Plaintiff 1 and one other (Law Firm ELD Partners, Attorneys Lee Lee-young, Counsel for the plaintiff-appellant)

The Director of Gangnam District Office

October 14, 2015

Seoul Administrative Court Decision 2014Guhap5052 decided November 20, 2014

1. The plaintiffs' appeal is dismissed.

2. The costs of appeal are assessed against the Plaintiffs.

The judgment of the first instance shall be revoked. Each disposition of the Defendant rendered against the Plaintiffs on December 1, 201 by KRW 253,56,670, and value-added tax of KRW 505,671,710 for the second period of 2010 shall be revoked.

1. Quotation of judgment of the first instance;

The court's explanation on this case is consistent with the reasoning of the judgment of the first instance except for a partial change in the reasoning of the judgment of the first instance as provided in paragraph (2). Thus, the reasoning of the judgment of the first instance is cited by Article 8 (2) of the Administrative Litigation Act and Article 4

2. The modified part;

○ From the second judgment of the first instance court to the second judgment, “The acquisition of assets” is also made by adding “the acquisition of assets” (hereinafter “the acquisition of assets of this case”) to “the contract.”

○ From the 7th judgment of the first instance to the 3rd and the 4th judgment, the following shall be added:

【The instant transfer contract also constitutes a transfer of business not deemed a supply of goods pursuant to Article 6(6)2 of the former Value-Added Tax Act (amended by Act No. 11873, Jun. 7, 2013; hereinafter “ Value-Added Tax Act”), and thus, the instant disposition imposing value-added tax is unlawful.

○ The following shall be added to 10 pages 10 of the first instance judgment:

4) The main contents of the instant transfer agreement (No. 5-1) are as follows.

The purpose of this Agreement is to transfer all the rights and obligations concerning the business operated by the decedent to the instant company as of July 31, 2010. ① As of July 31, 2010, the decedent shall transfer the rights and obligations of all the assets and obligations other than real estate and motor vehicles (excluding financial liabilities, etc. related to real estate) to the instant company. ② On or after the effective date, the instant company shall transfer all the rights and obligations of the decedent to the instant company. On or after the effective date, the value of the assets and obligations acquired by the decedent shall be transferred to the instant company on August 2, 2010. ④ On August 2, 2010, the acquisition of all the rights and obligations of the decedent to the decedent shall take over the trademark rights and obligations of the decedent as of August 2, 2010. ⑤ The instant company shall pay or enforce the retirement benefits to its officers and employees at the price of August 2, 2010 as of August 2, 2010.

On the other hand, among the specifications (Evidence A No. 5-2) attached to the instant transfer agreement, the items of assets or liabilities, which are not subject to succession, are as follows.

The 3,680,44,876 won in a long-term loan of KRW 78,000 in a long-term loan of KRW 778,00,00 in a vehicle transport vehicle of KRW 26,974,379,00 in a vehicle transport vehicle of KRW 1,964,416,016 in the building of KRW 389,80,800 in a building of KRW 26,974,379 in a vehicle transport vehicle of KRW 18,00 in a vehicle transport vehicle of KRW 26,979 in a vehicle transport vehicle of KRW 18,00 in a vehicle transport vehicle of KRW 26,974,379,00 in a separate sheet in the main sentence.

With respect to the assets determined to be transferred, the decedent issued a tax invoice to the company of this case, and reported and paid the value-added tax.

[Reasons for Recognition] Gap evidence Nos. 1, 5, Eul evidence Nos. 1, 3, and 5 (including each number), the purport of the whole pleadings

○ 12 pages 8 through 14 pages 7 of the first instance judgment (2. d. 2) are as follows.

【2] Whether a disposition imposing inheritance tax on the trademark right donated to a profit-making corporation without a liability to pay gift tax by adding it to the taxable value of the inheritance

Article 13(1) of the Inheritance Tax and Gift Tax Act (amended by Act No. 10411, Dec. 27, 2010; hereinafter “the Act”) which provides that the value of donated property shall be added to inherited property within a certain period prior to commencement of inheritance shall be prevented from evading or reducing inheritance burden by means of progressive tax rates, and thereby promoting fair taxation burden (see, e.g., Supreme Court Decision 2004Du14373, Jul. 6, 2006). It is because the Act provides that the value of donated property shall be added uniformly to the value of inherited property without considering its purpose or circumstance as above, if it is substantially impossible to predict the death of the deceased in terms of view, the value of inherited property shall not be deemed unfair since the real meaning of donated property may be also determined by the Constitutional Court, and it is impossible to verify and conceal the true meaning of donated property by way of 07Hun-year gift tax or 400 square meters (see, e.g., Supreme Court Decision 2007Hun-Ga74, supra).

