Whether it constitutes double taxation

"The gift tax is imposed on the same stock transaction by deeming it as a low price transfer between related parties and the transferee, and the "transfer tax is imposed on the transferor," not on the double taxation, and it is legitimate to evaluate it by the supplementary evaluation method under the Inheritance Tax and Gift Tax Act because the market price is unclear in the calculation of wrongful calculation."

Article 63 of the Inheritance Tax and Gift Tax Act by Wrongful Calculation of Transfer Income under Article 101 of the former Income Tax Act

1. The plaintiff's claims are all dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

Cheong-gu Office

The Defendant’s imposition of KRW 91,413,020 on Plaintiff ○○ on December 2, 2002 and the imposition of KRW 3,418,490 on the gift tax of KRW 199 on Plaintiff ○○○ on March 13, 2007, respectively, shall be revoked.

2. Grounds;

1. Details of the imposition;

The following facts are not disputed between the parties, or may be acknowledged by comprehensively considering the whole purport of the pleadings in each entry in Gap's evidence 1 through 5, Gap's evidence 9, Gap's evidence 10, Eul's evidence 1 through 4, and Eul's evidence 7 (including paper numbers):

A. On December 30, 1999, Plaintiff ○○○○○ Co., Ltd. (hereinafter referred to as “○○○○○○○”) (hereinafter referred to as “○○○○”) (hereinafter referred to as “the instant shares”) transferred KRW 52,70 per share, the standard market price calculated pursuant to Article 96 subparag. 2 of the former Income Tax Act (amended by Act No. 6051, Dec. 28, 1999; hereinafter referred to as the “former Income Tax Act”), 23,400 per share, to Plaintiff ○○○○, a wife of Plaintiff ○○○○○○○○, to transfer KRW 1,00 per share, KRW 60 per share, and KRW 30 per share to ○○○○○○○, a person who is the wife of Plaintiff ○○○○○○, based on the difference between the transfer price and the transfer price per share (hereinafter referred to as “the instant shares”).

B. However, the Defendant deemed that KRW 52,70 per share of the above shares reported by the Plaintiff ○○○ constitutes a wrongful act under 83,96 won as calculated pursuant to Articles 101(1) and (4) of the Income Tax Act, Article 167(3), (4), and (5) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 604, Dec. 28, 1999; hereinafter “former Enforcement Decree”) and Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 16660, Dec. 31, 1999; hereinafter “former Enforcement Decree of the Income Tax Act”) and reported the difference between the amount of capital gains tax paid by the Plaintiff ○○○○○○○○○○○○○○○○○○○○○ KRW 980,708,90,000,000 per share of the above shares and thus reported the difference between the amount of capital gains tax paid by the Plaintiff 2080.

C. On the other hand, the Defendant determined that the transfer of shares by Plaintiff ○○○, a transferee, constitutes a low-price transfer under Article 35(1)1 of the former Inheritance Tax and Gift Tax Act, and determined and notified Plaintiff ○○○ of KRW 3,148,480 as the gift tax in 199 on December 12, 2007 by adding a return and additional additional tax on the difference between the market price and transfer value assessed under the former Inheritance Tax and Gift Tax Act, along with the gift tax on the difference between the market price and transfer value (hereinafter “instant disposition imposing the gift tax”).

D. Accordingly, according to the result of the international inquiry brought by the Plaintiff et al. to the National Tax Tribunal, the Defendant corrected the tax amount of KRW 3,473,100 to the Plaintiff ○○○, thereby reducing the original capital gains tax amount to KRW 91,423,020 (hereinafter “instant disposition imposing capital gains tax”).

2. The parties' arguments.

A. The defendant's assertion

The defendant asserts that the disposition of this case is lawful in light of the above grounds of disposition and relevant statutes.

