Early High Court Decision 2012J 5315 (Law No. 19, 2013)

It is difficult to regard it as a general recruitment under the Securities and Exchange Act that is excluded from gift tax;

It is difficult to view that it falls under the general public offering under the Securities and Exchange Act that is excluded from taxable subject to gift tax because it is about 49 persons who are subscribed to acquire shares.

Inheritance Tax and Gift Tax Act Article 39 (Donation of Benefits)

2014Guhap52657 Revocation of Disposition of Imposition of Gift Tax

AA

BB Director of the Tax Office

November 14, 2014

December 23, 2014

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposing KRW 000,000,000 on the Plaintiff on August 5, 2012 shall be revoked.

1. Details of the disposition;

A. On May 3, 2007, the CCC changed its trade name from DD, a corporation listed in the securities market, to EEEEEE on June 2007, and changed its trade name from DD to FFF of the stock company on September 201, 201, and agreed to take over management rights of the company from the existing major shareholders GGGG of the company (hereinafter “instant company”). On the same day, the instant company agreed to take over an amount equivalent to 24% of the shares of JJJJJ, a corporation listed in HH JJJJ, to take over the management rights of the said company from the existing major shareholders of the company (hereinafter “instant company”). On the same day, the instant company adopted a resolution of the board of directors on capital increase in the method of allocating the shares of the third party to raise the funds.

B. Meanwhile, in order to offer 2 billion won or more under the former Securities and Exchange Act (amended by Act No. 8635 of Aug. 3, 2007, Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act; hereinafter the same shall apply), an issuer shall submit a securities registration statement to the Financial Supervisory Commission pursuant to Article 8 of the former Securities and Exchange Act and Article 2 of the former Enforcement Rule of the Securities and Exchange Act (amended by Ordinance of the Prime Minister No. 885 of Aug. 4, 2008, Article 2 of the former Enforcement Rule of the Financial Investment Services and Capital Markets Act; hereinafter the same shall apply). On May 3, 2007, the company of this case filed a corrective registration statement with the Financial Supervisory Commission on the issuance of new shares to a third party on two occasions, but the company shall not be deemed to have been ordered to submit a corrective registration statement with the Financial Supervisory Commission on August 1, 2007, the last party to allocation of new shares and the issuance of new shares to the Financial Supervisory Commission.

0 Purpose of financing: Project funds to promote new projects;

○ Issue price of new shares: 821 won per share (500 won per share)

○ Total amount of new shares issued : 00,000,000 won

○ Payment date of subscription money: August 16, 2007

Persons eligible for allocation of new shares: CCC and 51 others

The full amount of ○ New Stocks issued is expected to be protected by the Korea Securities Depository for one year from August 27, 2007.

C. The Plaintiff participated in the subscription to new shares in this case and subscribed 0,000,000 shares of the company in this case as KRW 821 per share.

D. After examining the change of shares with respect to the instant company from April 30, 2012 to June 8, 2012, the Director of the Regional Tax Office: (a) “this case’s capital increase is not made by means of public offering of new shares; (b) the Plaintiff notified the Plaintiff of the total amount of 30 GL 1, 465 per share of 20 GL 96 per share of 30 GL 1,46556 per share of 20 GL 1,467,50 per share of 30 GL 1,4656,467,50 per share of 20 GL 1,467,467,467, which was calculated by applying the final price of the Korea Exchange as of August 14, 2007; and (c) the Plaintiff notified the Plaintiff of the total amount of 30 GL 1,467,5750 per share of 20 GL 1,567

F. Accordingly, the Plaintiff filed an appeal with the Tax Tribunal on November 16, 2012, but the said claim was dismissed on April 19, 2013.

Facts without any dispute arising in recognition, Gap evidence 1, 2, Eul evidence 1, 2, 4 through 7 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) The instant capital increase with new shares, which provides that no gift tax shall be levied under Article 39(1)1 of the former Inheritance Tax and Gift Tax Act, is levied on the capital increase with new shares issued by a third party under Article 2(3) of the former Securities and Exchange Act, and the instant disposition made on a different premise is unlawful.

