Cho-2015-Divisions-2786 (Law No. 22, 2015.09)

Article 32 (5) 2 of the Restriction of Special Taxation Act (amended on January 1, 2013) applies to cases where Article 32 (5) 2 of the Restriction of Special Taxation Act (amended on January 1, 2013).

In full view of the legislative structure, legislative process, legislative intent, etc. of the provisions related to the law, Article 32 (5) 2 of the Restriction of Special Taxation Act (amended by Act No. 11614, Jan. 1, 2013) applies is "from the disposal of stocks after January 1, 2013."

Article 32 of the Restriction of Special Taxation Act (Carryover Taxation of Transfer Income Tax for Conversion into Corporation)

2015Guhap1616 Revocation of Disposition of Imposing capital gains tax

AA

BB Director of the Tax Office

March 15, 2016

April 12, 2016

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of KRW 00,000,000 on April 1, 2015, which was rendered to the Plaintiff on April 1, 2015, shall be revoked.

1. Details of the disposition;

A. On December 27, 2012, the Plaintiff engaged in a personal business with the trade name “CC stamp” in Busan ○○○-dong, ○○○-dong, Busan ○○○○○○-dong, and invested 5,142.8 square meters of land and 2,319.41 square meters of land in Busan ○○○-dong, ○○○-dong, and 2,319.41 square meters of land (hereinafter “instant real estate”).

B. On February 19, 2013, the Plaintiff reported KRW 000,000,000 for the transfer income tax on the instant real estate and was subject to a carryover taxation following the transfer of fixed assets for business pursuant to Article 32(1) of the former Act on Special Cases concerning Tax Restriction (amended by Act No. 11614, Jan. 1, 2013; hereinafter “former Act”).

C. On March 18, 2013, the Plaintiff transferred 137,380 shares non-listed shares issued atCC 137,380 non-listed shares (the shares of this case, hereinafter referred to as “instant shares”) to Daz, a shareholder ofCC Moz, and E respectively (hereinafter referred to as “instant shares transfer”), and did not file a return on the transfer income tax following the transfer of shares to 68,690 shares.

D. On April 1, 2015, the Defendant: (a) deemed that the transfer price of the instant shares to the Plaintiff was converted into a corporation by investing in kind the fixed assets for business pursuant to Article 32(5)2 of the Restriction of Special Taxation Act (amended by Act No. 11614, Jan. 1, 2013; hereinafter “the Act”); and (b) that the resident to whom the carried-over taxation on the fixed assets for business was applied falls under the case where the resident, within five years from the date of incorporation of the pertinent corporation, disposes of at least 50 percent of the stocks acquired by conversion into the corporation after January 1, 2013, the Defendant corrected and notified the transfer income tax of KRW 00,000,000 for the year 20 (hereinafter “instant disposition”).

E. On May 7, 2015, the Plaintiff filed an objection against the instant disposition with the Tax Tribunal, but was dismissed on September 22, 2015.

[Ground of recognition] Facts without dispute, entry of Gap evidence 1 to 5, purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Article 11 of the Addenda to the Act (hereinafter “Supplementary Rule”) provides that “The amended provisions of Article 32(5) of the Act provide that “The provisions of Article 32(5) shall apply from the disposal of stocks or equity shares that have been closed or acquired after January 1, 2013.” However, in cases of the principle of strict interpretation under the principle of no taxation without law, the said provisions shall only apply to the business succeeded after January 1, 2013 or to the stocks and equity shares acquired after January 1, 2013. Accordingly, the instant amended provisions are not applicable to the transfer of the instant stocks acquired by the Plaintiff to DaD, etc., and thus, the instant disposition is unlawful.

B. Relevant statutes

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

C. Determination

1) Under the principle of no taxation without the law, the interpretation of tax laws shall be interpreted as the text of the law, barring any special circumstance, and shall not be extensively interpreted or analogically interpreted without reasonable grounds. However, where it is necessary to clarify the meaning through the interpretation between the laws and regulations, it is permitted to conduct a combined interpretation with a view to the legislative intent and purpose within the scope that does not undermine the legal stability and predictability pursued by the principle of no taxation without the law (see, e.g., Supreme Court Decisions 2007Du4438, Feb. 15, 2008; 2006Du187, Apr. 24, 2008; 201Du1308, May 16, 2014).

2) The key issue of this case is whether the amended legal provision of this case applies to the portion of the acquisition of stocks after January 1, 2013, or whether it applies to the portion of the disposal of stocks after January 1, 2013. However, as seen below, considering the content of Article 32 of the Act and the structure of the relevant provisions, legislative process, legislative intent, etc., the case where the amended legal provision of this case applies is “from the portion of the disposal of stocks after January 1, 2013.”

① Article 11 of the Addenda provides that “The amended provisions of Article 32(5) of the Act shall apply from the disposal of stocks or equity shares that have been acquired or discontinued by a business succeeded after January 1, 2013.” However, in view of the language and text of the above provision itself, the phrase “after January 1, 2013” can be seen as referring to the word “he succeeded” and “acquisition” as alleged by the Plaintiff, but there may be room to interpret it as referring to the word “displication” and “disposition.” Therefore, it is difficult to determine the meaning by itself, and it is inevitable to grasp the structure, legislative process, legislative intent, etc. of the provisions under Article 32(5) of the Act.

② Article 11 of the Addenda provides that the applicable period of Article 32(5) of the Act shall be determined after January 1, 2013, and the language and text of Article 32(5) of the Act (a disposition of stocks or equity shares acquired by succession) shall be used as of the remainder. Therefore, the precise meaning of Article 11 of the Addenda shall not only be interpreted as the Addenda but also be interpreted as the premise of Article 32(5) of the Act. However, Article 32(5) of the Act provides that where a corporation discontinues its business acquired by succession from a resident within 5 years (within 5 years) or disposes of 50/100 or more of the stocks or equity shares acquired by the resident by conversion into a corporation (within 5 years), it shall not be interpreted as the "business" or "acquisition shares or equity shares" as "acquisition shares or equity shares", and it shall not be interpreted as the "acquisition of shares or equity shares" as "acquisition of shares or acquisition shares" in itself.

③ This can also be seen even when the amendment of Article 32(5) of the Act and the Addenda provisions was made. In other words, Article 32(5) of the former Act was newly established on December 31, 2011 by Act No. 111133. Article 12 of the former Act at the time provides that “The amended provisions of Article 32(5) shall apply from January 1, 2012 to the discontinuation of business or the reduction of the paid-in capital after the date of the act prohibited by the Act.” In addition, the said provisions were amended by Act No. 11614, Jan. 1, 2013; it appears that the requirements under Article 32(5)2 of the former Act were to be for the transfer, transfer, reduction of capital without consideration from capital reduction to capital, or the extension of capital without consideration (see Article 29(7) of the former Enforcement Decree of the Act). Therefore, the former Act only applies to a business from 201 to 13 of the former Act.13.

(4) The legislative intent of Article 32 (5) of the Act is to prevent the carryover taxation of transfer income tax recognized when a private company is converted into a corporation from being abused as a means of avoiding transfer income tax. Thus, the base point for applying the above provision is the time when the act to prevent occurs, that is, when the business is discontinued or stocks or equities are disposed

3) Therefore, the instant disposition that the Defendant deemed that the instant amended legal provision applies to the Plaintiff who disposed of the instant shares on March 18, 2013 is lawful.

3. Conclusion

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