Busan High Court (Capwon)-2012-Nu-969 ( October 13, 2013)

It is reasonable to impose gift tax on listed marginal profits from stocks issued with capital increase, and it is also reasonable to impose penalty tax in cases where it is evident that the provisions of the relevant statutes

Where gift tax is imposed on listed marginal profits, it is not divided into whether it is paid for or free of charge under the statutes, and it is reasonable to impose gift tax on paid-in capital increase, and even if it is not imposed on paid-in capital increase when conducting a tax investigation, additional tax should be imposed if it is evident that it

Article 41-3 of the Inheritance Tax and Gift Tax Act

Article 48 of the Framework Act on National Taxes

2013Du15385 Revocation of Disposition of Imposition of Gift Tax

-Appellee

AA

BB et al., six persons

-Appellant

○ Head of tax office

Busan High Court (Chowon) Decision 2012Nu969 Decided November 11, 2015

The part against the Defendant is reversed, and that part of the case is remanded to Busan High Court. Plaintiff AA’s appeal is dismissed.

The grounds of appeal are examined.

1. As to the ground of appeal by Plaintiff AA

A. Regarding ground of appeal No. 1

(1) Article 41-3(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter "the Inheritance Tax and Gift Tax Act") provides that where a person who has received a donation or acquired a fee for the stocks of the relevant corporation from a person falling under any of the following subparagraphs (hereinafter "large shareholder, etc.") is in a position to use information that is not disclosed to the management, etc. of the relevant corporation, the donation or acquisition of the stocks of the relevant corporation shall be made within five years from the date of donation or acquisition as the stocks, etc. are listed on the securities market or the KOSDAQ within five years from the date of donation or the date of listing them on the relevant securities market or the KOSDAQ, the donation or acquisition of the relevant stocks, etc. shall be made the value of the assets donated to the person who has acquired the profits in excess of the original taxable amount of gift or acquisition, the largest shareholder or largest investor under Article 22(2) of the same Act shall be deemed the value of assets donated to

Furthermore, Article 31-6 (2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 21992, Feb. 4, 2009; hereinafter “Enforcement Decree of the Inheritance Tax and Gift Tax Act”) (hereinafter “the Enforcement Decree of the Inheritance Tax and Gift Tax Act”) provides that “a person who holds not less than 25/100 of the “those who hold not less than 25/100” under Article 41-3 (1) 2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act and who holds not less than 25/100 of the total number of stocks, etc. owned by a person in a relationship falling under any of the subparagraphs of Article 19 (2) refers to the pertinent stockholder, etc. where he/she holds not less than 25/100 of the total number of stocks, etc. owned by him/her”

(2) One of the important criteria for determining whether a provision of the Enforcement Decree goes beyond the scope of delegation by the mother law is predictability. This means that the contents of the Enforcement Decree in question are already specifically delegated by the mother law and should belong to the scope within which anyone can predict the delegated contents from the mother law itself. The existence of such predictability does not require that only one of the pertinent specific provisions be determined, but should be determined by systematically and systematically considering the legislative intent of the law (see, e.g., Supreme Court Decision 2006Du19570, Nov. 27, 2008).

The purpose of Article 41-3(1) of the Inheritance Tax and Gift Tax Act is to enable the largest shareholder, etc. to obtain large profits from the listing by using internal information of the company, or transfer non-listed stocks to his/her children, etc. for consideration, so it is a provision prepared for the taxation of gains from the listing of such gains in order to effectively control the affiliate without tax burden (see Supreme Court Decision 2010Du11559, May 10, 2012). Since Article 41-3(1) of the Inheritance Tax and Gift Tax Act provides that the scope of the above provision may avoid the application of the Inheritance Tax and Gift Tax Act through the diversification of shares held by the company, but the largest shareholder, etc. who owns 25/100 or more of the total number of shares issued and outstanding or total amount invested by the person who owns the same Article 41-3(1)2 of the Inheritance Tax and Gift Tax Act does not need to be determined separately from the largest shareholder under Article 21-3(2) of the Inheritance Tax and Gift Tax Act.

(3) In the same purport, the court below is just in rejecting the Plaintiff’s assertion that the enforcement decree of this case is null and void, and it did not err by misapprehending the legal principles as to the effect of the enforcement decree of this case or the limitation of delegated legislation, as otherwise alleged in the

B. As to the grounds of appeal Nos. 2 and 3

(1) As seen earlier, Article 41-3 of the Inheritance Tax and Gift Tax Act provides that “The gift of profits arising from the listing of stocks or equity shares shall be subject to the gift tax.” Article 41-3 of the same Act provides that “in applying the provisions of paragraph (1), the acquisition of stocks, etc. shall include new stocks acquired and allocated by a corporation through the issuance of new stocks to increase its capital (including the amount of investment)”

Article 41-3 (1) of the Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 18, 2002) provides that "the largest shareholder, etc." shall be deemed to have donated or transferred only shares to a person with a special relationship, and thus, it is possible to avoid the application of the above provision by allowing the corporation to issue new shares to a person with a special relationship," and that Article 41-3 (6) of the Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 18, 200) provides that "the new shares issued by the corporation to increase the capital for consideration" and Article 41-3 (6) of the Inheritance Tax and Gift Tax Act (amended by Act No. 6701, Apr. 1, 200; 200. The court below determined that "the new shares issued by the plaintiff 20, an unlisted corporation for consideration, including those issued by the plaintiff 1, the largest shareholder and the non-party 201, who were entitled to receive shares for consideration.

