(영문) 서울행정법원 2007.11.6.선고 2007구합5349 판결

The Defendant’s disposition of imposition of acquisition tax of KRW 15, 693, 358, 550 against the Plaintiff on March 29, 2006 and special rural development tax of KRW 1,305, 702, and 610, respectively, shall be revoked.

Reasons

1. Details of the imposition; and

A. On March 21, 1994, the Plaintiff made an investment in full by B Lt. (hereinafter referred to as “B”) which is a Singapore-based subsidiary established by the Government of Singapore for the purpose of investing and managing its own assets.

The number of shares issued as a corporation is 50 million won, and the capital is about 30 billion Korean Won.

B. On December 10, 2004, the Plaintiff established C Ltd. (hereinafter referred to as "C") and D Ltd. (hereinafter referred to as "D"; hereinafter referred to as "C") by investing 100% in accordance with the Singapore Company Act.

C. On December 28, 2004, C acquired 50.01% of the total number of shares issued by Hrings SCA (hereinafter “E”) non-listed corporation F (hereinafter “F”), and D acquired 99% of the total number of shares issued by F (hereinafter “acquisition”).

D. The defendant, as the plaintiff's subsidiary on March 29, 2006, acquired F's shares as above by C and D, which are merely Pacom, as the plaintiff's subsidiary on March 29, 2006, and actually become an oligopolistic shareholder of F and owned by F.

On December 28, 2004, the tax base of real estate, etc. is KRW 593, 501, 193, and 859, which is the book value of the stockholder on December 28, 2004, and the Plaintiff imposed acquisition tax of KRW 15,693, 358, 550, and special rural fishing village tax of KRW 1,305, 70, and 610 (hereinafter referred to as “instant disposition”).

[Ground of recognition] Facts without dispute, Gap evidence 1, Gap evidence 2-1, Gap evidence 2-2, Eul evidence 3, and the purport of the body before oral argument

2. Whether the instant disposition is lawful

A. The defendant's assertion

The subsidiaries have the form of a corporation, but they merely take the form of a corporation for the purpose of tax avoidance, and in fact, the plaintiff in the hinterland is the plaintiff in the case.

Since shares are acquired, the disposition of this case is legitimate in light of the legal principle of denial of legal personality or substance over form principle, etc.

B. The plaintiff's assertion

(1) Whether a shareholder constitutes an oligopolistic shareholder under Article 105(6) of the Local Tax Act ought to be determined in accordance with Article 22 subparag. 2 of the Local Tax Act and Article 6(1) of the Enforcement Decree of the Local Tax Act with respect to the oligopolistic shareholder. However, F’s shares are owned by the Plaintiff’s subsidiaries not more than 51 percent of the total number of outstanding shares, and the Plaintiff is only a shareholder, and the Plaintiff does not hold the F’s issued shares at all. Thus, the Plaintiff does not constitute an oligopolistic shareholder as well as the substantial requirement for becoming an oligopolistic shareholder, and the Plaintiff does not meet the formal requirements for holding shares.

(2) Under the substance over form principle, “actual” should be understood as “legal substance,” not “economic substance,” and under the substance over form principle, to deny the validity of a party’s transaction as an act under the substance over form principle by deeming the transaction to be a tax installment, there must be a separate and specific denial provision under the principle of no taxation without law. Thus, as alleged in the above, the Defendant deemed the Plaintiff as an oligopolistic shareholder of F and issued the instant disposition by deeming the Plaintiff as an oligopolistic shareholder for the reason that the Defendant denied the legal form of the Plaintiff’s choice without any individual and specific legal basis, thereby violating the principle of no taxation without law beyond the bounds of the substance over form principle.

(3) The instant disposition is contrary to the authoritative interpretation of the tax authorities and the response of the head of the administrative autonomous department to the inquiries of the subsidiaries, and thus is contrary to the good faith principle.

(4) Accordingly, the Defendant’s instant disposition imposing the instant case, under the premise that the Plaintiff is an oligopolistic shareholder of F, appears to be a single mother or illegal disposition.

As shown in the attached Form.

