Seoul Administrative Court-2017-Gu Partnership-75897 ( October 15, 2018)

Cho High-2015-Seoul Government-1851 (Law No. 13, 2017)

When determining whether a related party under Article 42(3) of the former Inheritance Tax and Gift Tax Act is a related party

Article 42(3) of the former Inheritance Tax and Gift Tax Act applies only when a person is not a specially related person at the time of exercising the convertible right as well as the acquisition of convertible bonds.

Article 42 of the Inheritance Tax and Gift Tax Act (Gifts, etc. of Other Benefits)

Seoul High Court 2018Nu52688

AA

BB Director of the Tax Office

Seoul Administrative Court 2017Guhap75897

September 21, 2018

November 16, 2018

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The defendant shall revoke the imposition of gift tax of KRW 1,057,866,750 (including penalty tax) for the plaintiff on January 14, 2015.

1. Quotation of the reasons for the judgment of the first instance;

The reasons for this decision are as follows: Article 8(2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act are as follows, except for dismissal or addition of the following contents among the reasons for the judgment of the first instance.

○ 5, 8, 9 pages 8, “At the time of the acquisition of the instant convertible bonds, as well as at the time of the conversion of the instant convertible bonds, it was not a specially related person by holding less than 30% of the equity shares of the non-party company,” which read as follows: “Although there was a specially related person at the time of the conversion of the instant convertible bonds with the non-party company, at least

○ 7 pages 7, 9’s “Conclusion” was added to “(the Plaintiff had approximately 39% of the shares ofCC in its own name, other than the shares sold as above).”

○ 7 pages 10 " from the plaintiff, etc." shall be considered as "the plaintiff, etc.".

○ 8, 13 pages 13 adds the following:

In order to fall under the donation under Article 2 (3) of the former Inheritance Tax and Gift Tax Act, at least a critical element that "transfer of a father to a donee at no charge or at a low price" or "on the increase of property value" is required, and the act cannot be deemed as a donation under Article 2 (3) of the former Inheritance Tax and Gift Tax Act solely on the ground that any act occurred without such "written intention for transfer" or "on the basis of the fact that there was an increase of another's property without such "written intention for transfer" or "on the basis of the fact that there was an increase of another's property." However, there is no particular ground to view as alleged above by the plaintiff, and the non-party company seems to have had the intention to divide the business performance of the non-party

○ 10 pages 21 shall be changed into “whether or not”.

○ 11. 12. 12. 12. 12. 12. 1.2.2.2.2.3.2.3.

According to the above facts, as the representative director and the largest shareholder of the non-party company at the time of the conversion of the instant convertible bonds, the Plaintiff was exercising de facto influence over the management of the non-party company through exercising the right to appoint and dismiss officers and determining business policies. Thus, at the time of the conversion of the instant convertible bonds, the Plaintiff was in a special relationship under Article 12-2(1)3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act with the non-party company (the Plaintiff also recognized that the Plaintiff was in a special relationship with the non-party company at the time of the conversion of the instant convertible bonds). Accordingly, Article 4

(3) Even if the plaintiff and the non-party company did not have a relation with the non-party company, in light of the circumstances as seen in Article 2-C-1(c) of the above, it is reasonable to view that there is no justifiable reason for the transaction practice under Article 42(3) of the former Inheritance Tax and Gift Tax

2. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.