[1] Relationship between the principle of substantial taxation and the principle of no taxation without law under Article 14 of the former Framework Act on National Taxes, and whether the principle of taxation without law is applied to a person liable to pay acquisition tax under Article 105(6) of the former Local Tax Act (affirmative) and the standard of determination

[2] In a case where Company A, a parent company Company A, and C, a subsidiary company with 100% equity shares, acquired 50% equity shares of Company B, and Company C acquired 25% equity shares of Company B, and the remaining 75% equity shares of Company B, the competent administrative agency deemed Company A as an oligopolistic shareholder of Company B, and imposed acquisition tax, etc. on Company A pursuant to Article 105(6) of the former Local Tax Act, the case holding that the court below erred by misapprehending the legal principles as to the principle of substantial taxation, which concluded that Company A was not liable to pay acquisition tax, solely on the form and appearance of acquiring shares, etc.

[1] [Majority Opinion] (A) The substance over form principle under Article 14(1) and (2) of the former Framework Act on National Taxes (amended by Act No. 8830, Dec. 31, 2007; hereinafter the same) is the practical principle for realizing the principle of equality, which is the basic ideology of the Constitution, in a tax law relationship. In a case where unreasonable form or appearance, which is distinguishable from the substance of the facts requiring taxation, is taken for the purpose of evading the tax burden, the main purpose of this principle is to regulate the act of tax evasion and realize the tax justice by imposing tax on a place with the capacity to pay taxes according to the substance regardless of the form or appearance, and thereby enhancing the equity of taxation. This is not in conflict with the principle of no taxation without law, which is the basic principle of the tax law, but rather in application of various economic relations changing tax laws, thereby preventing the realization of the principle of no taxation without law and ensuring the effectiveness of no taxation without law.

(B) Under the principle of substantial taxation, where there is another person to whom the title of income, profit, property, transaction, etc. belongs differently from the nominal owner, the taxation principle on beneficial owner under Article 14(1) of the former Framework Act on National Taxes is the person to whom the title of ownership belongs is not the nominal owner due to form or appearance, but the person to whom the title belongs is the taxpayer. This principle applies mutatis mutandis to local tax legal relations under Article 82 of the former Local Tax Act (amended by Act No. 7843, Dec. 31, 2005; hereinafter the same shall apply). Therefore, in applying Article 105(6) of the former Local Tax Act, where the nominal owner of the pertinent stocks or shares is not capable of controlling and managing them, and where the disparity between the title and substance arises from the purpose of avoiding the application of the above provision, the relevant stocks or shares shall be deemed to have been reverted to the person who actually controls and manages them, and shall be determined by comprehensively taking into account the process and purpose of acquiring the pertinent stocks or shares, source and circumstance of acquiring them.

[Dissenting Opinion by Justice Jeon Soo-ahn and Justice Lee Sang-hoon] (A) The principle of substantial taxation is a basic principle of tax law to realize the principle of fair taxation, and there is a positive aspect to protect the rights of taxpayers by excluding the exercise of the right to impose taxes if it is contrary to actual factual relations. However, there is room to conflict with the principle of no taxation without law, which cores the principle of statutory taxation and the principle of clarity by infringing on the taxpayer’s property rights, by excluding

(B) A person liable for tax payment may choose a method of trading that removes or mitigates the burden of taxation on the basis of the principle of no taxation without law, and shall be respected as a taxpayer’s right unless it is deemed a disguised act or an illegal transaction. Nevertheless, in essence, the form of transaction chosen by the person liable for tax payment on the basis of the principle of no taxation without law should be avoided without permission, and if the scope of application is widened by deviating from the general meaning of the requirements for taxation expressed in the text and text of the law, the principle of no taxation without law would debris legal stability and predictability to be realized. Furthermore, the constituent elements of the crime of tax evasion, etc., such as tax evasion, can be determined by the person liable for tax payment, and the basis of the principle of no taxation without law may be undermined. From this perspective, the Supreme Court takes into account the external form of the ownership transfer of real estate, and takes into account the fact that the person who acquired real estate takes advantage of the profits gained by using, earning, or disposing of the real estate, rather than imposing the same on the person liable for tax payment without permission.