(d) Facts of recognition;

(1) The developments leading up to the establishment and acquisition of F

( 가 ) 주식회사 G ( 이하 ' G ' 이라 한다 ) 은 1996 . 1 . 9 . ' 서울 서초구 방배동 XXXX - X ' 을 본점소재지로 하고 , 프라스틱 제조 , 원단 텐트부품 제조판매업 등을 목적으로 하여 설 립되었고 , 1996 . 1 . 11 . 사업자등록을 하고 사업을 시작하였다가 3개월 후에 폐업하였 으며 , 폐업 후 휴면법인 상태로 있었다 .

(B) On June 15, 2001, E accepted the shares of G on June 15, 2001, and then changed its name to F, and changed its name to F, and all of its officers and intended businesses such as large-sized directors.

(C) On June 18, 2001, F acquired the entire ownership on June 21, 200, after acquiring the land at the Yandong, Gangnam-gu, Seoul Metropolitan City. On July 9, 2007, F changed the name of the owner of a building (F building) under construction on the said land from a stock company to F, from a stock company to F, and obtained the approval for use of the building. The reasons why subsidiaries acquired F shares from E on December 28, 2004 are as seen earlier.

(2) Status of subsidiaries

(a) Composition, human and physical elements, etc.

The following tables shall be listed:

A person shall be appointed.

* A, B, and C are officers such as the Plaintiff’s auditor and C, as the Plaintiff’s director.

A person shall be appointed.

** He succeeded to F’s liabilities 600, 460, 575, 897.

B. Particulars of acquiring the shares of this case

At the time of the acquisition of the instant shares, B, who is not an officer of the subsidiary, was signed on behalf of the subsidiary.

(3) Interpretational interpretation and inquiry of the Ministry of Government Administration and Home Affairs

(A) On August 23, 1999, the Minister of Government Administration and Home Affairs: (a) on August 23, 1999, when a subsidiary, in which the parent company has invested 10%, is a shareholder of an unlisted company, the parent company did not correspond to the shareholder of the unlisted company; and (b) the subsidiary did not have a special relationship with the subsidiary, thereby holding the oligopolistic shareholder liable to pay the acquisition tax as an oligopolistic shareholder (fixedly 13407 - 1052).

B. The Minister of Government Administration and Home Affairs rendered a reply as to the inquiries based on the share ownership relationship between subsidiaries with respect to the acquisition of the instant shares and the Minister of Government Administration and Home Affairs around November 2004 and February 2, 2006.

[Ground of recognition] Unsatisfy facts, Gap evidence 4, 5 evidence 1, 2, Gap evidence 6, Eul evidence 1 to 5, Eul evidence 1 to 17, Eul evidence 18-1 to 4, Eul evidence 19 through 26, Eul evidence 19-26, testimony of witness right misunderstanding, the whole purport of pleadings

E. Determination

(1) Whether the Plaintiff can be deemed as an owner of F shares

(A) Whether the theory of denial of legal personality can be applied to the tax law area

(1) The denial of tax avoidance act and the principle of substantial taxation

The term "act of tax avoidance" refers to an act of a taxpayer to achieve the economic purpose, such as an act of friendship, multi-stage act or other abnormal transaction form, and to unreasonably reduce tax burden by taking advantage of the ordinary transaction form. According to the above recognition facts, the Plaintiff’s acquisition of stocks in this case is a kind of act of tax avoidance, since the Plaintiff establishes a subsidiary and takes a legal form of acquiring F’s stocks by acquiring F’s stocks, thereby achieving the economic name, such as the Plaintiff’s acquisition of F’s stocks, and did not bear any taxes. Meanwhile, the denial system for such act of tax avoidance is based on the principle of substantial taxation (see Supreme Court Decision 87Nu357, Oct. 13, 1987).

However, in order to deny the validity of a party’s transaction based on the substance over form principle on the basis of the principle of no taxation without law, it is in principle that individual and specific denial provisions should be provided in the law under the principle of no taxation without law (see, e.g., Supreme Court Decisions 98Du14082, Nov. 9, 199; 91Nu13571, Sept. 22, 1992).

(2) The application to the tax law of the theory of non-existence of corporate personality.

However, prior to the existence of the above individual and specific denial rule, first of all, "the company has the form of a corporation in the external form, but it is used as a means to avoid the application of the law to the person behind the corporate entity (individual or corporation) without permission, in substance, it constitutes an exceptional case where the company's legal personality is abused and it is extremely unacceptable against justice and equity (see Supreme Court Decision 97Da21604 delivered on January 19, 2001), and the theory of corporate personality can be applied in the area of the tax law like the private law area (see Supreme Court Decision 2008Da21604 delivered on January 19, 200), and if it is judged that the company's legal personality is not a basis for the theory of corporate personality, it can not be viewed that the other tax law, except for the other tax law, which is the basis for the theory of corporate personality, is denied in the area of the private law. Therefore, if the plaintiff's legal relationship is interpreted in the area of the private law, it can not be viewed.