B. The plaintiffs' assertion

(1) Claims on the instant disposition of capital gains tax

(A) The provision on the denial of unfair act shall apply only to the case where the Plaintiff ○○, a trading partner of the person subject to the application of the provision on the denial of unfair act, falls under the Plaintiff ○○’s specially related party, the transferor. Therefore, Plaintiff ○○○ does not apply the provision on the denial of unfair act as the wife of Plaintiff ○○

(B) The Plaintiff ○○○○ may transfer 600 shares and 300 shares, respectively, to ○○○○○, other than a specially related person, based on the transfer value of 52,700 won per share of the non-listed shares held by himself/herself on December 30, 199 as the market price of the shares. Thus, the Defendant’s application of the former Inheritance Tax and Gift Tax Act pursuant to Article 167(5) of the former Enforcement Decree of the Income Tax Act is unlawful.

(C) Even if the transfer of the instant shares constitutes a low-price transfer among persons with a special relationship, in light of the following: (a) Plaintiff ○○○○ transferred the instant shares in a dispute over management rights; (b) calculated the standard market price under the former Income Tax Act at the time of transfer; (c) calculated the standard market price at the time of transfer; and (b) transacted with a person without a special relationship at the same price; (c) the transfer of the instant shares is deemed economic rationality; and (c)

(D) Article 167 (4) and (5) of the former Enforcement Decree of the Income Tax Act does not stipulate that the former Income Tax Act shall apply the evaluation method under the former Inheritance Tax and Gift Tax Act to the criteria for the denial of wrongful calculation. However, in the process of amendment of the former Enforcement Decree of the Income Tax Act, the provisions introduced without the basis of the former Income Tax Act, a parent corporation, in the process of amendment of the former Enforcement Decree of the Income Tax Act, and the taxation requirement is not only contrary to the principle of no taxation without law, but also goes beyond the limits of delegation under Article

(2) Claim on the imposition of gift tax of this case

(A) The Plaintiff ○○○○○ had the instant shares transferred to the Plaintiff ○○○○○, etc. in a managerial dispute over the management right with ○○○○○○○○. On December 30, 1999, there was an entry that ○○○○○, without any special relationship, sold the instant shares for KRW 52,700 per share to ○○○○○○○○. At the time, ○○○○○○○’s employees in charge of financial affairs on the actual inspection of ○○○’s assets and liabilities, etc., the amount calculated as KRW 52,70 per share based on the annual report under Article 96 of the former Income Tax Act, Article 165 of the former Enforcement Decree of the Income Tax Act, and Article 165 of the former Enforcement Decree of the Income Tax Act, based on the annual report of settlement in 198, a certified public accountant in charge of accounting with ○○○○○○, etc. should be deemed as an adequate transfer value.

Nevertheless, the Defendant deemed that the relationship between the Plaintiff ○○ and the Plaintiff ○○ constitutes a specially related person. Moreover, the Defendant assessed the value per share of the instant shares by supplementary assessment methods without any grounds, in violation of the market value principle, which is declared by the former Inheritance Tax and Gift Tax Act, as the value per share of the instant shares was 83,96 won, and accordingly, imposed gift tax on the Plaintiff ○○○. Accordingly, each of the instant dispositions should be revoked as unlawful.

(B) The Defendant imposed the instant transfer income tax on Plaintiff ○○, the transferor of the instant stock transfer, based on the wrongful calculation of the amount equivalent to the difference between the market value and the transfer value. At the same time, the Defendant’s imposition of the gift tax on Plaintiff ○○, the transferee of the instant stock transfer by deeming the instant stock transfer as the low-price between related parties, is not permissible as it goes against the principle of no taxation without law or the principle of tax equality, as it is a double taxation on one transaction. Furthermore, according to the latter part of Article 88(1) of the Income Tax Act, the latter part of Article 37(2) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 202), Article 101(2) of the Income Tax Act, Article 101(1) of the Income Tax Act and Article 35(1)1 of the former Inheritance Tax and Gift Tax Act, which prevents the imposition of the gift tax in the event of imposing the income tax.

3. Relevant statutes;

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

4. Facts of recognition;

The following facts are not disputed between the parties, or each entry in Gap evidence 1, Gap evidence 6 through 9, Gap evidence 14, Gap evidence 15, Gap evidence 18, Eul evidence 3, Eul evidence 8 through 11 (including additional numbers), and the whole purport of the pleadings can be acknowledged.