[2] The case holding that the court below erred in the misapprehension of legal principles as to the principle of substantial taxation by finding that Gap company has no liability to pay acquisition tax, based on the form and appearance of acquiring shares without such measures, although it should have determined whether Eul company has the obligation to pay acquisition tax under Article 105 (6) of the former Local Tax Act by examining the purpose of its establishment, the degree of control and control of Eul company, the process and purpose of acquiring shares of Eul company, and thereby, it should have determined whether Eul company has the obligation to pay acquisition tax under Article 105 (6) of the former Local Tax Act.

[1] Article 14(1), (2), and (3) of the former Framework Act on Local Taxes (Amended by Act No. 8830, Dec. 31, 2007); Article 22 subparag. 2 (see current Article 47 subparag. 2) of the former Local Tax Act (Amended by Act No. 7843, Dec. 31, 2005); Article 82 (see current Article 147 of the Framework Act on Local Taxes); Article 105(6) (see current Article 7(5) of the former Enforcement Decree of the Local Tax Act (Amended by Presidential Decree No. 19254, Dec. 31, 2007); Article 6(1)12 (see current Article 24 subparag. 12 of the Enforcement Decree of the Framework Act on Local Taxes); Article 78(2) (see current Article 47 subparag. 2) of the former Enforcement Decree of the Framework Act on Local Taxes (Amended by Act No. 19254, Dec. 31, 2007; see current Article 278 subparag. 19)

Romera Pacificbrub (Attorneys Lee Im-soo et al., Counsel for the plaintiff-appellant-appellant)

The head of Jongno-gu Seoul Metropolitan Government (Attorney Kim Jong-hwan)

Seoul Special Metropolitan City Mayor (Law Firm continental Aju, Attorneys Kim Jong-ray et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2007Nu32169 decided April 24, 2008

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Provisions of statutes

Article 105(6) of the former Local Tax Act (amended by Act No. 7843, Dec. 31, 2005; hereinafter the same) provides that “Where an oligopolistic stockholder becomes an oligopolistic stockholder by acquiring the stocks or shares of a corporation, the oligopolistic stockholder shall be deemed to have acquired the real estate of the corporation concerned.” Article 78(2) of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 19254, Dec. 31, 2005; hereinafter the same shall apply) provides that “where a stockholder or partner with limited liability who has become an oligopolistic stockholder increases the ratio of stocks or shares of the corporation by acquiring the stocks or shares of the corporation concerned, the increased ratio of stocks or shares shall be deemed to have been acquired, and thus, subparagraph 2 of Article 22 of the former Local Tax Act provides that “a stockholder or partner with limited liability and other relatives of the corporation or a person with limited liability prescribed by Presidential Decree, who holds more than 10 percent of the total number of stocks issued or shares invested by the corporation concerned or 10 percent of the corporation.”

2. The judgment of the court below

A. The court below found the following facts based on the evidence of employment.

1) The Plaintiff owns 100% of each of the shares of Rorocco Saco Saco Korea Co., Ltd. (hereinafter “Rorocco Korea”) and Roro Brobro (hereinafter “maro”) as the Netherlands-based subsidiaries of this case (hereinafter “the subsidiaries of this case” in combination with Rorocco Korea and paper).

2) On May 15, 2003, the subsidiaries of this case acquired 50% of the shares of Lline Industry Limited Company (hereinafter “ Lline Industry”), a domestic corporation, by dividing them by 50%. In addition, on July 15, 2005, Roin Korea owned 75% of the shares of Lineine Korea Co., Ltd., a domestic corporation (hereinafter “Aienna”), thereby succeeding to 25% of the remaining shares from Lineel Pink Korea, a Singapore corporation (hereinafter “the instant subsidiaries”), and acquired 100% of the shares of Linish Industries and 25% of the shares of Linish.

