Romera Pacificbrub (Attorneys Oi-min et al., Counsel for the defendant-appellant-appellant)

The head of Jongno-gu Seoul Metropolitan Government (Seoul High Law Firm, Attorney Park Sang-chul, Counsel for the plaintiff-appellant)

October 17, 2007

1. The imposition of acquisition tax (including additional tax) by the Defendant on April 10, 2006 and acquisition tax (including additional tax) of KRW 560,57,480 and special rural development tax of KRW 48,510,190 and acquisition tax of KRW 1,783,41,950 and special rural development tax of KRW 163,479,420 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 June 28, 1998, the Plaintiff (formerly, Rosco Korea) as the Netherlands, and established Rosco Saco Korea’s Rosco Korea Ltd. (hereinafter “Rosco Korea”), a Netherlands-based corporation, by investing 100% of the shares on June 28, 1998, and on May 7, 2003, the Plaintiff invested 100% of the shares, thereby establishing Rosco Korea’s Robro, a corporation of the Netherlands-based corporation (hereinafter “subro”).

B. Liberco Korea, a domestic corporation, owned 75% of the shares of ANN Korea Proteti Co., Ltd. (hereinafter “AN”), and 25% of the remaining shares of ANE were owned by CPE Korea, a Singapore corporation, hereinafter “CPE”).

C. On July 15, 2005, Gaz. acquired 25% of the shares of Gaz. (hereinafter “instant shares”) from CPel on July 15, 2005.

D. On May 15, 2003, Roundco Korea and Round Korea acquired 50% of the shares (in the case of a limited liability company, it is inconsistent with the indication of shares in the “shares”; hereinafter in this case, it is indicated as “stocks”) of Lluri Industries Limited Liability Company (hereinafter “Lluridong Industry”), a domestic corporation, respectively (hereinafter “instant shares”).

E. In relation to the acquisition of shares per issue, the Defendant deemed the Plaintiff, the parent company of Rorocco Korea, as the oligopolistic shareholder of Rorocco Korea, and deemed that the share ratio of the Plaintiff, the oligopolistic shareholder, increased by 25% (75% to 100%). On April 10, 2006, the Defendant imposed acquisition tax (including additional tax) on the Plaintiff with 25% book value of the real estate owned by ASEAN as of July 15, 2005 pursuant to Article 105(6) of the former Local Tax Act (amended by Act No. 7843, Dec. 31, 2005; hereinafter the same) on the ground that the share ratio of the Plaintiff, the oligopolistic shareholder, was increased by 25% (including additional tax).

F. In relation to the acquisition of the instant 2 shares, the Defendant deemed that the Plaintiff, the parent company, was an oligopolistic shareholder who owned 100% shares in the Lluri Industries by acquiring two shares at issue with Llurico Korea, and imposed acquisition tax (including additional tax) on the Plaintiff on April 10, 2006 on the tax base of 100% of the book value of the real estate owned by Lluri Industries under Article 105(6) of the former Local Tax Act (hereinafter “instant secondary disposition”).

[Ground of Recognition] Unsatisfy, Gap evidence 1-1, 1-2, Eul evidence 1-1, 1-2, 3-1 through 6-2

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

(1) Each of the instant dispositions that deemed the Plaintiff as an oligopolistic shareholder, who did not own stocks at all with respect to the Lienna and Lidong industry, is unlawful. In other words, in order to be deemed as an oligopolistic shareholder under the interpretation of Article 22 Subparag. 2 of the former Local Tax Act regarding the definition of oligopolistic shareholder, the Plaintiff is an oligopolistic shareholder, who owns more than 51% of the shares as well as the person with a special relationship. Therefore, deeming the Plaintiff as an oligopolistic shareholder under the principle of substantial taxation is an abuse of the principle of substantial taxation, and cannot be denied under the tax law the legal personality of the Lienna and Lidong Industries

(2) Even if the Plaintiff is an oligopolistic shareholder, the instant disposition is unlawful as it is based on the invalid law. In other words, Article 78(2) of the Enforcement Decree of the Local Tax Act, which provides that a person who has already become an oligopolistic shareholder shall impose acquisition tax on the stocks additionally acquired, is null and void as it violates the explicit provision of Article 105(6) of the former Local Tax Act, which provides that “if a person becomes an oligopolistic shareholder by acquiring the stocks

(b) Related statutes;

It is as shown in the attached Form.

C. Key issue of the instant case

The key issue of this case is: (a) whether the Plaintiff, based on the substance over form principle, owns 100% of shares in Rorocco Korea and Round-ro (the parent company), can be deemed as the oligopolistic shareholder of Rorocco Korea and Round-si industry; (b) whether the Plaintiff is denied under the tax law of Rorocco Korea and Round-ro (the pertinent disposition in this case is related to each disposition in this case); and (c) if the Plaintiff can be deemed as an oligopolistic shareholder, whether it is legitimate and valid under Article 78(2) of the Enforcement Decree of the Local Tax Act, which is already subject to the Plaintiff’s additional acquisition of shares (the instant first disposition in relation to the instant disposition).

