Appellate Court 2013west231 (Occ. 13, 2014)

Whether the avoidance of wrongful calculation under the Corporate Tax Act on stock acquisition is appropriate;

There was a fact that the Plaintiff traded shares in a third party before and after the purchase time of the shares, and the company paid new shares at a price similar to the purchase price, and transacted in the freeboard market. Therefore, it cannot be concluded that the purchase price of the Plaintiff is higher than the market price.

Article 52 of the Corporate Tax Act: Denial of Wrongful Calculation

2014Guhap63756 Revocation of Disposition of Imposing corporate tax, etc.

OOOO Stock Company

O Head of tax office

oly 30, 2014

November 27, 2014

1. On October 1, 2012, the Defendant’s notice of change in the income amount of KRW 0,000,000,000,000, that the Plaintiff rendered to the Plaintiff on October 1, 2012 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 April 201, 2010, the Plaintiff, the representative director of the Plaintiff, transferred 00,000 shares of the non-listed shares of △△ Co., Ltd. (hereinafter “instant company”) to KRW 00,000 per share to KRW 0,000.

B. The Defendant assessed the market price of the instant shares as 144 won per share by means of a supplementary assessment under the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201; hereinafter referred to as “Inheritance Tax and Gift Tax Act”) and the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 23591, Feb. 2, 2012; hereinafter referred to as “Enforcement Decree of the Inheritance Tax and Gift Tax Act”), and calculated the difference between the Plaintiff’s purchase of the instant shares from Kim○, a person with a special relationship, at a price higher than the market price (amended by Act No. 10423, Dec. 30, 2010; hereinafter referred to as “Corporate Tax Act”) and the Plaintiff’s disposal of shares at the same time by deeming the difference between the acquisition price of the instant shares and the transfer price of the shares as stated in Article 8(1)1 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 222570, Dec. 30, 200000).

C. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on October 0, 2012, but the Tax Tribunal dismissed it on October 0, 2014, and the Plaintiff appealed and filed the instant lawsuit on October 0, 2014.

2. The assertion and judgment

A. The plaintiff's assertion

The Plaintiff’s purchase of the instant shares from 0,000 won per share of the Plaintiff’s representative director Kim Jong-young is an market transaction that adequately reflects objective exchange values. Therefore, the instant disposition, which was made by applying the provision of the wrongful calculation based on the Plaintiff’s purchase of the instant shares, was unlawful.

(b) Related statutes;

Attached Form is as shown in the attached Form.

C. Determination

1) Review of relevant laws and regulations

The chief of the district tax office having jurisdiction over the place of tax payment or the commissioner of the regional tax office having jurisdiction over the place of tax payment may, where he deems that the tax burden of a domestic corporation has been unjustly reduced due to the act or transaction with a person with a special relationship, calculate the income amount for each business year of the relevant corporation regardless of the calculation of the income amount of the corporation; and paragraph (2) of the same Article, in applying the provisions of paragraph (1), the sound social norms and commercial practices.

applicable or applicable to a normal transaction between persons without a special relationship;

Article 88 (1) of the Enforcement Decree of the Corporate Tax Act provides that "where a corporation delegates matters necessary for the type of wrongful calculation and the assessment of the market price to be determined by Presidential Decree," and Article 88 (1) of the Enforcement Decree of the Corporate Tax Act provides that "where it is deemed that the burden of taxation has been unjustly reduced" means cases falling under any of the following subparagraphs. Article 88 (1) of the Enforcement Decree of the Corporate Tax Act provides that "where assets are purchased or received as investments in kind at a price higher than the market price or the assets are excessively depreciated," Article 89 of the Enforcement Decree of the Corporate Tax Act provides that "in the case of Article 52 (2) of the Corporate Tax Act concerning "market price" is similar to the transaction in question, the price shall apply if there is a general transaction price which is continuously traded with many and unspecified persons or a third party who is not a specially related person, not a specially related person." Article 52 (2) of the Act provides that "Where the market price is unclear, the following provisions shall apply in order:

2) In the instant case:

In light of the above legal principles, the Defendant rendered the instant disposition based on the Plaintiff’s purchase of the instant shares at a higher price than the market price. However, in full view of the following circumstances revealed in light of the facts and evidence examined earlier, 0,000 won per share, a purchase price of the instant shares, cannot be deemed as a higher price than the market price, and thus, the instant disposition is deemed unlawful.

