The plaintiff has calculated a reasonable stock value, which is not subject to the application of the unfair calculation panel rules (physical division).

Despite the amendment of the Inheritance Tax and Gift Tax Act, the Plaintiff constitutes a corporation less than three years from the date of physical division to the date of transfer, the Plaintiff assessed the net asset value only as the net asset value and purchased it at a higher price than the value reflecting the net profit and loss value together. The disposition agency applied the provision regarding the inclusion of the net profit and loss at the market price and applying the unfair calculation method (provisional purchase). However, the full bench ruling

2013Guhap5802 Revocation of Disposition of Corporate Tax Imposition

AABB Corporation

The director of the tax office

October 18, 2013

November 15, 2013

1. The disposition of imposition by the Defendant against the Plaintiff on February 8, 2013 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. 1) The Plaintiff (the former was BB, and the former was changed to the current trade name on March 30, 2012) was established on November 19, 1930, and was incorporated into a trucking transport business and railroad agency business, etc. on March 28, 2008 as an affiliate of the C CDD group, and was incorporated into an affiliate of the ADA group on December 30, 201.

2) On September 30, 2006,CC Terminal Co., Ltd. (hereinafter “CC Terminal”) was an unlisted corporation established under the division of the passenger vehicle terminal business division fromCC Industry Co., Ltd. (hereinafter “CC Industry”), and completed the registration of incorporation on October 2, 2006. On June 2, 2009, the ratio of the total value of land and building to the total value of total assets as of the end of 85.70%.

B. (1) On September 16, 2009, the Plaintiff entered into a sales contract with a person with a special relationship under the Corporate Tax Act, and with an OOOOCC terminal’s total outstanding shares (10,000,000 shares; hereinafter referred to as “instant shares”) owned by theCC industry, to purchase the shares of this case on December 30, 209, on the ground that the OOOCC terminal’s total issued shares (10,000 shares; hereinafter referred to as “the shares of this case”) fall under the category of “corporation less than three years after the commencement of the business”, and then purchased the shares of this case in accordance with the supplementary assessment method stipulated in Article 54(4)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22042, Feb. 18, 2010; hereinafter the same) at the net asset value at 30% per share.

(Deduction of Loss) OOO of the instant shares (Reserve of Loss)

(Inclusion of gross income) OOO (other outflows) as a wrongful calculation unit.

2011

(Inclusion into Gross Income) OOO of the instant shares (Reserve)

2) Thereafter, around June 20, 201, the Plaintiff concluded a sales contract with a specially related party, to sell the instant stocks to the OO per share, and transferred the instant stocks to the D Aviation on December 30, 201.

C. 1) As a result of the tax investigation conducted with the Plaintiff from September 10, 2012 to November 8, 2012, the director of the Seoul Regional Tax Office assessed the net value of profit and loss per share, which is the supplementary assessment method under the proviso of Article 54(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, and the net asset value per share, calculated by applying the weighted average rate of 30% to the largest shareholder of 2 and 3 in proportion to the ratio of 2 and 3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, based on the determination that the Plaintiff purchased the instant stocks from theCC industry, a related party, at a price higher than the market value, and notified the Defendant that the Plaintiff should impose the corporate tax OOOO for the business year belonging to 2011 through the tax adjustment as follows.

2) Accordingly, on February 8, 2013, the Defendant notified the Plaintiff of the correction and notification of the OOO of the corporate tax belonging to the business year 201 (hereinafter “instant disposition”).

D. The Plaintiff appealed and filed a request for examination with the Commissioner of the National Tax Service on February 26, 2013, but was dismissed on May 21, 2013.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 3, 4 (including each number; hereinafter the same shall apply), Eul evidence Nos. 1, 5, and 7, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case is unlawful for the following reasons.

1) Whether a certain transaction price falls under the market price should be determined on the basis of the circumstances leading up to the determination of the transaction price in question. However, there was no case where the Plaintiff purchased and sold the instant shares from the CCTV industry at the time of the purchase of the instant shares, and there was a situation where it is difficult to accurately calculate the net value per share of the instant shares because theCC industry did not keep separate accounts by business division before dividing theCC terminal. Considering such circumstances, assessing the shares of theCC terminal, the total value of which accounts for 85.70% of the total assets and the total value of the land and buildings, as net asset value, was the method to most appropriately reflect the objective exchange value of the instant shares. Considering that the Plaintiff’s assessment of shares of the total assets as net asset value exceeds 80% of the total value of the instant shares, it corresponds to the principle of substantial taxation, and that Article 54(4) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the net asset value of the instant shares, such as the purchase price of the instant shares and superficies, constitutes the net asset value.

