Cho High 2019No1253 (Law No. 29, 2019)

requirement for large shareholders of the amended listed shares

If the sum of shares, etc. owned as of the end of the immediately preceding business year is at least 1/100 of the aggregate of shares, etc. of the pertinent corporation, it is reasonable to interpret that the amendment of this case includes a person who does not hold at least 1% of shares of the pertinent corporation after the enforcement of the amendment of this case.

Enforcement Decree of the Income Tax Act Article 157 (Scope of Securities Depository Securities and Large Stockholders)

2019Guhap2249 Revocation of Disposition of Imposing capital gains tax, etc.

AA

BB Director of the Tax Office

September 5, 2019

September 26, 2019

1. The part concerning the claim for revocation of imposition of local income tax among the instant lawsuit is dismissed.

2. The plaintiff's remaining claims are dismissed.

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

Cheong-gu Office

The Defendant’s imposition of capital gains tax of KRW 13,843,530 and local income tax of KRW 1,384,350 against the Plaintiff on January 4, 2019 shall be revoked.

1. Details of the disposition;

A. On December 31, 2015, the Plaintiff and the Plaintiff’s spouse CCC owned 237,598 shares (1.46% of the total issued shares) of TTT Co., Ltd. (hereinafter “instant company”), a stock-listed corporation, and transferred the said shares over several occasions, and owned 149,408 shares on March 31, 2016.

B. From April 1, 2016 to December 31, 2016, the Plaintiff transferred 131,408 shares (hereinafter “instant shares”) to KRW 365,894,020, and did not report and pay capital gains tax.

C. In accordance with Article 94(1)3 of the Income Tax Act and Article 157(4)1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 27793, Jan. 17, 2017; hereinafter “former Enforcement Decree of the Income Tax Act”), the Defendant rendered a decision on December 31, 2015 that the Plaintiff and the Plaintiff’s spouse-related party constitutes a major shareholder (not less than 1% of the total issued shares) of the instant company as of the end of the business year immediately preceding the business year to which the transfer date of the instant shares belongs, pursuant to Article 94(1)3 of the Income Tax Act and Article 157(4)1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 27793, Jan. 17, 2017; hereinafter “instant disposition of imposition of capital gains tax”) and the disposition of imposition of local income tax of KRW 13,8430,530 (hereinafter “instant disposition”).

D. The Plaintiff, who was dissatisfied with the instant disposition of imposition of capital gains tax, filed an appeal with the Tax Tribunal on March 4, 2019, but was dismissed on May 29, 2019.

[Reasons for Recognition] Facts without dispute, Gap 2, 3 evidence, Eul 1 and 2 evidence (including numbers), the purport of the whole pleadings

2. Whether a request for revocation of imposition of local income tax of this case is lawful

Ex officio, we examine the legality of the part of the instant lawsuit seeking revocation of imposition of local income tax.

The instant local income tax is a local tax that is imposed and collected by a local government pursuant to Articles 3, 85, 89, and 100 of the former Local Tax Act (amended by Act No. 14474, Dec. 27, 2016; hereinafter the same), and thus, the other party to an appeal seeking revocation of imposition of the instant local income tax is the head of the local government having jurisdiction over the place where the Plaintiff’s place of tax payment is liable (see, e.g., Supreme Court Decisions 2004Du11459, Feb. 25, 2005; 2014Du205, Dec. 29, 2016).

Therefore, the part seeking revocation of the disposition imposing local income tax of this case among the lawsuit of this case

It is unlawful as against an unqualified person.

3. Whether the disposition of transfer income tax of this case is legitimate

A. The plaintiff's assertion

1) Article 157 (4) 1 of the former Enforcement Decree of the Income Tax Act provides that "where the ratio of stocks held is at least 1/100 as of the end of the business year immediately preceding the business year to which the transfer date of stocks belongs" (hereinafter referred to as "the amended provision of this case"), the above provision amends "where the ratio of stocks held as of the end of the business year immediately preceding the business year to which the transfer date of stocks belongs is at least 2/100" under Article 157 (4) 1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26982 of Feb. 17, 2016), and applies as from April 1, 2016 according to the relevant Addenda. Therefore, the interpretation of the amended provision of this case is not subject to capital gains tax if the Plaintiff or the Plaintiff did not own stocks at least 1/10 as of April 1, 2016, which is subject to the imposition of capital gains tax of this case (hereinafter referred to as "the first disposition of this case").

2) If the instant amended provision provides that the requirement of a major shareholder can be determined as of December 31, 2015, which is a taxation requirement, before its enforcement date, it is reasonable to view the instant amended provision as invalid not only because it deviates from the delegation scope under Article 94(1)3(a) of the Income Tax Act, but also goes against the principle of prohibition of retroactive legislation. Therefore, the instant disposition imposing capital gains tax based on the instant amended provision is unlawful (hereinafter “the instant second assertion”).