The ○○ Kim, on October 0, 2010, purchased the instant shares in KRW 000 per share from Nonparty Kim x 1 week. The x Kim x the Plaintiff’s purchase of the instant shares in KRW 0,000 per share or KRW 0,000 per share from October 0, 2010 to October 0, 2010.

The instant company purchased the instant shares on or before October 0, 2010, issued shares for KRW 0,000 or KRW 0,000 per share.

From October 0, 2010 to October 0, 2011, the shares of the instant company began to be traded in the free market (the free trade market for over-the-counter shares) and there was a transaction price formed from October 0 to October 0, 201.

According to the above facts, the plaintiff's purchase time of the shares of this case 】 Kim x 0,000 won or 0,000 won per share 】 (the price per share was 0,000 won or 0,000 won, and the company of this case paid for capital increase with the price per share of 0,000 won or 0,000 won, and the shares of this case are traded over 0,000 won in the freeboard market. Since each of the above prices falls under "the price generally traded with the third party, not the specially related party," it is judged that the price which the plaintiff purchased the shares of this case is 0,00 won higher than the market price.

3) Defendant’s assertion

The defendant's sale of the company's stocks to 00 x 10 x 00 x 00 x 00 x 00 x 00 x 00 x 00 x 00 x 00 x 10 x 30 m to purchase the company's stocks under the influence of Kim ○'s representative director. The above 00 x 00 m to participate in the capital increase of the company's stocks of this case but to purchase the same effect as the participation in the capital increase after the lapse of the time. Thus, it cannot be viewed as a price generally transacted by the third party. However, in addition to the purport of the whole arguments, the 00 x x m to the purport of the argument, not a full-time employee of the company of this case, but a person who is merely a business employee of the company of this case or a person who is unrelated to AA (for example, the 00 m) who acquired the company's stocks in this case's name is difficult.

As the Defendant’s offering of new shares was made against major shareholders and their relatives, the Defendant asserted that it cannot be deemed that the pertinent market price of the instant company was reflected, and accordingly presented Kim 】 Defendant’s statement. However, the aforementioned circumstance alleged by the Defendant is about the first offering of new shares, which was made on October 0, 2010, and the second offering of new shares, which was made on October 0, 2010, was conducted through public offering following the resolution of the board of directors of the instant company, and was purchased by ○○ and 00 public offering participants, and thus, the Defendant’s assertion also appears to be acceptable.

In addition, the Defendant asserts to the effect that the average market price per share of the shares of the instant company for one year and one year after October 2010 is 00 won or more, and that the aggregate of the number of shares traded during that period is 0% or more of the total number of shares issued. However, the said transaction is conducted between the Plaintiff and a third party unrelated to the Plaintiff and its specially related parties in the open market, and there is no ground to regard it as the transaction that reflects the market price. Even if the transaction price of the instant company was formed at a lower price, as seen earlier, insofar as the transaction price of the instant shares was 0,000 won or more, it cannot be concluded that the price per share, the price of which the Plaintiff purchased the instant shares, was higher than the market price.

On the other hand, the defendant asserts to the effect that 0,000 won was higher than the market price based on the management performance and financial status of the company of this case. However, the defendant is a specially related person.

It can be seen as a "market price" if there is a price generally traded between a third party, not a "third party," and the determination of the market price is derived from not only the business performance or financial status of the company in question but also from other factors considered by the parties to the transaction, so this part of the defendant's assertion cannot be accepted.

Therefore, the premise that the Plaintiff’s purchase price (0,000 won per share) of the instant shares is higher than the market price.