2) Even if the purchase price of the instant shares does not fall under the market price, in light of the aforementioned circumstances, the Plaintiff’s purchase of the instant shares from theCC industry does not constitute an abnormal transaction that lacks economic rationality in light of sound social norms and commercial practices. Therefore, it does not constitute the subject of rejection of unfair calculation.

3) Article 54(4)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that a corporation whose stocks are less than three years after the commencement of its business shall be appraised by net asset value, and does not separately stipulate the meaning of “the commencement of business.” However, Article 3(1)1 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010; hereinafter the same) under Article 6(6) of the former Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010; hereinafter the same) provides that a domestic corporation’s registration date of incorporation shall be deemed the commencement of business. Accordingly, as at September 16, 2009, for which the Plaintiff purchased the stocks of this case from theCC industry, the date of registration of incorporation shall be deemed the date of commencement of business. Accordingly, since it has not passed since the date of registration from October 23, 2006.

4) In assessing the net profit and loss per share of the instant shares, the method of calculating the net profit and loss per share of the instant shares for the business year 2006 is not in violation of the principle of no taxation without law, and is illegal as it lacks rationality.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) The value per share of the instant shares purchased by the Plaintiff from theCC industry is the value assessed on July 17, 2009 by the EE Accounting Corporation, which was requested by the Plaintiff to assess the value of the instant shares, as of June 30, 2009. The EE Accounting Corporation assessed the value per share of the instant shares as net assets pursuant to Article 54(4)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act on the ground that the CC terminal constitutes a new corporation established by spin-off from theCC industry on September 30, 2006, which was less than three years after the commencement of the business.

2) In the case of "a corporation less than 3 years after the commencement of business" under Article 54 (4) 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, the defendant's provision that the value of stocks shall be evaluated as net asset value. The reason why the value of the net profit and loss which is low due to the incomplete business at the beginning of the business is to prevent distortion of the appraised value by excluding it from the stock value assessment. Thus, the issue of whether a corporation constitutes "a corporation less than 3 years after the commencement of business" should be determined not at the time of the incorporation of the corporation but at the time of the actual business commencement. The issue of whether a corporation newly incorporated due to physical division such asCC terminal does not constitute "a corporation less than 3 years after the commencement of business" on the ground that it should be determined as at the time of the commencement of the business at the same business division before the division, and the determination of the market value of the corporation in this case is based on a weighted average of 30% of the average of the O value and net asset value of the corporation.

○ The basis for calculating the value per share of the instant shares

OO members [The net asset value per share x (the net asset value x 3 + the net profit and loss value per share x 2) x 5 x the largest shareholder 130%, and the amount below the source hereinafter the same shall apply].

○ Ground for calculating the net value of profit and loss per share

OO members [The assessed amount of net profit and loss per share for the last three years = (OO members of the amount of net profit and loss per share as of December 31, 2008 x 3) + (OO members of the amount of net profit and loss per share as of December 31, 2007 x 2) + (OO members of the amount of net profit and loss per share as of December 31, 2007 x (OO members of the amount of net profit and loss per share as of December 31, 2006 x 1)] 】 1/6] 】 ± (10% of the interest rate determined and publicly announced by the Commissioner of the National Tax Service in consideration of the rate of profit and loss per share x 1) of the three-year

○ The basis for calculating the net profit and loss per share as of December 31, 2006

OOO members [=OOO members [== (i.e., the net profit and loss amount prior to the division of theCC industry x the ratio occupied by the net asset of the bus terminal division transferred toCC terminals x 12.59%) + the net asset of the bus terminal division prior to the division x the total net asset of theCC industry x OO members] ± 10,000,000]; or

Meanwhile, the Defendant calculated according to the ratio of net assets of the passenger vehicle terminal business division, which transferred the net profit and loss before the division of theCC terminal to the net assets of the entire CCTV industry, to the net asset of the passenger vehicle terminal business division, to the Plaintiff on November 27, 2009, because, at the time when theCC industry sells 6,604,843 share of the total issued and outstanding shares of theCC cooking, the net profit and loss for the business year 2006 at the time of the sale of 6,604,843 share of the total issued and outstanding shares of theCC, was calculated by the above method. In other words, as at the date of theCC terminal, it was spin-off from the CCTV industry on September 30, 2006, and completed the establishment registration on October 2, 2006, theCC industry calculated the net asset value of the total net asset value at the time of the split-off of the net asset value at the rate of the net asset value to the Plaintiff.

