early 2012 Middle 4036, 2012west 4162 ( November 26, 2014)

No issue of stocks determined by the board of directors shall be deemed the market price.

The issue price of shares can not be deemed to have been reflected in the market price at the time of increase in the reason of the issue price.

2015Guhap61888 Revocation of Disposition of Imposition of Gift Tax

○ Kim

○ Head of tax office

November 3, 2015

January 12, 2016

1. The Defendant imposed a gift tax of KRW 728,251,030 on the Plaintiff on December 15, 2014.

706,492,633 won (this tax shall be 396,93,273 won, additional tax shall be 309,49,360 won) shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. 9/10 of the costs of lawsuit shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

Cheong-gu Office

The Defendant imposed a gift tax of KRW 728,251,030 on the Plaintiff on December 15, 2014.

126,337,430 won or more (including additional duties) shall be revoked.

1. Details of the disposition;

A. The circumstances surrounding the previous title trust

1) The ○○ System Co., Ltd. (former ○○○ Co., Ltd.; hereinafter “Nonindicted Company”) was established on June 27, 1980 with the manufacture and sale business of automobile parts as its intended business.

2) The Red ○○ corporation, a Japanese corporation, around 2004, that was the representative director of the non-party company (this is the corporation).

H. When acquiring 91,301 shares of the non-party company owned by '○○○' (hereinafter referred to as 'the non-party company') in KRW 11,041 per share, 27,643 shares among them are held in title by the plaintiff who was the head of the finance team of the non-party company, and 41,465 shares (30 percent shares) are held in title by the plaintiff who was the head of the finance team of the non-party company, and 41,465 shares (30 percent shares shares) are held in title to the plaintiff who was the managing director

(b) Particulars of capital increase increase;

On December 28, 2005, the non-party company issued new shares with a total of 60,000 shares by the method of shareholders allocation. Among them, 12,00 shares equivalent to 20% of the Plaintiff’s shares (the issuance price of KRW 24,940 per share; hereinafter “instant shares”) were allocated in the name of the Plaintiff, thereby resulting in the non-party company’s shares owned in the name of the Plaintiff (=27,643 shares in previous title trust + 12,00 shares for new shares).

(c) Details of the imposition of gift tax;

1) The plaintiff around January 2007, 39,643 shares of the non-party company, including the shares of this case, red.

All transfer income tax was transferred to the list and reported and paid.

2) The defendant conducted a tax investigation on the plaintiff's above capital gains tax return around August 2010.

Around August 201, the director of the regional tax office of ○○○ issued a regular audit of the ○○ Tax Office’s ○○ Tax Office, and notified the Defendant of the imposition of gift tax against the Plaintiff on the ground that the 39,643 share shares of the non-party company was held in title trust with the Plaintiff.

3) Accordingly, the Defendant’s amendment to the former Inheritance Tax and Gift Tax Act (amended by Act No. 8139, Dec. 30, 2006)

On September 8, 2011, pursuant to Article 45-2, the Plaintiff imposed a gift tax of KRW 97,325,490 on the previous title trust shares, and calculated the value of donated property based on KRW 24,940 per share, the issue price of the instant shares, based on the value of donated property, and imposed a gift tax of KRW 126,337,430 on the instant shares.

(d) Circumstances on the disposition of gift tax correction;

1) The director of the regional tax office of ○○ may change shares, etc. against red ○○ from February 10, 2012 to April 7, 2012

As a result of the investigation into the same situation, the Plaintiff notified the Defendant of the rectification of gift tax on the acquisition of the instant shares on the ground that the market price of the instant shares allocated to the Plaintiff in its name is not KRW 24,940 per share, but KRW 136,025 per share calculated by the supplementary assessment method prescribed by the former Inheritance Tax and Gift Tax Act. Accordingly, the Defendant issued a corrective disposition to increase the gift tax amount of KRW 126,337,430 on August 7, 2012 to KRW 637,24,180 on the Plaintiff.

2) On September 7, 2012, the Plaintiff filed an appeal with the Tax Tribunal on the disposition of increase or decrease, and on November 26, 2014, the Tax Tribunal decided that the pertinent disposition of increase or decrease shall reflect the number of shares issued by increase or decrease of its tax base and tax amount when calculating the net profit or loss per share for the assessment of the instant shares.

