Seoul Administrative Court-2017-Gu Partnership-51969 ( April 12, 2018)

Whether a suspended corporation is a corporation and where a provision for calculating the profits from donation is null and void, whether it is impossible to calculate the profits from donation

Although it is reasonable to see that the corporation is a corporation under suspension of business, where the provision on the calculation of donated income (Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act) is null and void,

Article 2 of the Inheritance Tax and Gift Tax Act: Donation of profits through transactions with a specific corporation under Article 41 of the Inheritance Tax and Gift Tax Act

2018Nu44601 Revocation of Disposition of Imposition of Gift Tax, etc.

AAA 3 persons

The Head of AA Tax Office 2 others

2018.04.12

December 18, 2018

1. Revocation of a judgment of the first instance;

2. On August 10, 2015, the head of a tax office imposed gift tax of KRW 779,59,346, penalty tax of KRW 412,953,774, and KRW 738,913,407, penalty tax of KRW 391,402,433, gift tax of KRW 779,59,346, penalty tax of KRW 412,953,774, and Plaintiff****** on August 5, 2015, Defendant*** the head of a tax office imposed gift tax of KRW 662,418,540, penalty tax of KRW 350,83,100, Defendant* the head of a tax office imposed gift tax of KRW 686,634,116, penalty tax of KRW 363,710,94, respectively.

3. The total costs of the lawsuit shall be borne by the Defendants.

The same shall apply to the order.

1. Details of the disposition;

This Court's explanation is the same as the entry of the reasoning of the judgment of the court of first instance. Therefore, this Court's explanation is accepted by Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Whether the disposition is lawful;

A. Plaintiffs’ assertion, relevant statutes, and facts of recognition

The reasoning for this Court’s explanation is as follows: (a) the pertinent part of the judgment of the court of first instance (from No. 5, No. 3 to No. 8 of the judgment of the court of first instance) is the same as that of the judgment of the court of first instance, except for dismissal or addition as follows; and (b) thus, it shall be cited in accordance with Article 8(2) of the Administrative Litigation Act and Article 420

○ On the 6th judgment of the first instance court, the following shall be added to the following:

4) As long as Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act is contrary to the purport of Article 41(1) of the former Inheritance Tax and Gift Tax Act, which is the mother corporation, and is null and void beyond the scope of delegation, and there is no basis for calculating the profits earned by the Plaintiffs, the failure to report and pay gift tax is difficult to expect the Plaintiffs’ return and payment of gift tax, and therefore, there

○ Going the 8,081,443,520 Won for the 8,081,443,520 of the 8th instance judgment.

B. Determination on the primary grounds for the main disposition (a donation of profits through transactions with a corporation during the suspension of business)

1) Whether the additional reason for disposition is changed; the legislative intent of Article 41(1) of the former Inheritance Tax and Gift Tax Act; and whether the non-party corporation’s donation of the instant real estate constitutes “a corporation whose business is suspended or discontinued” under Article 41(1) of the former Inheritance Tax

This Court's explanation is identical to each corresponding part of the judgment of the court of first instance (as stated in section 9, No. 3, No. 14, No. 2, of the judgment of the court of first instance). Thus, this Court's explanation is accepted in accordance with Article 8 (2) of the Administrative Litigation Act, Article 420 of the

2) Calculation of the benefit of donation

A) Article 41(1) of the former Inheritance Tax and Gift Tax Act provides that “Where a person who has a special relationship with a shareholder or investor of a corporation (a specific corporation) who has deficits or has been suspended or closed, obtains the profit through any transaction falling under any of the following subparagraphs with the specific corporation, the shareholder or investor of the specific corporation concerned shall be deemed the value of donated property of the shareholder or investor of the specific corporation concerned, and Article 41(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act delegates the method of calculating the profit to the Presidential Decree. Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the profit under the said Act shall be the amount calculated by multiplying the value of donated property, etc. (in the case of a corporation with losses, it shall be limited to the relevant losses) by

B) Although Article 41(1) of the former Inheritance Tax and Gift Tax Act delegates only "the calculation of the profit by the largest shareholder, etc. through a certain transaction with a specific corporation" to the Enforcement Decree, Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act stipulates that the profit acquired by a specific corporation shall be deemed as "the profit obtained by the shareholder, etc.," and it shall be calculated as "the profit obtained by the specific corporation, etc.," under Article 41(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, if there is no profit acquired by the shareholder, etc., even if there is no profit acquired by the free provision of the property for the specific corporation, it may be excluded from the subject of gift tax. However, under Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, if there is a gratuitous provision of property to the specific corporation, it shall be deemed that the shareholder, etc. has obtained the profit by itself and shall be liable to pay gift tax (Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act).