3) On November 19, 2012, FF, the Plaintiff’s vice head, was investigated by the Seoul Regional Tax Office, and stated to the following purport with respect to the sales of the instant shares by the Plaintiff andCC industry.

The author trusted the complementary value under the Inheritance Tax and Gift Tax Act as it is, at the time, the plaintiff's accounting team did not participate in the decision of stock trading price, and was notified only of the situation that it was decided to be OO per share in the complementary value under the Inheritance Tax and Gift Tax Act. Therefore, it is evaluated by the method of cash flow discount on its own, in preparation for future tax risks.

The evaluation by the cash flow discount law has been conducted by the staff in charge of the settlement of accounts of the accounting team with the unofficial assistance of the accounting firm.

On November 7, 2012, 2012, the letter of confirmation (No. 25) issued by KimG to a tax official on November 7, 2012, which was the head of the accounting management team of theCC industry as of September 2009, is as follows:

○ At the time of 2009, theCC industry requested an external accounting firm to assessCC terminal stocks.

At the time of determining the market price of shares, there was no price equivalent to the market price under the Corporate Tax Act, and there was no official objection by AA against the assessed amount.

The ○CC industry has traded the amount with trust in the appraised value of a certified accounting firm at the time.

4) On December 2006, CESD group announced a liquidity plan to secure liquidity through the sale of stocks belonging to theCC industry and DD aviation companies (hereinafter “H Construction”), DD aviation (M&A) around March 2008, and large amount of acquisition and merger (M&A) by acquiring the Plaintiff, etc., financial investors at the time of HH construction acquisition, raising put options redemption funds, and sales performance of major affiliates due to the global financial crisis that occurred around 2008. Accordingly, PESD group sold stocks owned to the Plaintiff, etc. for the purpose of securing liquidity and improving the financial structure, etc. as indicated in the table, and the largest shareholder of AO transferred 30% of its total amount to the Plaintiff at around 208, 2008, and 30% of its total amount to the Plaintiff at around 25, 2009.

See Table 9 of the Court Decision

[Ground of recognition] Facts without dispute, entry of evidence Nos. 1 to 28, purport of the whole pleadings

D. Determination

1) Article 52(1) of the former Corporate Tax Act provides that where a domestic corporation’s act or calculation of its income amount is deemed to reduce the tax burden on the corporation’s income through a transaction with a specially related person, it may calculate the income amount for each business year of the corporation without any relation to the act or calculation of its income amount. Article 88(1)1 of the former Enforcement Decree of the Corporate Tax Act provides that “where it is deemed that the tax burden has been reduced unfairly,” assets are purchased or received as investments in kind at a price higher than the market price or the assets are excessively depreciated.” Meanwhile, Article 52(2) of the former Corporate Tax Act provides that “The tax amount shall be calculated based on the sound social norms and common practice and the market price, i.e., the price applied to a normal transaction between a person and a specially related person, and Article 89(1)1 of the former Enforcement Decree of the Corporate Tax Act provides that Article 9(1)1 of the former Enforcement Decree of the Corporate Tax Act shall apply mutatis mutandis to a case where the market price is unclear under Article 9(2).

Meanwhile, in a case where a corporation’s wrongful calculation under Article 52 of the former Corporate Tax Act is deemed to have avoided or reduced tax burden by abusing the various forms of transactions listed in each subparagraph of Article 88(1) of the former Enforcement Decree of the Corporate Tax Act without a reasonable method by a person with a special relationship, it is deemed that the person with a right to taxation has denied it and has the income objectively and reasonably deemed to be reasonable by the method prescribed in the statutes. In light of the economic person’s viewpoint, it is limited to the case where the person with a right to taxation is deemed to have neglected the economic rationality due to disregarding the calculation of natural and unreasonable acts. Determination of whether the economic rationality exists shall be made on the basis of whether the transaction lacks economic rationality in light of sound social norms and commercial practices, and the special circumstances at the time of the transaction should also be considered (see, e.g., Supreme Court Decisions 205Du14257, Dec. 13, 2007; 201Du4298, Dec. 19, 20108).

2) In light of the following circumstances, even if considering the circumstances alleged by the Defendant, such as the motive for the Plaintiff to purchase the instant shares from theCC industry, it is difficult to readily conclude that the Plaintiff’s purchase of the instant shares at OOO per share was an abnormal transaction lacking economic rationality in light of sound social norms and commercial practices.

Therefore, the instant disposition is unlawful.

