National High Court Decision 2013J 2586 (2014.04)

In acquiring shares of the non-party, the said amount was donated to the plaintiff by granting the acquisition fund to the plaintiff on behalf of the plaintiff.

It is reasonable to view that the purchase and sale of shares is merely a transactional relationship with external appearance, and that the actual substance is to give the acquisition fund to the Plaintiff in acquiring the shares of the CCC by paying it to CCC instead of the Plaintiff.

Article 2 of the Inheritance Tax and Gift Tax Act

2014Guhap53446 Revocation of Disposition of Imposition of Gift Tax

AA

o Head of the tax office

November 27, 2014

December 18, 2014

1. The plaintiff's claim is dismissed.

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

The Defendant’s revocation of the imposition of OO (including additional tax) of gift tax for the year 2008 against the Plaintiff on February 5, 2013 (the Plaintiff sought revocation of the disposition made on February 22, 2013, but the Plaintiff appears to be an obvious clerical error in the evidence No. 1, and thus, the Defendant’s correction as of February 5, 2013, which is the date of the imposition and notification thereof, is made).

1. Details of the disposition;

A. A.K.DDDD. Corporation (hereinafter “DDD”) that is a wood manufacturing plant in Africa after jointly investing with EE, etc. on June 2002, 202. The Plaintiff’s A.K.DDD. Corporation (hereinafter “DD”). At the time of its establishment and the shareholders’ status at the end of 2006 were as listed below.

Current shareholders at the time of incorporation and at the end of 2006.

B. Around April 2008, DD acquired all the shares held by CCC, an investor, as its own shares, and transferred them to the Plaintiff on July 31, 2008. Around March 31, 2010, III, the investor, transferred all the shares of DD to BB at KRW 0 billion.

C. On March 2012, the director of the Central Regional Tax Office of China: (a) conducted a tax investigation on the Plaintiff and BB; and (b) constituted an income from leasing the Plaintiff’s overseas machinery and equipment from among the OCC’s KRW 100 million received as

The remainder of the OOO(hereinafter referred to as "the issues of this case") except the OO members shall be deemed to have donated funds created by BB through omission of sales in DD to the Plaintiff in Korea as a fund for acquiring stocks, and the Defendant notified the Plaintiff of taxation data. Accordingly, on February 5, 2013, the Defendant notified the Plaintiff of the correction and notification of the OO(including additional tax) of gift tax amount for 2008 as a result of donation of the issue amount of this case (hereinafter referred to as "the disposition of this case").

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on May 16, 2013; however, the Plaintiff filed an appeal with the Tax Tribunal:

April 4, 2014.

Facts without dispute over the basis of recognition, Gap evidence 1-1, 2, Eul evidence 1-1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

According to Article 2 (1) 2 of the Inheritance Tax and Gift Tax Act (hereinafter referred to as the "Inheritance Tax and Gift Tax Act"), in the case of non-residents, a gift tax is obligated to pay only when a non-resident receives property located in the Republic of Korea from a non-resident. DDR paid KRW 00 million to CCC, a representative director, through BBB on April 30, 2008, and acquired its own shares, and transferred the above shares to the plaintiff on July 31 of the same year. The above shares transaction was separately conducted, and the plaintiff offsets the existing vehicle rent and the vehicle rent for DD with some purchase price, and is currently unpaid only OOG HS.

Therefore, it shall be deemed that BB donated the instant issue amount to the Plaintiff as a share acquisition fund.

not, even if BB acquired shares from CCC and donated shares to the Plaintiff.

Even if the Plaintiff and BB are non-residents, they are not obligated to pay gift tax pursuant to the Inheritance Tax and Gift Tax Act. Thus, the instant disposition should be revoked.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

(1) On November 8, 2007, BB and CCC drafted an agreement with the following contents (hereinafter “instant agreement”).

In preparing this Agreement, investors CCC are referred to as “A” and referred to as “BB” for convenience.

1. A agreed on November 8, 2007 that the amount invested in DD shall be KRW 00 million and the amount invested shall be recovered.

2. Eul shall give priority to the payment of the KRW 00 million out of the investment funds of Gap, and the remainder of the KRW 00 million shall not be later than the date.

The frequency of recovery was agreed.

3. At the time of recovery of investment KRW 00 million, Party A agreed to waive all equity and hand over equity shares to the next investor.

4. On November 8, 2007, Eul agreed that Eul will first submit a debt memorandum to Gap as debt for the remaining O billion won.

5. The liquidation of a company and the sale and purchase of shares shall be entrusted to B and shall cooperate to B as much as possible with them.

6. [Omission]

November 8, 2007

A CCC

BB

C. Determination

In light of the following circumstances, in light of the above facts of recognition, the statement in Eul evidence No. 2 and the testimony of CCC, and the overall purport of the pleadings, it is reasonable to view that the sales of shares Nos. 1 and 2 of this case are merely a transactional relationship in appearance, and that it is reasonable to deem that BB donated the above money to the Plaintiff by granting the acquisition fund to BCC instead of the Plaintiff when the Plaintiff acquired the shares of CCC. Therefore, the first Plaintiff’s assertion on a different premise is without merit.

(1) The instant agreement was made between BB and CCC and, at the time of recovery of investment funds O00 million won, CC agreed to waive all equity and transfer equity shares to the next-time investors. 'CCC shall cooperate with DD to the maximum extent possible, and 'BCC shall not have any specific agreement on the date of payment of the purchase amount, etc. 'BCC’s return of investment funds to the investors designated by BBCC is deemed to have been made with a device exceeding the equity interest designated by BB in return for return of the investment funds. It is insufficient to view DD as having entered into the relevant stock sales contract with the acquisition of its own shares from CCC.

(2) The Plaintiff asserts that the source of the share purchase price paid by the DD to CCC is the amount of money deposited by HHH from the representative director of GG, who is the customer of DD, to DD, but in light of the fact that the said amount was fully deposited into the Plaintiff’s mother-friendly FF account, HH made a written confirmation that HH was repaid in DD after it was lent to BB, it appears that the said share purchase price was not directly related to DD, and even if the said share purchase price was paid, it is difficult to view that BB was paid for the acquisition of its own stocks, which was not reflected in DD’s account books.

(3) In the course of the tax investigation on April 2012, BB prepared a confirmation document stating "(3) the receipt of export and other expenses, the O00 million won of living funds, and the OO00 million won of foreign machinery and equipment rental income of AAA to the Republic of Korea to adjust DD shares, and the CCC paid KRW 250 million to the CCC." BB appears to have already paid the amount equivalent to the Plaintiff's above machinery and equipment rental income to CCC at the stage of recovering investment shares from CCC (the Plaintiff asserted that the above rental income was offset against some of the purchase price under the 2 stock transaction certificate of this case, but there is insufficient objective material to support this)" (4) the 1 stock transaction certificate of this case and the 2 stock transaction certificate of this case to the date of receipt of the 2 stock transaction certificate of this case to July 3, 2008.

In particular, the 2nd share sale certificate was received on July 31, 2008, but was received on July 3, 2008, and the process of arranging the shares of the CCC to be reverted to the plaintiff via DD was actually handled on the same day.

3. Conclusion

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