3) The defendant reflects the purport of the decision of the Tax Tribunal to the Enforcement Decree of the former Inheritance Tax and Gift Tax Act

After calculating the net profit and loss value per share of the instant shares in accordance with Article 29, the net asset value and the weighted average of 105,773 won per share of the instant shares, the valuation amount of the instant shares, which was calculated as a result, was adjusted to increase the gift tax of KRW 637,24,180 on December 15, 2014 as KRW 728,251,030 (=this tax + KRW 418,751,670 + penalty tax + KRW 309,49,360) as stated in paragraph (1) of the same Article (the amount of gift tax was reduced per share of the instant shares, but the amount of gift tax was increased without reducing the amount of gift tax in the process of correcting the error in the calculation of the above adjusted disposition; hereinafter referred to as "disposition exceeding the original imposition of KRW 728,251,030".

[Reasons for Recognition]

facts without dispute, Gap evidence 1, evidence 2-1, 2, 5 through 7, Eul evidence 1,

Each entry of No. 2-1 through 5, 3, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. Summary of the plaintiff's cause of claim

1) KRW 24,940 per share, the issue price of the instant shares, shall be the board of directors’ financial status, etc.

The market value of the instant shares can be deemed to be the most appropriate value taking into account the reflective circumstances and can be deemed to be the market value under Article 60 of the former Inheritance Tax and Gift Tax Act. Therefore, the Defendant’s assessed the value of the instant shares by the supplementary assessment method under Article 63 of the former Inheritance Tax and Gift Tax Act

2) Even if the instant shares were issued at a low price, the part corresponding to the difference between the market price and the issue price in the case of capital increase with shares issued by a shareholder allotment method does not constitute subject to gift tax under Article 45-2 of the former Inheritance Tax and Gift Tax Act, as it is not subject to gift tax, and furthermore, it cannot be said that the purpose of additional tax avoidance is recognized in the title trust of the instant shares. Thus,

3) The Defendant donated the Plaintiff on September 8, 201, following a tax investigation on the instant shares.

Although a tax disposition was imposed, the instant disposition was unlawful as it was based on an unlawful duplicate tax investigation, since ○○ Tax Office’s tax investigation on the gift value again conducted around 2012.

4) The value of the instant shares per share at the time of issuing new shares, as well as the former Inheritance Tax and Gift Tax Act

The instant disposition, which adopted the method of reflecting the dilution effect of capital increase with consideration by reflecting the dilution effect of capital increase with consideration of net asset value only, is unlawful, by retroactively applying the amended Inheritance Tax and Gift Tax Act.

B. Relevant statutes

Attached Form 1 is as shown in the relevant statutes.

C. Determination on the Plaintiff’s assertion as stated in the Plaintiff’s aforementioned A-1

Even in case of unlisted stocks with low market feasibility, where there is a transaction fact thereof, the transaction shall be made.

The value of stocks shall be evaluated in light of the market price and the value of stocks shall not be evaluated in accordance with the supplementary assessment methods stipulated in the former Inheritance Tax and Gift Tax Act. However, since the market price means the objective exchange price formed by the general and normal transaction, in order to be recognized as the market price, the circumstances that can be seen as properly reflecting the objective exchange value as of the date of donation should be recognized (see, e.g., Supreme Court Decision 2010Du26988, Apr. 26, 2012).

According to the above facts, Red ○○ was actually one shareholder of the non-party company due to the purchase of the entire non-party company’s shares by the non-party company’s largest shareholder. The issue price of the non-party company’s new shares upon the issuance of the non-party company’s shares on December 28, 2005 is merely determined by the non-party company’s representative director and the non-party company’s Hong ○○. Since the issue price of the new shares with the offering of shares is determined in consideration of all the circumstances such as the company’s status, it is not limited that the issue price of the non-party company should be determined at the market price. Thus, the mere fact that the board of directors decided the issue price of the non-party company’s shares was not reflected in the market price at the time of increase in the reason of the issue price, and there is no other evidence to find otherwise. Furthermore, it is difficult to view that the issue price of the non-party company’s shares was an ordinarily established price if it was freely traded among many unspecified persons. Furthermore, the non-party company’s company shares were not changed in accordance with the above market price.

Ultimately, the shares of this case fall under a case where it is difficult to calculate the market price and thus the old inheritance tax and certificate.

This part of the Plaintiff’s assertion on a different premise is without merit.

D. Judgment on the Plaintiff’s assertion as stated in the Plaintiff’s above A-2

1) Article 45-2(1) of the former Inheritance Tax and Gift Tax Act provides that “transfer or transfer of the right” in the main text.

