Whether the issue of this case’s capital increase with new stocks is exempt from taxation by the third party allotment method.

Paid-in capital increase does not fall under the third party allocation method pursuant to Article 2(3) of the Securities and Exchange Act, which is subject to non-taxation, and the gift value calculation is lawful.

Article 2 of the Inheritance Tax and Gift Tax Act

2014Guhap61927 Revocation of Disposition of Imposition of Gift Tax

IsaA

Head of Nowon Tax Office

April 17, 2015

May 8, 2015

1. All of the plaintiff's claims are dismissed.

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

Each disposition of KRW 00,00,000,000,000, and KRW 00,000,000, which the Defendant imposed on the Plaintiff on December 1, 2013, shall be revoked.

A. On August 16, 2007, the Plaintiff paid KRW 000,000 per share price (00,000 per share price) among new shares issued by BB (CC Energy Co., Ltd., Ltd., a KOSDAQ-listed corporation; hereinafter “instant company”) by a third party’s allocation method on August 16, 2007.

B. From April 30, 2012 to June 8, 2012, the Daegu regional tax office conducted an investigation of stock change with respect to the instant company, not the method of securities offering under Article 2(3) of the former Securities and Exchange Act (amended by Act No. 8635, Aug. 3, 2007; hereinafter the same shall apply) but notified the Plaintiff that the value per share of the stocks was lower than the value of the new stocks (amended by Act No. 8828, Dec. 31, 2007; hereinafter the same shall apply), Article 39(1)1(c) of the former Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20621, Feb. 22, 2008); Article 29(3)1 and (4) of the former Enforcement Decree of the same Act (amended by Presidential Decree No. 20621, Feb. 22, 2008; hereinafter the same).

○ Evaluation Value per share

○ Profits from donation per share: Values of KRW 0,000 - Acceptance value of KRW 000 = 000 won

C. On December 2, 2013, the Defendant imposed a total of KRW 000,000,000 on the Plaintiff as follows:

(hereinafter referred to as the "disposition of this case").

D. The Plaintiff filed an appeal with the Tax Tribunal on February 20, 2014, but was dismissed on April 22, 2014.

[Ground of recognition] Unsatisfy, Gap evidence 1 to 3, Eul evidence 1 and 2 (including paper numbers; hereinafter the same shall apply)

2. Whether the instant disposition is lawful

A. Summary of the Plaintiff’s assertion

For the following reasons, the instant disposition is unlawful.

The capital increase in this case constitutes a third party allocation method following the offering of securities under Article 2(3) of the Securities and Exchange Act, which is exempt from taxation.

○ As the price of new shares issued through capital increase with consideration of the instant case is calculated in accordance with Article 57 of the Regulations on Issuance and Public Disclosure of Securities (amended by the Financial Services Commission Notice No. 2008-8 of April 7, 2008, hereinafter referred to as the “securities provision”), it shall be deemed as the market price under Article 39(1) of the Inheritance Tax and Gift Tax Act.

○ It is illegal that the appraised value per share before the capital increase is applied as a closing price on the day of the split-off.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) The details and documents disclosed by the instant company to the electronic disclosure system of the Financial Supervisory Service for capital increase with consideration are as follows.

2) The par value division process of the instant shares is as follows.

○ Decision on May 8, 2007 on the split of shares with the face value of KRW 0,000 per share from KRW 0,000.

○ Report on June 28, 2007 Correction of Stock Splits

○ Suspension of trading from July 27, 2007 to August 13, 2007

○ on August 14, 2007 the listing of new shares at par value.

3) When the instant company conducted capital increase with capital increase by the third party allotment method on August 16, 2007, it received protection for the entire shares issued pursuant to Article 12(1) of the Securities and Exchange Regulations for one year. At the time, the third party allotment party was 00 persons, but among them, DD, EE, FF was the representative director, director, and auditor of the instant company.

4) The changes in the final market price in the Korea Exchange are as follows:

[Reasons for Recognition] Facts without dispute, entry in Eul evidence Nos. 2 through 5 (including virtual numbers), the whole pleadings

Purport

D. Determination

1) Whether the method falls under Article 2 (3) of the Securities and Exchange Act

No gift tax shall be imposed on capital increase issued through the offering of securities to a third party under Article 2(3) of the Securities and Exchange Act (Article 39(1)1 (a) of the Inheritance Tax and Gift Tax Act). In order to constitute the method of public offering of securities under Article 2(3) of the Securities and Exchange Act, the number of persons who are solicited to acquire securities shall be 50 persons or more. However, even if the number of persons who are solicited to subscribe is less than 50 persons, it may be transferred to 50 persons or more within one year from the date of issuance of securities, and it falls under the standard of public offering of securities as determined by the Financial Supervisory Commission (Article 2-4(1) and (

