Seocho 2013west 2876 ( November 18, 2013)

Where gift tax cannot be imposed because there is no interest granted to the plaintiffs due to the retirement of shares, it shall be applicable.

B The capital reduction through the purchase of shares in this case constitutes a case where gift tax cannot be imposed because it constitutes a case where there is a justifiable reason in light of the practice of transaction under Article 42(3) of the Inheritance Tax and Gift Tax Act.

Donation, etc. of other benefits under Article 42 of the Inheritance Tax and Gift Tax Act

Seoul Administrative Court 2014Guhap50122

U.S. 00 foreign1

Head of Gangnam Tax Office et al.1

May 15, 2014

6.19

1. Details of the disposition;

A. The representative director of the Plaintiff ChoB (hereinafter “B”) held 62.56% of the shares issued by BB at the time of acquiring the shares of the Plaintiff Cho Jae Construction Co., Ltd. (hereinafter “CC Construction”) on March 23, 2004, and Plaintiff UDR owned 2.5% (8,000 shares) of the shares issued by BB at the same time as the spouse of Plaintiff Cho Jae-A.

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B. BB was established on July 3, 1992 and operated the leasing and selling business of construction materials. At March 23, 2004, BB had been a major shareholder other than the Plaintiffs (17.7%, 00 shares, hereinafter “instant shares”) and the rest of shares was owned by 47 minority shareholders.

C. Around March 5, 2004,CC Construction requested BB to purchase all of the instant shares owned byCC Construction until April 23, 2004. BB decided to purchase and retire all of the instant shares by holding a board of directors on March 18, 2004. According to the above resolution, BB purchased the instant shares fromCC Construction on March 23, 2004 to KRW A (a) per share (the total amount of purchase x x 00 million)

The formula under Article 29-2 (2) 1 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act.

(The amount per share paid when the appraised value per share of capital is retired) * Total number of capital reduction * Shares after the capital reduction of a large shareholder * The number of capital reduction / the total number of capital reduction / the number of capital reduction / the number of capital reduction /

ChoAA UDD (abbwon)*00 note *

D. BB did not retire the instant shares by appropriating them in the “capital adjustment” of the financial statements. On November 27, 2009, BB passed a resolution to retire all of the instant shares upon a special resolution of the special shareholders’ meeting. On January 1, 2010, BB completed the capital reduction registration on January 15, 2010 on the date of the change.

E. The Plaintiff’s share ratio from 62.56% to 76.04% due to the retirement of the instant shares, and the Plaintiff’s UDD’s share ratio from 2.5% to 3.0%, and the Plaintiff’s UD’s share ratio has increased from 2.5%. The Plaintiffs are the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “Inheritance Tax Act”).

On February 26, 2010, the plaintiff Cho Jae-A reported and paid d won as gift tax belonging to the plaintiff Cho Jae-A in 2010 (hereinafter referred to as "the return and payment in this case", and the plaintiffs' respective return and payment in this case were referred to as "each of the tax amount paid in this case" as gift tax belonging to the plaintiff Cho Jae-A in 2010.

As of November 27, 2009 (the date on which the reduction of capital has been resolved at the general meeting of shareholders), the Plaintiffs were determined as the appraised value per share of the reduced stocks 】 (the date on which the reduction of capital has been resolved) 】 won 】

The specific grounds for calculating the amount of tax shall be as follows:

F. The Plaintiffs are not specially related persons pursuant to Article 42(3) of the Inheritance Tax and Gift Tax Act.

In the case where there is a justifiable reason for the practice of transaction, the gift tax is not imposed even if the equity ratio is increased due to the reduction of capital. In the judgment that the retirement of the shares of this case constitutes this, the plaintiff Cho Young-ju Director of the tax office on January 27, 201, and on February 12, 2013, the plaintiff Cho Nam-nam Director of the tax office on February 12, 201, requested the plaintiff Cho Nam-nam Director of the tax office to rectify the amount of each tax of this case to 0 won.

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G. As to this, the Defendants: (a) deemed that the completion of the reduction of capital of the pertinent shares at the time five years and eight months have elapsed since the acquisition of the Plaintiff’s own shares cannot be deemed as “justifiable cause in light of trade practice”; and (b) on the grounds that the Commercial Act does not recognize the Plaintiffs’ request for reduction of capital, the head of the tax office having jurisdiction over the head of the tax office having jurisdiction over the head of the Si/Gun/Gu rendered a disposition to reject the request for reduction of capital on February 25, 201 and April 11, 2013 (hereinafter “instant disposition”).

H. The Plaintiffs are dissatisfied with this, and Plaintiff ChoA filed an appeal with the Tax Tribunal on April 28, 201, and Plaintiff UD on June 7, 2013, but the Tax Tribunal dismissed all the Plaintiffs’ appeals on November 18, 2013.

