Whether or not donation is made shall not be applied in preference to the Inheritance Tax and Gift Tax Act.

The fact that the acquisition value of new shares issued with capital increase does not exceed the scope of the discount rate set forth in the above provision cannot be deemed as a gift gift under the Inheritance Tax and Gift Tax Act, and the Securities Disclosure Regulations cannot be deemed as prior to the Inheritance Tax and Gift Tax Act

2013Guhap9069 Revocation of Disposition of Imposition of Gift Tax

NewA

Head of the Do Tax Office

August 22, 2013

October 24, 2013

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

Each disposition listed in attached Form 1, which the Defendant rendered on March 13, 2012 to the Plaintiff, shall be revoked.

1. Details of the disposition;

A. The plaintiff's new shares

1) On June 30, 2010, BB Co., Ltd., a KOSDAQ-listed corporation (hereinafter referred to as “Nonindicted Co., Ltd.”) held a board of directors on June 30, 2010 and decided to issue registered common shares 2,520,000 shares (final issued shares 2,30,000 shares) to the Plaintiff as the issue price OOO, the subscription date, July 1, 2010, and the share price payment date as the third party allotment method. The Plaintiff allocated 2,30,000 shares of new shares to the Plaintiff via procedures such as reporting to the Exchange, public notice, and change of corporate register. On July 1, 2010, the Plaintiff acquired registered common shares 2,30,000 shares (OO shares per issue price).

2) On December 6, 2010, the non-party company held a board of directors and decided to issue registered common shares 4,090,909 shares (the Plaintiff’s share 3,181,818 shares) to the Plaintiff by fixing the issue price as the OOO, December 7, 2010 on the date of subscription, and the share price as the third party allotment method on December 7, 2012. The non-party company allocated 3,181,818 shares to the Plaintiff via the aforementioned procedure. The Plaintiff acquired registered common shares 3,181,818 shares (the issue price OO shares) on December 7, 2010 and acquired 3,1818 shares (the issue price per share 3,181,810 shares) (hereinafter referred to as “OOO shares”).

12. 6. Paid-in capital increase for each of the following reasons:

(b) The issue price of new shares;

1) Pursuant to Article 5-18(1) of the former Regulations on Issuance, Public Disclosure, etc. of Securities (Public Notice No. 2009-63 of the Financial Services Commission; hereinafter “Securities Disclosure Regulations”) based on the Financial Investment Services and Capital Markets Act (hereinafter “Capital Markets Act”), the non-party company calculated the weighted average share price from the third transaction day before the date of subscription to the third transaction to the fifth transaction day, and determined the issue price of new stocks at an amount within 90% of the share price.

2) Paid-in capital increase as of July 1, 2010

No.

Date

State (won)

Amount of trading;

Total transaction amount (cost)

1

June 28

OOO

34,762

OOO

2

June 25

OOO

183,086

OOO

3

June 24

OOO

263,443

OOO

Total

OOO

781,291

OOO

Criteria Ghana

OOOE

Discount Rates

4.94%

Issuance Price

OOOE

3) Paid-in capital increase issued on December 6, 2010

No.

Date

State (won)

Amount of trading;

Total transaction amount (cost)

1

December 2

OOO

2,183,072

OOO

2

December 1

OOO

1,326,922

OOO

3

November 30

OOO

3,663,665

OOO

Total

OOO

7,173,659

OOO

Criteria Ghana

OOOE

Discount Rates

9.8% by mass

Issuance Price

OOOE

(c) Imposition of gift tax;

1) The Seoul Regional Tax Office conducted an on-site investigation of stock change with respect to the non-party company between September 30, 201 and December 20, 2011. As follows, the Seoul Regional Tax Office determined that the Plaintiff obtained gift benefits pursuant to Article 39(1)1 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201; hereinafter “Inheritance Tax and Gift Tax Act”) and Articles 29(3) and 52-2 subparag. 1 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 23591, Feb. 2, 2012) and notified the Defendant of the result.