In case where the actual owner and the nominal owner are different with respect to property (excluding land and buildings; hereafter the same shall apply in this Article), which requires registration, etc. for exercise, notwithstanding Article 14 of the Framework Act on National Taxes, the value of the property shall be deemed to have been donated to the actual owner on the day (where the property is subject to registration of change of ownership, it refers to the day following the end of the year following the year in which the date of acquisition of ownership falls) on which the actual owner registers it as the nominal owner, notwithstanding the provisions of Article 14 of the Framework Act on National Taxes, and where subparagraph 1 of the proviso provides, “Where the property is registered in another person’s name or the ownership is not transferred in the actual owner who acquired the ownership without any purpose of tax evasion, this provision shall not apply.” The provisions of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act are one of the exceptions to the principle of substantial taxation, and thus, it is restricted to the extent of realizing tax justice by effectively preventing the title trust system from being abused as a means of tax avoidance.

In light of the above legal principles, in the case where: (a) under title trust with the Plaintiff’s shares of the non-party company, Red ○○ was issued with capital increase by the method of stockholders allocation, the instant case

The preemptive right to the shares is vested in Hong○, a real owner of the shares initially nominal trust, and Hong○○, by exercising the above preemptive right and paying the acquisition price of new shares in the name of the Plaintiff and Gangnam○, under title trust with the Plaintiff and Gangwon○. Thus, the donation price should be deemed the value of the shares, and among them, the donation price is limited to the amount paid by Hong○○ as the purchase price of new shares.

2) In addition, Article 45-2(1) of the former Inheritance Tax and Gift Tax Act uses the title trust system.

Inasmuch as an exception to the principle of substantial taxation is recognized in the purport of effectively preventing avoidance and realizing the tax justice, the proviso of the same Article can only be applied to a case where the purpose of the title trust is not included in the purpose of the tax avoidance, and in such a case, the burden of proving that there was no purpose of the tax avoidance can be established by means of proving that there was no purpose of the tax avoidance, not the purpose of the tax avoidance. Therefore, the fact that there was no purpose of the tax avoidance can be proven by means of proving that there was another purpose of the tax avoidance. However, as the nominal owner who bears the burden of proof, there was an obvious purpose of the tax avoidance and non-related to the tax avoidance to the extent that it is recognized that there was no purpose of the tax avoidance in the title trust, and that there was no tax avoidance in the future at the time of the title trust or in the absence of the tax avoidance in the future, it should be proven to the extent that it would not have any doubt

In light of the above legal principles, there is no assertion or proof as to the fact that the title trust of the shares of this case had a clear different purpose from that of tax avoidance. Rather, this case’s death

According to the actual relationship, Hong○○ is a title trust with respect to new shares allocated in proportion to the number of shares held in the name of the Plaintiff and Gangwon○○○ through active exercise of preemptive rights, such as subscription for new shares and payment of the subscription price for new shares. The acquisition of new shares is not a shareholder’s right but a duty to secure the acquisition fund. The equity ratio of Hong○, the Plaintiff, and Kang○○’s shares in title trust with respect to new shares issued in title trust remains the same as that of the previous shares after the issuance of new shares. There is no evidence to deem that there was a different purpose from that of the existing title trust with respect to the title trust of new shares issued in title trust between Hong○, the Plaintiff, and Kang○, the Plaintiff, and the Plaintiff. As the Plaintiff’s assertion, it is reasonable to deem that the title trust of the instant shares was made in accordance with the same purpose as that of the existing title trust between Hong○ and the Plaintiff. Even if the Plaintiff’s claim for the settlement of accounts for 2004 business year, the non-party company did not have distributed KRW 250,000,00,000.

3) Therefore, the Plaintiff’s assertion on this part is without merit.

E. Judgment on the Plaintiff’s assertion as stated in the Plaintiff’s above A-3)

1) For a tax investigation, the tax official’s determination or correction of the tax base and amount of the national tax

The legislative intent of the prohibition of double tax investigations prescribed in Article 81-4 of the former Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 2013; hereinafter the same shall apply) and Article 63-2 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 24366, Feb. 15, 2013; hereinafter the same shall apply) is to prevent the abuse of the right to tax investigations, as the same is to prevent the abuse of the right to tax audits, since the prohibition of double tax audits is allowed to allow repetitive tax audits, if it violates the taxpayer’s freedom of business, privacy, and the tax authorities are likely to cause arbitrary tax audits.

2) ① Around August 2010, the Defendant reported the Plaintiff’s transfer income tax related to the Plaintiff’s shares.