A. The ○○○○○○○○○-dong established the head office in ○○○-dong, ○○○○-dong, and operated an industrial machinery and parts manufacturing and processing and selling business. From October 13, 1994 to ○○○○○○○○○-dong, the Plaintiff’s retirement (after a retirement registration on December 27, 1999) around 08, determined the amount of KRW 25,300 per share of the non-listed shares owned on December 30, 199, at KRW 52,70, and at least KRW 23,40 per share to ○○○○○-dong, ○○○○○○-dong, ○○○○○-dong, ○○○○○-dong, 1,233,180,888, 1994, 1,000, 200, 300, 301, 6300, 61, 6000.

B. The Plaintiff ○○○○ calculated the transfer value of the instant shares to an employee in charge of financial affairs of the ○○○○○○○○○. The employees confirmed the net asset value and net profit value per share of ○○○○○○○○○○○○ based on the annual settlement of accounts in 1998 under the former Income Tax Act and the former Enforcement Decree of the Income Tax Act (the method of assessment is as follows *). The net profit value per share of 1998, which is the business year immediately preceding the business year immediately preceding the business year in which the date of the transfer falls as of 50/100 of the net asset value per share and set the amount of 52,700 won per share, which is the net asset value per share. The advisory accountant in charge of accounting of ○○○○○○○ in 198, also confirmed that the transfer value of the instant shares was adequate.

* Net asset value per share: 52,700 won = 6,534,880,811 won (net asset value)/124,000 shares (total number of shares issued)

Net profit and loss per share: 1,044 won = 129,408,230 won (net profit and loss value after the tax adjustment in 98)/124,000 shares (total number of shares issued)

Value per share: 52,700 won

C. Meanwhile, around October 1, 1998, ○○○ was employed as a managing director and promoted to the vice president on or around 05, 1998, but was promoted to the president on or around 03, 2000 and retired from office on or around 05, 2001. From 1992 to 1996, ○○○ served as the head of ○○○○○ from 1996 to 1996, and served as the head of ○○○○○ from 1996 to 1999, and served as the head of ○○○○○○○○ Company after having been transferred to ○○○○○○○ on or around 03, 200 while serving as the head of ○○○○ Company.

D. However, when the sum totaling KRW 68,510,000, which corresponds to the large number of shares transferred by Plaintiff ○○ and ○○○○○○, was deposited into the foreign exchange bank account of ○○○○○, the head of the Daejeon branch office of ○○○○○ Company, on February 28, 2000. On February 29, 2000, KRW 15,810,000 corresponding to the total amount of shares purchased by ○○○○○○○○○ was deposited into the Japanese bank account in the name of ○○○○○○○○○○○○○. In addition, KRW 52,70,000, which is the total amount of shares purchased by Plaintiff ○○○○○○○, was deposited into the account of Plaintiff ○○○○○○○.

E. Accordingly, on August 05, 2002, the Defendant issued each of the instant dispositions imposing gift tax amounting to KRW 205,657,290, and KRW 5,441,080 on ○○○○○○○, based on the settlement report, including the balance sheet, etc., in 1999 (the method of assessment is as follows) by the method stipulated in Article 54 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act pursuant to Article 63(1)1 (c) of the former Inheritance Tax and Gift Tax Act (the method of assessment is as follows) on December 30, 1999.

*76,360 won (net asset value per share) = [[The net asset value per share) = 9,310,523,826 won (the net asset value of the person concerned),/124,000 won (the total number of outstanding stocks] + [7,635 won (net value) = 11,635 won (the weighted average amount of net profit and loss per share) = 11,635 won (the weighted average amount of net profit and loss per share)/0.15 (the rate determined by the Ordinance of the Ministry of Finance and Economy, taking into account the average interest rate expressed in the financial market)] ¡À2

Value per share: 83,96 won ( appraised value per share of the largest stockholder) = 76,360 * 110/100

