Cho Jae-2018-China286 ( October 05, 2018)

The transfer tax rate of 20% shall apply to non-listed stocks transferred by the large shareholder.

According to the literal interpretation of the language and text, it is reasonable to see that the 'large shareholder' under Article 94 (1) 3 (a) of the Income Tax Act includes all of the large shareholders of the listed corporation and the unlisted corporation, and thus, in the case of the unlisted stock, 20% transfer income tax rate is applied to the

Article 104 of the Income Tax Act

Incheon District Court-2018-Gu 5955 (Law No. 21, 20196)

O KimO

O Head of tax office

oly 17, 2019

.06.21

1. The plaintiff's claim is dismissed.

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

1. Details of the disposition;

A. On November 19, 2007, the Plaintiff acquired 25,500 shares (around 19.32% out of total issued shares 130,000 shares, hereinafter referred to as “instant shares”) issued by new ○○○○○○○ Science Co., Ltd. (hereinafter referred to as “instant company”). On August 3, 2016, the Plaintiff transferred KRW 1,350,000 shares to the Plaintiff-○○○○○ Science Co., Ltd. (hereinafter referred to as “instant shares”).

B. On October 31, 2016, the Plaintiff reported and paid KRW 121,424,500 of the capital gains tax for the year 2016 by applying the tax rate of 10% under Article 104(1)11 (b) of the former Income Tax Act (amended by Act No. 14389, Dec. 20, 2016; hereinafter the same shall apply) to the transfer of the instant shares. On March 17, 2017, the Plaintiff reported and paid KRW 121,424,50 of the capital gains tax for the year 2016, on the premise that the said transfer of shares falls under the “small and medium enterprise shares transferred by a major shareholder”, applying the tax rate of 20% under item (c) of the said subparagraph to the said shares.

C. On December 28, 2017, the Plaintiff filed a claim for correction with the Plaintiff for reduction of KRW 132,486,271 among the transfer income tax for the year 2016, by 132,486,271.

D. On February 6, 2018, the Defendant rendered a disposition rejecting capital gains tax correction against the Plaintiff on the ground that Article 104(1)1(b) of the former Income Tax Act excludes the application of Article 104(1)1(c) of the same Act with respect to the shares transferred by a major shareholder of a small and medium enterprise (hereinafter “instant disposition”).

E. The Plaintiff appealed and filed an appeal with the Tax Tribunal on April 16, 2018, but the said appeal was dismissed on October 5, 2018.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, and 3, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Article 104 (1) 11 (b) of the former Income Tax Act provides that the capital gains tax rate of 10% shall apply to the stocks of small and medium enterprises that are transferred by a person who is not a "large stockholder". Article 94 (1) 3 (a) of the same Act provides that the scope of "large stockholder" shall be "transfer by a large stockholder prescribed by Presidential Decree taking into account the ratio of stocks held by a stock-listed corporation under the Financial Investment Services and Capital Markets Act and the total market price of stocks held by the stock-listed corporation." The language and text of the above provision and the former Income Tax Act shall only be governed by the amendment of the former Enforcement Decree of the Income Tax Act on December 20, 2016; the former Enforcement Decree of the Income Tax Act was amended on February 3, 2017; in light of the purport of the no taxation without law and the clear principle of taxation requirements, the "large stockholder" shall be deemed to mean a stockholder

Therefore, 10% of the transfer income tax rate pursuant to Article 104(1)11(b) of the former Income Tax Act shall apply to the Plaintiff who transfers the instant shares, which are unlisted stocks, to the Plaintiff. Thus, the instant disposition is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) Under the principle of no taxation without law, the interpretation of a tax law shall be interpreted in accordance with the text of the law, barring any special circumstance, and it shall not be permitted to expand or analogical interpretation without reasonable grounds, and where it is necessary to clarify the meaning through the interpretation between the laws and regulations, it is inevitable to make a combined interpretation in view of the legislative purport and purpose to the extent that it does not undermine the legal stability and predictability pursued by the principle of no taxation without law (see, e.g., Supreme Court Decision 2016Da21272, Oct. 12, 2017).

(2) In light of the language, structure, legislative intent, and history of amendment, etc. of the aforementioned statutes, even in cases where stocks of stock-listed corporations are transferred, it is reasonable to view that 20% of the transfer income tax rate is applied to cases where a major shareholder transfers “large shareholder” under Article 104(1)11(b) of the former Income Tax Act when meeting the requirements of Article 157(4) of the former Enforcement Decree of the Income Tax Act (wholly amended by Presidential Decree No. 27829, Feb. 3, 2017; hereinafter the same shall apply).

(A) Interpretation of the language and text under Articles 94(1)3(a) and 104(1)1(b) of the former Income Tax Act

Article 94 (1) 3 (a) of the former Income Tax Act provides that "the transfer of stocks, etc. of a stock-listed corporation under the Financial Investment Services and Capital Markets Act by a major shareholder prescribed by Presidential Decree (hereafter referred to as a "major shareholder" in this Chapter) shall be made in consideration of the ratio of stocks owned or the total market value, etc.," and it is natural to interpret "the transfer of stocks, etc. from the capital market to the stock-listed corporation" as "the person prescribed by Presidential Decree in consideration of the ratio of stocks owned or the total market value, etc." as "the person prescribed by Presidential Decree". Furthermore, the above provision clearly states that the concept of a major shareholder will be used uniformly in the same chapter by adding "the major shareholder prescribed by Presidential Decree" (hereafter referred to as "the major shareholder" in this Chapter)" in Chapter 3 of the former Income Tax Act shall also be interpreted as mentioned above.