After conducting a tax investigation on the Plaintiff’s tax investigation, the Plaintiff’s report on capital gains tax and closed the investigation and closed the tax investigation. ② However, on August 7, 2011, the director of ○○ Regional Tax Office notified the Defendant of the imposition of gift tax on the Plaintiff on the ground that the non-party company’s shares were held in title trust with the Plaintiff. Accordingly, the Defendant issued a disposition of imposition of gift tax amounting to KRW 126,337,430 on September 8, 201. ③ The director of ○○ Regional Tax Office assessed the value of the instant shares allocated under the Plaintiff’s name as KRW 136,025 on the ground that the Plaintiff conducted a tax investigation on the change of shares, etc. on or around February 2012, the director of ○○ Regional Tax Office assessed the value of the instant shares allocated to him as KRW 136,025 on the Plaintiff, and accordingly, the Defendant issued a disposition of increase the gift tax amount to KRW 637,24,180 on August 7, 2012.

According to the above facts, the assessment of the value of the instant shares is deemed to have been conducted on the basis of data related to the imposition of gift tax as of September 8, 201 without any separate questioning or request for submission of data on the Plaintiff, Gangwon-do, etc., and there is no evidence to prove that the director of the Central District Tax Office or the Defendant, at the time of the instant disposition, conducted a substantial tax investigation by exercising the right of questioning and questioning or questioning with the Plaintiff, etc., or by inspecting, investigating, or ordering submission of the relevant account books, documents

Meanwhile, the Plaintiff asserted that the disposition of this case is based on double tax investigation, since the head of ○○ Tax Office conducted a tax investigation on the acquisition and transfer of the shares of this case on or before August 2010. However, the tax investigation conducted around August 2010 by the head of the Gangwon District Tax Office is limited to the income tax investigation related to the transfer income tax, while the tax investigation conducted by the director of the Jung Seo District Tax Office relating to the disposition of this case is related to the gift tax, it cannot be deemed that each of the above tax investigation conducted on the disposition of this case constitutes the same tax item

3) Therefore, the Plaintiff’s assertion on this part is without merit.

F. Determination on the Plaintiff’s assertion as stated in the Plaintiff’s above A-4

1) Article 63(1)1 (c) of the former Inheritance Tax and Gift Tax Act provides that an appraisal of unlisted stocks shall be made by the method prescribed by the Presidential Decree in consideration of the corporation’s assets, earnings, etc. according to delegation by such Act. Article 54(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1933, Feb. 9, 2006; hereinafter the same) provides that an appraisal of unlisted stocks shall be based on the weighted average value of net profit and loss per share and net asset value at the rate of 3:2. The net value per share shall be the weighted average value of net profit and loss per share for the preceding three years at the interest rate determined by the Commissioner of the National Tax Service. Article 56(1)1 and 2 of the Enforcement Decree of the same Act provides that an weighted average amount of net profit and loss per share for the preceding three years shall be based on the weighted average value of profit and loss per share in each business year before the base date of appraisal, but it shall be deemed that an average value of credit assessment by an accounting corporation or an accounting corporation within 21:

Article 17-3 (1) 3 of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance No. 505, Apr. 25, 2006; hereinafter the same) (amended by Ordinance No. 505, Apr. 25, 2006; hereinafter the same) is one of the cases where the value is based on subparagraph 2 of Article 17-3 (1).

Therefore, barring any special circumstance, the net profit and loss value per share cannot be calculated on the basis of "an weighted average amount of net profit and loss for the last three years per share" under Article 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, barring any special circumstance; furthermore, even if the value under subparagraph 2 (value of subparagraph 2) is not calculated or it is impracticable to apply the value under subparagraph 2 because it does not meet the requirements to be applicable under subparagraph 2, it is unreasonable to apply the value under subparagraph 1. In such a case, it can be assessed by applying the objective and reasonable method among the supplementary assessment methods prepared by the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, such as the method under Article 54(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which allows an assessment by only net asset value (see Supreme Court Decision 2011Du31253, Nov. 14, 2013).

2) As the appraisal base date of the instant shares, there was capital increase on December 28, 2005, which was the date of acquisition of the instant shares, and thus, barring any special circumstance, the net value of the instant shares based on the value under subparagraph 1 cannot be calculated, barring any special circumstance, and furthermore, the Plaintiff cannot calculate the net value of the instant shares based on the value under subparagraph 2 as it did not report the value under subparagraph 2 within the gift tax base return deadline, and thus, it should be assessed by applying objective and reasonable methods among other supplementary methods prepared by the former Inheritance Tax and Gift Tax Act mutatis mutandis. In full view of the above facts and the following circumstances revealed in addition to the purpose of the entire pleadings, the net value of the instant shares, including the number of shares issued by the non-party company, including the number of shares issued by capital increase, shall be weighted average, and this shall be calculated based on the net asset value and 3:2% average of the share