① OOO, the value per share of the instant shares purchased by the Plaintiff from theCC industry on September 16, 2009, is deemed to fall under “a corporation less than three years after the commencement of the business,” and it is based on Article 54(4)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, based on the determination that the EE accounting corporation entrusted with the assessment of the instant shares falls under “a corporation less than three years after the commencement of the business” in the case ofCC terminal which completed the registration of incorporation on September 30, 2006 due to spinoff from theCC industry.

In this regard, the defendant's provision that the value of stocks shall be evaluated as net asset value in the case of "a corporation less than 3 years after the commencement of business" under Article 54 (4) 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act. The reason why the defendant's provision that the value of stocks shall be evaluated as net asset value is to prevent the loss of the net profit and loss value which is low due to the incomplete business in the early commencement of the business from being excluded from the stock value assessment. Thus, the issue of whether a corporation constitutes "a corporation less than 3 years after the commencement of business" should be determined at the base of the actual business commencement, not at the time of the incorporation of the corporation. Therefore, since a corporation newly incorporated due to a physical division such asCC terminal, it does not constitute "a corporation less than 3 years after the commencement of business", it is argued that Article 54

However, the issue of whether a corporation newly established due to a physical division, as alleged by the defendant, falls under the category of "corporation less than three years after the commencement of business" should be determined based on the starting date of the same business division before the division. Thus, even if Article 54 (4) 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act should not apply to "corporation less than three years after the commencement of business," such interpretation or legal principle should not be clearly established by the Supreme Court's decision, etc., unless the rules established by the Ministry of Strategy and Finance (re-1065, June 15, 2009) presented as one of the grounds for the above interpretation or legal principles are merely an internal guidelines within the administrative agency, and it cannot be deemed that the above rules alone have legal effect to bind the court or citizens, and it is difficult to conclude that the E-listed corporation's economic rationality or legal principles have been established based on the value of shares purchased as the net asset value of the Plaintiff under Article 54 (4) 4 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.

(2) Article 54(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the net asset value of the corporation shall be appraised by averaging the net asset value of the corporation (the amount calculated by dividing the net asset value of the corporation by its total issued value) and net asset value of the corporation. However, even if the corporation is a deficit, there is a problem that the value of the corporation can be evaluated by the above method, and Article 54(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the net asset value of the corporation shall be valued by 10 percent or more of its net asset value (the net asset value of the corporation shall be valued by 30%) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (the total asset value of the corporation before its issuance, by 1.5 percent or more of the net asset value of the corporation). The net asset value of the corporation shall be valued by 160 percent or more of its total asset value (the net asset value of the corporation shall be appraised by 170%) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.

As such, Article 54 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, which is a provision on the method of assessing unlisted stocks, has been amended several times to find an assessment method close to the objective exchange value of the unlisted stocks. Even if the Plaintiff did not provide that the total amount of the value of the land, building, etc., out of total assets under Article 54 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, at the time of the Plaintiff’s purchase of the shares from theCC industry, shall be assessed as net asset value. However, if Article 54 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 23591, Feb. 2, 2012) stipulates that the total amount of the value of the land, building, etc., out of total assets shall be assessed as net asset value, it is difficult to conclude that the Plaintiff’s purchase of the shares of 21,907 won, which is the value assessed as net asset value, was inconsistent with the economic rationality in light of sound social norms and commercial practices.

③ In assessing the net profit and loss value per share of the instant shares, the Defendant calculated the amount of net profit and loss before physical division from the net assets of the CCTV industry as a whole toCC terminal, based on the ratio of net assets of the bus terminal business division transferred from the net assets of the entire CCTV industry toCC terminal. However, such method of evaluation is not in violation of the no taxation without the law without the law, and it is not generated from the assets ratio of each business division, and it is unlawful due to the lack of substantial rationality (if the Plaintiff assessed the net profit and loss value by the above method as at November 27, 2009, it shall not be deemed otherwise).

Therefore, it is difficult to readily conclude that the Plaintiff purchased the instant shares at a price higher than the market price solely on the ground that the value per share (OO) purchased by the Plaintiff per share of the instant shares calculated by the said method, etc. is higher than that of the instant shares (OOO). Article 17-3(2) of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 141 of Mar. 31, 2010) provides that, in calculating the weighted average amount of net profit and loss per share for the latest three years pursuant to Article 56(1)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, if the business year is less than one year, the disposal of the instant shares shall be calculated by one year if the Defendant calculated the net profit and loss per share of 2006 business year from October 1, 206 to December 31, 2006, based on the net profit and loss per share of 2006, the Defendant’s disposal of the instant shares within 16 O.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is decided as per Disposition by admitting it.