The disposition of this case made under this case must be revoked because it is unlawful (However, in the purport of the claim by the plaintiff

In addition to the notice of change in income amount, the inclusion of 0,000,000,00 won in deductible expenses and the inclusion in gross income will also be revoked.

(2) The notice of change in the amount of income is not an independent disposition, but a specific statement of change in the amount of income

The law shall be included in the calculation of the content of the stock sales at the time of the sale of the stock of this case after the loss.

If a tax is imposed, it can be disputed against the imposition of corporate tax, so cancellation is separately made in the disposition.

(2).

3. Conclusion

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

Related Acts and subordinate statutes

○ former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010)

Article 52 (Disliability of Evaluation of Wrongful Acts)

(1) Where the head of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office deems that the tax burden of a domestic corporation has been unjustly reduced through transactions with a person with a special relationship as prescribed by the Presidential Decree (hereinafter referred to as a "specially related person"), he may calculate the income amount for each business year of the corporation regardless of the act or calculation of the income amount of the corporation (hereinafter referred

(2) In the application of the provisions of paragraph (1), the standard for determination shall be the prices (including rates, interest rates, rents, exchange rates and other equivalent rates, and market prices; hereafter in this Article, referred to as "market prices") applied or to be applied in sound and commercial practices and normal transactions between persons without a special relationship.

(3) A domestic corporation shall submit a detailed statement describing transactions with a specially related person for each business year as prescribed by the Presidential Decree.

(4) In applying the provisions of paragraphs (1) through (3), matters necessary for the types of wrongful calculation and the assessment of market price shall be prescribed by the Presidential Decree.

○ former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010)

Article 88 (Calculation Type of Wrongful Acts)

(1) Where it is deemed that the tax burden has been unjustly reduced in Article 52 (1) of the Act means any of the following cases:

1. Where assets are purchased or received as investments in kind at a price above the market price or the assets are excessively depreciated;

Article 89 (Scope of Market Price, etc.)

(1) In applying Article 52 (2) of the Act, where the relevant corporation has a price of continuous trade with many and unspecified persons other than a person with a special relationship or a third party who is not a person with a special relationship in a similar situation to the relevant trade, the price (where stocks issued by a stock-listed corporation are traded at the Korea Exchange, the market price of the

(2) In applying Article 52 (2) of the Act, if the market price is unclear, the amount calculated by applying in sequence the following provisions:

1. Where there is a value appraised by the appraisal evaluation corporation under the Public Notice of Values and Appraisal of Real Estate Act, the value thereof (in case there are not less than two appraised values, the average amount of the appraised values): Provided, That this shall not include stocks, etc.;

2. The amount appraised by the mutatis mutandis application of the provisions of Articles 38 through 39-2, and 61 through 64 of the Inheritance Tax and Gift Tax Act. In applying mutatis mutandis the provisions of Article 63 (2) 1 of the Inheritance Tax and Gift Tax Act and Article 57 (1) and (2) of the Enforcement Decree of the same Act, the immediately preceding six months (three months for stocks, etc. upon which gift tax is levied) shall be deemed the immediately preceding six months, respectively.

○ former Inheritance Tax and Gift Tax Act (Amended by Act No. 11130, Dec. 31, 201)

Article 60 (Principles, etc. of Appraisal)

① 이 법에 따라 상속세나 증여세가 부과되는 재산의 가액은 상속개시일 또는 증여일(이하 평가기준일 이라 한다) 현재의 시가(��價)에 따른다. 이 경우 제63조제1항제1호가목 및 나목에 규정된 평가방법으로 평가한 가액(제63조제2항에 해당하는 경우는 제외한다)을 시가로 본다.

(2) The market price referred to in paragraph (1) shall be the price generally recognized as a transaction between many and unspecified persons, including the expropriation price, public sale price, appraisal price, and others recognized as the market price, as prescribed by Presidential Decree.