① The proviso of Article 56(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the total number of issued stocks as of the end of each business year before capital increase or capital increase without compensation shall be governed by the Ordinance of the Ministry of Finance and Economy in calculating the value of subparagraph 1, and Article 17-3(5) of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act provides that “the total number of issued stocks as of the end of each business year before capital increase or decrease without compensation shall be determined by the Ordinance of the Ministry of Finance and Economy.” According to the delegation of the Enforcement Rule, “the number of issued stocks as of the end of each business year before capital increase or decrease without compensation + the number of issued stocks at the end of each business year immediately before capital increase or decrease without compensation” shall be calculated by dividing “the number of issued stocks at the end of each business year immediately before capital increase or decrease without compensation + the number of issued stocks at the end of the immediately preceding business year before capital increase or decrease without compensation” by applying mutatis mutandis the number of issued stocks at issue before capital increase or decrease without consideration. The reason is that is unreasonable.

② Article 56(3) proviso of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act amended by Presidential Decree No. 23040, Jul. 25, 2011; Article 56(2) proviso of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act prior to the amendment.

It was changed that ‘free capital increase' or ‘free capital increase' has been changed to ‘increased capital increase or capital decrease', and the provisions that reflect the dilution effect of capital increase with respect to free capital increase prior to the amendment have expanded to capital increase with capital increase increase, the interpretation theory such as the above (1) has been legislated.

(3) The term "net asset value" means the value per share that can be received by shareholders on the premise of liquidation in an amount obtained by subtracting liabilities from the company's assets, but "net profit and loss value" means the number of future values on the premise of a continuing

Article 54(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that “The liquidation procedure is in progress, the corporation prior to the commencement of the business, the corporation under three years after the commencement of the business, the corporation under temporary closure or closure of business, and the corporation under deficit shall be based on the net asset value.” However, since the non-party company continues to engage in profit-making activities, it is inappropriate to assess the value per share based on the net asset value assessed. In other words, when calculating the value of the stock of this case based on the net asset value of the stock of this case, the value per share is 52,820 won and the net asset value per share is 101,240 won and the difference per share reflecting the net profit-making value is twice as seen below. This is proven that the net asset value alone does not reflect the accurate market value of the stock of this case.

(4) Where a donation is made after capital increase with respect to an unlisted continuing enterprise, the net profit or loss and net asset value shall be calculated by appropriately averaging the net value per share, and net profit or loss per share shall be calculated.

▷1주당 순자산가치 : 10,469,775,496원(순자산가치 + 영업권) ÷ 198,216주

0

▷1주당 순손익가치 :

The value needs to be calculated based on the weighted average amount of net profit and loss per share of the business year prior to the capital increase, and it is difficult to calculate based on the total number of issued and outstanding shares before the capital increase in calculating the net profit and loss per share of the business year prior to the capital increase in accordance with Article 69(1) of the former Inheritance Tax and Gift Tax Act.

⑤ Under Article 39 of the former Inheritance Tax and Gift Tax Act and Article 29(3)(a) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, the Defendant calculated the net value per share of the instant shares after capital increase. In addition, in cases of capital increase with respect to capital increase, it is not subject to deemed donation under Article 39 of the former Inheritance Tax and Gift Tax Act, but in cases of capital increase with respect to capital increase and capital increase with respect to capital increase, the calculation of net value per share is entirely different. Therefore, it cannot be deemed that the Defendant applied objective and reasonable methods among other supplementary methods prepared by the Defendant.

G. Sub-determination

If the value per share of the instant shares is calculated in accordance with the legal principles as seen in the foregoing paragraph, it shall be as follows:

101,240 won, and the amount of legitimate tax calculated based on this is KRW 396,93,273 won, additional tax of KRW 357,152,156, as stated in the grounds for calculation of legitimate tax amount in attached Table 2. Of the instant disposition, the amount exceeding KRW 396,93,273 won, and the amount exceeding KRW 309,49,360, which is the sum of the amount of legitimate principal tax and the amount of additional tax of KRW 309,49,360, is unlawful.

- KRW 3,623,029,406 (net profit or loss in the immediately preceding year) ¡À198,216 = 18,278 won

- KRW 2,091,968,893 (Amount of net profit or loss in the immediately preceding second year) ¡À198,216 = 10,553 won

- 827,572,216 won (amount of net profit or loss for the immediately preceding three years) ¡À198,216 note = 4,175 won;

- The weighted average amount of net profits and losses per share for the preceding three years: [(18,278 won x (3) + (10,553 won x (2) + 4,175 won x (1)] ¡À6 = 13,352 won

- The net value per share: 13,352 won ¡À10% (net profit and loss exchange rate) = 133,520 won

▷ 1주당 가액 : [(133,520원×3) + (52,820원×2)] ÷ 5 = 101,240원

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.