Details of gift tax (unit: State, source)

Subject shares

Number of acquired stocks 1

Value per share after capital increase ②

per share acquisition value â……

Value of donated property ?(1) 】(2) 】3)

Total amount of gift tax

(including additional tax)

Paid-in capital increase as of July 1, 2010

2,300,000

OO*

OOO

OOO

OOO

Paid-in capital increase as of December 7, 2010

2,809,137

OO*

OOO

OOO

OOO

*1 The appraised value per share after the capital increase (Article 29(3)1 (a) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act)

Min [1. (2.00 OO, 2.0 OO, 2.0 OO, 2.0

*2 The appraised value per share after the capital increase (Article 29(3)1 (a) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act)

Min [1. (2.00 OO, 2.0 OO, 2.0 OO, 2.0

Number of shares 2,809,137=3,181,818-372,681 Shares (=total number of oil increase 4,090,908 Shares x 9.11%)

2) Accordingly, the Defendant imposed each gift tax on March 13, 2012, as indicated in the separate sheet No. 1, as indicated in the separate sheet (hereinafter “instant disposition”).

3) The Plaintiff dissatisfied with the request for review by the Board of Audit and Inspection, but was dismissed on January 7, 2013.

[Reasons for Recognition] Each entry of Gap evidence Nos. 1 through 5 (including branch numbers), and the purport of the whole pleading

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Each disposition of this case is unlawful in view of the following circumstances.

① The non-party company lawfully issued new shares within the scope of discount rates set by the Disclosure Regulations of the Securities. The Disclosure Regulations of the Securities based on the Financial Investment Services and Capital Markets Act is a special law than the Inheritance Tax and Gift Tax Act in relation to the determination and transaction of the issue price of the listed shares, and it should be deemed that there was no benefit of donation under Article 39 of the Inheritance Tax and Gift Tax Act in the

② Article 39 of the Inheritance Tax and Gift Tax Act shall apply only to cases where there was a purpose of evading gift tax, such as issuing new shares at a low price or distributing profits to a specially related person for the purpose of evading gift tax. The Plaintiff did not have any purpose of tax avoidance. In cases of capital increase by issuing new shares through a third party allotment, it is necessary to provide incentives to a third party in order to promptly raise capital, and Article 39(1)1 (c) of the Inheritance Tax and Gift Tax Act shall apply only where it is proved that there was a mutual agreement between the existing shareholders and the third party’s shareholders who participated in

(3) In cases of capital increase with respect to which shareholders are allocated or offered through public offering, the criteria for calculating the market price under the Inheritance Tax and Gift Tax Act that does not reflect any ex-rights in the exchange or in the capital increase with respect to the method of allocating shares, since there is no ex-rights measure.

(4) Article 63 (1) 1 (b) of the Inheritance Tax and Gift Tax Act and Article 53 of the Enforcement Decree of the same Act excludes the method of appraisal of securities where the transaction has been suspended, or where the transaction has been designated or announced as the item to be managed, the said method shall be excluded. The same economic situation is the same as that of the suspension of the transaction even during the period of safekeeping, and since the price of the securities has

(5) Under Articles 35(2) and 42(1)3 of the Inheritance Tax and Gift Tax Act, in cases of non-specially related persons and transactions with a special relationship, a request is made to the effect that there is no justifiable reason in light of the transactional practice, and taxation is not made if justifiable grounds exist. Thus, the aforementioned provisions and equity should be considered.

(6) The non-party company issued each of the instant shares with capital increase following the resolution of the board of directors. If the act of donation by low-price issuance is conducted, the directors who attended the resolution of the board of directors should be held accountable for breach of trust in business. However, since the allocation of capital increase by a third party gives benefits for prompt and efficient financing, it is logical contradictory to imposing gift tax on the non-party company

7) Of the instant disposition, Nos. 7 and 7 from among the donations dated July 1, 2010 among the donations made from July 1, 2010 and December 7, 2010 were calculated pursuant to Article 39(2) of the Inheritance Tax and Gift Tax Act. The purport of the aforementioned provision is that in the case of a minor shareholder for the convenience of offering the gift tax as to the donation to a minor shareholder, one of the minor shareholders shall be deemed to have been donated, and it does not mean that the portion of the gift tax rate may be applied by adding up all the gift gains on the deemed donation to the minor shareholder. Accordingly, 10% tax rate shall apply in a lump sum.