In regard to this, the plaintiff asserts that if the theory of denial of corporate personality applies to the tax law area, the principal company of the plaintiff should be the taxpayer and that confusion in the tax law system is caused due to the extinguishment of corporate personality of the subsidiary company, etc. However, although the principal company of the plaintiff is determined only to each legal act, the legal act subject to this case is the acquisition of the shares of this case, and only the plaintiff is the parent company of the subsidiary company (the person behind the subsidiary), the plaintiff's shareholder company will be excluded from the object of taxation, and the theory of denial of corporate personality applies to the tax law and thus does not have the effect of acquiring the shares of this case or terminate the corporate personality of the subsidiary, the above argument cannot be accepted.

(3) The general theory of corporate personality of a parent company

In the case of a parent company, it is inevitable for the parent company to have a substantial human and capital relationship between the parent company and the subsidiary. As such, it is insufficient to view that the parent company's independent legal personality of the subsidiary is an abuse of legal personality in relation to the creditors, etc. of the subsidiary, and at least it is necessary to exercise complete control to the extent that the subsidiary loses its own intention or existence and the parent company operates its own business as a part of its own business, and specifically, it is necessary to objectively collect the status of both the parent company and its employees, such as property and business between the parent company and the subsidiary, and the parent company has a strong control over the subsidiary, or the size of the subsidiary's business has been expanded by holding the entire shares of the subsidiary, but the size of its capital has not increased to the extent that the subsidiary's business size has not increased to the extent that the subsidiary's own legal personality is not increased to the extent that the parent company's own legal personality is not subject to the above 20th judgment or the above 20th judgment is not subject to the law of the parent company.

(4) Whether it is possible to deny the legal personality of subsidiaries.

In the instant case, the following circumstances appear in the above facts and arguments, i.e., (i., the company’s contact point, website, employee, sales revenue, financial statements, and external business performance are entirely the same as the Plaintiff (personal and material elements are lack, but the Plaintiff did not prove that the subsidiaries engaged in business other than the acquisition of the instant shares). However, there is no evidence to prove that its executives are identical to each other and three of them were the Plaintiff’s officers at the time of the acquisition of the instant shares, and there is no evidence to prove that the company’s employees were responsible for the acquisition of the instant shares (such as non-compliance with the procedures, the materials such as the resolution of the board of directors submitted by the Plaintiff are less than 1,200 won after the acquisition of the instant shares). In light of the above circumstances, the Plaintiff’s capital and 300 million won after the acquisition of the Plaintiff’s shares are merely one of the subsidiary companies’s own financial liabilities, or the Plaintiff’s capital and 300 million won after the acquisition of the instant shares by means of the Plaintiff’s shares.

Therefore, in acquiring the instant shares, it is reasonable to view that the subsidiaries are denied legal personality and have legal effect on the Plaintiff, who is behind the acquisition of the instant shares.

Even if it is not so, in light of the details of the establishment of the subsidiary, the existence of human and physical elements, the economic effect of the acquisition of the shares of this case, the ownership of profits, and the form of the conclusion of the agreement on the transfer of shares, etc., as seen earlier, the subsidiary's acquisition of the shares of this case is merely merely a borrowed form of the company, which takes the form of the company, and the acquisition of the shares of this case is merely merely nominal. In substance, the Plaintiff, the parent company, can be deemed to have acquired the shares of this case using the corporate personality of the subsidiary as a means of avoiding the imposition of acquisition tax on it. Thus, in light of substance and tax principles, it is reasonable to deem that the legal effect of the acquisition of the shares of this case extends to the Plaintiff.

In this regard, the Plaintiff asserts that the subsidiaries should be treated as tax payers with independent corporate personality, as in the case of a nominal company, such as a special purpose company, etc. for investment purpose. Therefore, the Plaintiff asserts that the subsidiaries should be subsidiaries. However, the above nominal companies are established for investment purpose, and subject to special laws, while the subsidiaries are established for investment purpose, they cannot be viewed as being established for "the purpose of tax avoidance" and they are not subject to special laws. Therefore, the above argument cannot be accepted.