(3) Where it is difficult to compute the market price in applying paragraph (1), the value appraised by any method prescribed in Articles 61 through 65 in consideration of the type, scale, transaction status, etc. of the relevant property shall be deemed the market

Article 63 (Evaluation of Securities, etc.)

(1) Securities, etc. shall be appraised by any of the following methods:

1. Appraisal of stocks and equity shares; . In cases of stocks and equity shares of a stock-listed corporation traded on the securities market under Article 9 (13) 1 of the Financial Investment Services and Capital Markets Act, the average of the closing price (not based on whether there is a transaction record) of the Korea Exchange every two months before and after the base date of appraisal: Provided, That in calculating the average amount, where it is inappropriate to make it as the average amount due to a cause of capital increase, merger, etc. occurred during two months before and after the base date of appraisal, the average amount of the periods calculated, as prescribed by Presidential Decree, between two months before and after the base date of appraisal;

(b) item (a) shall apply mutatis mutandis to the stocks and equity shares prescribed by Presidential Decree among the stocks and equity shares of a corporation listed on the KOSDAQ market under Article 9 (13) 2 of the Financial Investment Services and Capital Markets Act;

(c) Stocks and equity shares other than those under item (b), which are not listed in the Korea Exchange shall be appraised by the methods prescribed by Presidential Decree in consideration of the assets, profits, etc. of the relevant

○ Enforcement Decree of the former Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 23591, Feb. 2, 2012)

Article 54 (Appraisal of Unlisted Stocks)

(1) The weighted average value of stocks and investment shares not listed on the Korea Exchange under Article 63 (1) 1 (c) of the Act (hereafter in this Article and Article 56-2, referred to as "non-listed stocks") and the net asset value per share shall be the value appraised by the following formula (hereinafter referred to as "net profit and loss value") and the net asset value per share, respectively: Provided, That in cases of a corporation in excess of real estate (referring to a corporation falling under Article 158 (1) 1 (a) of the Enforcement Decree of the Income Tax Act) 2 and 3, the ratio of the net value per share to the net profit

The value per share = The weighted average amount of net profits and losses per share for the latest three years ± the interest rate determined and publicly announced by the Minister of Strategy and Finance in consideration of the circulation rate of three-year corporate bonds guaranteed by the financial institutions (hereinafter referred to as "net profit and loss exchange rate").

(2) The net asset value per share under paragraph (1) shall be the value appraised by the following formula:

The value per share = the net asset value of the corporation ± the net asset value of the corporation ± (hereinafter referred to as the “net asset value”).

(3) In applying the provisions of paragraphs (1) and (2), where a corporation that has issued stocks or investment shares under Article 63 (1) 1 (c) of the Act owns stocks or investment shares not more than 10/100 of the total number, etc. of outstanding stocks of a corporation that has issued other unlisted stocks, the evaluation of such other unlisted stocks may be based on the acquisition price provided for in Article 74 (1) 1 (e) of the Enforcement Decree of the Corporate Tax Act, notwithstanding the provisions of paragraphs (1) and (2): Provided, That where any market price provided for in

(4) In cases falling under any of the following subparagraphs, notwithstanding the provisions of paragraph (1), the net asset value under paragraph (2) shall be based on the net asset value:

1. Stocks or equity shares of a corporation whose business is deemed difficult to continue within the inheritance tax and gift tax under Articles 67 and 68 of the Act, or the liquidation procedures for the corporation subject to evaluation due to the death, etc. of the business operator; and

2. Stocks or investment shares of a corporation prior to the commencement of business, a corporation less than three years after the commencement of business, and a corporation under suspension or closure of business.

3. Stocks or equity shares of a corporation which have losses in excess of the total amount of earnings which belong or comes to belong to each business year under the Corporate Tax Act continuously from that business year within three years before the base date of appraisal, which falls within the business year before the base date of appraisal;

(5) In applying paragraph (2), the total number of issued and outstanding stocks shall be determined by the standard date of appraisal.