G. The Plaintiffs were dissatisfied with this and filed the instant lawsuit on January 10, 2014.

[Ground for Recognition: Facts without dispute, Gap 1 through 3, 5 through 7, 9 through 11, Eul 1 and 2

2. The assertion and judgment

A. The plaintiff's assertion

1) The assertion that there is a legitimate cause for transaction practice

The retirement of shares of this case constitutes a transaction between persons who are not in a special relationship, and where it is deemed that there is a justifiable reason in light of the transactional practice,” and thus, gift tax cannot be imposed. Nevertheless, the Defendants refused the Plaintiffs’ request for correction. Thus, the disposition of this case is unlawful.

2) The allegation that there is no benefit from the retirement of the shares of this case to the plaintiffs

In the case of reduction of capital such as the retirement of shares in this case, gift tax can be imposed only when the existing shareholders gain profit. However, in the case of this case, there is no benefit granted to the Plaintiffs fromCC Construction when considering the market price, etc. of shares B. Nevertheless, the Defendants refused the Plaintiffs’ request for correction. Thus, the disposition in this case is unlawful.

(b) Related statutes;

Attached Form is as shown in the attached Form.

C. Determination

A) Grounds for the Defendants’ disposition

The defendants asserted to the effect that the disposition of this case is legitimate, since the case of the retirement of the shares of this case cannot be seen as "the case where justifiable reasons exist in light of the transaction practices." Based on the above, B does not immediately retire after acquiring the shares of this case, and completed the capital reduction registration after about five years and eight months. This is not recognized in Articles 341 and 342 of the Commercial Act, so it cannot be viewed as a case where justifiable reasons exist in the transaction practices. (2) The transaction price of the shares of this case between B andCC Construction is 】 】 】 the transaction price of the shares of this case is 】 】. EE securities is eegggs per share, the net asset value is eeggs per share, and the value of the supplementary evaluation method applied as of December 31, 2002 x x fff x x the exchange x the above exchange x it cannot be viewed as an adequate transaction practice.

However, considering the circumstances such as Gap's statement of evidence Nos. 4, 14, and 17 and the grounds for certification as seen earlier, it appears that BB's purchasing and retirement of the shares of this case fromCC Construction constitutes "a transaction between parties other than those with a special relationship under Article 42 (3) of the Inheritance Tax and Gift Tax Act where it is recognized that there is a justifiable reason for transaction practice," and therefore, the disposition of this case is unlawful.

B) Absence of special relationship

First, there is no dispute between the parties that there is no special relationship under Article 42(3) of the Inheritance Tax and Gift Tax Act, Articles 31-9(1)1 and 19(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22042, Feb. 18, 2010; hereinafter “Enforcement Decree of the Inheritance Tax and Gift Tax Act”).

C) The issue at the time of the instant stock retirement

BB purchased the instant shares fromCC Construction on April 23, 2004. Since BB did not carry out the capital reduction procedure after purchasing its own shares, it decided to retire all the instant shares on November 27, 2009 with a special resolution of a special shareholders' meeting at the time of the lapse of five years, and on January 1, 2010, the completion of capital reduction registration on January 15, 2010 is as mentioned above. (1) However, according to Articles 341 and 342 of the Commercial Act, in principle, a stock company may acquire its own shares on its own account in exceptional cases where it fails to acquire its own shares, but the Commercial Act does not provide for the effect of acquiring its own shares without delay after acquiring its own shares, and the Commercial Act does not provide for the effect of acquiring its own shares if it did not carry out the procedure for invalidation without delay. However, a stock company that acquired its own shares can retire its shares without delay on the ground that it did not retire its shares without delay for 29 years (see Supreme Court Decision 2094Da94, etc.

However, in addition to the facts and evidence examined above, since BB can acknowledge the fact that it acquired the shares of this case for the purpose of the initial retirement, it cannot be concluded that BB's purchase and retirement of the shares of this case constitutes "the case where there is no justifiable reason in light of the transaction practice" merely on the ground that there exists a period exceeding five years between the purchase and retirement of the shares of this case.

(2) Article 35(1) and (2) of the Inheritance Tax and Gift Tax Act provides that where a third person acquires property from another person at a price lower than the market price or transfers property to another person at a price higher than the market price, the difference between such price and the market price shall be

However, in cases of transfer or acquisition between persons who are not specially related persons, "it shall not have any justifiable reason in light of the transaction practices." The purport of these provisions is to interpret that the same applies to cases under Article 42 of the Inheritance Tax and Gift Tax Act, where profits equivalent to the difference between the price and the market price are actually transferred without compensation through abnormal methods that manipulates the transaction price for the benefit of the trading partner, thereby coping with abnormal donation acts and promoting fair taxation by imposing gift tax on the benefits acquired by the trading partner, but it is generally difficult to view that there is a difference between the price and the market price, just because there is a difference between the price and the transaction between those who are not specially related persons, the difference is difficult to be deemed to have been donated to the trading partner. Thus, in cases of transactions between those who are not specially related persons, unlike the transaction between the special related persons, there is no justifiable reason in light of the transaction practices (see Supreme Court Decision 2013Du5081, Aug. 23, 2013).

