The meaning of “share certificates transferred on a securities market, etc.” under Article 3 subparag. 1(a) of the former Securities Transaction Tax Act / In the case of listed stocks transferred without going through a securities company outside the securities market, etc., a taxpayer of securities transaction tax (=the transferor of stock certificates, etc.)

Further to the language and text of Article 3 subparag. 1(a), (b), (2), and (3) of the former Securities Transaction Tax Act (amended by Act No. 9274, Dec. 26, 2008; hereinafter the same), where a securities company is a taxpayer of securities transaction tax, it is based on the place or method of transaction of stock certificates by stipulating that “where a securities company is a taxpayer of securities transaction tax through a securities company, other than subparagraph 1,” and Article 3 subparag. 2 of the former Securities Transaction Tax Act provides that “where a securities company transfers stock certificates, etc. through a securities company, other than subparagraph 1,” and Article 1 and Article 2(1)2 of the former Securities Transaction Tax Act provide that “stock certificates listed in a securities market, etc. are listed in a securities market, etc.” In light of the structure of the relevant provisions, it is reasonable to interpret “stock certificates transferred at the securities market, etc., rather than on the securities market itself, where the securities company actually transfers the securities transaction tax outside of the securities market, etc.

Articles 1 (see current Article 2), 2(1)2 (see current Article 1-2(1)2), and 3 of the former Securities Transaction Tax Act (Amended by Act No. 9274, Dec. 26, 2008);

Plaintiff 1 and one other (Attorney Han Han-chul, Counsel for the plaintiff-appellant)

Head of Yongsan Tax Office

Seoul High Court Decision 2014Nu4429 decided October 16, 2014

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

The grounds of appeal are examined.

1. Article 3 of the former Securities Transaction Tax Act (amended by Act No. 9274 of Dec. 26, 2008; hereinafter the same) provides that with respect to a taxpayer of securities transaction tax, “the person who conducts the relevant substitute settlement in the event that a substitute settlement is made with respect to the following share certificates,” subparagraph 1 provides that “the person who conducts the relevant substitute settlement” as referred to in item (a) and (b) “the share certificates transferred outside the securities market, etc. by the method prescribed by Presidential Decree outside the securities market, etc.” as referred to in item (b) and subparagraph 2 provides that “the relevant securities company transfers the share certificates, etc. through a securities company other than subparagraphs 1 and 2,” and the main sentence of subparagraph 3 provides that “in the case of a transfer of share certificates, etc. other than subparagraphs 1 and 2

In addition, in light of the structure of relevant provisions, such as the fact that Article 3 subparag. 2 of the former Securities Transaction Tax Act provides that “where a securities company is a taxpayer of securities transaction tax, etc. through a securities company, other than subparagraph 1, is subject to the transfer of share certificates, etc.” (Article 1 and Article 2(1)2 of the former Securities Transaction Tax Act, “share certificates listed on a securities market, etc.” with respect to listed stocks in the securities market, etc., the term “share certificates transferred on a securities market, etc.” under Article 3 subparag. 1(a) of the former Securities Transaction Tax Act shall not refer to the listed stocks themselves, but shall be construed as the relevant share certificates in a case where a securities market, etc. is actually transferred at the securities market, etc... In that sense, it is reasonable to interpret that Article 3 subparag. 1(a) of the former Securities Transaction Tax Act allows the Korea Securities Depository, which pays a substitute share certificate, to collect securities transaction tax without considering the convenience and efficiency in collecting the securities transaction tax, etc.

2. The lower court acknowledged the facts as indicated in its reasoning based on evidence, and determined that the instant disposition, which the Plaintiffs imposed on deeming the taxpayers of securities transaction tax as the Plaintiffs, was lawful, on the ground that the instant disposition was lawful, since the Plaintiffs transferred the stocks of this case, which are listed stocks, without going through a brokerage or proxy by a securities company outside the market operated by the Korea Securities and Futures Exchange, in lieu of the

Examining the reasoning of the lower judgment in light of the aforementioned legal doctrine, the lower court did not err by misapprehending the legal doctrine on the interpretation of Article 3 subparag. 1(a) of the former Securities Transaction Tax Act, contrary to what is alleged in the grounds of appeal.

3. Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Poe-dae (Presiding Justice)