3) The subsidiaries of this case concluded a contract with the same person when their addresses, telephone numbers and representative directors are the same as each other, and they acquire 50% of the equity shares in the Lling Industry, or on May 29, 2003 when selling part of the equity shares to Samsung Bio-stock Co., Ltd., and on March 30, 2004, at the general meeting of members of Lling Industries held on March 30, 2004, a person who was delegated by the subsidiaries of this case participates in the meeting alone and participated in the meeting.

4) Although the purchase price of the instant shares, etc. is deemed to have been withdrawn and paid from the passbook of the instant subsidiary, it would have been provided by the Plaintiff in full.

5) The Defendant, in the form of 75% of the ASEAN stocks and the instant stocks, etc. were owned by the instant subsidiaries, but all substantially belong to the Plaintiff, deeming the Plaintiff to be an oligopolistic shareholder in the lives industry and ASEAN, based on Article 105(6) of the former Local Tax Act, deemed that the instant subsidiaries acquired the instant stocks, etc., and thus, the Plaintiff acquired real estate equivalent to 25% of the book value of the lives industry and 100% of the book value of the real estate owned by the lives industry, and issued the instant disposition imposing acquisition tax, etc. based on the tax base.

B. Based on the above factual basis, the lower court determined that, in order to constitute an oligopolistic shareholder under Article 22 subparag. 2 of the former Local Tax Act, the Plaintiff is only the parent company of the instant subsidiary, and the Plaintiff cannot be deemed an oligopolistic shareholder under the former Local Tax Act because it was not a shareholder or a member of the Lienna industry. Furthermore, even if the instant subsidiary’s acquisition of the instant shares, etc. and thereby bring about economic effects to the Plaintiff, at the time of acquiring the instant shares, etc., the Plaintiff and the instant subsidiary’s intent to deliberate on the Plaintiff’s acquisition of the instant shares, etc. was not the Plaintiff but the instant subsidiary’s ownership at the time of acquiring the instant shares, etc., and it cannot be denied the legal personality of the instant subsidiary. However, the lower court determined that the instant disposition was unlawful, disregarding the intent of the relevant party and deeming the parent company as an oligopolistic shareholder without any explicit provision, deeming the Plaintiff as an oligopolistic shareholder and an oligopolistic shareholder of the Lienna industry solely based on the substance over form

3. Judgment of the Supreme Court

The above judgment of the court below is not acceptable for the following reasons.

Article 14(1) of the former Framework Act on National Taxes (amended by Act No. 8830, Dec. 31, 2007; hereinafter the same) provides that “If the ownership of the income, profit, property, act or transaction subject to taxation is merely nominal and there is a separate person to whom such income, profit, act or transaction belongs, the person to whom such income, profit, or transaction belongs shall be liable to pay taxes.” Article 14(2) of the same Act provides that “The provisions on the calculation of tax base in the tax-related Acts shall apply according to the substance, notwithstanding the name or form of the income, profit

The substance over form principle, which declares the above provision, is a practical principle for realizing the principle of equality, which is the basic ideology of the Constitution, in a tax law relationship. In a case where any unreasonable form or appearance that differs from the substance of the facts requiring taxation is taken for the purpose of evading the burden of taxation, the main purpose of this principle is to regulate unfair tax avoidance acts and to enhance the equity of taxation by imposing tax on a place with the taxable capacity according to the substance regardless of the form or appearance. This does not conflict with the basic principle of the tax law, but rather with the principle of the no taxation without law, to the extent that predictability and legal stability are not undermined in applying the economic living relationship changing various tax laws and regulations to the extent that it does not undermine the predictability and legal stability in applying the principle of no taxation without law. Therefore, it is complementary and indivisible with the principle of no taxation without law.