Article 13(1)2 of the Act does not limit the scope of “a person who is not a successor,” and Article 13(1)2 of the Act does not limit the scope of “a person who is not a for-profit corporation,” and Article 4(1) of the Act provides that a profit-making corporation shall be exempted from the gift tax on the profits acquired through a donation does not constitute double taxation due to the inclusion of gift tax in gross income and the establishment of a corporate tax taxable object. Thus, the above provision does not constitute a basis for the exclusion of the gift tax on the profit-making corporation from the taxable amount of inheritance tax. (3) In addition to the above circumstances, even if the corporation of this case did not bear the gift tax on the property acquired in advance from the predecessor, it is legitimate to impose the gift tax by adding the value of the trademark in this case to the taxable amount of inheritance tax pursuant to Article 13(1)2 of the Act.

(3) Whether a disposition based on the amount of income for the past three years is legitimate in the evaluation of trademark rights

Article 59 (5) of the Enforcement Decree of the Act provides that "any patent right, utility model right, trademark right, design right, copyright, etc. shall be the aggregate of the amounts calculated in accordance with Ordinance of the Ministry of Strategy and Finance on the basis of the amount of income for each year payable in the future by such right. In such cases, the amount of income for each year for which no amount of income has been determined for three years before the base date of appraisal may be the amount of income for

In full view of the following circumstances recognized as above, it is lawful to view the trademark right of this case as "where the amount of revenue of each year has not been determined" under Article 59 (5) of the Enforcement Decree of the Act, and to evaluate the trademark right of this case based on the average amount of revenue of each year for the last three years prior to the evaluation base date.

① The point of time to assess the trademark right of this case is the point of time of gift under the contract (Article 60(4) of the Act). At the evaluation date, the decedent entered into a trademark lease agreement with 5 companies, i.e., e., e., e., e., e., e., e., e., e., e., e., e., e., e., e., e., e., e.

② In fact, the user fee for the last three years prior to the evaluation base date of “S&M”, “S&M”, “S&M” was at least KRW 100 million, and was at least KRW 100 million.

③ Even if the decedent’s death at the time of the evaluation criteria for the trademark right of this case was imminent, it cannot be readily concluded that the amount of income that can be gained through the trademark right of this case is determined as the minimum amount of usage fee due to such circumstances as the decline in sales of goods bearing the trademark of this case. In fact, it is difficult to view that the company of this case, after the date of evaluation, specified the income gained

④ Since the name of a designer is still a case of maintaining the value of a well-known brand even after he/she died, it cannot be deemed unfair in light of the substance of evaluating the value of the trademark right of this case by using the name of the inheritee, which was a well-known designer, in accordance with Article 59(5) of the Enforcement Decree of the Act.

⑤ Although the Plaintiffs asserted that trademark rights related to an enterprise that has not paid usage fees in excess of the minimum usage fees due to the lack of the sales volume, cannot be deemed to be “where the revenue amount of each year has not been determined,” the reason for raising sales that the relevant enterprise has to pay at least the minimum usage fees is sufficient to deem that the relevant enterprise is mainly related to other factors irrelevant to the value of the relevant trademark rights, namely, quality, promotion, market situation, etc. of products produced by the relevant enterprise. The circumstances required by the Plaintiffs cannot be the grounds for separately assessing only the trademark rights related to the relevant enterprise out of the pertinent trademark rights.”

○ From 15th to 6th of the judgment of the first instance court is as follows.