(d) Facts of recognition;

The following facts can be acknowledged by taking into account the following facts: there is no dispute between the parties, or the above acknowledged evidences and the statements in Gap Nos. 3, 4, and Eul Nos. 7-1 through 13-2.

(1) All Rorocco Korea and Rorocco Korea are established by the Plaintiff’s investment of 100%, and their addresses and telephone numbers and representative directors are the same, and there are no separate employees.

(2) At the time of acquiring two shares at issue with Rocon Korea and paper, the same person (non-party 1), respectively, was selected as a contracting agent, and in the general meeting of members of the Liber industry held on March 30, 2004, non-party 2 was selected as an agent of the two companies and proceeded with the general meeting of members. In addition, on May 29, 2003, part of the shares of the Liberco Korea and paper paper sold to Samsung Bio-stock Co., Ltd., and both contracts were designated as an agent (non-party 3).

(3) The key 1 shares and the purchase price for the shares at issue 2 shares were withdrawn and paid, respectively, in the Rorocco Korea and the head of the Rorocco. The funds were provided by the Plaintiff.

(4) Meanwhile, in the questionnaire No. 13407-686 of Jun. 8, 1999, the Minister of Government Administration and Home Affairs responded to the purport that “A’s stocks of a domestic corporation are owned by 50% and acquired 50% of A’s stocks from the United States corporation B and D were invested by 100% by each United States corporation E”, “B, E, and D do not fall under the special relationship under Article 22 subparag. 2 of the Local Tax Act, and even if acquired stocks from C, D does not have any obligation to pay acquisition tax as an oligopolistic stockholder” in the questionnaire No. 134270 of Nov. 24, 2004, the questionnaire No. 6(1)12 of the Enforcement Decree of the Local Tax Act is not a special relationship between “A and B, which is a shareholder of the non-listed corporation C and B, a shareholder of the non-listed corporation.”

E. Determination

(1) Interpretation of “excess shareholder” under Article 105(6) of the former Local Tax Act

Article 105(6) of the former Local Tax Act provides for oligopolistic shareholders of a corporation as a taxpayer of acquisition tax (the so-called Constructive Acquisition Tax) and does not provide for the definition of oligopolistic shareholders. Therefore, the 'excess shareholder' should be identified pursuant to Article 22(2) of the Local Tax Act and Article 6(1) of the Enforcement Decree of the Local Tax Act, which provides for the secondary tax liability of investors.

However, Article 6 (1) 12 of the Enforcement Decree of the Local Tax Act provides that "the corporation whose number of stocks, etc. is more than 50/100 of the total number of stocks issued by the corporation and the corporation whose number of stocks, etc. is more than 50/100 of the total number of stocks issued by the corporation is more than 50/100 of the total number of stocks issued by the corporation," and according to this provision,

Meanwhile, Article 22 Subparag. 2 of the former Local Tax Act defines all of the persons who hold 51/10 or more of the number of shares issued to an oligopolistic stockholder as an oligopolistic stockholder. In this case, whether a person who does not own shares among those who have a special relationship with an oligopolistic stockholder is included in the oligopolistic stockholder is required to be the person who owns the shares to become an oligopolistic stockholder (whether it is based on the “deficient” or “deficient”) according to the interpretation of the language of “a shareholder”.

Therefore, unless the parent company is identified as a “shareholders” under the above statutes, since there is no special relationship with the subsidiary holding 50% shares of the corporation, it shall be interpreted that both the parent company and the subsidiary company do not constitute an oligopolistic shareholder who is liable to pay acquisition tax.

(2) Whether the Plaintiff can be seen as an oligopolistic shareholder under the substance over form principle

Article 14(1) of the Framework Act on National Taxes declares the principle of substantial taxation by stipulating that “if the ownership of income, profit, property, act, or transaction subject to taxation is merely nominal and there is another person to whom such ownership belongs, the person to whom such ownership belongs shall be liable for tax payment,” and this is also applicable mutatis mutandis to local taxes pursuant to Article 82 of the Local Tax Act. However, the term “actuality” in this context means not the meaning of having all interested parties from an economic perspective as a taxpayer, but the meaning of understanding such ownership in accordance with the substance without being bound to go through the form of the legal title even if the nominal nominal owner exists within the legal framework (see, e.g., Supreme Court Decisions 201Nu1579, Dec. 8, 1992; 201Da19797, Feb. 19, 201). The same applies to the case where a taxpayer is engaged in economic activity.”