B. Relevant statutes

Attached Form 2. The entry in the relevant statutes is as follows.

C. Determination

1) Article 39(1)1 (c) of the Inheritance Tax and Gift Tax Act

Article 39(1)1 (c) of the Inheritance Tax and Gift Tax Act provides that where a corporation issues new shares or equity shares at a price lower than the market price of the new shares in order to increase capital, a person who is not a shareholder of the relevant corporation shall be deemed to have received a donation of the amount equivalent to the profits acquired by being allocated new shares directly from the relevant corporation. Article 29(3)1 and (4) of the Enforcement Decree of the same Act provides that the above profits shall be based on the payment date of stock price: (i) the assessment value per share before the increase x the number of shares before the increase x the number of shares issued) + (the number of shares increased by the increase x the number of shares before the increase x the number of shares issued by the increase x the number of shares increased by the increase x the number of shares increased by the increase x the number of new shares issued before the increase x the number of shares increased by the increase x the number of new shares issued by the increase , and then the calculation shall be made by multiplying the number of shares allocated to the public.

Meanwhile, Article 63(1)1(a) and (b) of the Inheritance Tax and Gift Tax Act provides that the method of evaluating stocks of any KOSDAQ-listed corporation shall be the average market value of the Korea Securities and Futures Exchange every two months before and after the base date of appraisal by applying mutatis mutandis the method of appraisal of stocks traded on the Korea Securities and Futures Exchange. However, in the calculation of the average amount, where it is inappropriate to determine the average amount based on the relevant average amount due to the occurrence of causes such as capital increase or merger during the two-month period before and after the base date of appraisal, the average amount during the two-month period before and after the base date of appraisal as prescribed by the Presidential Decree shall be based on the average amount during the two-month period before and after the base date of appraisal (see, e.g., Supreme Court Decisions 2008Du9140, Jan. 13, 201; 2014Du421, Jan. 27, 2011).

2) Determination as to the assertion (1)

The Disclosure Regulations of the Securities requires the issuance price to be calculated as the weighted average share price from the third transaction to the fifth transaction day before the date of the subscription. In light of the following: (a) the subscription date can be arbitrarily determined by the company as well as the inclusion period, and thus, it is possible to avoid the donation through the third party allocation method; and (b) the Disclosure Regulations of the Securities impose restrictions on the average closing price for a certain period retroactively at the time of issuance to ensure the fairness and transparency of the issue terms and the solicitation procedure for subscription; and (c) the acquisition price of new shares under each of the newly issued securities of this case does not exceed the scope of the discount rate set forth in the above provision, the mere fact that the acquisition price of new shares does not exceed the limit of the discount rate under the Inheritance Tax and Gift Tax Act cannot be said to be a donation under the Inheritance Tax Act. Whether the donation was made should be governed by the Inheritance Tax and Gift Tax Act, and the Disclosure

The plaintiff's assertion on this part is without merit, which is premised on the priority application of the Securities Disclosure Regulations.

3) Determination as to claims (2), (5), and (6)

Paid-in capital increase in the third party allotment method is limited to cases where it is necessary to achieve business objectives of the company, such as the introduction of new technology, improvement of financial structure, etc., inasmuch as the acquisition of new stocks by a third party, other than a shareholder, the shareholder’s right to control the company in proportion to the shares held by the shareholder, and the net asset value per share formed by mixing new and old shares due to the occurrence of new stocks shows the dilution effect of stocks that are lower than the previous value.

