Cho High Court Decision 201Do3520 ( November 24, 2011)

The calculation of the value of donated property shall not be deemed an objective and reasonable method.

It cannot be deemed that calculating the value of donated property is based on objective and reasonable methods, and it is unlawful against predictability or taxation, contrary to the predictability or equity, by increasing the value of donated property only when it is subject to gift tax by gratuitously transferring or contributing the profits equivalent to the difference between the value of stocks and the value of stocks before the donation of real estate

2012 disposition of revocation of imposition of gift tax, etc.

XX

The Director of Gangnam District Office

September 28, 2012

November 2, 2012

1. The Defendant’s disposition of imposing gift tax of KRW 000 (including additional tax) against the Plaintiff on July 1, 2011 shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. 1/10 of the costs of lawsuit shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

Paragraph 1 and the defendant on July 1, 201 revoke the imposition of gift tax of KRW 000 (including additional tax) against the plaintiff on July 1, 201.

1. Details of the disposition;

"가. 지AA은 2006. 1.경 당시 비상장법인인 XX건업 주식회사(2010. 1. 20. OO주식회사로 상호가 변경되었다. 이하소외 회사'라 한다.)의 발행주식 5,000주(발행주식 총수의 100%)를 보유하고 있었다.", "나. 지AA은 2006. 2. 27. 아래 〈표1> 기재와 같이 특수관계자인 원고 등 8인(이하원고 등'이라 한다)에게 소외 회사의 주식 합계 4,182주(발행주식 총수의 83.64%, 이하 '이 사건 주식l이라 한다)를 액면가인 주당 000원에 양도하였다.", "다. 지AA의 조부(祖父)인 지BB은 2006. 2. 28. 소외 회사에 서울 관악구 XX동 42-1 대 2,112㎡ 및 그 지상 3층 건물(이하 '이 사건 부동산'이라 한다)을 증여하고, 2006. 3. 3. 소외 회사 명의로 이 사건 부동산에 관한 소유권이전등기를 마쳤다.",라. 소외 회사는 이 사건 부동산에 관한 자산수증이익 000원을 익금에 산입하여 2006 사업연도 귀속 법인세 000원을 신고 • 납부하였다.

E. On July 1, 2011, the Defendant imposed capital gains tax of 000 won on the ground that “The transfer of the instant shares constitutes a low price transfer between the related parties, and thus, the provision regarding the wrongful calculation panel shall apply.” On July 1, 201, the Defendant imposed and notified the Plaintiff of KRW 00 (including additional tax) on the ground that “the non-party company should be deemed to have donated the Plaintiff’s stock value increase due to the gift of the instant real estate to the branchB” (hereinafter referred to as “taxation imposition disposition of gift tax”), and “the difference between the transfer value of the instant shares and the appraised value calculated by the supplementary assessment method of the non-party company’s shares shall be deemed to be a gift interest” (hereinafter referred to as “taxation disposition of gift tax of this case”). The Defendant imposed and notified the gift tax of KRW 00 (including additional tax) on the ground that each of the above gift tax disposition of this case should be deemed to be a gift interest.”

F. The Plaintiff filed an appeal on September 23, 201, but received a decision of dismissal from the Tax Tribunal on November 24, 201.

[Reasons for Recognition] Facts without dispute, Gap evidence 1, 2, 3, Eul evidence 1 to 7 (including provisional number), the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

(1) As to the imposition of gift tax 1

(A) Absence of donation and illegality of the calculation method of donated property

The increase in the value of the shares of the non-party company due to the instant real estate donation is merely an incidental effect that the branchB made the donation of the instant real estate to the non-party company. Thus, there is no donation made by the branchB against the plaintiff. Even if there is a donation made by the branchB against the plaintiff, the first gift tax was imposed pursuant to Articles 2(3) and 42(1)3 of the Inheritance Tax and Gift Tax Act (amended by Act No. 8139, Dec. 30, 2006; hereinafter referred to as the “former Inheritance Tax and Gift Tax Act”). Article 2(3) does not stipulate the method of calculating the value of the instant real estate, but does not apply Article 42(1)3, different from the type of the transaction of the instant real estate.

(b) Taxation on unrealized benefits;

The first gift tax is imposed on unrealized gain, such as the increase in stock value. In order to impose unrealized gain on unrealized gain, the issue of fair and accurate measurement of taxable gain, and the establishment of supplementary regulations on the decline in asset value should be resolved. However, in the absence of such prior resolution, it is against the principle of excessive prohibition to impose gift tax by deeming the increase in stock value, which is unrealized gain, as the subject of taxation, as the subject of taxation.