On the other hand, with respect to the ownership relationship, who is a shareholder, the Korean legal system gives certain effect to the shareholder registry or the statement of changes in stocks, etc., but it does not have a public disclosure system as an effective requirement of changes in rights, such as in the ownership of real estate, and if the nominal owner and the actual trader are different, the so-called substantive theory by which the actual trader is identified as a shareholder is appropriate (see Supreme Court Decision 85Meu239,240, Jul. 22, 1986, etc.).

However, in light of the above facts in the instant case, although the economic effect of the acquisition of shares by Rocon Korea and Rocon Korea and paper will be the Plaintiff, the Plaintiff’s “in-depth intention” and “in-house intention” of the Plaintiff, Rocon Korea and Rocon Korea are to own the shares in question with rocon Korea, not the Plaintiff, rather than the Plaintiff (the Plaintiff’s oligopolistic shareholder by forming the legal relationship under the relevant tax law).

Ultimately, unless the legal entity itself is denied under our legal system that grants independent legal capacity to a corporation, it is reasonable to view the Plaintiff as a “shareholders” merely because it disregards the intent of the Plaintiff to form legal relations with the Plaintiff, the parent company, with respect to the acquisition of shares, and deeming the Plaintiff as a “shareholders” on the sole basis of the Plaintiff’s economic effect as the parent company. In addition, if the application of tax law from an economic perspective is in violation of the essence of the principle of substantial taxation, it is not different from that of Article 6(1) of the Enforcement Decree of the Local Tax Act that provides detailed and specific provisions as to the scope of a specially related person, if the application of tax law from an economic perspective is “the principle of substantial taxation.”

Therefore, apart from the legislative theory that, if the parent company does not own shares, there is a need to prevent the result of the fact that any subsidiary is not liable to pay acquisition tax because it is not recognized as a special relationship with the subsidiary under the relevant laws and regulations, it is not possible to regard the plaintiff as an oligopolistic shareholder of the Ienna and the Ligue industry on the sole basis of the principle of substantial taxation without express provisions.

(3) Whether the legal personality of Rorocco Korea and paper is denied

The theory of the so-called theory of the denial of legal personality or the theory of the abuse of legal personality lies in regulating abuse of the company's independent legal personality by separating it from the shareholder or investor of the company. In the event that there are special circumstances between the shareholder or investor of the company, the company can be held liable for the act of the company. Meanwhile, since there are considerable human and capital combined relations between the shareholder or investor of the company and the parent company, it is reasonable that the officer or employee of the subsidiary concurrently belongs to the parent company's status as the officer or employee of the parent company, or that the parent company has a strong control over the subsidiary as a result of exercising shareholder's rights by holding the former shares of the subsidiary, and other circumstances such as the increase in the size of the company's business but the size of the company has not increased accordingly, it is insufficient to view that the parent company's independent legal personality of the subsidiary constitutes abuse of legal personality in relation to the creditor of the subsidiary company, at least 20 subsidiaries are required to be recognized as abuse of legal personality, such as the parent company's independent intent or loss of its own business.

According to the above facts of recognition, it can be recognized that Rorocco Korea or Round is a nominal company, and the two companies have an independent interest independent from the Plaintiff in the possession of the Round and Round Industry, or do not engage in particular business activities other than the business owning the Round and Round Industry.

However, in light of the above facts, it is difficult to see that the above two companies lose their independent intent or loss of the existence and exercise full control over the Plaintiff as part of their own business (Article 22 of the Local Tax Act provides that the secondary taxpayer shall be limited to those who exercise de facto control over the corporation even among oligopolistic shareholders of certain requirements) based on the general requirements for abuse of corporate personality, as seen above, in light of the fact that the above two companies were operated with independent accounts separate from economic sources or interests, and the method of acquiring shares in the Alinna industry was not identical, and the tax law provides that the above companies may not be deemed to have been subject to broad sanctions against the avoidance of tax liability established by the second taxpayer (Article 22 of the Local Tax Act provides that the second taxpayer shall be limited to those who exercise de facto control over the corporation). In addition, in light of the above general requirements for abuse of corporate personality, it is difficult to conclude that the above two companies lose their independent intent or loss, and that there is no means to acquire shares in the Alinna industry (Article 222 of the Ministry of Government Administration and Home Affairs).

Ultimately, the plaintiff cannot be viewed as a shareholder of the issues because of the denial of legal personality between Rorocco Korea and paper.

(4) Sub-determination

Therefore, without considering the validity of Article 78(2) of the Enforcement Decree of the Local Tax Act, each of the instant dispositions against the Plaintiff is illegal as against a person who is not an oligopolistic shareholder under Article 105(6) of the former Local Tax Act.

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and all of them are accepted, and it is so decided as per Disposition.

[Attachment]

Judges Lee Young-young (Presiding Judge)