(B) The amendment purpose of Article 104(1)1(b) of the former Income Tax Act

In the former Income Tax Act (amended by Act No. 1358, Dec. 15, 2015), 10% of the transfer income tax rate is applied to the shares of small and medium enterprises under the former Income Tax Act (amended by Act No. 1358, Dec. 15, 2015); however, Article 104 (1) 11 (b) of the Income Tax Act (amended by Act No. 1041, Dec. 15, 2015) was amended as of December 15, 2015, and it is stipulated that the transfer tax rate of shares should be adjusted from 10% to 20% in consideration of the fact that there is a low need to give preferential treatment to the shares of small and medium enterprises. Accordingly, it is reasonable to interpret that the provision that the majority shareholder standard is applied only to the stock-listed corporations and the stock-listed corporations are different or that the necessity to revitalize the stock market is lower than that of the stock-listed corporations.

(C) Systematic interpretation of Article 94(1)3 and Article 104(1)11 of the former Income Tax Act, Article 157(4), (5), and (6) of the former Enforcement Decree of Income Tax Act

Article 94 (1) 3 (a) of the former Income Tax Act provides that the transfer of stocks, etc. of a stock-listed corporation, which meet certain standards, by the "large stockholder prescribed by Presidential Decree" and the transfer of stocks, etc. not through transactions on the securities market shall be subject

In the past, the Income Tax Act, in principle, includes the transfer of unlisted stocks in the subject of taxation, but ② In the case of the transfer of listed stocks, even if the transfer margin accrues in order to promote the activation of the stock market, the transfer margin is not treated as taxable income under the Income Tax Act, and the transfer of stocks or equity shares listed on the Korea Stock Exchange, which are prescribed by the Presidential Decree, is defined as transfer income in Article 94 subparagraph 3 of the Income Tax Act, as amended by Act No. 5580 of Dec. 28, 1998, taking into account the tax equity on capital gains, etc.

In other words, Article 94 (1) 3 (a) of the former Income Tax Act provides that capital gains tax shall also be imposed on cases where listed stocks are traded in order to prevent any abnormal donation using listed stocks and to ensure the equity of taxation in cases where other assets, such as real estate, are transferred. However, rather than for all listed stocks, in a lump sum, in order to alleviate the impact of the capital market and protect the interests of small-sum investors, the transaction, etc. of those who own stocks more than a certain scale of the capital market is subject to taxation, and if the capital market is developed in a sound manner, the scope of taxation is "the scope of taxation," which reflects the legislative intent to gradually expand the scope of the capital market (see, e.g., Constitutional Court Order 2004Hun-Ba32, 2005Hun-Ba63, 02,04,05Hun-Ba63,0

In light of the legislative purport above, Article 94 (1) 3 (a) of the former Income Tax Act does not apply to the transfer of unlisted stocks subject to capital gains tax, as a matter of principle, unlike the transfer of unlisted stocks subject to capital gains tax, it can be interpreted that the transfer margin is subject to taxation only to ① transfer of listed stocks in consideration of the ratio of owned stocks and total market value, etc., and ② transfer of listed stocks not through transaction in the securities market. It does not constitute a provision for recognizing the concept of a major shareholder only in the case of a stock-listed corporation. Thus, regardless of whether it is a stock-listed corporation or not, it shall be deemed that it falls under a “major shareholder” if it satisfies the criteria of Article 157 (4), 5, and 6 of the former Enforcement Decree of the Income Tax

In addition, Article 157 (4) of the former Enforcement Decree of the Income Tax Act provides the general requirements on the ratio of stocks owned and the total market value of such stocks to fall under the "large stockholder" and Article 157 (5) of the former Enforcement Decree of the Income Tax Act provides for the special requirements on the ratio of stocks owned and the total market value in the case of transfer of stocks of a venture business, and the special requirements on the ratio of stocks owned and the total market value in the case of transfer of stocks of a venture business.

(D) The amendment history of Article 104(1)1 of the former Income Tax Act; Article 157(4), (5), and (6), and Article 167-8(1) of the former Enforcement Decree of the Income Tax Act

As the former Enforcement Decree of the Income Tax Act was amended on December 20, 2016, on February 13, 2017, Article 104 (1) 11 of the former Income Tax Act (wholly amended by Act No. 15225, Dec. 19, 2017) provides that "major shareholders prescribed by Presidential Decree, considering the ratio of owned stocks, total market price of listed stocks, etc.," a separate provision on delegation. In addition, the former Enforcement Decree (wholly amended by Presidential Decree No. 28637, Feb. 13, 2018) separates a listed-listed corporation into a listed-listed corporation and a non-listed corporation from the current Enforcement Decree of the Income Tax Act (wholly amended by Presidential Decree No. 28637, Feb. 13, 2018; 2006Du1841, Nov. 29, 2007).

(3) Therefore, the Defendant’s assertion on a different premise cannot be accepted, and the instant disposition is lawful.

3. Conclusion

Therefore, the claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.