National High Court Decision 2006Du1875 (207.05)

The propriety of any disposition taken on the part of a related party or the transfer of listed shares into the final market price by an improper act

Since shares and equity shares of a stock-listed corporation are deemed to be the market price of the Korea Securities and Futures Exchange every two months before and after the base date of appraisal, it is reasonable to apply the denial of wrongful calculation by considering the difference between the market price reported and the market price in transactions with a person with a special relationship as the under-reported amount.

The contents of the decision shall be the same as attached.

Article 101 (Calculation of Capital Gains by Wrongful Acts)

Article 98 (Dispudiation of Wrongful Calculation)

The Defendant’s imposition of capital gains tax of KRW 1,387,727,610 against the Plaintiff on December 15, 2005 shall be revoked.

1. Details of the disposition;

A. The deceased Kim Jong-hoon (Death on February 20, 201) is a founder of ○○ Group, including ○○ Industry Co., Ltd. (hereinafter referred to as “○○ Industry”), a listed corporation, and ○○ Urban Gas Co., Ltd. (hereinafter referred to as “○○ Urban Gas”), and the plaintiff and the non-party Kim Il-hoon et al. (hereinafter referred to as “the plaintiff et al.”) are children of the deceased.

B. After the deceased's death, the plaintiff et al. decided to transfer or take over the shares of the corporation belonging to the ○○ Group to divide the ○○ Group including the ○ Industry and the ○○ Urban Gas. Accordingly, on June 12, 2001, the plaintiff sold 489,71 shares of the ○ Industry to the ○○ Industries at KRW 27,600 per share, which is the ○○ Industries's closing market price, through mass trade. On June 27, 2001, the plaintiff sold 20,000 shares of the ○○ Urban Gas to the ○○ branch of the Korea Stock Exchange at KRW 17,300 per share, which is the ○○ branch of the Korea Stock Exchange (hereinafter referred to as "the shares of this case").

C. The Plaintiff reported and paid to the Defendant the transfer value per share of the instant shares at KRW 27,600 for the shares of ○○ Industry, and KRW 17,300 for the shares of ○○ Urban Gas.

D. On December 15, 2005, the Defendant: (a) deemed that the stock transaction in this case was conducted by means of a large volume transaction with a person with a special relationship, and the tax burden on the pertinent income was reduced unfairly; (b) as such, it constitutes an unfair act stipulated in Article 101 of the Income Tax Act; and (c) Articles 98 and 167 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17456, Dec. 31, 2001; hereinafter the same shall apply); (c) pursuant to the latter part of Article 60(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 18, 2002; hereinafter the same shall apply); (d) pursuant to Article 63(1)1(a) and (3) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 17456, Dec. 31, 2001; (c) pursuant to the average market price of the Plaintiff’s 307.

[Ground of recognition] Facts without dispute, Gap's evidence 1 and 2's evidence 1, 2, Gap's evidence 3 through 6, Gap's evidence 8-1 to 6, Eul's evidence 1, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

① Since a large-time transaction that the Plaintiff used to transfer the instant shares to Nonparty Kim Jong-hun is a market price formed in the stock market within the hours of the stock market in accordance with the securities transaction-related Acts and subordinate statutes, the transaction of the instant shares is reasonable market price. Nevertheless, the Defendant’s disposition that deemed the instant share transaction as an unfair act that unfairly reduces tax burden is unlawful.

② If the largest shareholder and his specially related shareholders hold more than 50/100 of the total number of outstanding shares of the pertinent corporation, the provisions of Article 60(3) of the former Inheritance Tax and Gift Tax Act stipulating that the amount of 30/100 of the appraised value under Article 60(1)1 of the former Inheritance Tax and Gift Tax Act shall be added to the shares held by other shareholders solely on the ground that the shares held by the largest shareholder, etc. are shares held by them. Even if the shares held by the largest shareholder have special value by which they can exercise control over the pertinent company, and so-called 'management right premium', it takes a method of imposing an additional tax uniformly without properly grasping the value of the management premium that has been reduced through a stock transaction. Accordingly, Article 60(3) of the former Inheritance Tax and Gift Tax Act unfairly infringes on equality and property rights under the Constitution, violates the principle of prohibition of excessive restriction under the Constitution, and the principle

The instant disposition is unlawful.

(b) Related statutes;

Article 101 (Calculation of Capital Gains by Wrongful Acts)

Article 98 (Dispudiation of Wrongful Calculation)

Article 167 (Calculation of Wrongful Act in Transfer Income Tax)

Article 60 (Principles, etc. of Appraisal)

Article 63 (Appraisal of Securities, etc.)

C. Determination

1) 1 The argument

Articles 98(2)1 and 167(3), (4) and (5) of the former Enforcement Decree of the Income Tax Act provide that where it is deemed that any tax burden has been unjustly reduced by transferring assets to a related party at a price lower than the market price, the transfer price shall be calculated on the basis of the market price, and the "market price" in this context shall be based on the value appraised by applying mutatis mutandis Articles 60 through 64 of the former Inheritance Tax and Gift Tax Act and Articles 49 through 59 of the Enforcement Decree of the same Act. In the latter part of Article 60(1) of the former Inheritance Tax and Gift Tax Act, the value of assets shall be based on the market price as of the base date for appraisal (transfer date or acquisition date in the case of transfer income tax) and the value appraised by the method of assessment under Article 63(1)1(a) shall be deemed as the market price in the latter part of the same paragraph, while Article 60

In light of the above, it is reasonable to view that the latter part of Article 60(1) of the former Inheritance Tax and Gift Tax Act is the special provision under Article 60(2) of the same Act with respect to the listed shares identical to the shares of this case, and thus, the latter part of Article 60(1) of the same Act shall be preferentially applied to the shares of this case. Therefore, the value assessed by applying Article 63(1)1(a) and (3) of the Inheritance Tax and Gift Tax Act to the shares of this case under the latter part of Article 60(1) of the former Inheritance Tax and Gift Tax Act shall be the market value per share, and the above assertion by the Plaintiff on a different premise is without merit.

(2) 2) The argument

The legislative intent of Article 60 (3) of the former Inheritance Tax and Gift Tax Act is to make a fair evaluation method in order to prevent the transfer of stocks, etc. held by the largest shareholder, etc. of a lower amount of tax without being subject to legitimate taxation. The special value of stocks held by the largest shareholder, i.e., the special value of the stocks held by the largest shareholder, i., the structure of the company's capital and liabilities, and the management performance, which can vary depending on various factors such as the management performance, so it is not easy to grasp the value individually, and the issue of whether to give a certain degree of value in the evaluation of the control value is a matter that the legislators may choose within the scope that does not deviate from the legislative formation discretion, considering various social and economic factors (see, e.g., Constitutional Court Decision 2006Hun-Ba22, Jan. 17, 2007). Therefore, Article 60 (3) of the former Inheritance Tax and Gift Tax Act is unreasonable, and thus, it cannot be viewed as a violation of the above principle of no taxation without law.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so ordered as per Disposition.

partnership.