Busan District Court 2012Guhap1847 (2013.05.03)

Appellate Court Decision 201Da1414, 0101. 19

Even if the company acquired warrant certificates at a lower price than the theoretical price and gained profits in the process of converting them to stocks, they are not subject to gift tax.

"If there is a reasonable ground to believe that the parties to a transaction who transferred or acquired a preemptive right at a price lower than the theoretical price has properly reflected the objective exchange value, as well as where there is an objective reason to believe that the transfer or acquisition at that price would not have been an abnormal reason for the parties to the transaction, even if there is no such reason, it is reasonable to view that there is a justifiable reason in light of transaction practices."

2013Nu1355 Revocation of Disposition of Imposition of Gift Tax

The AA

○ Head of tax office

Busan District Court Decision 2012Guhap1847 Decided May 3, 2013

September 27, 2013

October 25, 2013

1. Revocation of a judgment of the first instance;

2. On December 1, 2010, the Defendant’s imposition of gift tax for the Plaintiff on December 1, 2010, the imposition of KRW OO, OO, OO, OO, OO, OO, OO, and OO, respectively, shall be revoked.

3. All costs of the lawsuit shall be borne by the defendant.

The same shall apply to the order.

1. Details of the disposition;

"A. BBGGGG Co., Ltd. (hereinafter referred to as "BBGG") is a KOSDAQ-listed corporation that is engaged in the strong manufacturing business, and BBGG Co., Ltd. (hereinafter referred to as "BBG") is a KOSDAQ-listed corporation that is incorporated by dividing the part of the manufacturing business in BB B B B BG, 204. BBG and BBG were issued on December 14, 2004, respectively, and the contents of the warrant certificates are as follows:

The exercising price per share;

Period of Time

BBBD

OOOE

January 14, 2005 - December 13, 2011

BBB Leil

OOOE

January 14, 2005 - December 13, 2011

C. The Plaintiff acquired new shares issued BB BBG and BB BB date by exercising the right to purchase part of the above warrant certificates as indicated below (hereinafter the above purchase of warrant certificates as stated below) as stated in the following table, and thereby acquiring the new shares issued BBG and BB date by exercising the right to subscribe to the instant preemptive rights. In addition, the Plaintiff’s acquisition of warrant certificates and its exercise details of the issuance of BB BBG publication 3 pages

The - 3 pages of the decision

D. The Defendant determined that the Plaintiff’s purchase and exercise of the warrant certificates of this case constituted a donation of other benefits arising from capital transactions between unrelated parties, and that it was subject to a decision on December 1, 2010 on December 1, 2010 by imposing an OOO on the Plaintiff under Article 42(1)3 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter “the Inheritance Tax and Gift Tax Act”) as the gift tax reverted to the year 2007 (hereinafter “instant disposition”). (e) The Plaintiff filed a request with the Tax Tribunal on February 28, 201, but was dismissed on January 19, 2012.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, 6, 8 through 10, Eul evidence Nos. 1 through 7 and 18 (including each number; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) The Plaintiff’s economic benefits derived from the acquisition and exercise of the warrant certificates of this case were generated by the Plaintiff’s purchase of the above warrant certificates with the burden of risk of price fluctuation and the rise in the share price between BBG and BB B B, and it is unlawful to impose gift tax on the Plaintiff on the Plaintiff, since it does not correspond to not only to the gains from the transfer of listed stocks but also to a third party’s donation.

"2) The plaintiff, through a securities company, acquired warrant certificates of this case from a third party without special relation at the market price, and even if the acquisition price for domestic affairs falls short of the market price, in light of the process of acquisition and exercise of the above preemptive right, this is not subject to gift tax because it is recognized that there is a justifiable reason in light of transaction practices stipulated in Article 42(3) of the Inheritance Tax and Gift Tax Act, and even if the plaintiff's acquisition and exercise of warrant certificates of this case are subject to gift tax, it is not subject to gift tax for the same reason as the above 2). The plaintiff is illegal to impose penalty tax on the plaintiff on the ground that there is a justifiable reason for the

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether acquisition and exercise of warrant certificates of this case constitutes subject to gift tax

A) Article 42(1)3 of the Inheritance Tax and Gift Tax Act provides that where profits have been acquired from transactions which increase or decrease the corporation’s capital by conversion of stocks into warrant certificates, etc., and which exceed the standard prescribed by the Presidential Decree, such profits shall be deemed the value of property donated to the person who

Article 31-9 (2) 4 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 20720 of Feb. 29, 2008) provides that "the benefit above the standard prescribed by Presidential Decree shall be the corresponding amount in the case where the amount obtained by subtracting the value of stock conversion, etc. from the value of the stock at the time of stock conversion, etc. shall be the corresponding amount in the case where the amount calculated by deducting the value of stock conversion, etc. from the value of the stock at the time of stock conversion, etc."; the plaintiff returned to this case; as seen above, in the process of acquiring the warrant right of this case and using it to the stocks, the plaintiff obtained profits by subtracting the value of stock conversion, i.e., the acquisition value of the above warrant right, the amount of exercise, and the fee from the value of the stock at the time of stock conversion, and the disposition

Therefore, the instant disposition is not related to the transfer margin of converted shares.