C) Meanwhile, Article 41(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “the former Inheritance Tax and Gift Tax Act”) partially changed to “the case where a shareholder, etc. of a specific corporation has obtained benefits” as prescribed by Presidential Decree. However, Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act has been maintained before the amendment by Presidential Decree No. 25195, Feb. 21, 2014. However, in light of the taxation system of gift tax and the concept of gift tax, etc., it should be deemed as a provision premised on the fact that the shareholder, etc. obtained benefits corresponding to donated property under the Inheritance Tax and Gift Tax Act by providing property to a specific corporation without compensation, and it is difficult to assume that “interest that a shareholder, etc. may obtain by such provision is contrary to the value of shares, etc. of the specific corporation, which was actually delegated by the former Enforcement Decree, regardless of the statutory amendment.”

D) Therefore, Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which was enforced at the time of the date of donation of real estate, is null and void as above, and thus, cannot be applied to this case (this case is based on the interpretation theory that the defendant's order and rule under Article 107(2) of the Constitution only extends to specific cases, and thus, the above Supreme Court en banc Decision 2015Du45700 Decided as to a juristic person during suspension of business is a deficit, and thus, Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act concerning a juristic person during suspension of business can be applied to this case. However, the above Supreme Court en banc Decision 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act is judged to be in violation of the purport and scope of delegation of the parent law because Article 31(6) of the former Enforcement Decree of

E) Even if Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act is null and void, the Defendant asserts that Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (hereinafter “Enforcement Decree of the Inheritance Tax and Gift Tax Act”) prior to the amendment that is null and void as seen above is consistent with the purport of the above Supreme Court en banc Decision 2015Du45700 Decided that “the value of shares increased due to the value of donated property” and thus, it can be applied to the instant case. Even if not, it is possible to calculate the gains of donation pursuant to Article 63(1) of the former Inheritance Tax and Gift Tax Act and Article 54(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which provides for the general evaluation method of unlisted stocks, can be calculated pursuant to Article 63(1) of the former Inheritance Tax and Gift Tax Act and Article 2(3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.

① First, the argument that the gift tax can be calculated under Article 31(6) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act prior to the amendment in 2003 is possible. Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act amended on December 30, 2003 can be applied retroactively to cases where the tax liability is established prior to the enforcement of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, but the gift tax after the enforcement of the Enforcement Decree was determined or corrected. However, the Supreme Court en banc Decision 2006Du19693 Decided 206Du19693 Decided that Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act and Article 6 of the former Enforcement Decree of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which provides that the tax liability for gift tax, was established on April 200, and Article 6 of the former Enforcement Decree of the same Act that allows its retroactive application, which was null and void at the time of its enforcement.

However, Article 31(6) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20035, Apr. 30, 2012); Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20035, Apr. 1, 2004); Article 1 and Article 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20045, Apr. 30, 200; Presidential Decree No. 20135, Apr. 31, 2012; Presidential Decree No. 20135, Apr. 30, 2012; Presidential Decree No. 2010, Feb. 1, 2003; Presidential Decree

② Next, the assertion that it is possible to calculate the Plaintiffs’ donation gains pursuant to Article 63(1) of the former Inheritance Tax and Gift Tax Act and Article 54(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which provides for the general evaluation method of unlisted stocks, is contrary to the language and text of Article 41(1) of the former Inheritance Tax and Gift Tax Act, which is left to the legislative discretion to set the contents of donation gains through transactions with a specific corporation, at the legislative discretion by separate Enforcement Decree. Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax

This part of the Defendant’s assertion can be deemed to be based on the fact that it is difficult to propose any difference in the value of stocks, etc. of a specific corporation through a transaction with a specific corporation other than the increase in the value of the stocks, etc. of the specific corporation according to the general evaluation method of unlisted stocks. In calculating the profit of donation through a transaction with a specific corporation, there are still many variables, such as the method of deduction for the prevention of double taxation, in case where the relevant specific corporation paid related corporate tax (in this case, the non-party corporation paid corporate tax on the aforementioned donation). Therefore, it cannot be concluded that the contents of the profit of donation through a transaction with a specific corporation are identical to those of the non-listed stocks calculated by the difference in the value of stocks, etc. of the relevant donation before and after the relevant donation according to the general evaluation method of the non-listed stocks. In fact, Article 31(6)4 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act amended on February 21, 2014, as well as Article 31(4) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act.

