Cho-2017-Gu-0192 (Law No. 2017.06.20)

Whether listed marginal profits acquired by the largest shareholder, etc. who renounced preemptive rights and received the allocation of forfeited stocks are subject to gift tax.

Listing marginal profits other than the listing marginal profits acquired or donated with the property acquired from the largest shareholder, etc. who has a special relationship, shall not be subject to gift tax due to listing, etc.

Donation of profits from listing, etc. under Article 41-3 of the former Inheritance Tax and Gift Tax Act

2017Guhap23188 Revocation of Disposition Rejecting Gift Tax Correction

Park ○

○ Head of tax office

December 20, 2017

February 8, 2018

1. On September 26, 2016, the Defendant’s disposition rejecting the correction of the gift tax ○○○○○○○○, which was made against the Plaintiff, is revoked.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. On October 27, 2014, the ○ Industry Co., Ltd. (hereinafter “instant company”) decided to issue new shares by holding a board of directors on October 27, 2014.

- Types and number of new shares: ○○○○ Shares

- Par value per share: gold ○○○ per share

- New stocks: Issuance price of one week gold ○○○

- The method of acquiring new shares: A new shares shall be allocated in proportion to the number of shares held by each shareholder, and the new shares that have waived the right of shareholders may be publicly offered or taken over by another shareholder.

- Other procedures necessary for the issuance of new shares shall be entrusted to the representative director.

B. On October 28, 2014, the instant company offered ○○○○○ Shares (hereinafter referred to as “instant shares”) with the foregoing resolution. After the shareholders of the instant company acquired ○○○○ shares (hereinafter referred to as “instant shares”), the Plaintiff owned the total ○○○ shares of the instant company on or around December 2015 through capital increase without compensation and par split. The details of the Plaintiff’s share change are as listed below.

Table Omission of the Table

C. The instant company was listed on the KOSDAQ on December 17, 2015, and the Plaintiff reported and paid KRW 000 to the Defendant on June 30, 2016 on the premise that the acquisition of the instant shares constitutes a taxable object under Article 41-3 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 13557, Dec. 15, 2015; hereinafter “former Inheritance Tax and Gift Tax Act”).

D. On August 29, 2016, the Plaintiff filed a claim for the correction of the payable tax amount at zero won on September 26, 2016, because the instant shares were not subject to taxation by acquiring the Plaintiff’s funds, irrespective of the largest shareholder, by means of a third party allocation method. However, the Defendant rejected the said request for correction on September 26, 2016 (hereinafter “instant disposition”).

E. On December 13, 2016, the Plaintiff filed a claim with the Tax Tribunal for the revocation of the instant disposition, but was dismissed on June 20, 2017.

Facts without any dispute, Gap's 1 through 4, the purport of the whole pleadings, and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Article 41-3(6) of the former Inheritance Tax and Gift Tax Act provides that "the case where Article 41-3(1) is applicable". Thus, even if new shares are received and allocated, it may be taxed only where the taxation requirement under Article 41-3(1) of the former Inheritance Tax and Gift Tax Act is satisfied. Since the Plaintiff acquired the shares of this case from the company of this case through capital increase with capital increase by the third party, it does not fall under the taxation requirement under Article 41-3(1) of the former Inheritance Tax

Therefore, the instant disposition is unlawful.

B. Relevant statutes

Attached Form 2 is as shown in the relevant statutes.

(c) Fact of recognition;

The following facts may be acknowledged according to each of the above evidence, Gap evidence Nos. 5 through 13 (including the number of branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings.

1) As of October 15, 2014, before issuing new shares, the status of ownership of the instant company’s shares as of October 15, 2014, and the relationship with the Plaintiff are as indicated in the attached Table 1’s shareholding status

2) At the time of issuing new shares, the Plaintiff was working as the representative director of the instant company, and was working as ○○ director of the instant company, ○○○ director of the instant company, and was a major shareholder of ○○ Development Co., Ltd. (the Plaintiff’s representative director’s type ○○), and ○○ Building Co., Ltd.

3) For the purpose of raising the acquisition fund of the instant shares, the Plaintiff recovered the bonds owned by ○○○○○○○○○○○○○○○○○○○○○○ in respect of the instant building on October 27, 2014. On October 22, 2014, following the board of directors meeting on October 27, 2014, the Plaintiff leased ○○○○○○○○○○○ upon setting the annual interest rate of 6.9% and one year for the lending period to the Plaintiff on October 27, 2014. For this purpose, the Plaintiff was provided as security for ○○○○○○○○○, ○○○○○○○, ○○○○○, ○○○○, and ○○○○○○○, each.

4) On October 27, 2014, the Plaintiff paid a total of ○○○○○○○○ as the share acquisition fund.

5) Meanwhile, the Plaintiff’s death-related ○○○○○ shares (in relation to the imposition of gift tax on the acquisition of ○○ shares by ○○○○○○○○○○ shares), upon which the existing shareholders participated in capital increase with the instant capital increase and gave up acceptance (in relation to the imposition of gift tax on ○○○’s acquisition of the said shares, the Plaintiff’s revocation lawsuit was filed with the ○○ District Court 2017 Guhaphap○○○○○○, and the court of first instance rendered

D. Determination

1) Relevant legal principles

Article 41-3 (1) of the former Inheritance Tax and Gift Tax Act provides that "where a person in a special relationship with the largest shareholder, etc. has received stocks, etc. of the relevant corporation from the largest shareholder, etc. or has acquired stocks, etc. of the relevant corporation for consideration, the date of donation or acquisition, and where the value of the relevant stocks, etc. has increased as the stocks, etc. are listed on the securities market within five years from the date of acquisition, and where a person who has received a donation of, or acquired with compensation for, such stocks, etc. has acquired a certain profit in excess of the original taxable value or acquisition value of the gift tax, it shall be deemed the value of the property donated, etc. to the person who has acquired such profits." In applying paragraph (1), Paragraph

The legislative purport of Article 41-3(1) of the former Inheritance Tax and Gift Tax Act is to ensure equality in taxation by imposing gift tax on the listed profits of unlisted stocks acquired by a person with a special relationship with the largest shareholder, etc. before the donation or acquisition is made at the time of donation or acquisition, and accordingly, Article 41-3(1) of the former Inheritance Tax and Gift Tax Act provides that where a person with a special relationship receives stocks from the largest shareholder, etc., or acquires them with the donated

In addition to the purport of the aforementioned provisions, in light of the language and structure thereof, the term “new stocks” under Article 41-3(6) of the former Inheritance Tax and Gift Tax Act refers to new stocks acquired from the largest shareholder, etc. or assets acquired from the corporation based on the assets donated to the largest shareholder, etc. or acquired from the corporation based on the assets donated to the corporation from the largest shareholder, etc., and does not include new stocks acquired or distributed from the corporation without being donated or acquired from the largest shareholder, etc., regardless of the assets donated or acquired from the corporation. Even if such new stocks obtained the listing benefits, it cannot be interpreted that they constitute the value of donated property under Article 41-3(1) of the former Inheritance Tax and Gift Tax Act (see Supreme Court Decisions 2016Du5926, Mar. 30, 2017; 2017Du35691, Sept. 21, 2017).

2) Determination

In light of the above legal principles, the Plaintiff was the representative director of the instant company at the time of issuing new shares as of October 28, 2014, the shareholders of the instant company at that time constituted relatives within the sixth degree of relationship, such as the Plaintiff’s children, the Plaintiff’s her son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s ○.

3. Conclusion

The plaintiff's claim is reasonable, and it is so decided as per Disposition.