(2) Whether the Plaintiff constitutes an oligopolistic shareholder or not

(A) Article 105(6) of the Local Tax Act does not separately define oligopolistic shareholders. Thus, in order to become an oligopolistic shareholder as prescribed in Article 22 subparag. 2(a) of the Local Tax Act, a person who actually exercises the rights to more than 51/100 of the total number of outstanding stocks or total amount of investment of the relevant corporation pursuant to Article 22 subparag. 2(a) of the Local Tax Act shall be deemed to fall under “a person (see, e.g., Supreme Court Decision 2003Du1165, Oct. 27, 2004). However, since the subsidiaries do not acquire 51/10 of the total number of outstanding stocks of each F, but do not fall under a person with a special relationship as prescribed in Article 6 of the Enforcement Decree of the Local Tax Act, each of them shall not be deemed to be an oligopolistic shareholder.

(B) However, as seen earlier, the legal personality of the subsidiary with respect to the acquisition of the instant shares

In light of the principle of substantial taxation, it is reasonable to deem that the Plaintiff acquired F shares 100% by the Plaintiff’s acquisition of the said shares due to its denial or the effect on the Plaintiff’s acquisition of the substance over form principle (a formal standard is satisfied) and, in addition, comprehensively taking account of various circumstances as seen earlier and the fact that the profit and loss of the subsidiaries’ dividends, etc. belongs to the Plaintiff, the sole shareholder, and thus, the Plaintiff is deemed to exercise the right to FM as a de facto shareholder through the acquisition of the instant shares.

C. In addition, the authoritative interpretation and inquiry of the Minister of Government Administration and Home Affairs are merely limited to the ownership ratio of shares, and it is difficult to regard it as an interpretation or reply on the case corresponding to a corporate body for the purpose of tax avoidance, such as abuse of corporate personality, etc., and there is no other public opinion statement that the Plaintiff does not impose tax on the Plaintiff, and there is no other evidence to recognize this. Thus, the Defendant’s disposition of this case cannot be deemed to have been contrary to the principle of good faith. The Plaintiff’s assertion on this premise cannot be accepted.

(3) Sub-decisions

Therefore, the disposition of this case based on the premise that the Plaintiff falls under an oligopolistic stockholder as stipulated in Article 105(6) of the Local Tax Act is legitimate. The conclusion is that the Plaintiff’s assertion on a different premise is without merit.

Therefore, the plaintiff's claim is justified and it is decided as per Disposition by the assent of all participating Justices.

Judges

Justices Kim Jong-hwan

Judges Kim Jong-sung

Judges Croat

Site of separate sheet

Related Acts and subordinate statutes

Basic Act

Article 14 (Real Taxation)

(1) If the title to income, profit, property, or transaction subject to taxation is merely nominal and a person to whom such title belongs exists, the tax-related Acts shall apply to such person to whom such title belongs as a taxpayer.

Article 15 (Good Faith and Sincerity)

Any taxpayer shall perform his liability in good faith and sincerity. The same shall apply to cases where the tax officials perform their offices.

Local Tax Act

Article 22 (Secondary Liability for Tax Payment of Contributors) (amended by Act No. 8138 of December 30, 2006)

In case where the property of a corporation (excluding a corporation whose stocks are listed on the Korea Stock Exchange) is imposed on a corporation or is insufficient to cover the impositions of a local government to be paid by such corporation, the person falling under any of the following subparagraphs as of the tax base date or the date on which the tax liability is established (the date on which the tax base period commences in case of a tax item with no provisions concerning it), shall be subject to the secondary tax liability for such shortage: Provided, That in case of an oligopolistic stockholder under the provisions of subparagraph 2, it shall be limited to the amount calculated by multiplying the amount obtained by dividing the shortage by the total number of stocks issued (excluding non-voting stocks; hereinafter in this Article the same shall apply) of such corporation or the total amount of investment made by such oligopolistic stockholder, by the number of stocks owned by such oligopolistic stockholder (excluding non-voting stocks) or the amount of investment made by such oligopolistic stockholder