(5) (5) Whether the scope of prior donation of trademark rights by the decedent is limited to 50% of the trademark value because the decedent had 50% of the shares in the company of this case

As seen earlier, the fact that the trademark right of this case was donated to the company of this case before the commencement of the inheritance through the contract is not included in the trademark right of this case. Further, the above facts of recognition are as follows: ① the company of this case is a separate right which differs from the deceased, ② the legislative intent of Article 13(1) of the Act, which provides that the property value donated within the period prior to the commencement of the inheritance should be added to the inherited property, is to prevent the act of evading or reducing inheritance tax burden by high-speed rate; ③ The plaintiffs reported the value of shares (50%) of the company of this case owned by the deceased without consideration of the value of the trademark right of this case to KRW 50,00,000, which is an amount calculated according to the face value per share without consideration of the value of the trademark right of this case.

○ At the bottom of the 16th judgment of the first instance court, the following shall be added:

[7] Whether the acquisition by transfer of this case constitutes a transfer of business not deemed a supply of goods under the Value-Added Tax Act

Article 6(6) of the Value-Added Tax Act provides that a transfer of business shall not be deemed a supply of goods subject to value-added tax, and Article 17(2) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 22758, Dec. 30, 2010) upon delegation thereof provides that “The term “those prescribed by Presidential Decree” under Article 6(6)2 of the Act shall be comprehensively succeeded to all rights and obligations relating to the business at each workplace. In such cases, even if a business is succeeded without including those falling under any of the following subparagraphs among the rights and obligations relating to the business, the relevant business shall be deemed comprehensively succeeded to.” Article 6(6)3 provides that “The said business shall be deemed as related to land, buildings, etc. which are not directly related to the relevant

The term "transfer of business" refers to the comprehensive transfer of human, physical, and rights and duties, including business property, to replace only the management body while maintaining the identity of the business. As such, the business must be separated from the management body as an organic combination of human and physical facilities so that social independence can be recognized. The fact that the object of transfer is not a simple physical facility, but such an organic combination is not a real facility, shall bear the burden of proving that there is a tax disability in value-added tax (see, e.g., Supreme Court Decisions 97Nu12778, Jul. 10, 1998; 2013Du18827, Jan. 16, 2014).

In light of the above facts, it is insufficient to view the acquisition by transfer of this case as transfer of business under Article 6 (6) 2 of the Value-Added Tax Act, and there is no other evidence to acknowledge it. Rather, as seen earlier, the acquisition by transfer of this case between the decedent and the company of this case excludes all the land, building and structure used by the decedent for business when entering into the contract for transfer of this case, and the transfer of this case also does not succeed to human facilities for business, such as the provision that the decedent would pay retirement allowances to the previous officers and employees. Unlike the case of transfer of business at the time of the return of value-added tax for the second time in 2010, the decedent issued a tax invoice to the company of this case only for the assets subject to transfer of this case, and the company of this case also received input tax deduction based on the tax invoice that was received at the time of the return of value-added tax scheduled for the second time in 2010, it cannot be viewed as maintaining the identity of the business by the decedent.

The following Acts and subordinate statutes shall be added to the corresponding part of the relevant Acts and subordinate statutes of the court of first instance.

【Value-Added Tax Act (Amended by Act No. 11873, Jun. 7, 2013)】

Article 6 (Supply of Goods)

(6) None of the following shall be deemed the supply of goods:

1. Offering any goods as security, which is prescribed by Presidential Decree;

2. Transfer of business, as prescribed by Presidential Decree.

Enforcement Decree of the Value-Added Tax Act (Amended by Presidential Decree No. 22758, Dec. 30, 2010)

Article 17 (Provision of Security, Transfer of Business and Payment of Taxes in Kind)

(2) "Those prescribed by Presidential Decree" in Article 6 (6) 2 of the Act means comprehensively succeeding to all rights and obligations with respect to the relevant business at each place of business (including cases of transfer by each division within the same place of business in cases of division or merger after division under the Commercial Act) (including cases of comprehensive transfer of assets meeting the requirements under Article 46 (1) of the Corporate Tax Act, cases of the comprehensive transfer of assets meeting the requirements under the subparagraphs of Article 37 (1) of the Restriction of Special Taxation Act, and cases where the transferee adds new types of business or changes the types of business in addition to the succeeded business). In such cases, even if the transferee succeeds to the relevant business without including the following rights and obligations related to such business, it shall be deemed that the relevant

1. The amount receivable;

2. A document concerning accounts payable;

3. Land, buildings, etc. not directly related to the relevant business, which are prescribed by Ordinance of the Ministry of Strategy and Finance;

Judges Ansan-chul (Presiding Justice)