When calculating the net asset value at the time of supplementary evaluation of unlisted stocks, the method of assessing listed stocks held by the corporation

When calculating the net asset value of the corporation for the supplementary evaluation of unlisted stocks in relation to the denial of wrongful calculation, listed stocks owned by the corporation shall be assessed in accordance with the Inheritance Tax and Gift Tax Act.

1. The Defendant’s disposition of imposition of corporate tax of KRW 168,450,610 against the Plaintiff on January 17, 2005 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On May 31, 1999, the Plaintiff transferred 860,000 non-listed shares issued by ○○○○○○○○○○ (hereinafter “○○○○○”) (hereinafter “the instant non-listed shares”) owned by it to KRW 5,295 per share (hereinafter “the instant non-listed shares”).

B. The director of ○○○ Regional Tax Office: (a) deemed that the Plaintiff transferred the instant shares at a low price to ○○○ in the course of investigating changes in shares on ○○○○, around 2002; (b) denied the instant unlisted shares as a wrongful calculation; and (c) assessed the instant unlisted shares by the method under Article 63(1)1(c) and (3) of the Inheritance Tax and Gift Tax Act (amended by Act No. 6048, Dec. 28, 1999; hereinafter “Inheritance Tax and Gift Tax Act”); and (c) assessed the market price per share of listed shares 3,63,430 (hereinafter “instant listed shares”) issued by ○○○○○, among the assets owned by ○○○○○, the market price per share of the instant unlisted shares at KRW 12,705, which is the average value of the Korea Stock Exchange for three months prior to the base date of appraisal; and (c) assessed the market price per share as KRW 5,825

C. Based on the above findings, the Defendant included the difference between the market price of the instant unlisted stocks and the Plaintiff’s above transfer value (=860,000,000 won) in the Plaintiff’s gross income in the Plaintiff’s gross income for the business year 1999, but did not impose additional corporate tax in excess of the above gross income.

D. After that, the Defendant assessed the market price of the listed stocks of this case as KRW 18,500 per share, which was the final market price at the time of the date of the transfer of this case according to the land registry by the Board of Audit and Inspection, by applying Article 89(1) of the Enforcement Decree of the Corporate Tax Act. Based on this, the Defendant calculated the market price of the listed stocks of this case as at the time of the transfer of this case according to the above supplementary evaluation method as stipulated under the Inheritance Tax and Gift Tax Act, at the time of the transfer of this case, as at the market price of the listed stocks of this case, at KRW 8,715 per share, and then additionally included 2.45 million [=860,000 won] corresponding to the difference between the

E. As a result of the above tax adjustment, the defendant reduced the plaintiff's 199 business year's losses to the extent of the above difference. As a result, the plaintiff's losses before 2003 business year's 5,027,892,137 business year's income amount of 2003 business year's 4,458,109,909 won, even if the remaining losses carried forward are deducted from the above difference, 569,782,228 won was deducted, and the defendant imposed 168,450,610 won of corporate tax of 203 business year's 2003 business year's 203 business year's 203 business year's 4,450,610 won (hereinafter "the disposition of this case").

[Ground of recognition] Facts without any dispute, Gap evidence 1, Gap evidence 2-1, Gap evidence 1, Eul evidence 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The defendant's assertion

Even if ○○○○ issued non-listed shares are assessed on the basis of the supplementary valuation method stipulated in the Inheritance Tax and Gift Tax Act, the listed shares owned by ○○○○ should be assessed by the method stipulated in Article 89(1) of the Enforcement Decree of the Corporate Tax Act. Based on this, the market price of the non-listed shares should be calculated.