3) Additional tax may not be imposed if a taxpayer has justifiable grounds that could not be attributable to his/her failure to perform his/her duty. The imposition of capital gains tax on the transfer of stocks of this case constitutes a case in which the interpretation of the relevant statutes is unclear and its taxation is not clear. Therefore, the Plaintiff’s failure to report and pay a capital gains tax base after the transfer of the stocks of this case is justifiable. Therefore, the penalty tax on the disposition imposing capital gains tax of this case in

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Determination on the first argument

A) Article 94 (1) 3 (a) of the Income Tax Act provides that income from the transfer of stocks, etc. transferred by a large stockholder of a listed stock corporation prescribed by Presidential Decree shall be capital gains. Accordingly, the amended provisions of this case stipulate that "one stockholder or one investor who owns stocks or investment shares of a corporation" and that as of the end of the business year immediately preceding the business year to which the transfer date of stocks, etc. belongs, in cases where the ratio of the total amount of stocks, etc. owned as of the end of the business year immediately preceding the business year to which the transfer date of stocks, etc. belongs to not less than 1/10 (hereinafter referred to as "ratio of owned stocks, etc.") to the total amount of stocks, etc. owned by the relevant corporation, etc. as of the end of the business

B) In light of the language and text of the instant amendment provision, in a case where the pertinent corporation’s shares are not owned by more than 1% since April 1, 2016 after the enforcement of the instant amendment provision, such as the Plaintiff, it is difficult to find a reasonable ground for interpreting the instant amendment provision by limiting the amount of capital gains tax even if the total amount of shares owned as of the end of the business year immediately preceding the business year to which the date of the transfer of shares belongs is 1/100 or more, and such interpretation is difficult to recognize the validity in terms of taxation equity. Therefore, “where the total amount of shares, etc. owned as of the end of the immediately preceding business year exceeds 1/100,” it is reasonable to interpret that the instant amendment provision includes a person who did not hold more than 1% of the shares of the pertinent corporation after the enforcement of the instant amendment provision.

C) Therefore, we cannot accept this part of the Plaintiff’s assertion.

2) Judgment on the second argument

(A) Retroactive legislation is, in principle, classified into “deficial legislation” and “deficial and quasi-deficial legislation” according to whether new law has already been terminated or has already started but has not yet been completed, and the former is not constitutionally permitted. On the other hand, in principle, the point of view of protecting trust in the bridge process between reasons for public interest requiring retroactive treatment and requests for protection of trust should be limited to the legislative formation right (see, e.g., Constitutional Court Order 94Hun-Ba12, Oct. 26, 1995; Constitutional Court Order 9Hun-Ba5, Apr. 26, 2001; Constitutional Court Order 9Hun-Ba5, Apr. 26, 2001). Meanwhile, in the case of legislation that has retroactive effect, if the parties’ trust in the old law is reasonable and the party’s losses arising from the amendment cannot be justified, the amendment of the Income Tax Act’s reliance or reliance on the transfer of shares should not be recognized as a new provision that should not be effective.

(1) The legislative purpose of Article 94(1)3 of the Income Tax Act is to realize the principle of tax equality through the realization of a able to pay taxes equivalent to those of listed stocks which are subject to taxation on capital gains of listed stocks having the nature of capital gains.

② Based on policy decisions taking into account the policy purpose of fostering the capital market and the necessity of taxation following the transfer of listed stocks, the relevant Acts and subordinate statutes were amended and expanded to include listed stocks not included in the subject of capital gains tax in the subject of taxation, and the ratio of stocks held in order to determine major shareholder requirements is gradually mitigated from 5/100 to 3/100 and 2/100, and the provisions of this case are prescribed as 1/100 in the amended provisions of this case. In light of the process of the amendment of the above amended provisions of this case, all of the above provisions were deemed to have a provisional nature premised on future changes.

③ In light of the above nature of the instant amendment provision, in cases where listed stocks are owned by less than 2%, it is difficult to view that the income tax-related law, which is not subject to taxation, is expected to be maintained in the future without any change or trust.

④ The public interest, which is the equity of taxation and the realization of the principle of tax equality, to achieve the instant revised provisions, seems to be greater than the trust held by the Plaintiff in respect of the order of tax laws before the amendment.

⑤ Even if the amendment of the former Act and subordinate statutes in force at the time of acquisition of the instant shares is made in the future, no transfer income tax shall be imposed or exempted because the shares of listed shares held before the amendment are less than 2 per cent, as a major shareholder after the amendment.

(6) Furthermore, the amended provisions of this case specifically stipulate the scope of major shareholders in consideration of the ratio of stocks owned, total market value, etc. under Article 94(1)3 (a) of the Income Tax Act, and the total market value of the stocks owned, as prescribed by Presidential Decree, considering the ratio of stocks owned, total market value, etc., and thus, to achieve the legislative purpose of the above provision, they seem to be properly prescribed within the scope of delegation (see, e.g., Supreme Court Decision 2006Du4394, Nov.

C) Therefore, the Plaintiff’s assertion on this part cannot be accepted.

3) Judgment on the third argument

A) Additional tax is an administrative sanction imposed pursuant to the tax law in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim where a taxpayer has performed the duty of return, tax payment, etc. as prescribed by the law without justifiable grounds, and the taxpayer’s intent or negligence is not considered. However, if a taxpayer is not unaware of such duty or there is a circumstance that the taxpayer is not unreasonable to have known of his/her duty or that the taxpayer would not expect the fulfillment of such duty, etc., and there is a justifiable reason not to impose such duty (see, e.g., Supreme Court Decision 2002Du4761, Dec. 11, 2003).

B) On the other hand, according to the laws and regulations that were enforced at the time of the transfer of the instant shares, taxation of capital gains tax seems to be clear in terms of the language and text of the statutes or the legislative intent of the statutes. Therefore, it is difficult to deem that there is justifiable reason to deem that the Plaintiff did not report and pay

C) Therefore, the Plaintiff’s assertion on this part cannot be accepted.

4. Conclusion

Therefore, the part concerning the claim for revocation of imposition of local income tax among the lawsuit in this case is unlawful, and the remaining claims of the plaintiff are dismissed as it is without merit. It is so decided as per Disposition.