(c) double taxation;

The non-party company already paid corporate tax on the income accruing from the receipt of assets related to the instant real estate, and the Plaintiff bears dividend income tax when receiving dividends from the non-party company to increase the value of assets, and the Plaintiff bears capital gains tax on the increase in the value of assets. However, the imposition of gift tax on the Plaintiff is in violation of Article 2(2) of the former Inheritance Tax and Gift Tax

(D) Violation of the equality principle

The tax authority imposes gift tax on shareholders only when the share value has increased due to a corporation’s gratuitous transaction, and when the share value has increased due to a corporation’s onerous transaction, gift tax is not imposed on shareholders. The two are the same economic substance as the shares value has increased due to a corporation’s transaction without a shareholder’s property contribution. Therefore, imposing gift tax only when the share value has increased due to a capital transaction without reasonable grounds is contrary to the equality principle

(e) The applicable law of imposing additional tax

Until March 2006, the Defendant authoritative interpretation to the effect that gift tax is not levied. Since the Plaintiff trusted this, and did not return and pay gift tax, it constitutes a case where justifiable grounds exist to neglect the duty to report the gift tax. Therefore, the part on imposition of gift tax, among the disposition imposing gift tax, is unlawful.

(2) As to the imposition of gift tax by the second gift tax

Although the gift tax was imposed on the difference between the transfer value of the shares of the non-party company calculated by the supplementary evaluation method and the transfer value of the shares of the non-party company, it constitutes double taxation on the difference between the market value and the actual transaction value, and thus, the imposition of gift tax is unlawful.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) As to the imposition of gift tax 1

(A) Non-existence of gift

Article 2(3) of the former Inheritance Tax and Gift Tax Act provides that “The term “donation” means a free transfer (including transfer at a remarkably low price) of any tangible or intangible property to another person by direct or indirect means that can calculate economic value, regardless of the name, form, purpose, etc. of the act or transaction, or an increase in property value of another person by means of contribution, or an increase in the concept of comprehensive donation under the Civil Act and other tax-related Acts, and Articles 33 through 42 of the former Inheritance Tax and Gift Tax Act are converted to an example provision on the calculation of donated property by supplementing the contents of the previous individual donation, and Article 2(3) of the former Inheritance Tax and Gift Tax Act is confirmed and declared. In light of the legislative intent of Article 2(3) of the former Inheritance Tax and Gift Tax Act and Article 2(3) of the former Inheritance Tax and Gift Tax Act and Article 2(3) of the former Inheritance Tax and Gift Tax Act and Article 281(2) of the former Inheritance Tax and Gift Tax Act and Article 281(2) of the Inheritance Tax Act are applicable.

Inasmuch as the Plaintiff transferred the interest of increase in stock value to the Plaintiff by gifting the instant real estate to the Nonparty Company, it constitutes “donation” under Article 2(3) of the former Inheritance Tax and Gift Tax Act. As such, the Plaintiff’s assertion on the premise is without merit.

(B) Violation of the calculation method of donated property

1) Under the principle of no taxation without law, the interpretation of tax laws shall be interpreted in accordance with the text of the law unless there are special circumstances, and shall not be extensively interpreted or analogically interpreted without reasonable grounds. However, where it is necessary to clarify the meaning through the interpretation between the laws and regulations, it is inevitable to make a combined interpretation with the objective taking into account the legislative intent and purpose, etc. to the extent that it does not undermine the legal stability and predictability pursued by the tax law (see Supreme Court Decision 2007Du4438, Feb. 15, 2008).

2) Possibility of Article 42(1)3 of the former Inheritance Tax and Gift Tax Act

(1) As to the former part of this Act, profits derived from "an increase or decrease in corporate capital (referring to capital transactions)" is subject to taxation, and this is a provision to impose taxes on the direct or indirect profits resulting from a change in the appraised value of property or ownership without paying any consideration to be paid ordinarily by failing to participate in or participate in the merger, division, reduction of capital, etc. of a corporation. Since a branchB made a donation of the instant real estate to a non-party company is only a profit and loss transaction giving rise to increase or decrease in the capital of the non-party company, it does not fall under the type of transaction prescribed in the former part.

(2) With regard to the latter part of this Article, the benefit derived from the change in ownership shares or the price of a corporation is subject to taxation; therefore, the type of transaction referred to above shall not be deemed the ownership shares or any transaction the change in the shareholder's share or the price of which is subject to taxation (if the shareholder's share price is changed, it shall mean any transaction the shareholder's share or any transaction the change in the shareholder's share or the price of which is subject to taxation, so there shall be no meaning of the above separate provision as mentioned above), at least the business acquisition limit, the business exchange and the change in the corporation's organization. Furthermore, the transfer of business, the business exchange and the change in the corporation's organization are not the unique concept under the tax law, but shall, in principle, be subject to judicial interpretation

In full view of the purport of the entire pleadings in the statement of evidence Nos. 5 through 14 (including the provisional number) of this case, the real estate donation of this case and the title of the business registration of this case was changed from the branchB to the non-party company from the branchB, and the non-party company succeeded to the obligation to return deposit money of the branchB from the branchB. For the real estate management of this case, the branchB employs the HongCC, the non-party company employed the branch bank, the sales from the lease of the real estate of this case under the income statement of the non-party company other than the lawsuit of 2006 to 2011, the sales from the lease of the real estate of this case under the income statement of the non-party company on the balance sheet of the non-party company, and the value of the real estate of this case as stated

According to the above facts, although the non-party company acquired important assets for the real estate leasing business of the branchB, the business transfer refers to the transfer of all the business organized for a certain business purpose, i.e., human and material organization as a whole while maintaining its unity (see, e.g., Commercial Act - Article 41 of the Commercial Act, Supreme Court Decision 2007Da17123, Jan. 15, 2009). Thus, it is difficult to deem the business transfer to fall under the business transfer, and there is no other circumstance to regard the business exchange and the business change to fall under the business change, and there is no other similar transaction type.

