated pursuant to subparagraph 1 to the amount calculated pursuant to paragraph (4) and subtracting the amount calculated pursuant to subparagraph 2. In such cases, the net profit and loss for the business year in which capital increase or capital reduction with consideration has been made shall be calculated as a monthly rate for the period from the date of commencing

1. The number of stocks issued with capital increase 】 The number of stocks increased by capital increase with capital increase 】 The rate prescribed by Ordinance of the Ministry of Strategy and Finance

2. The amount per share paid upon capital reduction for consideration ¡¿ the number of stocks, etc. reduced by capital reduction for consideration ¡¿ the rate prescribed by Ordinance of the Ministry of Strategy and Finance;

3. Conclusion

Therefore, the plaintiff's claim of this case shall be dismissed as it is without merit. Since the part against the defendant among the judgment of the court of first instance against the defendant is unfair with its conclusion different, it shall be revoked, and the plaintiff's claim corresponding to the revoked part shall be dismissed, but the plaintiff's appeal shall be dismissed as it is without merit