Suwon District Court-2017-Gu Partnership-67194 ( April 26, 2018)

Cho Jae-2017-China-173 (24 May 2017)

The base point of time for calculating the gains from donation due to capital reduction shall be the date of resolution of the general meeting of shareholders for capital reduction.

The base point of time for calculating the gains of donation due to capital reduction shall be the date of resolution of the board of directors for retirement, not the date of resolution of the board of directors for retirement of shares.

Inheritance Tax and Gift Tax Act Article 39-2 (Donation of Profits Following Reduction of Capital)

2018Nu4683 Revocation of Disposition of Imposition of Gift Tax

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○ Head of tax office

Suwon District Court Decision 2017Guhap67194 Decided April 26, 2018

October 29, 2018

November 21, 2018

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The imposition of gift tax of KRW 307,426,710 (including penalty tax) on the Plaintiff on September 6, 2016 by the Defendant shall be revoked.

1. Quotation of judgment of the first instance;

The reasons for this Court concerning this case are as stated in the reasoning of the judgment of the first instance except for adding the judgment on the plaintiff's assertion that it has repeated at the trial of the first instance as stated in the following Paragraph (2) (However, the meaning of the abbreviationd language used in this case is the same as the judgment of the first instance). Thus, it is accepted in accordance with Article 8(2) of the Administrative Litigation Act, the main text of Article 420 of the Civil Procedure Act (hereinafter referred to as "the meaning of "the stocks purchased with earned surplus").

2. Additional determination

A. The plaintiff's assertion

The resolution of the general meeting of shareholders of this case cannot be deemed as the resolution of the general meeting of shareholders as stipulated in the provisions on reduction of capital. Thus, the date cannot be deemed as the "date of the resolution of the general meeting of shareholders for reduction of capital" as stipulated in Article 29-2 (3) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act. The time when the profit of donation distributed to the Plaintiff by an empty ○○○○ does not become final and conclusive shall be deemed as the "date of the resolution of the general meeting of shareholders". The resolution of the board of directors to purchase 18,000 won per share from an empty ○○○○ to purchase 54,250 won per share. Thus, the market price of the shares

B. Determination

1) Comprehensively taking account of the purport of the entire arguments in each statement in evidence Nos. 1-2, 3, and 12, ○ Development: (a) held a board of directors meeting on March 12, 2012 and resolved to purchase 18,000 shares of 54,250 won per share, total 976,500,000 won per share (hereinafter referred to as “the resolution of board of directors of this case”); and (b) pursuant to the resolution of the instant case, ○○ Development purchased 18,00 shares of 18,00 shares from ○○ on March 15, 2012 in total from 976,50,000,000 won; (c) according to the above recognition facts, the resolution of this case constitutes part of the resolution of the resolution of the general meeting of shareholders for capital reduction in the procedure for the retirement of shares under ordinary provisions, it can be deemed that the resolution of this case was adopted by the board of directors.

2) However, in light of the ordinary procedures for the retirement of shares under the provisions on the reduction of capital, even if the acquisition of shares does not immediately take effect at the time of the resolution of the general meeting of shareholders for the reduction of capital, the effect of the retirement of shares takes place at a certain point. On the other hand, in the case of capital reduction by the method of acquiring treasury shares, prior to the resolution for the retirement, the resolution for the acquisition of treasury shares does not take effect, and there is no plan to have the effect of the retirement naturally at a certain point thereafter (Article 342 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, which was amended by Act No. 10600 of April 14, 2011, provides that the acquisition of treasury shares shall take the procedures for the retirement of shares without delay, even if some of the procedures for the reduction of capital through the retirement of treasury shares, it is apparent that the acquisition of shares does not take effect only at the time of the resolution of the general meeting of shareholders, and it is reasonable to deem the acquisition of shares at a price lower than the market price of the Plaintiff’s.

3) Meanwhile, even if the market value of the instant shares increased between the resolution of the instant general meeting of shareholders following the resolution of the resolution of the resolution of the resolution of the resolution of the resolution of the instant general meeting of shareholders and the amount greater than the difference between the acquisition value of treasury shares expected at the time of the resolution of the said resolution of the resolution of the resolution of the resolution of the instant general meeting of shareholders and the market value thereof were calculated as the Plaintiff’s gift gains, the legislative intent of Article 39-2 of the Inheritance Tax and Gift Tax Act and Article 29-2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act is to promote tax equality by imposing tax on the large shareholders who are specially related parties by retiring only a certain shareholder’s shares without compensation by the corporation’s disequal retirement, taking into account the purport of the legislative intent of Article 39-2 of the Inheritance Tax and Gift Tax Act and Article 29-2 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act is also the profits received gratuitously by the Plaintiff when

4) Therefore, the Plaintiff’s assertion that the market price of the instant shares ought to be calculated on the basis of the date of resolution by the board of directors of the instant case, which was before the Plaintiff obtained donation profits such as increase in equity ratio due to the invalidation of the shares

3. Conclusion

Therefore, the judgment of the first instance court is legitimate, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.