It is inappropriate to assess the arm's length price of the instant shares according to the supplementary assessment method under Article 54 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act

Since there is no evidence to prove that it is inappropriate to assess the value of the shares of this case according to the supplementary method of assessment, it is unlawful in itself to calculate the value of the shares of this case by applying the supplementary method of assessment.

Article 98 of the International Taxes Act, Tax Adjustment by Normal Price

2014Guhap5470 Revocation of Disposition of Imposing corporate tax

United States Co., Ltd.

O Head of tax office

July 9, 2015

August 13, 2015

1. On January 12, 2012, the Defendant’s revocation of the part exceeding KRW 278,79,474 of the corporate tax of 681,22,870 (including additional tax) reverted to the Plaintiff for the business year 2009.

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

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

"A. The plaintiff was established on December 30, 1986, and made and sold a professional production and sale of a liver system (hot) which is the core point of plastic sales. A○○ Investmentst (hereinafter "A○○○") around October 2003 is a holding company of the plaintiff in Hong Kong and China established in Hong Kong, and Y0 USC Co. Ltd. Ltd (hereinafter "Y○○ US") is an overseas subsidiary of the plaintiff established in the United States around April 1997. However, on April 6, 2009, the plaintiff held 100% of the issued shares of the United States of America, which is an overseas non-listed corporation, but on April 6, 2009, transferred 1053,000 shares of the United States ("O○○○") to ○○○○ on April 30, 2009, 2005, 3015, 2081, 2005.

C. From August 30, 2011 to November 26, 2011, the director of the Seoul Regional Tax Office: (a) conducted a tax investigation on the Plaintiff; (b) deemed that the Plaintiff transferred the instant key shares at a low price to A○○, a person with a special relationship, and notified the Defendant of the relevant taxation data.

D. According to the supplementary method of assessment as stipulated in Article 63(1)1(c) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “former Inheritance Tax and Gift Tax Act”) and Article 54(1) and (2) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 22042, Feb. 18, 2010; hereinafter the same shall apply), the Defendant assessed the key shares of this case as 3,773,402,431 won (the 2,757 won per share and 30% increase per share), and assessed the difference between the transfer value and the transfer value as 2,40,13,939 won in gross income and the acquisition value as 827,90,010 won in the calculation of deductible expenses, 1,412,213,929, and 2030 won in the calculation of corporate tax and 304.

E. On April 9, 2012, the Plaintiff appealed to the Tax Tribunal. However, on March 5, 2014, the Tax Tribunal revoked only the part of KRW 686,487,820 which denied the transfer of the instant shares and the rejection of the rejection of individual wrongful calculation among the above corporate tax on March 5, 2014, thereby reducing the corporate tax attributed to the Plaintiff for the business year 2009 to KRW 681,222,870.

[Ground of recognition] Unsatisfy, Gap evidence 1 to 8, Eul evidence 1 to 4 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff transferred the instant shares to A○○ at a price that meets the stock evaluation amount assessed in accordance with the Fair Value Evaluation Act, which is an evaluation standard that generally uses the U.S.’s shares for tax purposes.

Nevertheless, the Defendant determined that it was a low-price transfer by applying the above supplementary evaluation method without any proof as to whether it is inappropriate to assess the value of the shares in this case by applying the supplementary evaluation method under Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, and imposed corporate tax on the Plaintiff. The instant disposition is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

Article 4(1) of the former Adjustment of International Taxes Act (amended by Act No. 1. 1. 2010, Jan. 1, 2010; hereinafter referred to as the "former Adjustment of International Taxes Act") provides that "the tax authorities may determine or rectify the resident's tax base and tax amount on the basis of the arm's length price if the transaction price is less than or exceeds the arm's length price in an international transaction in which one transaction party is a foreign related party." The transfer of the issue shares of this case constitutes an international transaction in which one transaction party is a foreign related party, the tax authorities can rectify the tax base and tax

However, since the instant shares are not traded and thus their arm's length price cannot be calculated by applying the comparable third party price method, resale price method, cost plus profit-sharing method, profit-sharing method, and net trade profit ratio as stipulated in Article 5 (1) 1, 2, and 3 of the former Adjustment of International Taxes Act and Article 4 (1) 1 and 2 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 22040, Feb. 18, 2010; hereinafter the same), since the instant shares cannot be calculated by applying the comparable third party price method, resale price method, cost plus profit-sharing method, and net trade profit ratio, it is inevitable to calculate the arm's length price by applying "other methods deemed reasonable in light of the substance and practice of other transactions" as stipulated

For the foregoing reasons, the Defendant assessed the arm’s length price of the instant shares in accordance with the supplementary assessment method under Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which held that “other methods deemed reasonable in light of the substance and practice of the transaction” and accordingly imposed corporate tax on the Plaintiff

Therefore, we will examine whether the above supplementary assessment method applied by the defendant to assess the arm's length price of the stock at issue at issue at issue at issue at issue at issue at issue at issue at the time of "reasonable method in light of the substance

The "net value of profit and loss" under Article 54 (1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act is a discount on the current value of future expected profit (the weighted average amount of net profit and loss for the last three years per week) based on the net value reduction rate of profit and loss (the interest rate determined and publicly notified by the Commissioner of the National Tax Service in consideration of the distribution rate of corporate bonds with maturity of three years guaranteed by the financial institution). Thus, in principle, the stocks of a domestic non-listed corporation shall be subject to the application thereof. Therefore, in cases of stocks of a non-listed corporation in a foreign country, applying the supplementary evaluation method under Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act only when it is not reasonable, and the burden of proof is imposed upon the tax authority (see Supreme Court Decision 2007Du5646, Jan

However, since there is no evidence to prove that it is inappropriate to assess the value of the shares of this case according to the above complementary evaluation method, the Defendant’s calculation of the value of the shares of this case by applying the above complementary evaluation method is in itself unlawful.

Therefore, the disposition of this case that imposes corporate tax on the Plaintiff on the basis of the value of the shares at issue, which was illegally calculated as above, is unlawful, and the materials submitted by the parties alone cannot be calculated as legitimate amount of tax, so all of the disposition of this case

3. Conclusion

Therefore, the plaintiff's claim of this case is justified, and it is so decided as per Disposition.