D) The issue of trading price, etc. of the instant shares

In light of the taxation requirement of Article 35(2) of the Inheritance Tax and Gift Tax Act, where a property is transferred at a high price, there is no justifiable reason for the transaction’s practice. (1) It is reasonable to view that there is a “justifiable reason for the transaction’s practice” under Article 35(2) of the Act in the case where a transaction party who transferred or acquired the property at a high price has a reasonable reason to believe the transaction price at a reasonable price reflecting the objective exchange value as well as where there is no such reason, and even if there is no objective reason for not deeming that the transferee’s acquisition of the property at the market price at a reasonable price from a reasonable economic perspective was an abnormal reason from a reasonable economic person (see Supreme Court Decision 2013Du5081, Aug. 23, 2013). As seen earlier, Articles 35 and 42 of the Inheritance Tax and Gift Tax Act as mentioned above.

As such, the above legal principle should be interpreted as the same as the case of Article 42 of the Inheritance Tax and Gift Tax Act, which provides for the reduction of capital, such as the retirement of shares in this case. Therefore, self-ownership should be

(1) In the case of capital reduction through the purchase of food, the parties to the transaction who have transferred or acquired shares at a low price.

of such transaction value as may be reasonably reflected in the objective exchange value; and

(2) In a case where there is an objective reason that the transferor of shares (BB in this case) received shares at the transaction price is unreasonable from the viewpoint of a reasonable economic person, the case where there is an objective reason that does not seem to have been normal from the viewpoint of a reasonable economic person, the case where there is a justifiable reason for the transaction practice under Article 42(3) of the Inheritance Tax and Gift Tax Act.

In light of the above legal principles, according to the evidence evidence Nos. 14 and 15, as to the shares of BB from February 6, 2004 to March 4, 2010, the following [Attachment 2] share purchase and sale was made nine times (the first time of Nos. 2 is the distance between Plaintiff ChoA and 46 employees) from February 6, 2004 to March 4, 201, and the following [Attachment 2] transaction parties are not related to the special relation such as family or relatives, and each transaction price is formed between 10,000 won per share and 22,300 won. Thus, since the purchase price falls under the transaction price of the shares between B andCC construction 】 BB 】 because the transaction price of shares falls under considerably higher than the general transaction price of shares 】 BB 】 where there was a reasonable reason to believe that there was an objective transaction price reflected by the parties to the transaction who transferred and acquired shares at an objective price.”

not only falls under subparagraph (B), but also from the viewpoint of BB, the acquisition of shares from the position of B to the transaction price.

Since there is an objective reason that could not be seen as abnormal from the viewpoint of a person with an economic perspective, it is also considered that there is a justifiable reason in the practice of transaction under Article 42(3) of the Inheritance Tax and Gift Tax Act.

As to this, the Defendants appears to have argued to the effect that the EE securities 】 (based on the acquisition price of the stocks of this case and net asset value through the appraisal by the accounting firm 】 (based on the evaluation of the accounting firm 】 The acquisition price of the stocks of this case is 00 won per share, and the net asset value per share of this case is 00 won per share on December 31, 2002 as a result of the audit of the financial statements on the CC construction by the accounting firm 】 the net asset value per share of this case on April 23, 2004 can be recognized as 00 reasons. Thus, the value of the stocks of this case between the Plaintiff andCC Construction 】 (the transaction price of this case 】 】 the transaction price of each of the above stocks 】 】 】 13.8%, 88.9%, 70.3%, which corresponds to the domestic securities market value 】 40%, which is less than the net asset value at the time of the exchange 】 204%.

E) Sub-decisions

Therefore, since the capital reduction through the purchase of shares in this case constitutes a case where there is a justifiable reason in light of the practice of transaction under Article 42(3) of the Inheritance Tax and Gift Tax Act, the gift tax cannot be levied. The instant disposition based on a different premise is unlawful without the need for further review as to other issues. In addition, in light of the circumstances described in the above sub-paragraph (d), profits granted to the Plaintiffs by the retirement of shares in this case as alleged by the Plaintiffs.

Therefore, there may be room to view that gift tax may not be imposed.

3. Conclusion

If so, the plaintiffs' claims are reasonable, and it is decided as per Disposition.