3) Possibility of Article 41(1) of the former Inheritance Tax and Gift Tax Act

Article 41 (1) of the former Inheritance Tax and Gift Tax Act provides that "where a person who has a special relationship with a shareholder, etc. of a corporation (hereinafter "specific corporation") who has a loss, or whose business has been suspended or closed, obtains profits from such transaction as donation of property to the specific corporation, the amount equivalent to such profits shall be the value of the property donated to the shareholder, etc. of the specific corporation concerned." Article 31 (1) 1 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 19899 of Feb. 28, 2007) provides that "specific corporation" means a loss under Article 18 (1) 1 of the Enforcement Decree of the Corporate Tax Act (excluding an Association-registered corporation under the Securities and Exchange Act) from among the corporations that are not listed on the Korea Stock Exchange until the business year to which the date of donation belongs, the loss for the business year to which the donation date belongs shall be the value of the property donated under Article 41 (1) of the former Inheritance Tax and Gift Tax Act."

In the instant case, although the non-party company did not carry forward any deficit, the non-party company is a corporation with deficit (i.e., before including the amount of donation, etc. of property in its gross income) in the business year 2006 to which the donation date belongs (i.e., the amount of income for the business year - the amount included in its gross income as the profit accruing from the receipt of assets) (i.e., the evidence No. 3-2, No. 4), and the case where the plaintiff, a shareholder of the non-party company, obtains profits due to the gift of the non-party company in the instant case from

4) Whether legal stability and predictability are added

① Since the instant real estate donation is a type of transaction similar to that stipulated in Article 41 of the former Inheritance Tax and Gift Tax Act; the same provision was newly established on December 30, 1996 to cope with such changes in the Inheritance Tax and Gift Tax Act; and it is difficult to regard the instant real estate donation as a new type of gift tax that could not have been predicted in advance; and (2) the tax authority imposed corporate tax on the shareholders of the instant real estate for a considerable period of time after the introduction of the comprehensive gift taxation principle; and (3) it is difficult to fairly and accurately calculate the gift tax base based on the revised provision of Article 41 of the former Inheritance Tax and Gift Tax Act, such as the newly established provision on the 4th Inheritance Tax and Gift Tax and Gift Tax Act and the revised provision on the 4th comprehensive gift taxation method (see, e.g., Supreme Court en banc Decision 201Du48509, Jun. 17, 2004; Supreme Court Decision 200Du539, Apr. 11, 2005).

5) Sub-decisions

Therefore, in the interpretation of the language and text, Article 42(1)3 of the former Inheritance Tax and Gift Tax Act cannot be applied directly to the increase in the Plaintiff’s share value due to the gift of real estate of this case. In the event of a joint-purpose interpretation taking into account the legislative intent and purpose of the provisions, the legal stability and predictability of the taxpayer would be infringed on. Therefore, the imposition of gift tax on the first instance application of the said provision is unlawful without any need to examine the remainder of the Plaintiff’s assertion. Therefore, the Plaintiff’s above assertion

(2) As to the imposition of gift tax by the second gift tax

(A) Since gift tax and capital gains tax vary between the requirements and timing for establishing tax liability and taxpayers, in cases where the tax authority imposes each disposition, it shall be independently determined according to the substance of each taxation requirement, and if both of them meet the respective taxation requirements, only one taxation is possible, unless there is any special provision excluding double application. Article 2(2) of the Inheritance Tax and Gift Tax Act provides that gift tax shall not be imposed when income tax is imposed on a donee pursuant to the Income Tax Act on the donated donated property under paragraph (1) of the same Article, in light of the language and text thereof and the nature of the gift tax as a supplementary tax for income tax, in cases where gift tax is imposed on a donee, it does not fall under a special provision excluding double application of capital gains tax and provisions on gift tax (see, e.g., Supreme Court Decision 2002Du12458, May 13, 2003).

(B) With respect to the transfer of the instant shares, the Defendant imposed gift tax on the Plaintiff, etc. on the difference between the actual transfer value of the relevant shares and the appraised value calculated by the supplementary assessment method, and imposed transfer income tax on the Plaintiff, etc. by using the appraised value as the transfer value. Therefore, the disposition imposing transfer income tax on the Plaintiff, etc. and the disposition imposing gift tax on the second gift tax on the Plaintiff, etc. on the Plaintiff, etc. on the ground that the imposition of transfer income tax on the Plaintiff and the second gift tax cannot be deemed as

3. Conclusion

Therefore, the plaintiff's claim is justified within the scope of the above recognition, and the remaining claims are dismissed as it is without merit. It is so decided as per Disposition.