National Tax Service Review Donation 2010-0049 (Law No. 19, 2010)

The disposition imposing gift tax by evaluating shares as a supplementary assessment method is legitimate.

The transferor and transferee of shares have special interests with the company, and it is difficult to recognize the purchase price of shares at the market price at one time, and there is no evidence to prove that the sale, appraisal, expropriation, auction, or public sale has been conducted within three months before and after the date of the stock transaction, it is difficult to calculate the market price.

2010Guhap32952 Revocation of Disposition of Imposition of Gift Tax

IsaA

O Head of tax office

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s disposition of imposition of KRW 306,263,310 for the taxable year 2005 against the Plaintiff on March 5, 2010 is revoked.

1. Details of the disposition;

A. BBB Co., Ltd. (hereinafter referred to as the “instant company”) was established on December 21, 1998 for the purpose of printing and manufacturing business, etc., with a capital of KRW 50 million (10,000 per share x 5,000 won per share). Since then May 10, 2005, with a capital of KRW 150,000 won per share (30,000 per share x 5,000 won per share), the capital was transferred to the Plaintiff on December 10, 2005, with a capital of KRW 20,000,000 per share, and the total number of issued shares was KRW 40,00,00. (B) This company’s shares were transferred to the Plaintiff on December 10, 2005, KRW 120,000 per share (hereinafter referred to as the “instant shares”) and KRW 2810,000 per share (hereinafter referred to as the “instant shares”).

The value per stock of the company of this case was calculated as KRW 103,92 by using the unlisted stock appraisal method as stipulated in Articles 54 through 56 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20621, Feb. 22, 2008; hereinafter the same shall apply) as the donation of profits from the transfer of low-price under Article 35(2). The detailed contents are as follows.

Methods of valuation of unlisted stocks under Articles 54 through 56 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act;

○ The weighted average amount of net profit and loss per share over the last three years

A person shall be appointed.

○ Net Value of Profit and Loss = The weighted average amount of net profit and loss per share for the last three years ± an interest rate determined and publicly announced by the Commissioner of the National Tax Service in consideration of the circulation rate of corporate bonds with three

○ Net asset value = Net asset value of the corporation ± Total number of outstanding stocks

○ Price per share = (net value of profit and loss x3 + net asset value x2) ¡À5

BBBB Co., Ltd. price per stock as of December 10, 2005

○ 16,030 won per share average of net profit and loss in the last three years.

0

¡À Net value of profit and loss 160,302

0

○ Net Asset Value 19,529 won

0

○ Price per share 103,992

0

D. On March 5, 2010, the Defendant calculated gift gains on the premise of the price per share as stated in the preceding paragraph, and imposed KRW 306,263,310 on the Plaintiff in the year of taxation in 2005 (hereinafter “instant imposition”).

'Disposition'.

E. On May 17, 2010, the Plaintiff filed a petition for review with the Commissioner of the National Tax Service against the instant disposition, but was dismissed on July 19, 2010.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 2, Eul evidence Nos. 1 through 3, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition should be revoked because it is unlawful for the following reasons.

(1) 10,00 won per share, the price for which the Plaintiff purchased the instant shares, was assessed according to the supplementary assessment methods, notwithstanding the fact that it falls under the market price due to trade practices.

(2) In order to calculate the price of the instant shares, the Defendant applied Article 56(1)1 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (hereinafter “the Enforcement Decree of this case”) to calculate the amount of net profits and losses per share for the last three years. According to this, the instant provision of the Enforcement Decree is invalid as it is against the principle of equality in comparison with the conversion of the total number of shares into shares pursuant to Article 56(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act and Article 17-3(5) of the Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 11505 of Apr. 25, 2006) to classify the amount of net profits and losses per share for the last three years by dividing the annual net profits and losses by the number of shares each year for each year for three years.

(b) Related statutes;

Attached Form is as shown in the attached Form.

C. Determination

(1) Whether the Plaintiff’s purchase price of the instant shares can be recognized as the market price

According to Article 60(2) of the Inheritance Tax and Gift Tax Act and Article 49(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, the market price of this case is deemed to have been ordinarily established in the event of free trade between many and unspecified persons. This includes the sale, appraisal, expropriation, auction or public sale price within six months (three months in the case of gift property) before and after the base date of appraisal, which meets the requirements stipulated in the above Enforcement Decree. Since the shares of this case are non-listed stocks, it cannot be deemed that free trade between many and unspecified persons is conducted, barring special circumstances. Considering the overall purport of the argument in the evidence No. 4, No. 4, No. 3 and No. 4, the transferor of this case was working as a director or auditor of the company of this case. The plaintiff was a person who received wage and salary from the company of this case, and the plaintiff can recognize that the transferor and transferee of this case had a special interest in the purchase of the shares of this case.

In addition, there is no other evidence to acknowledge that the shares were traded, appraised, expropriated, auction or public auction within three months before or after the date of the transaction of the shares in this case, so the shares in this case constitutes a case where it is difficult to calculate the market price, and thus, the value should be assessed in accordance with Article 63 of

(2) Whether the enforcement decree of this case is null and void

The net value of shares is calculated by dividing the net profit and loss calculated during a certain period of business year into the total number of shares issued in the pertinent business year. Thus, even if it is calculated based on the total number of shares issued as of the end of the business year without adding up the number of new shares that have not contributed at all to realizing the net profit and loss amount during the pertinent period, it cannot be deemed as violating the principle of substance over form or the principle of market economy (Supreme Court Decision 2002Du9667 Decided October 10,

In addition, a separate provision for reflecting the dilution of stock value with respect to a person with free capital is considered in view of the characteristics of a person with free capital equivalent to the division of stocks, and thus, there is no such provision concerning the capital increase with respect to the capital increase with the payment of capital, and thus, it cannot be deemed as a discrimination without reasonable grounds,

(3) Intermediate conclusion

Therefore, the instant disposition is lawful.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.