③ Finally, the argument that it is possible to calculate the gift tax pursuant to Article 2(3) of the former Inheritance Tax and Gift Tax Act, which provides for the comprehensive taxation principle of gift tax. In order to ensure predictability of taxpayers, in a case where an individual valuation rule limits only a certain transaction or act among them to taxable objects of gift tax by regulating a specific type of transaction or act, and the scope of taxation can be limited, thereby setting the scope and limit of taxation of gift tax by prescribing the scope of taxation of gift tax, the gift tax may not be imposed even if the transaction or act excluded from the taxable subject of gift tax or the scope of taxation among the transaction or act regulated by the individual pricing rule. (See, e.g., Supreme Court Decision 2013Du16104, Oct. 15, 2015).

Therefore, as long as Article 41(1) of the former Inheritance Tax and Gift Tax Act separately provides for the taxation on the profits accruing from a transaction with a specific corporation, only such individual provision can be applied to the transaction subject to taxation, and Article 2(3) of the former Inheritance Tax and Gift Tax Act, which is a general provision, cannot be applied. If an individual provision can be applied to a transaction subject to taxation, the existence of individual provision is uncertain, as well as the calculation method of the profits accruing from donation in addition to the method of calculating the profits accruing from donation, so it is possible to calculate it in a way different from that of the individual provision, thereby causing an unreasonable outcome in terms of legal stability and predictability of the taxpayer. Accordingly, the Defendant’s assertion on this part is without merit.

F) The instant disposition, which is based on the donation of profits from a transaction with a juristic person during the primary disposition, is null and void under Article 31(6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, and there is no other provision which can compute the said donation profits. As such, the disposition based on the invalid provision is unlawful in its entirety, unlike the case where the tax base was simply erroneous (see Supreme Court Decision 82Nu148, Jul. 12, 1983). Thus, the instant disposition based on the primary disposition is unlawful.

C. Determination on the conjunctive disposition (a donation of profits through a business transfer)

Article 42(1)3 of the former Inheritance Tax and Gift Tax Act stipulates that the gains acquired as a result of a change in the value of the shares owned by a business transfer, etc. shall be included in the value of the donated property. Accordingly, if intending to present the donated gains, 'business transfer, etc.' should be recognized. In this regard, the defendant asserts that DoD donated the real estate to the non-party corporation in this case and transferred all of the lease relationship to the non-party corporation, and thus, it can be viewed as

However, since a business transfer is a transfer of all the projects organized for a certain business purpose as a whole while maintaining its identity, it is difficult to deem that a business transfer existed solely on the ground that a lease contract or a business registration name is succeeded to by transferring real estate, as well as only a case of transferring real estate (see, e.g., Supreme Court Decision 2013Du16104, Oct. 15, 2015).

The instant real estate donation certificate (No. 5 and No. 9) against the non-party corporation of DD stated only that DD donated the instant real estate to the non-party corporation, and even if the non-party corporation added the type of the real estate lease business and received the transfer of the lease relationship with respect to the instant real estate (Evidence No. 1 and No. 2-1 through No. 3) by adding the type of the real estate lease business to the real estate lease business, such circumstance alone cannot be deemed that there was a transfer of business with respect to the real estate lease business as a whole organized business for a certain business purpose, and there is no other evidence to prove that DD transferred such business.

Therefore, the Defendant’s preliminary disposition based on the donation of profits through the transfer of business cannot be recognized without examining the remainder of the grounds for the Defendant’s preliminary disposition. Thus, the instant disposition based on the preliminary disposition is unlawful.

3. Conclusion

If so, the plaintiff's claim is reasonable, and the judgment of the court of first instance is unfair with different conclusions, so the plaintiff's appeal is accepted and the judgment of the court of first instance is revoked and the disposition of this case is revoked and it is so decided as per Disposition.