Article 39(1)1 (c) of the Inheritance Tax and Gift Tax Act provides that even if there was no direct conclusion or contact between the existing shareholders and the new subscribers, gains from capital transferred by means of indirect and second preferential methods are deemed donated by the existing shareholders. In other words, gains from capital gains accrued from issuing new shares at a low price and directly allocating them to a third party. It does not require a special relationship in the taxation requirement, but does not require a gift intent specifically (see Supreme Court Decision 99Du2499, Jan. 21, 200).

Meanwhile, as a matter of principle, Article 35(1) of the Inheritance Tax and Gift Tax Act provides that where a person takes over an asset from another person at a price lower than the market price, the transferee of the asset shall be deemed to have received the donation equivalent to the difference between the price and the market price. However, since Article 35(2) of the Inheritance Tax and Gift Tax Act provides that it is difficult to confirm whether the donation is made if a person takes over the asset by paying the price to another person who is not a person with a special relationship is a transaction between the parties with a special relationship, or whether the transfer is a gift at a low price based on the transfer without justifiable reasons. In addition, if the value calculated by subtracting the price from the market price of the asset acquired by the "low price" under Article 26(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act differs by 30 percent or more of the market price, or if the difference is 300 million won or more, it does not constitute a transfer under Article 60 of the Inheritance Tax and Gift Tax Act.

In light of the following: ① (a) the issue of taxation under Articles 35(1) and (2) of the Inheritance Tax and Gift Tax Act and Article 39(1)1(c) of the same Act cannot be seen as a justifiable ground for rationalizing the donation by issuing at a low price, solely on the ground that the issue of whether the third party’s offering of new shares is a justifiable ground for rationalizing the donation by issuing new shares is determined based on the determination of whether the third party’s offering of new shares is made in accordance with the provision on the evaluation of securities under the Inheritance Tax and Gift Tax Act; (b) the market price is separately stipulated in accordance with the provision on the evaluation of securities under the same Act; and (c) the taxation issue under Articles 35(1) and 39(1) of the Inheritance Tax and Gift Tax Act does not arise if the value of shares issued by a KOSDAQ-listed corporation accords with the appraised value under the provision on the evaluation of securities under the same Act.

Meanwhile, under the Criminal Act, a person who administers another’s business obtains pecuniary advantage or causes a third party to obtain such benefit by acting in violation of his/her duty, and thereby causes loss to the principal (Article 355(2) of the Criminal Act). It is decided whether to punish him/her under the Criminal Act, and it does not necessarily constitute a gift under the Inheritance Tax and Gift Tax Act, and thus, it is not directly related to whether to punish a crime of breach of trust under

Therefore, this part of the Plaintiff’s assertion to the effect that Article 39(1) of the Inheritance Tax and Gift Tax Act violates the provisions of equity with other provisions, or that each of the dispositions of this case is unlawful on the grounds that it is likely to be criminal

4) Claim No. 3 and No. 4

A) As seen above, in calculating the gift gains, Article 39(1)(c) of the Inheritance Tax and Gift Tax Act provides that "the value per share after the person who is the market price of the new shares" shall be "the value per share after the person who is the market price of the new shares"; Article 29(3)1 and (4) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "the value per share calculated by the formula of "(the appraised value per share before the person who has issued the new shares x the number of issued shares before the person who has issued the new shares x the number of issued shares x the number of issued shares increased by the person who has issued the new shares x the number of increased by the person who has issued the new shares x the number of issued the new shares)" (Article 63(1) of the Inheritance Tax and Gift Tax Act; Article 52-2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "the appraised value per share after the person has increased the new shares by taking account of the value of the new shares as a theory."

In addition, in a case where new shares are issued at a price lower than the market price for new shares issued at a price than the new shares issued by a third party, the existing shareholders renounce their economic benefits by giving up their participation in the new shares issued, and the new subscribers are considered to have economic benefits. As such, the Plaintiff’s economic benefits are not generated only when acquiring shares at a price lower than the market price through each of the new shares issued at a price higher than the new shares issued by a third party.