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

A. Whether the transaction is made with the related party;

The special relationship under Article 98 (1) 1 of the Enforcement Decree of the Income Tax Act is established in cases where not only the other party to the transaction falls under a person with a special relationship of a resident, etc. under the Income Tax Act, but also a resident, etc. under the Income Tax Act falls under a person with a special relationship of the other party to the transaction. In this case, the plaintiff ○○ constitutes the husband of a paternal blood relative within the third degree as the father of the plaintiff ○○○, as the mother of the plaintiff ○○, and therefore, the plaintiff ○○ and the ○○○○○ are included in the relatives of the plaintiff ○○○○. Accordingly, the plaintiffs' special relationship under the above Act is established

(b) Whether it falls under the case of transferring assets at a price lower than the market price;

(1) Article 98(2)1 of the former Enforcement Decree of the Income Tax Act provides that one of the acts of wrongful calculation under Article 101 of the former Enforcement Decree of the Income Tax Act refers to the time when assets are transferred at a price lower than the market price to the related party. In a case where the market price is unclear under Article 167(5) of the former Enforcement Decree of the Income Tax Act, “market price” refers to an objective exchange value formed through a general and normal transaction. Thus, in a case where there is a normal transaction example that properly reflects the objective exchange value of unlisted stocks not listed on the Korea Stock Exchange, the transaction value shall be deemed the market price and the shares price shall be deemed the market price. Even if there is no such example or actual example, it is difficult to view that the transaction value properly reflects the general and normal exchange value, and where there is no other method to calculate the market price, only if there is no other method to calculate the market price, the market price shall be evaluated by the supplementary evaluation method under the former and the former Enforcement Decree of the Inheritance Tax Act.

(2) Therefore, according to the facts acknowledged earlier, it is difficult to view 52,70 won per share, which is the transaction price of December 30, 1999, as the market price at the time of the transfer of shares, as the market price at the time of the transfer of the shares. ① Although ○○○ is not a special relationship with Plaintiff ○○○, it is a person who worked for ○○○○ and its mother company as an executive officer or employee, and it is merely about 1.2% of the total number of transferred shares with 300 shares, and it is difficult to view that the share price at ○○○ was a normal transaction with ○○○○’s funds, and it is difficult to regard that the share price at ○○○ was a normal transaction. In light of the above, it is difficult to view that the share price at ○○○ as the market price at the time of the exchange of shares at a reasonable level as the market price at the time of the exchange of the shares at ○○○○ is also an objective net asset price at 1998.

Therefore, even if there are transactional examples or stock appraisal cases, it is difficult to view that the transaction price of the instant shares properly reflects the general and normal exchange value, and there is no other method of calculating the market price, and thus, the supplementary evaluation method is bound to be chosen. Therefore, the Defendant’s transfer of the instant shares by Plaintiff ○○○○ constitutes a low price transfer, on the basis of KRW 83,996 per share assessed as of December 30, 199 by the supplementary evaluation method stipulated in Articles 61 through 64 of the former Inheritance Tax and Gift Tax Act. Therefore, as the transfer price of the instant shares falls short of this, the Defendant’s transfer of the instant shares by Plaintiff ○○○ constitutes a low price transfer.

(3) On the other hand, since the transfer of the instant shares was made on December 30, 199, the Defendant’s calculation of net asset value based on the balance sheet in 1999 where the fiscal term has not yet expired and the assessment of shares was made on December 31, 1999, which includes future asset value. However, in assessing the instant unlisted shares based on the supplementary assessment method, the Defendant’s calculation of the net asset value based on the balance sheet as of the first day after the date of the transfer of shares does not vary between the base date of the balance sheet and the date of the transfer of shares. The net asset value on the balance sheet was reported to the tax office by ○○○ upon reporting the corporate tax by ○○○○ upon its own, and it cannot be deemed that the net asset value on the balance sheet was sharply increased during the period of 1999 days, and thus, it cannot be deemed that the Defendant’s calculation based on the above net asset value on the balance sheet in 199-196.