The principle of taxation on the beneficial owner under Article 14(1) of the former Framework Act on National Taxes, where there is another person to whom the nominal owner substantially belongs, unlike the nominal owner, with respect to the subject matter of taxation on income, profit, property, transaction, etc., is not the person to whom the nominal owner belongs, but the person to whom the nominal owner actually belongs, on the ground of form or appearance. This principle also applies mutatis mutandis to the legal relationship on local tax pursuant to Article 82 of the former Local Tax Act. Therefore, in applying Article 105(6) of the former Local Tax Act, where the nominal owner of the pertinent shares or equity shares is not capable of controlling and managing them, and where the difference between the nominal owner and the actual owner is attributable to the purpose of avoiding the application of the above provision, the relevant shares or equity shall be deemed to have been reverted to the person who actually controls and manages them, and thus, the person to whom the said provision belongs shall be the person to whom the said shares or equity belongs. Moreover, whether it is applicable shall be determined by comprehensively taking into account the following circumstances:

In this case, according to the facts established by the court below, when considering the legal form of acquiring and holding stocks of 10% of the ASEAN and Lering Industries, the Plaintiff did not hold all the ASEAN’s stocks. On the other hand, the ASEAN’s shares acquired by 50% of the ASEAN’s shares are 50% of the shares acquired by the ASEAN’s subsidiaries, and it does not fall under the requirement of oligopolistic shareholders applicable to 51% of the shares held by 51% or more of the shares. Thus, the Plaintiff and the subsidiaries of this case have suffered damage to the requirement of applying the so-called deemed acquisition tax as stipulated in Article 105(6) of the former Local Tax Act. However, according to the reasoning of the court below and the record, it seems that the Plaintiff owned 10% of the shares of the ASEAN’s subsidiaries when acquiring the shares of this case by 60% of the ASEAN’s shares, etc., and it appears that the Plaintiff did not own the 75% shares of the ASEAN’s shares in its own possession or sale of the 75% shares. The same applies to the Plaintiff’s shares.

Examining the above circumstances in light of the aforementioned provisions and legal principles, it is reasonable to view that the Plaintiff is liable to pay acquisition tax under Article 105(6) of the former Local Tax Act regarding the acquisition of stocks, etc. of this case as the actual owner, since the Plaintiff substantially controls and manages the stocks, etc. of this case, along with 75% of the NAN stocks through full control over the subsidiaries of this case.

Therefore, the lower court should have deliberated on the purpose of the instant subsidiaries’ establishment, the degree of control over the instant subsidiaries, the Plaintiff’s 75% of the Ghana stocks, and the process and purpose of acquiring the instant stocks, etc. in detail, and should have determined whether the Plaintiff is liable to pay acquisition tax under Article 105(6) of the former Local Tax Act with respect to the acquisition of the instant stocks, etc. Accordingly, the lower court should have determined that the instant subsidiaries were not liable to pay acquisition tax without examining and determining the aforementioned issues. Nevertheless, the lower court concluded that the Plaintiff did not have any liability to pay acquisition tax on the form and appearance of acquiring the instant stocks, etc. without examining and determining the aforementioned issues. In so doing, it erred by misapprehending the legal doctrine on the principle of substantial taxation, which led to the failure to exhaust all necessary deliberation, which affected the conclusion of the judgment.

4. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition.

Except for the dissenting opinion by Justice Jeon Soo-ahn and Justice Lee Sang-hoon, the decision is delivered with the assent of all participating Justices, and there is a concurrence with the Majority by Justice Park Poe-dae.

5. Dissenting Opinion by Justice Jeon Soo-ahn and Justice Lee Sang-hoon

The majority opinion argues that if the Plaintiff, who acquired the instant shares through the instant subsidiaries by distributed the instant subsidiaries with a view to evading the application of Article 105(6) of the former Local Tax Act, actually controls and manages the instant shares, etc. through full control over the instant subsidiaries, the judgment of the court below is reversed to the contrary purport on the ground that the Plaintiff ought to be liable to pay acquisition tax as an oligopolistic shareholder on the ground that the instant shares, etc. actually belonged to the Plaintiff by the principle of substantial taxation, and that the Plaintiff ought to assume the liability to pay acquisition tax as an oligopolistic shareholder

A. The substance over form principle is a basic principle of tax law in order to realize the principle of fair taxation, and there is a positive aspect to protect the taxpayer’s rights by excluding the exercise of the right to impose taxes against substantial factual relations. However, it is likely to conflict with the principle of no taxation without law, excluding the exercise of the right to impose taxes against the taxpayer’s property rights as a tool to justify the abuse of the right to impose taxes.