1. General partners;

2. A person falling under any of the following items among oligopolistic shareholders (referring to one stockholder or one partner with limited liability and his relatives as prescribed by the Presidential Decree or persons having special relations with him, whose total amount of stocks held or investments is not less than 51/100 of the total number of stocks issued or the total amount of investments made by the relevant corporation: hereinafter the same shall apply):

(a) A person who exercises a substantial right over the stocks or investment shares in excess of 51/100 of the total issued stocks or total investments of the juristic person concerned;

(b) A person who actually controls the management of a corporation, notwithstanding the name of the honorary chairperson, chairperson, president, vice president, managing director, managing director, or any other name;

(c) Spouse (including persons in de facto marital relations) of the persons referred to in items (a) and (b) and lineal ascendants and descendants sharing the same livelihood with them;

Article 105 (Persons Liable for Tax Payment, etc.) (Amended by Act No. 7843, Dec. 31, 2005)

(6) Where a person becomes an oligopolistic stockholder by acquiring the stocks or shares of a corporation, the oligopolistic stockholder shall be deemed to have acquired the real estate, vehicle, machinery and equipment, standing trees, aircraft, ships, mining right, fishing right, golf membership right, condominium membership right, or right to use athletic facilities complex: Provided, That this shall not apply to the case where a person becomes an oligopolistic stockholder by acquiring the stocks or shares issued at the time of incorporation, or to the portion for which acquisition tax is exempt or reduced by this Act and other Acts and subordinate statutes as of the date on which a liability to pay acquisition tax on an oligopolistic

Enforcement Decree of the Local Tax Act

Article 6 (Scope of Relatives and Other Specially Related Persons)

(1) The term “relatives or other persons having special relation as prescribed by the Presidential Decree” in subparagraph 2 of Article 22 of the Act means those falling under any of the following subparagraphs: Provided, That in case where a stockholder or partner with limited liability is a woman, the relation with her husband shall not be applicable except in the cases of subparagraphs 9 through 13:

1. Any paternal blood relationship within the six degrees and the body of any paternal blood relationship within the four degrees;

2. The husband ( husband) and children of any paternal kins woman within the third degrees of relationship;

3. Any maternal blood relationship within the third degrees and her spouse and children;

4. Any paternal blood relationship within the second degrees of the wife and her spouse;

5. Spouse (including a person in a de facto marital relationship);

6. A lineal ascendant of the birth parents of an adoptee;

7. Any person adopted into another family and his spouse, and any lineal descendant of the two families;

8. The natural mother of a person born out of wedlock;

9. Any employee and other persons in an employment relationship;

10. Person sharing a livelihood with a person who maintains his livelihood by the money or other properties of a stockholder or partner with limited liability;

11. In case where any stockholder or any partner with limited liability is an individual, the corporation in which the aggregate of stocks or investments (hereinafter referred to as the “stocks, etc.”) by the relevant stockholders or partners with limited liability and persons in the relationship under subparagraph 10 with him is not less than 50/100 of the total number of stocks issued or the total amount of investments (hereinafter referred to as the “total number of stocks issued, etc.”) 12. In case where any stockholder or partner with limited liability is a corporation, the corporation in which the number, etc. of stocks issued, etc. of the relevant corporation is not less than 50/100 of the total number, etc. of stocks issued, and the number, etc. of stocks owned, etc. of the relevant corporation is not less than 50/100 of the total number,

13. A non-profit corporation in which a stockholder, partner with limited liability, or a person in the relationship under subparagraphs 1 through 8 with him is the majority of directors or one of them establishes: Provided, That this shall be limited to the case where he owns 20/100 or more of the total number of stocks issued, etc. of the juristic person concerned.

Article 78 (Acquisition, etc. of Oligopolistic Stockholders)

(1) Where a stockholder or partner with limited liability who is not an oligopolistic stockholder of a corporation becomes the first oligopolistic stockholder by acquiring the stocks or shares of another stockholder or partner with limited liability, or becomes the first oligopolistic stockholder due to capital increase, etc., all of the stocks or shares of the corporation owned by the relevant oligopolistic stockholder as of the date on which he first becomes an oligopolistic stockholder shall be deemed to have been acquired, and the acquisition tax shall be imposed pursuant to Article 105

Act on Special Rural Development Tax.

Article 5 (Tax Base and Taxation)

(1) The amount of special rural development tax shall be calculated by multiplying the tax base by the tax rate on the following tax bases:

A person shall be appointed.

- Finally

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