C. Whether it can be deemed that a tax burden has been reduced or exempted

(1) Under the former Income Tax Act, in a case where a resident’s act of wrongful calculation is deemed to have avoided or reduced tax burden by abusing the various forms of transactions listed in each subparagraph of Article 98(2) of the former Enforcement Decree of the Income Tax Act without a reasonable method by a person with a special relationship, the taxing authority is deemed to have denied it and have the income objectively and appropriately shown in the manner prescribed by the laws and regulations. In light of the economic person’s viewpoint, the determination of whether the economic rationality exists shall apply only to the case where it is deemed to have neglected the economic rationality due to the wrongful and unreasonable calculation. The determination of whether the transaction is unfair in the transaction behavior with a person with a special relationship by separately removing only the price relation of the transaction, not just because it does not fall under the ordinary transaction behavior with a person with a special relationship. However, the determination of whether the transaction lacks economic rationality in light of sound social norms or customary practices should be made by considering the overall circumstances of the transaction (see, e.g., Supreme Court Decision 2005Du387, May 12, 2005).

On the other hand, in tax litigation, the tax authority needs to establish the legality of taxation disposition and to establish the facts of taxation disposition in order to impose tax disposition. Therefore, in principle, the tax authority bears the burden of proof as to the existence of taxation requirements or the tax base. Therefore, in principle, the tax authority must prove the fact that the taxpayer’s act constitutes a wrongful calculation, and in the case of the wrongful calculation type which requires comparison with the market price, the tax authority must prove the market price. However, it is sufficient that the tax authority must prove only the type of the wrongful calculation type as stipulated in Article 98(2) of the Enforcement Decree of the Income Tax Act. However, in order to avoid the application of the provision of wrongful calculation, it should be proved that the taxpayer did not have a

(2) According to the facts acknowledged earlier, after the resignation of the representative director of ○○○○○, Plaintiff ○○ transferred the instant stocks held by ○○○○○○○, based on the standard market price under the former Income Tax Act. At the time, it can be recognized that the value was calculated by consulting with the employees in charge of finance and advisory accountants of ○○○○○○○ at the time. Moreover, the market price of unlisted stocks is not formed between the total insiders and the free price through competition in the open market, but its value has the characteristics of change from time to time. Therefore, it is difficult to calculate the transaction price. The current Corporate Tax Act, income tax, and the Inheritance Tax and Gift Tax Act are considerably supplemented by several amendments, and the evaluation method of unlisted stocks is reasonable, but it is difficult to deem the evaluation method of unlisted stocks as absolute.

However, the plaintiff ○○ does not have to dispose of the shares of this case, which were held by the representative director of ○○○ in a dispute over the management right due to the indivation with ○○○○○○, because there was no way to sell the shares to the general public. Thus, there is no clear evidence to acknowledge the fact of the plaintiff ○○○○○’s assertion that it had no choice but to accept the demand of ○○○○○ in a decision on the sale price ( even if such circumstance is recognized, it cannot be a single necessary condition in determining whether the sale is an economic rationality). Thus, insofar as there is no assertion or proof on other circumstances that can be deemed as having an economic rationality in the above transaction of the shares, the above fact finding alone is insufficient to readily conclude that the transfer of shares of this case is economic rationality in light of sound social norms or commercial practices, and therefore, the plaintiff ○○○○○ is also rejected.

(d) Whether it is an invalid provision without delegation by the mother law

Article 101 (4) of the former Income Tax Act provides that the scope of related parties under paragraph (1) and other matters necessary for wrongful calculation shall be prescribed by the Presidential Decree. Article 167 (4) and (5) of the former Enforcement Decree of the Income Tax Act provides that the acquisition value or transfer value shall be calculated based on the market price. In addition, Article 99 (1) 2 of the former Income Tax Act provides that where the market price is unclear, the standard market price of non-listed stocks, etc. shall be calculated based on the method prescribed by the Presidential Decree, taking into account the type, size, transaction status, etc. of transferred assets. Article 165 (1) 2 of the former Enforcement Decree of the Income Tax Act provides that the standard market price of non-listed stocks, etc. shall be calculated by applying mutatis mutandis the provisions of Article 63 (1) 1 (b) and (c) of the former Inheritance Tax and Gift Tax Act shall be calculated by calculating the standard market price of non-listed stocks, etc., and in this case, the evaluation date or appraisal value shall be re-entrusted to the extent under the Ordinance of delegation.

