Incheon District Court-2018-Gu 50080 ( October 17, 2019)

Cho Jae-2017-China-3646 (Law No. 29, 2017)

The scope of a person with a special relationship includes an employee of a corporation controlled by investment.

The scope of persons with a special relationship includes the employees of a corporation that controls by investment, and the stocks acquired by exercising preemptive rights based on the stocks acquired from the initial largest shareholder shall be subject to gift tax based on the listed profits.

Donation of profits from the listing, etc. of stocks or equity shares under Article 41-3 of the Inheritance Tax and Gift Tax Act.

2019Nu37495 Revocation of Disposition of Imposition of Gift Tax

OO

○ Head of tax office

Incheon District Court Decision 2018Guhap50080 Decided January 17, 2019

2019.09.04

October 30, 2019

1. The plaintiff's appeal is dismissed.

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

The decision of the first instance court shall be revoked. The defendant's imposition of the gift tax (including the additional tax) of 198,90,180 won on May 2, 201 against the plaintiff on May 2, 2011 and the imposition of the gift tax of 30,117,170 won on June 2012 shall be revoked.

1. Quotation of judgment of the first instance;

The reasoning for the judgment of the court in this case is as stated in the reasoning for the judgment of the court of first instance except for the following parts and any additional part, thereby citing it in accordance with Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

○ 3 to 9 parallels in the judgment of the first instance court shall be conducted in the following manner:

The Plaintiff acquired shares No. 2 from the instant corporation by participating in capital increase with a third party allotment method of the instant corporation. As such, the Plaintiff deemed that the Plaintiff acquired shares No. 2 from Cho○, the largest shareholder of the instant corporation, and the disposition No. 2 of this case was unlawful.

The Plaintiff’s transfer of part of its shares to the KOSDAQ by the instant corporation after listing it on the KOSDAQ. As such, the instant disposition was unlawful as it constitutes double taxation.

In addition, since the Defendant imposed gift tax on the 39,476 shares of the instant corporation, including the 2 shares, on the 39,476 shares of the instant corporation, the acquisition value should be calculated as 4,028 won in the instant 2 disposition, it was calculated as 1,520 won in calculating the value of donated property. This part also constitutes double taxation.

Article 41-3 of the Inheritance Tax and Gift Tax Act is a taxation that takes into account the increase in the value of donated property, and thus, even if such taxation is imposed, only the realized profits should be subject to the said taxation. The taxation of gift tax based on the time when stocks of the instant corporation temporarily increase the value at the time of listing on the KOSDAQ and continues to decrease thereafter, is unlawful as it infringes on the essential contents of property rights.

After the Plaintiff’s acquisition of shares 1, the Defendant expressed a public opinion that it would not impose gift tax on the second shares acquisition by not imposing gift tax. Since the Plaintiff trusted this and acquired the second shares by participating in the capital increase with capital increase issued by the corporation, the instant disposition was unlawful since it violated the principle of trust protection.

○ At the bottom of the 5th judgment of the first instance court, the following shall be added:

Therefore, the Plaintiff’s assertion that “employee” under Article 19(2)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 23040, Jul. 25, 2011) should be confined to a person who is directly in use with the largest shareholder, or a commercial employee under the Commercial Act is not accepted (see, e.g., Supreme Court Decisions 2016Du5926, Mar. 30, 201; 2012Hun-Ga5, Sept. 24, 2015). The legislative intent of Article 41-3(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 2011) is to promote tax equality by imposing gift tax on the listed interest of unlisted stocks acquired by a person with a special relationship with the largest shareholder, etc., and thus, it is difficult to interpret the same as the Plaintiff’s employee’s relative relationship with the largest shareholder, etc. 201.

○ The 7th written judgment of the first instance court shall be deemed to be a person with special interest, and the same part shall be from the 8th to the same day.

Meanwhile, comprehensively taking account of the purport of the Plaintiff’s statement No. 2, the Plaintiff transferred 5,10 shares, which were held on June 23, 2015 and June 24, 2015, after listing on the KOSDAQ of the instant corporation, and reported capital gains tax. According to such report, it is recognized that the Plaintiff’s shares transferred are indicated as shares acquired on June 24, 2010. According to the above, shares subject to capital gains tax are unrelated to the first and second shares, which are subject to taxation, and the first and second shares, which are subject to taxation. Thus, the Plaintiff’s assertion on double taxation is without merit [the Plaintiff’s shares transferred by the Plaintiff are deemed as 1 shares, 200 won, and 163 subparag. 10 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 25193, Feb. 21, 2014). However, the Plaintiff’s taxation of capital gains tax was not based on the premise that the Plaintiff would be subject to taxation of gift tax.

In addition, Article 41-3(2)3 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11845, May 28, 2013) provides that "the date on which three months have elapsed from the date of listing" as the base date for the settlement of accounts, which sets a certain point of time at the base date for the settlement of accounts in order to reasonably calculate the listing profit and exclude the arbitrary calculation by the tax authorities (see, e.g., Constitutional Court Decision 2012Hun-Ga5, Sept. 24, 2015). Since the issue of whether the price drop or the listing profit has been realized after the base date for the settlement of accounts cannot be considered as the factor to be considered in the calculation of the listing profit, the Plaintiff’s assertion on this different premise

2. Conclusion

Therefore, the judgment of the first instance court is justifiable, and the plaintiff's appeal is dismissed as it is without merit.