(2) The plaintiff's assertion

The instant listed stocks owned by ○○○○, as long as there is no legal basis to evaluate the instant listed stocks in accordance with the method stipulated in Article 89(1) of the Enforcement Decree of the Corporate Tax Act, and as long as the instant listed stocks are assessed by the method of complementary evaluation, the instant listed stocks owned by ○○○ shall be assessed by the method stipulated in

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Article 88(1)3 of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826, Dec. 30, 2002; hereinafter the same) provides that where assets are transferred or invested in kind with no compensation or at a price below the market price, the method of wrongful calculation shall be deemed a type. In applying Article 89(1) of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826, Dec. 30, 2002; hereinafter the same) Article 52(2) of the Corporate Tax Act, where there is a price generally traded with many and unspecified persons other than a person with a special relationship or a third party who is not a person with a special relationship under similar circumstances, the said price shall be deemed as the market price. Article 88(2) of the Enforcement Decree provides that where

Meanwhile, Article 63(1)1 (a) of the Inheritance Tax and Gift Tax Act provides that stocks, etc. traded on the Korea Stock Exchange shall be assessed on the basis of the average amount of the closing price of the Korea Stock Exchange every day, which is published on the basis of three months before the base date of appraisal. In full view of Article 63(1)1 (b) of the same Act and Articles 54(2) and 55(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1660, Dec. 31, 199; hereinafter the same), the value per stock of unlisted stocks shall be calculated by dividing the net profit or loss per share (the rate determined by the Ordinance of the Ministry of Finance and Economy, taking into account the average amount of net profit or loss per share for the latest three years/financial market) by the net asset value per stock (the net asset value / total number of stocks issued by the relevant corporation) as of the base date of appraisal by the net asset value assessed under Articles 60 through 666 of the Inheritance Tax and Gift Tax Act.

(2) On the other hand, the provision of Article 89 (1) of the Enforcement Decree of the Corporate Tax Act provides that where there is a transaction subject to the rejection of unfair act and calculation, in similar circumstances to the transaction, the price of the transaction shall be deemed to be the market price in case where there is a transaction price continuously traded with many and unspecified persons other than specially related persons or a transaction price generally transacted between third parties other than specially related persons, and the above provision applies only to the transaction itself subject to the avoidance of unfair act and calculation. In this case, the Plaintiff is the transfer of the instant unlisted shares, and the transfer of the said unlisted shares is subject to the avoidance of unfair act and calculation, and the Plaintiff does not transfer the instant listed shares themselves or the transfer of the said listed shares is not subject to the avoidance of unfair act and calculation. Thus, the instant unlisted shares cannot be evaluated by applying Article 89 (1) of the Enforcement Decree of the Corporate Tax Act only the market price of the instant listed shares among the assets held by ○○○○

In addition, where the market price of the instant unlisted stocks is calculated based on the supplementary evaluation method prescribed by the Inheritance Tax and Gift Tax Act, the method prescribed by Article 63(1)1(b) of the Inheritance Tax and Gift Tax Act, and Article 54(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (the value per share = the net asset value of the relevant corporation ± the total number of issued stocks) may be assessed. In such a case, in calculating the net asset value of ○○○○○○○○○○, the instant listed stocks among the holding assets shall be assessed based on the average value of the Korea Stock Exchange, which is published every three months before the base date of appraisal under Article 63(1)1(a) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, i.e., the instant disposition based on the premise that the market price of the instant listed stocks

3. Conclusion

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

Related Acts and subordinate statutes

○ Corporate Tax Act

Article 52 (Dispudiation of Wrongful Acts)

(1) Where the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office deems that the tax burden on the income of a domestic corporation has been unjustly reduced through transactions with persons with a special relationship as prescribed by the Presidential Decree (hereinafter referred to as "specially related persons"), he may calculate the income amount for each business year of the relevant corporation without regard to the acts of the domestic corporation or the calculation of the income amount (hereinafter

(2) In the application of the provisions of paragraph (1), the standard for determination shall be the prices applied or to be applied in sound and generally accepted practices and normal transactions between persons without a special relationship (including rates, interest rates, rents, exchange rates and other corresponding rates; hereafter in this Article referred to as "market prices").

(4) In applying the provisions of paragraphs (1) through (3), matters necessary for the types of wrongful calculation and the assessment of market price shall be prescribed by the Presidential Decree.

Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826 of Dec. 30, 2002)

Article 88 (Calculation Type of Wrongful Acts)

(1) The term “case where it is deemed that the tax burden has been unjustly reduced” in Article 52 (1) of the Act means the case falling under any of the following subparagraphs:

3. Where assets are transferred or invested as investment in kind with no compensation or at a price below the market price;

Article 89 (Scope of Market Price, etc.)