E. Sub-committee

Therefore, the imposition of the transfer income tax of this case against the plaintiff ○○○ is legitimate.

6. Whether the imposition of gift tax of this case is lawful

A. Whether 52,700 won per share, the transaction price of December 30, 1999, can be deemed as the market price at the time of the instant transaction

(1) Article 60(2) of the former Inheritance Tax and Gift Tax Act provides that the market price of the property on which a gift tax is levied shall be the amount deemed to be normal if a transaction is made freely between many and unspecified persons. Article 49(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that, unless the value of the property is objectively unreasonable, such as a transaction with a person with a special relationship with the person with a special relationship with the pertinent property, the transaction price shall also be recognized in cases where there is a fact of transaction with the pertinent property during the period for filing a return of the tax base of gift tax from six months before the base date of appraisal (three months in cases of a gift property) to the period for filing a return of the tax base of gift tax. Thus, in the case of the evaluation of unlisted stocks not listed on the Stock Exchange, if there is a normal transaction example reflecting the objective exchange value properly, the relevant transaction price shall be deemed to be the market price and the value of the stocks shall be evaluated as the market price.

(2) Therefore, according to the facts acknowledged earlier, it is difficult to view the shares price of 00% per share, which is the transaction price of 1 December 30, 1999, as the market price at the time of the instant transaction, as the market price, and the following facts are examined: ① although 00 did not constitute a special relationship with Plaintiff ○○○○, it is a person who worked for ○○○○ and its subsidiaries as an executive officer or employee of ○○○○○○, but it is merely about 1.2% of the total number of shares transferred with 300 shares of the instant transaction capital, and it is difficult to view that 00% of the total number of shares transferred with 300 shares of the instant transaction capital, and it is difficult to view that the share price of 00% was a normal transaction. In light of the above facts, it is difficult to view that the share price of 00% as the market price at the time of the instant transaction can not be seen as the market price at the time of the instant exchange price at the time of 190%.

(3) Therefore, since the shares of this case can not be seen as properly reflecting the general and normal exchange value even in the case of transactional examples or stock appraisal cases, there is no other method of calculating the market price, it is reasonable to evaluate the market price of the shares of this case as of December 30, 199 by the supplementary method of assessment, and it is clear that the difference is in excess of 30/10 of the total appraised value of the shares of this case calculated by deducting the transaction price of this case, which is assessed as 52,70 won from the total appraised value of the shares of this case according to the above market price, from the total appraised value of the shares of this case, at least 30/10 of the total appraised value. Thus, the disposition imposing the gift tax of this case constitutes deemed donation under Article 35(1)1 of the former Inheritance Tax and Gift Tax Act and Article 26(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.

(4) Meanwhile, since the acquisition of the instant shares by Plaintiff ○○ was made on December 30, 199, it is unreasonable for the Defendant to calculate the net asset value based on the balance sheet in 1999 where the fiscal term has not yet expired and assess the shares based on December 31, 199, as it is based on the balance sheet in 199 where the fiscal term has not yet been terminated, to include the future asset value. However, as seen in the above 5-B B, it is not unlawful for the Defendant to calculate the net asset value of ○○○ based on the balance sheet in 199 as seen in the above 5-B.

B. Whether gift tax and capital gains tax can be imposed concurrently

The plaintiffs, while the lawsuit of this case is pending, are imposed capital gains tax and gift tax on the plaintiffs in relation to the transfer of shares of this case. The grounds for imposing capital gains tax and gift tax are duplicate taxation on a single transaction, and they filed a petition for adjudication on the unconstitutionality of law by asserting that the provisions of law violate the Constitution, and this court received it and filed a petition for adjudication on the unconstitutionality of law with the Constitutional Court. However, the Constitutional Court decided on 2004HunBa76,204HunBa16 (Joint) on 2006. 29. 06. 2006.

7. Conclusion

Therefore, the plaintiffs' claims seeking revocation of each taxation of this case as a whole are without merit, and all of them are dismissed.

Judges ○○○○○

Judges ○○○

Judges ○○○