B) Meanwhile, Article 2(3) of the Inheritance Tax and Gift Tax Act provides that "The term "the transfer of tangible and intangible property (including the transfer of tangible and intangible property at a remarkably low price) which can calculate economic values to another person by direct or indirect means, regardless of the name, form, purpose, etc. of the act or transaction," and "the increase of the value of another person's property by means of the contribution" and "the public health zone in this case, ED, EE and FF funds, the transferor of the warrant certificates in this case, are transferred to the Plaintiff at a lower level than the theoretical price (hereinafter referred to as "the theoretical price") calculated by subtracting the exercise price per one share of the preemptive right from the BB system and BB-day's share price, and thus the gain accrued from the acquisition and exercise of the warrant certificates in this case falls under the donation stipulated in the above Inheritance Tax and Gift Tax Act, unless there are any special reasons such as transactional practice, etc.," and therefore, the plaintiff's assertion in this part is without merit.

2) Whether there is a justifiable reason in light of transactional practice in the acquisition and exercise of the instant preemptive right securities

A) The purpose of Article 42(1)3 of the Inheritance Tax and Gift Tax Act is to cope with an irregular donation act and to promote the fairness of taxation by imposing gift tax on the profits earned by the counterparty in a case where the gains equivalent to the difference between the value of stocks at the time of stock conversion and the value of stocks conversion are de facto gratuitously transferred through abnormal capital transactions.

Article 42(3) of the Inheritance Tax and Gift Tax Act provides that Article 42(1)3 of the same Act shall not apply in a case where it is acknowledged that there is a justifiable reason for transaction practice between unrelated parties as to the transaction between the transaction partner and the price of the new shares at the time of conversion of shares, solely on the ground that the transaction price of the new shares does not reach the theoretical value of the new shares in the transaction between unrelated parties, and thus, the difference between the price of the new shares at the time of conversion of shares and the price of the new shares is difficult to be deemed to have been donated to the transaction partner. In full view of these points, it is reasonable to view that there is a justifiable reason for the Plaintiff to believe that the transaction partner who transferred and acquired the new shares at the price lower than the theoretical value of the new shares and the price of the new shares at the time of transfer of the new shares at the time of transfer of the new shares at the price of the new shares at the time of sale of the new shares at the time of sale of the new shares at the time of the sale of the new shares at the 20B.

- 8 pages of the decision

However, there is a room for the actual transaction price of warrant certificates to be formed at a lower level than the theoretical price. This is because, as a result of the exercise of preemptive rights, the increase in the total number of shares issued due to the exercise of preemptive rights, the share price generally drops, and the number of new shares acquired by the exercise of preemptive rights is required until the listing.

In addition, the theoretical value of the warrant certificates is the difference in the same amount as the price changes due to the price fluctuations, and the scambling width is greater than the scambling width of the share price (for example, if the share price and theoretical value of the exercise price of the warrant certificates in the issue of OO's cause has fallen to the OO's won if the share price has fallen to the 25% price, while the share price drops to the 50% price of the warrant certificates).

Therefore, if there is a large change in the stock price and the exercise period of preemptive rights remains for a considerable period, the actual market price of the warrant certificates is likely to be much lower than the theoretical price.

In addition, considering the above circumstances and the difficulty in realizing the purchaser in the event that the warrant certificates are not listed, even if the price much lower than the theoretical price was traded in the price of the warrant certificates, it cannot be readily concluded that it was an abnormal transaction.

Furthermore, the following facts or circumstances may be acknowledged, if the above evidence and the evidence Nos. 5 and 7 mentioned above show the overall purport of the pleadings.

① Around 2006, the Plaintiff’s father JungG and its specially related persons, prior to acquiring the warrant certificates of this case, sold the shares of BBG and BB, and the largest shareholder of BBG was changed to III and BB, and the largest shareholder of BBG, respectively, toCC.

② Of the transferor of the warrant certificates of this case, ED and EE acquired and disposed of the shares of HH in around 2007, a company with a special relationship with JungG, but there is no evidence to find out the specific relationship among them.

③ In addition, the FF Fund, the other transferor of the warrant certificates of this case, appears to have no connection with the Plaintiff or JungG as a foreign accounting fund. However, the FF Fund transferred the above warrant certificates at a discount rate similar to that at the time of transfer by DoD and HaE.

④ Since the period of exercise of the instant preemptive right was until December 13, 201, the Plaintiff’s expiration date remains for a considerable period of time. However, the share price (type price) of BB river, such as [Attachment 207] written on January 2, 2007, gradually drop from OO on January 15, 2007 to OO again fell again, and the Plaintiff’s acquisition of the warrant right was set out as OO on January 24, 2007, up to KRW 200,000 on March 5, 2007, the Plaintiff’s acquisition of the Plaintiff’s 200,000,000 KRW 70,000,000,000 KRW 70,000,000,000, KRW 70,000,000,000, KRW 70,000,000,000.

Therefore, even if the Plaintiff acquired the warrant certificates of this case at a lower price than the theoretical price and gained profits in the process of converting them to stocks, it is ultimately not subject to gift tax, and thus, the disposition of this case is unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is accepted on the grounds of its reasoning, and the judgment of the court of first instance which has different conclusions is unfair, so it is revoked, and it is so decided as per Disposition with the cancellation of the disposition of this case.