For this concern, the Supreme Court has repeatedly expressed the opinion that in order for a taxpayer to choose one of the various legal relations in order to achieve the same economic purpose, and thus, barring any special circumstance to view it as the most unfair act, the tax authority shall respect the legal relationship chosen by the taxpayer, and that in order to deny the validity of the transaction of the taxpayer as the act of tax avoidance according to the principle of no taxation without law, the individual and specific denial provisions should be provided in the law in light of the principle of no taxation without law in order to deny the validity of the transaction of the taxpayer, and even if the parent company intervenes in the transaction of the subsidiary, it did not recognize such exception (see Supreme Court Decisions 90Nu3027, May 14, 1991; 97Nu18462, Sept. 29, 200; 204Du2332, Jan. 27, 2005; 207Du26629, Apr. 9, 2009).

A person liable for tax payment may choose a transaction method that removes or mitigates a tax burden on the basis of the principle of no taxation without the law, and shall be respected as a taxpayer’s right unless it is deemed a disguised act or an illegal transaction. Nevertheless, in essence, the form of transaction chosen by the person liable for tax payment based on the principle of no taxation without the law should be avoided, and the scope of application is widened by deviating from the general meaning of the taxation requirement expressed in the text and text of the law, the principle of no taxation without the law would debris legal stability and predictability to be realized thereby. Furthermore, the elements constituting the crime of tax evasion, etc. may be determined by the person of the tax authority, and the basis of the principle of no

From this point of view, the Supreme Court has focused on the form of transfer of ownership by interpreting that the acquisition of real estate in the form of transfer of ownership is subject to taxation regardless of whether the purchaser of real estate acquires ownership or not, regardless of whether the purchaser of real estate has actually acquired ownership or not (see, e.g., Supreme Court Decisions 2005Du9491, Apr. 12, 2007; 2009Du18325, Apr. 29, 2010) considering the external character of transfer of ownership of real estate and its legislative nature, thereby expanding the scope of the taxpayer’s scope of acquisition tax, such as real estate under Article 105(6) of the former Local Tax Act.

B. Even if the motive that the Plaintiff acquired by the instant subsidiaries without acquiring the instant stocks directly is suspected or further acknowledged to have been intending to avoid the liability to pay deemed acquisition tax, such as real estate, under Article 105(6) of the former Local Tax Act, it is not reasonable to deny the legal form chosen by the Plaintiff and the instant subsidiaries, unless such transaction cannot be evaluated as the most unfair act, etc. for which the legal effect cannot be recognized under the private law. As a result, deeming that the instant stocks, etc. were reverted to the Plaintiff is the same as denying the existence of the instant subsidiaries, and denying the form of transaction that the said subsidiaries acquired the instant stocks, etc..., and if so, it is insufficient to view that the economic effect following the acquisition of the instant stocks, etc. belongs to the Plaintiff. However, the legal effect of the acquisition transaction of the instant stocks, etc., including the acquisition of the instant stocks, etc., can not be deemed to have been attributed to the Plaintiff, other than the instant subsidiaries. However, as properly expressed by the lower court, it is difficult to deem that the Plaintiff and the instant subsidiaries’s legal effect belongs to the Plaintiff.

In addition, the majority opinion applied the provision of Article 14(3) of the Framework Act on National Taxes, which was newly established on December 31, 2007, that is, in cases where it is acknowledged that a person would unfairly benefit from this Act or other tax-related Acts by indirect or more acts or transactions through a third party, it shall be deemed that a direct transaction has been made by the party according to the economic substance, or a continuous one act or transaction has been conducted, and thus this Act or other tax-related Acts shall apply to this case. It is difficult to view the provision as a provision to the effect that the person liable for tax payment may replace the person liable for tax payment. Moreover, it shall not be immediately applicable to the acquisition of the stocks of this case, etc. of this case, which was made more than that of January 1, 2008, and therefore, it may be criticized for the majority opinion that it violated the principle of no taxation without law by applying the aforementioned provision retroactively in violation of the legislative purport.

