Seoul High Court 2012Nu5444 (2012.13)

early 2011west 1546 ( October 16, 2016)

Where a company in the grace period for small and medium enterprises merges with a small and medium enterprise, the grace period shall not expire.

Unlike the cases where a small or medium enterprise does not become a small or medium enterprise by absorbing the enterprise during the grace period, the provision of exclusion from the grace period is not applied to the merger of small or medium enterprises.

2012du2249 Revocation of disposition of revocation of capital gains tax imposition

New AAA et al.

Head of Gangnam-gu Tax Office et al.

Seoul High Court Decision 2012Nu5444 Decided September 13, 2012

February 14, 2013

All appeals are dismissed.

The costs of appeal are assessed against the Defendants.

The grounds of appeal are examined.

1. Article 104 (1) 4 (b) of the former Income Tax Act (amended by Act No. 8825, Dec. 31, 2007; hereinafter the same shall apply) provides that the tax rate of 10/10 shall apply to the tax base of transfer income of stocks, etc. of a small or medium enterprise prescribed by Presidential Decree; Article 167-8 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 2358, Feb. 2, 2012; hereinafter the same shall apply) provides that "small or medium enterprise prescribed by Presidential Decree" means a small or medium enterprise falling under Article 2 of the Framework Act on Small and Medium Enterprises as of the end of the business year immediately before the business year in which the date of transfer of stocks, etc. belongs, and Article 2 (3) of the former Framework Act on Small and Medium Enterprises (amended by Act No. 10952, Jul. 25, 2011; hereinafter the same shall apply) provides that a small or medium enterprise becomes one of the following three years.

2. Based on the adopted evidence, the court below acknowledged the facts as stated in its reasoning, and held that the main sentence and proviso of Article 2 (3) of the former Framework Act on Small and Medium Enterprises provide that both small and medium enterprises become non-small and medium enterprises for a certain reason, and that the companies under the three-year grace period under the main sentence are not small and medium enterprises due to expansion of their size before the occurrence of the causes as prescribed by the Presidential Decree, so even if other small and medium enterprises are merged, they cannot meet the requirement of "where they become non-small and medium enterprises due to such reasons as prescribed by the proviso," and that there is no provision that the grace period becomes void immediately after a merger of small and medium enterprises with a company under the above grace period, unlike the above cases where a small and medium enterprises are merged with a company under the above grace period, the court below held that Article 9 (1) 1 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises is not applicable to the merger of small and medium enterprises under Article 10 (1) 4 of the former Framework Act.

3. Examining the above provisions, legislative intent, and records, the judgment of the court below is just, and there is no error in the misapprehension of legal principles as to the capital gains tax rate and the scope of small and medium enterprises, as otherwise alleged in the

4. Therefore, all appeals are 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 on the bench.