In light of the above legal principles, the above judgment of the court below is just, and it did not err by misapprehending the legal principles on the scope of application under Article 41-3 (6) of the Inheritance Tax and Gift Tax Act, as alleged in the

2. As to the Defendant’s ground of appeal

A. Article 47-2 of the former Framework Act on National Taxes (amended by Act No. 911, Jan. 1, 2010; hereinafter the same) provides that: (a) where a taxpayer fails to file a tax base return within the statutory due date of return; (b) where a taxpayer files a tax base return under the tax-related Acts within the statutory due date of return; (c) where the reported tax base falls short of the tax base to be reported under the tax-related Acts; and (d) where a taxpayer fails to pay a national tax within the due date of return under the tax-related Acts; and (e) Article 47-5 of the former Framework Act on National Taxes provides that a taxpayer shall impose an additional tax if the amount of tax to be paid falls short of the tax base to be reported under the tax-related Acts; and (e) where a taxpayer fails to pay a national tax within the due date of return under the tax-related Acts; and (e) Article 48-2

B. Comprehensively taking account of the adopted evidence, the court below accepted 1) the remaining plaintiffs except the plaintiff A (hereinafter referred to as the "Babs plaintiffs") on December 1, 2004, 0,000 shares of the non-listed company (unlisted corporation) from DDR under Article 41-3 (1) 1 of the Inheritance Tax and Gift Tax Act. The remaining plaintiffs were employees of the non-party company, and 2) the non-party company took over 0,000 shares of 10 shares per share of 1 shares allocated to them, and 00 shares of the non-party company were not listed on the KOSDAQ market on January 25, 2008; 3) the head of ○○○○ was not listed on August 10, 2009 to the non-party company's profits under Article 41-3 (1) 1 of the Inheritance Tax and Gift Tax Act, but did not impose gift tax on the non-party company's profits for consideration including the new shares initially acquired on the non-party company.

Furthermore, the lower court determined that the part of the penalty tax in the instant disposition is unlawful on the ground that: (a) the listed marginal profits of the instant shares fall under the category of gift tax subject to Article 41-3(1) and (6) of the Inheritance Tax and Gift Tax Act; (b) the public official in charge of ○○○ Office did not impose gift tax on the listed marginal profits of the instant shares by taking the same view as the Plaintiffs after careful legal review as at the time of the instant tax investigation; (c) it is difficult to believe that the Plaintiffs trusted that there was no liability to pay gift tax on the listed marginal profits of the instant new shares with the trust of the Plaintiffs; and (d) whether to impose gift tax on the listed marginal profits of the new shares with the consideration because there is a conflict of opinion among tax officials, and thus, there is

C. However, the lower court’s determination is difficult to accept for the following reasons.

Under the tax law, penalty taxes are administrative sanctions imposed by taxpayers in accordance with the law in order to facilitate the exercise of the right to impose taxes and the realization of tax claims in cases where they violate the reporting and tax liability, etc. under the law without justifiable grounds, and the taxpayer’s intentional or negligent acts do not constitute justifiable grounds. Moreover, even if a taxpayer has believed a tax official’s erroneous explanation and failed to perform his/her duty to report and pay taxes, such reasons alone do not constitute justifiable grounds (see, e.g., Supreme Court Decision 2003Du10350, Sept. 24, 2004).

According to the evidence duly admitted by the court below, even if ○○○○○○ House (which was published in the integrated information system for national taxes) opened by ○○○○○○○○○○ on March 2008 (it is also indicated in the integrated information system for national taxes), all of the listed marginal profits on the stock acquired by the ○○○○○○○○○○○○○○○○, etc., were included as subject to gift tax, and in light of the language and text and legislative intent of Article 41-3(1) and (6) of the Inheritance Tax and Gift Tax Act, it seems clear that the listed marginal profits on the stock of this case constitute subject to gift tax in the light of the language and intent of Article 41-3(1) and (6) of the Inheritance Tax and Gift Tax Act, and it was found that the tax official who conducted an integrated investigation on EE did not constitute subject to gift tax, and thus, even if the Plaintiffs trusted it, even

Nevertheless, the lower court determined otherwise by deeming that there was a justifiable reason that could not be caused to the Plaintiffs by neglecting to report and pay gift tax on the exchange marginal profits of new stocks with compensation in this case. In so doing, the lower court erred by misapprehending the legal doctrine on justifiable grounds for exempting from additional tax, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of appeal on this point is with merit.

3. Conclusion

Therefore, the part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. The appeal by Plaintiff AA is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.