(1) In the application of the provisions of Article 52 (2) of the Act, if there is a price generally traded between many and unspecified persons other than a person with a special relationship or between a third party who is not a person with a special relationship in the law concerned, the price shall apply.

(2) In applying Article 52 (2) of the Act, if the market price is unclear, the amount calculated by applying in sequence the following subparagraphs:

1. The winter value which is appraised by an appraisal corporation under the Act on Publication of Land Prices and Evaluation of Land, etc.: Provided, That stocks, etc. not listed on the Stock Exchange shall be excluded;

2. The amount evaluated by the mutatis mutandis application of the provisions of Articles 38, 39, and 61 through 64 of the Inheritance Tax and Gift Tax Act.

○ Inheritance Tax and Gift Tax Act (amended by Act No. 6048 of Dec. 28, 199)

Article 60 (Principles for Appraisal)

(1) The value of property on which an inheritance tax or gift tax is levied under this Act shall be the market price as of the date the inheritance commences or the date of donation (hereinafter referred to as the “date of appraisal”). In such cases, the value appraised by the method of appraisal stipulated in Article 63 (1) 1 (a) and (b) (excluding cases falling under the provisions of Article 63 (2))

Article 63 (Appraisal of Securities, etc.)

(1) The appraisal of securities, etc. shall be made according to the following methods:

1. Appraisal of stocks and investment shares:

(a) Stocks and equity shares traded with the Korea Stock Exchange shall be the average daily market price ( regardless of whether there is any transaction record) of the Korea Stock Exchange every three months before the evaluation base date: Provided, That in cases where it is inappropriate to apply the average amount on the basis of the relevant average amount due to a cause, such as capital increase or merger, etc. during the three-month period, in calculating the average amount, the period from the day following the day on which capital increase, merger

(b) The provisions of item (a) shall apply mutatis mutandis to the stocks and equity shares as prescribed by the Presidential Decree from among the stocks and equity shares of the Association-registered corporations as prescribed by the Presidential Decree. In this case, the “final market price”

(c) Stocks and equity shares not listed on the Korea Stock Exchange other than those under item (b) shall be appraised according to the methods prescribed by Presidential Decree in consideration of corporation assets and profits;

(3) In applying the provisions of paragraphs (1) 1 and (2), 10/100 of the value appraised in accordance with the provisions of paragraphs (1) 1 and (2) shall be added to the value of stocks and equity shares of the largest shareholder or largest investor and those of the shareholder or investor who has a special relationship with him as prescribed by the Presidential Decree

○ Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 16660 of December 31, 199)

Article 54 (Appraisal of Unlisted Stocks)

(1) Stocks and contribution shares not listed on the Korea Stock Exchange (hereafter in this Article, referred to as “nonlisted stocks”) under Article 63 (1) 1 (c) of the Act shall, except in the case of paragraph (2), be the value assessed by the following formula:

The value per share = [The net asset value of the relevant corporation / the total number of issued stocks (hereinafter referred to as the “net asset value”) + the weighted average amount of net losses for the latest three years per week / the average interest rate formed in the financial market (hereinafter referred to as the “net value of profit and loss”) ± 2] ¡À2

(2) In case where non-listed stocks fall under any of the following subparagraphs, the appraised value according to the net asset value shall be determined:

2. Stocks or investment shares of a corporation which have losses exceeding the total amount of earnings which belong or comes to belong to the relevant business year under the Corporate Tax Act continuously from the business year within three years before the business year in which the base date of appraisal falls;

4. Stocks or investment shares the net profit or loss per share of which is less than 50/100 of the net asset value per share;

(4) In applying the provisions of paragraph (1), “total number of issued stocks” shall be determined by the total number of issued stocks as of the evaluation base date.

Article 55 (Calculation Method of Net Asset Value)

(1) The net asset value under Article 54 (2) shall be the value calculated by subtracting liabilities from the value appraised under Articles 60 through 66 of the Act as of the evaluation base date.