2012west 4013 ( November 06, 2013)

Securities depository receipts are not subject to capital gains tax under the Income Tax Act before the amendment.

After amendment, "securities depository receipts prescribed by Presidential Decree" under Article 94 (1) 3 and Article 118-2 (3) of the Income Tax Act includes securities depository receipts subject to taxation should be deemed as a creative provision for imposing capital gains tax on securities depository receipts separate from the stocks in light of the principle of no taxation without law.

Article 94 of the former Income Tax Act

2014Guhap51272 Revocation of disposition of refusal to correct capital gains tax

EA and 1

○ Head of tax office et al.

September 17, 2015

November 5, 2015

1. The Defendants’ rejection of correction of each transfer income tax stated in the separate disposition list against the Plaintiffs shall be revoked.

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

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. On 2008, Plaintiff A transferred ○○ share to ○○○ (hereinafter referred to as “DD”) from among the shares owned by ○○○○, Inc., Ltd. (hereinafter referred to as “DD”) to an overseas securities depository receipts (Deposic Recepex, which falls under ADR (Deposary Recepex, the U.K.)) and transferred ○○ on 008. ○○○ on 2008. ○○. This was assigned to E, an investment in the U.K. system.

B. In addition, on 2009, the Plaintiff: (a) exercised a call option with respect to ○○○○ Securities Depository; (b) converted 1,400,000 shares of DD into ○○○○; and (c) transferred the total sum of ○○○ Securities Depository receipts over three occasions between ○○○ and ○○○ on 2009, to F, a company in the UK.

C. The Plaintiff B converted DD shares held on ○○ on ○○ on ○, 2008 into securities depository receipts, and then on ○○ on 2009, ○○. The Plaintiff B was a capital market other than the U.S. trading market (NASA Q);

The Ministry of Information and Communication assigned each of the securities depository receipts that the plaintiffs transferred to ○○○ level (hereinafter referred to as “each of the securities depository receipts to which the plaintiffs transferred”).

D. Based on the premise that each of the above DD stocks was transferred to EE, F (Plaintiff A), or Na (Plaintiff BB), the Plaintiffs respectively reported and paid ○○○○○ in 2008, 009, and ○○○ in 2009, and ○○ in 2009, respectively.

E. After that, on October 24, 2012, the Plaintiff filed a request for correction with the director of the tax office of ○○○ on the ground that the deposit receipts with the director of the tax office of ○○○ on the ground that the deposit receipts are not subject to capital gains tax, and the Plaintiff B filed a request for correction with the director of the tax office of ○○○ on the ground that the deposit receipts are not subject to capital gains tax. However, on July 2, 2012, the director of the tax office of ○○○○ and the director of the tax office of ○○○○ on the ground that the Plaintiff’s request with the director of the tax office of ○○○ was rejected on the ground that the deposit receipts are subject to capital gains tax (hereinafter collectively referred to as “instant disposition”).

F. On August 31, 2012, Plaintiff AA, and Plaintiff B, respectively, filed an appeal with the Tax Tribunal on December 12, 2012, against the instant disposition, but all of which were dismissed on November 6, 2013.

[Ground of recognition] Facts without dispute, Gap evidence 1-1-3, Gap evidence 2-1, 2-2, Gap evidence 3 and 4-1-3, Gap evidence 6 and 7, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiffs' assertion

The term “stocks or equity shares subject to capital gains tax as provided by subparagraph 3 of Article 118-2 of the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009; hereinafter referred to as the “former Income Tax Act”) shall not include securities depository receipts, and the transfer of securities depository receipts shall not be the same as the transfer of stocks. In addition, the conversion of securities depository receipts into securities does not constitute capital gains tax subject to capital gains tax under the Income Tax Act.

B. Relevant statutes

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

C. Determination

1) In light of the principle of no taxation without law, the requirements for taxation, non-taxation, or tax exemption, and the interpretation of tax laws shall be interpreted in accordance with the text of the law, barring any special circumstance, and it shall not be permitted to expand or analogically interpret without reasonable grounds (see, e.g., Supreme Court Decision 92Nu18603, Feb. 22, 1994). Since the Income Tax Act adopts the so-called listing method, capital gains other than those provided for in the Income Tax Act shall be excluded from taxation (see, e.g., Supreme Court Decisions 86Nu331, Dec. 13, 198; 2007Du490, May 8, 2008).

2) According to Article 118-2 subparag. 3 of the Income Tax Act and Article 178-2(2) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 22034, Feb. 18, 2010), stocks or equity shares (including preemptive rights; hereafter referred to as “stocks, etc.” in this Chapter), which were in force at the time of issuance of the instant securities depository receipts, only those income accrued from the transfer of stocks, etc. meeting certain requirements, are subject to capital gains tax, and there is no provision on depository receipts. It is difficult to view that Article 94(1)3 and Article 118-2 subparag. 3 of the Income Tax Act (amended by Act No. 10408, Jan. 1, 201; hereinafter referred to as “the Income Tax Act”) as securities depository receipts to be subject to capital gains tax as prescribed by Presidential Decree, separately from stocks, which were issued by Presidential Decree, the concept of stocks, etc. under Article 94(1)3 and Article 118-2 subparag.

The transfer by the plaintiffs to EE, etc. of this case is clear that it is not D stocks, but this case’s securities depository receipts, and it cannot be deemed that it included this case’s securities depository receipts in “stocks, etc.” as prescribed by Article 118-2 subparag. 3 of the Income Tax Act before the amendment. Thus, the disposition of the defendants reported differently

3) As to this, the Defendants asserted to the effect that they were converted to the instant securities depository receipts to transfer DD stocks owned by the Plaintiffs abroad, and that the consignment of DD stocks and the issuance of securities depository receipts are subject to capital gains tax as a kind of exchange exchange. However, the conversion of stocks to the securities depository receipts is an act of depositing stocks in a depository institution to trade in the overseas securities market and of receiving securities to commend the original claim for the deposited stocks, so it is distinguishable from the exchange under the Civil Act established by both parties to mutually transfer property rights other than money, and it is difficult to recognize that the transfer of assets is an onerous transfer of assets. ② Even based on the Defendants’ assertion itself, the Defendants’ owners of securities depository receipts can exercise voting rights the same as the ownership of stocks, receive dividends, and convert the securities depository receipts into the securities depository receipts after certain procedures, and thus, cannot be deemed to constitute “transfer” subject to capital gains tax.

Therefore, the above assertion by the defendants is without merit.

3. Conclusion

If so, all of the plaintiffs' claims are reasonable, they shall be accepted, and it is so decided as per Disposition.