Although there were 52 third party parties to whom shares were allocated at the time of the instant offering of new shares, three of them are officers of the instant company, and the said three of them should be excluded from the calculation of the third party to whom shares were allocated (Article 2(3) of the Securities and Exchange Act and Article 2-4(3)2 of the Enforcement Decree of the same Act), the third party to whom shares were allocated is 49 persons (Article 2(3) of the Securities and Exchange Act and Article 2-4(3)2 of the Enforcement Decree of the same Act). Meanwhile, since the instant company received shares for one year, it may not be transferred to 50 persons or more within one year from the date of issuance. Accordingly, the instant offering of new shares

2) Whether the issue price of new shares by the securities provision falls under the market price under the Inheritance Tax and Gift Tax Act

Where a listed corporation conducts capital increase in the manner of allocating capital to a third party, the issue value shall be calculated by applying the discount rate set within the limit of 10/100 of the existing share price as of the date preceding the date of resolution of the board of directors for capital increase (Article 57(2) of the Securities Regulations).

On the other hand, the profit acquired by a person who is not a shareholder of a corporation by directly obtaining an allotment of new stocks from the corporation at a price lower than the market price shall be calculated by subtracting the subscription price per new stocks from the smaller of the value per stock calculated in the formula of "((the appraised value per stock before the increase x the total number of issued stocks before the increase x the number of issued stocks)" ± (the total number of issued stocks before the increase x the number of issued stocks increased by the increase x the number of issued stocks)" ± (the total number of issued stocks before the increase x the number of issued stocks increased by the increase x the number of issued stocks)", and then multiplying the allocated number by the number of new stocks and the gift equivalent to this amount (Article 39(1)1 (c) of the Inheritance Tax

The foregoing provision on securities only provides for a certain limitation in order to ensure the fairness and transparency of the issuance of new shares, while the above provision on the Inheritance Tax and Gift Tax Act provides for the calculation of profits equivalent to the difference by deeming the difference to have been donated in cases where new shares are acquired at a price lower than the market price. In light of the legislative purport of separate legislation, even if the value per share was calculated in accordance with the securities provision, profits of donation deemed granted under the Inheritance Tax and Gift Tax Act may be calculated according to the relevant provision. The value per share calculated in accordance with the securities provision, as alleged by the Plaintiff, is not deemed as the market price under Article 39(1)1 (c) of the Inheritance Tax and Gift Tax Act (see Supreme Court Decision 2013Du21670, Mar. 13, 2014)

3) As to the assessment value per share

In order to calculate the value of donated property, stocks traded on the Korea Stock Exchange shall be assessed as the average daily market price at the Korea Stock Exchange every two months before and after the evaluation base date, but in cases of a capital increase or merger after the evaluation base date, the average amount of the period from the day after the date when the cause occurs before and after the evaluation base date to the day before the date when the cause occurs (proviso of Article 63 (1) 1 of the Inheritance Tax and Gift Tax Act, and Article 52-2 subparagraph 3 of the Enforcement Decree

On the other hand, since the par value division is so high that the market price of ordinary stocks is so high that the transaction is not achieved smoothly or it is difficult to issue new stocks. If the par value division is made, the stock transaction is active, and the issuance of new stocks is easy, and it affects the share price.In this regard, the effect of the par value division on the share price is similar to that of capital increase, merger, etc., and the basic rules of the Inheritance Tax and Gift Tax Act (63-02) also provides that "in applying Article 52-2 of the Enforcement Decree of the Securities and Exchange Act, the reasons such as capital increase, merger, etc. include capital increase, merger, etc., or the division of the company". Therefore, the par value division is included in "reasons such as capital increase, merger, etc." as stipulated in Article 52-2 (3)

The evaluation base date of the shares before the capital increase is August 16, 2007, which is the date of the payment of shares (Article 29(4) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act), and the capital increase was made before the evaluation base date and on the evaluation base date. Pursuant to Article 52-2 subparag. 3 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, the average amount of the shares before the capital increase is appraised from August 14, 2007, which is the first transaction day after the capital increase, to August 15, 2007, which is the day before the capital increase, is a legal holiday from August 15, 2007, and thus, the appraised value per share before the capital increase is KRW 0,000, which is the closing price at the Korea Exchange as of August 14, 2007. Therefore, the disposition of this case is not unlawful.

4) Therefore, the Plaintiff’s above assertion is rejected.

3. Conclusion

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