B) In the case of a listed company, the company has the right to acquire the ownership of the pertinent purchased shares within two days from the date of the conclusion of the transaction of stocks. As such, the company has the right to participate in the purchase of shares by the second day prior to the base date, and the purchase of shares without the right to participate in the purchase of shares on the first day prior to the base date is lower than the value of shares on the second day prior to the base date. Generally, the beginning price of the transaction of shares following the following day is set within a certain period based on the closing price of the preceding day. Since it is necessary to take measures to artificially lower the closing price prior to the date of calculating the beginning price of the securities exchange of the relevant shares at the first time when the trading of shares on the first day prior to the base date is conducted at the Stock Exchange (for example, if the 10th day is the base date, there is no preemptive right to purchase shares by the 8th day, and if shares are purchased by the 9th day prior to the base date, there is no preemptive right to purchase shares by the 9th day

As can be seen, the difference arising from the issue of capital increase with respect to the allocation of shares by shareholders is reflected in the share price. The capital increase with respect to the third party allotment method is unlikely to change the share price due to the preemptive right, so there is no room for the revocation of the value of shares, and there is a problem only for the dilution of the value of shares. The above provisions of the Inheritance Tax and Gift Tax Act consider the value per share after the capital increase by taking account of the difference between the theoretical share price and the final average value for two months after the date

C) Article 53(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act excludes the application of the Securities Appraisal Regulations under Article 63(1)1 (b) of the Act, “Where a transaction is suspended or is designated or announced as an item subject to administration,” and stipulates that such transaction shall be subject to the supplementary assessment method under Article 63(1)1 (c) of the Act. “Suspension of transaction” refers to a case where it is deemed necessary to protect investors and to manage the items whose share price and trading volume are rapidly variable or are expected to rapidly change due to the occurrence of the default on bills or checks,

It temporarily suspends the sale and purchase of the issue, and the "management issues" refers to the issues designated by the Korea Stock Exchange or KOSDAQ Securities Exchange, which are market managers, to attract attention to ordinary investors and refer to investment as an issue that falls under the criteria for listing or cancelling registration of stock certificates with respect to the suspension of business or insolvency, etc. In this case, it is recognized as an exception since it can not be seen that the market price is properly reflected in the market price.

Article 63(1)1 (c) of the Act provides that “The date of donation shall be the date of payment of new shares because the Plaintiff paid the price of the shares and acquired the ownership of the shares by receiving the shares of this case.” ② The donation is realized at the time of issuance of new shares as the capital gains derived from issuing new shares at a low price and directly allocating them to a third party. As such, calculating the donation gains at the time of the issuance of new shares is consistent with the substance-over principle; ③ The purpose of protecting minority shareholders is to prevent the fluctuation of the value of shares by selling shares at a time to the purchaser; ④ Even if the Plaintiff failed to sell the shares acquired by issuing new shares during the period of protection, the remaining shares except the Plaintiff’s shares are normally traded in the market, and thus, the average market value is not unreasonable. Thus, even if some shares are protected, the provision does not apply to the appraisal of securities.

Ultimately, this part of the plaintiff's assertion related to the value per share after the capital increase is not justified.

5) Judgment on the assertion 7

Article 39(2) of the Inheritance Tax and Gift Tax Act (amended by Act No. 6301, Dec. 29, 2000) was revised and newly established to resolve the problems in which, in practice, it is difficult to calculate the gift amount by donor in cases where minority shareholders renounce the acceptance of new shares (in particular, it is difficult to issue in cases where many minority shareholders, such as the non-party company, are listed corporations with a large number of minority shareholders).

In light of the purport of this amendment, the gift profit should be calculated in proportion to the market price of the shares held by the existing shareholders prior to the increase in the capital as a donor (a minority group and individual major shareholder) in proportion to the shares held by the group of minority shareholders and the individual major shareholder. It does not necessarily mean that the tax rate for the gift profit of minority shareholders should be equal to that for the gift profit of the major shareholder, but there is no legal basis to apply it accordingly.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.