(2) Since the Plaintiff’s stocks were subject to the conditions of protection for one year from the date of issuance, the assessment value per share before the capital increase should not be based on the date of payment of the stock price, but on the date of cancellation of the security deposit, the disposal of the issued stocks should be based on the date of payment of the stock price. However, the disposition of this case, which calculated the stock price as of the date of

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) Whether an exemption from taxation under Article 39(1)1 of the former Inheritance Tax and Gift Tax Act constitutes grounds for exclusion from taxation

Article 39(1)1 of the former Inheritance Tax and Gift Tax Act provides that no gift tax shall be levied on forfeited stocks that a stock-listed corporation or Association-registered corporation under the Securities and Exchange Act allocates to a public offering method of securities under Article 2(3) of the same Act. This is the exception that where a corporation issues new stocks and allocates new stocks to many and unspecified persons through a public offering procedure under the Securities and Exchange Act and other relevant Acts and subordinate statutes, it is determined in the process of fair competitive trade, and it is difficult to view the difference between the market price and the

Article 2 (3) of the former Securities and Exchange Act provides that "the public offering of new or outstanding securities shall be made to invite persons to acquire them under the conditions as prescribed by the Presidential Decree". Article 2-4 (1) of the former Enforcement Decree of the Securities and Exchange Act provides that "the public offering of new or outstanding securities shall be made to not less than 50 persons who have been solicited to acquire them shall be 50 or more in case of conducting a public offering of new or outstanding securities under Article 2 (3) of the former Enforcement Decree of the Securities and Exchange Act". Paragraph (4) of the same Article provides that "the public offering of new or outstanding securities shall be made to not less than 50 persons within one year from the date of issuance of the securities if it is transferable to not less than 50 persons within one year from the date of public offering of new or outstanding securities, and the public offering of new or outstanding securities shall not be made to an issuer of the securities unless the issuer submits a report to the Financial Supervisory Commission for the public offering of new or outstanding securities," and Paragraph (3) of the same Article provides that an issuer's offering of new or outstanding securities shall not be made.

In light of the following circumstances, i.e., ① the instant company’s withdrawal of its securities declaration; (ii) the method of public offering pursuant to Article 2(3) of the former Securities and Exchange Act; and (iii) there is no sanctions imposed on the grounds that it did not perform its duty to report at the time of public offering; and (iv) it is possible for the instant company to submit a securities declaration and invite subscription through public offering procedures to a specific person. Thus, it cannot be deemed that the instant company’s subscription cannot be deemed an act of public offering under Article 2(3) of the former Securities and Exchange Act, even if it did not comply with the provision on public offering of new stocks, such as advertising through newspapers, magazines, etc.; (iv) there is no evidence to view that the instant company’s issuance or sale of new stocks through public offering of new stocks through public offering under Article 2(3) of the former Securities and Exchange Act; and (v) there is no reason to view that the instant company’s issuance or sale of new stocks by means of electronic communications, etc., i.e., its own interest in the instant company.

(2) Whether there is illegality in calculating the stock assessment value

Article 29 (4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act explicitly provides that "the calculation of profits under paragraph (3) shall be based on the date of payment of the stock price," and does not provide for the provisions on the evaluation base date of the shares that are otherwise protected. Article 423 of the Commercial Act provides that "any underwriter of new shares shall have the rights and obligations of shareholders from the day following the due date when he performs payment or investment in kind." Thus, the plaintiff becomes a shareholder of the company of this case at the time of payment of the stock price, and also acquired the right to receive dividends and the right to receive the remaining assets at the time of liquidation, etc. as well as the right to receive dividends and the right to receive the remaining assets at the time of liquidation. Therefore, even if the shares acquired by the plaintiff are protected, it is merely limited to the restriction on the disposal of new shares for a certain period under an agreement between the plaintiff and the

On the other hand, Article 63 of the former Inheritance Tax and Gift Tax Act provides the method of appraisal of securities, etc., and Article 65 (1) of the former Inheritance Tax and Gift Tax Act provides that "as to the rights with uncertain duration, the rights to receive trust profits, or the rights to receive periodical payments as prescribed by the Presidential Decree, the value of such rights shall be appraised according to the method prescribed by the Presidential Decree based on the nature, content, and the remaining period of existence of such rights, the value of such rights shall be assessed separately from the securities, etc." Thus, the plaintiff's assertion of this part of this case includes the plaintiff's assertion that Article 65 of the former Inheritance Tax and Gift Tax Act shall apply to this case since the plaintiff's shares are acquired with the condition subsequent to the cancellation, the right subject to the condition subsequent is dependent on the future uncertainty of the legal act, and thus, the legal act shall become void as a matter of course if the uncertainty is fulfilled. Thus, the acquisition of the plaintiff's shares shall not be deemed to have been restricted in the transaction to be disposed of to a third party.

Therefore, the plaintiff's assertion against this cannot be accepted.

3. Conclusion

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