[1] The meaning of Article 39(1)2 Item (a) of the former Framework Act on National Taxes concerning the secondary tax liability of oligopolistic stockholders and the standard for its determination

[2] The meaning of Article 39 (1) 2 (c) of the former Framework Act on National Taxes concerning the secondary tax liability of oligopolistic stockholders

[1] Article 39(1)2 and (2) of the former Framework Act on National Taxes (amended by Act No. 7930 of April 28, 2006) / [2] Article 39(1)2 of the former Framework Act on National Taxes (amended by Act No. 7930 of April 28, 2006)

[1] Supreme Court Decision 2001Du5354 Decided July 8, 2003 (Gong2003Ha, 1725) 2003Du1615 Decided July 9, 2004 (Gong2004Ha, 1365) Supreme Court Decision 2006Du19105 Decided January 10, 2008 (Gong2008Sang, 242)

Plaintiff (Attorney Kim Jong-soo, Counsel for the plaintiff-appellant)

Head of Seoul Customs Office

Seoul High Court Decision 2007Nu4089 decided Dec. 20, 2007

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

1. Article 39(1)2 of the former Framework Act on National Taxes (amended by Act No. 7930 of Apr. 28, 2006; hereinafter “the Act”) provides that “a person falling under any of the following items among the oligopolistic shareholders shall be subject to secondary tax liability.” Paragraph (a) of the same Article provides that “a person who actually exercises the rights to 51/100 or more of the total number of issued and outstanding stocks of the corporation concerned” in subparagraph (b) provides that “a person who actually controls the management of the corporation, regardless of the title,” in subparagraph (c) provides that “a person who is the spouse (including a person in a de facto marital relationship with him; hereinafter the same shall apply) of the person referred to in subparagraphs (a) and (b) provides that “a person who is in a de facto marital relationship with him shall be entitled to 1/100 or more of the total number of issued and outstanding stocks of the corporation concerned” and the proviso to paragraph (1) of the same Article provides that “a person who is in a de facto controlling shareholder’s stocks or other person with it shall be held stocks”

In light of the legislative purport and amendment process of Article 39(1)2(a) of the Act, the meaning of Article 39(1)2(a) of the Act is that all the persons falling under oligopolistic shareholders who actually exercise the rights to 51/10 or more stocks of the total number of issued and outstanding stocks among oligopolistic shareholders shall bear the secondary tax liability: Provided, That it is reasonable to view that the scope of their liability is limited within the scope of their own shares, and that one shareholder falling under oligopolistic shareholders is not required to actually exercise the rights to 51/10 or more of the stocks (see Supreme Court Decision 2006Du19105, Jan. 10, 208; 2006Du19105, Jan. 10, 2008; 51/100 or more of the stocks referred to in Article 39(1)2(a) of the Act does not necessarily require that the exercise of the rights to the stocks held as of the date on which the tax liability is established.

On the other hand, whether it constitutes an oligopolistic shareholder under Article 39(2) of the Act shall be determined by whether it is a member of a group of stocks owned by at least 51/100 in a special relationship, and the fact of ownership of stocks shall be proved by the data such as the register of stockholders, the statement of stock transfer or the register of corporate register, etc. However, even if it appears to be a single shareholder in light of the above data, if there are circumstances, such as the tax authority's fraudulent use of the shareholder's name or the registration in the name other than the name of the actual owner, the actual shareholder shall not be deemed to be a shareholder, but this shall be proved by the nominal owner who asserts that he is not a shareholder (see Supreme Court Decision 2003Du1615, Jul. 9, 2

After compiling the adopted evidence, the court below rejected the plaintiff's assertion that the name of the shareholder was stolen by Nonparty 1 who is the father or is merely the nominal shareholder, and determined that the plaintiff, the non-party 2 (the plaintiff's largest child), and the non-party 3 (the mother of the plaintiff) are shareholders of the non-party 4 corporation and those who are related to the non-party 20 under Article 20 of the Enforcement Decree of the Framework Act on National Taxes, and their holding (68/10) constitutes an oligopolistic shareholder under Article 39 (2) of the Act, together with the non-party 2 and 3, since their holding (68/100) constitutes at least 51/100 of the total number of issued and outstanding shares. In light of the above legal principles, related Acts and subordinate statutes and the records, the judgment of the court below

2. The lower court determined that the Plaintiff constitutes an oligopolistic shareholder with the secondary tax liability under Article 39(1)2 Item (a) and (b) of the Act, on the ground that it is reasonable to deem that the Plaintiff is in a position of a person who actually exercises the rights to “not less than 51/100 of the total number of outstanding shares of Nonparty 4, and not less than 51/100 of the total number of outstanding shares of Nonparty 4, and that the Plaintiff constitutes an oligopolistic shareholder with the secondary tax liability under Article 39(1)2 Item (a) and (b) of the Act, on the ground that it constitutes a person who actually exercises the rights to shares exceeding 51/100 of the total number of outstanding shares of Nonparty 4, and a person who actually exercises the rights to shares of not less than 51/100 (68/100 of the total number of outstanding shares) by delegation or de facto control over the Plaintiff and Nonparty 2’s father’s tax liability under Article 39(1)2 Item (a) of the Act.

However, in light of the legislative purport, amendment process and regulatory form of Article 39 of the Act, it is reasonable to interpret Article 39 (1) 2 (c) of the Act only to an oligopolistic stockholder who is the spouse of an oligopolistic stockholder or a lineal ascendant or descendant who lives with the oligopolistic stockholder who falls under items (a) and (b) of the same subparagraph, but the court below erred in the misapprehension of legal principles as to the oligopolistic stockholder who has the secondary tax liability under Item (c) of the above item (c) under the premise that the "person provided for in items (a) and (b) of the above item (c) does not need to be an oligopolistic stockholder," even though the non-party 1 does not fall under the oligopolistic stockholder under Article 39 (2) of the Act because he does not own his own stocks and does not fall under the oligopolistic stockholder under items (a) and (b) of the above item (c).

However, according to the facts established by the court below, the non-party 3 was registered as the representative director, the plaintiff and the non-party 2 respectively in the corporate register of the non-party 4 corporation, and the non-party 2 were registered as each director. In addition to the payment in the form of salary of 7.2 million won from the non-party 4 corporation, the plaintiff was paid each month from April 2002 to December 2003, the non-party 3 was paid living expenses, vehicle maintenance expenses, credit card expenses, and the non-party 2 was paid each month from April 2002 to the non-party 203, and the non-party 2 was paid 18 million won each in the form of salary in 202 and 203, and the non-party 3 was actually the name of the representative director, the plaintiff's name was stated as the director, and the non-party 3 was the seals and the right of the plaintiff 2 to the non-party 3 as the seal and the right of the plaintiff 2.

Therefore, although the court below erred by the plaintiff as an oligopolistic shareholder who is liable to pay the second tax pursuant to Article 39 (1) 2 (a) of the Act, it is justified in the conclusion that the plaintiff is an oligopolistic shareholder who is liable to pay the second tax, and therefore, the above error is not an error of law that affected the conclusion of the judgment.

3. The plaintiff's remaining grounds of appeal are that since Article 39 (1) 2 (c) of the Act violates the principle of no taxation without law or unfairly infringes on the people's property rights and human rights guaranteed by the Constitution, it is unlawful to erase the secondary tax liability of this case under the above provision. However, as seen earlier, as long as the plaintiff did not constitute an oligopolistic shareholder with the secondary tax liability under Article 39 (1) 2 (c) of the Act, this part of the grounds of appeal cannot be accepted without further review.

4. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Jeon Soo-ahn (Presiding Justice)