C. The Majority Opinion denies the subject of the instant subsidiaries regarding the acquisition of the instant stocks, etc., and without presenting objective and reasonable standards as to the requirements to fall under the instant subsidiaries and their legal effects, leads only to the principle of substantial taxation without any specific legal basis. Therefore, the development of the logic is not faithful, and the conclusion is bound to be contrary to the principle of clarity of the taxation requirements.

Furthermore, according to the records, at the time of acquiring the instant shares, etc., the subsidiaries were in the state of expiration of a considerable period of time after establishment in case of Roco Korea, and in case of paper, they were in the state of lawful establishment process. All of them were capable of carrying out legitimate business activities with considerable authorized capital and paid-in capital, and have been engaged in various legal acts as shareholders or employees with independent accounts separate from the Plaintiff in the process of acquiring, retaining, and disposing of the instant shares, etc. Accordingly, the subsidiaries of this case should be deemed to have acquired the instant shares, etc. with separate legal status from the Plaintiff. Nevertheless, the majority opinion determined that the remaining subsidiaries of this case, even though the economic effect of acquiring the instant shares, etc. is ultimately attributable to the Plaintiff, the parent company, the parent company, is merely a nominal company created by the Plaintiff for acquiring the instant shares, etc., and that the Plaintiff was a substantial acquisitor of the instant shares, etc.

In addition, such opinion of the majority opinion is practically the same as denying the legal personality of the subsidiaries of this case as an independent legal entity separate from the shareholders of this case. The theory of denying the legal personality is still controversial under the Company Act, and it is difficult to say that the opinion has yet to be established with respect to the requirements for its application. Considering that the application of the legal principle of denying the legal personality has been limited to exceptional cases where the corporate body has been de facto denied or abused for illegal purposes such as debt evasion, etc. (see Supreme Court Decisions 87Meu1671, Nov. 22, 198; 2002Da66892, Nov. 12, 2004; 2007Da90982, Sept. 11, 2008; 2008; and it is difficult to accept the attitude of the majority opinion that denies the legal personality of the subsidiaries of this case.

Recently, Supreme Court Decision 2008Du10591 Decided April 14, 201 ruled that the corporation is merely a nominal company by applying the principle of substantial taxation in cases where a ship is acquired under the name of a corporation established in Pakistan, a tax haven for the purpose of evading acquisition tax, etc. on the ship. However, unlike the subsidiaries of this case, the corporation did not have any personal or material facilities, and the parties’ internal intent is difficult to regard the corporation as a party to the transaction. In particular, it is inappropriate to invoke the purport of the above judgment in this case, since there are many cases where convenience is abused as a tax haven place, and it is highly necessary to regulate it.

Rather, since the Supreme Court Decision 2007Du26629 Decided April 9, 2009, a number of cases held that, in order to avoid the heavy registration tax imposed on a large city under Article 138(1) of the former Local Tax Act, even if a third party acquired all the shares of the existing corporation, which have no business performance after closing its establishment registration, and subsequently changed its trade name, articles of incorporation, officers, capital, or objective business, it cannot be deemed as a "establishment of a corporation" under the above provision, and even if it is necessary to regulate such act, the imposition of registration tax on such act under the tax law that does not have any individual and specific legal provision denying the validity of the act, cannot be allowed as an extension or analogical interpretation without a reasonable reason. The above precedents are clear that it is a tax avoidance case similar to this case, and the majority opinion that newly recognized the concept of a "point shareholder" without the Enforcement Decree of the former Local Tax Act on the ground of the principle of substantial taxation cannot be said to be inconsistent with the above precedents.

In this regard, even if the Plaintiff did not reach 100% of the shares of the subsidiaries of this case, the Majority Opinion can be maintained, and in this case, if it should be judged individually according to the specific facts and circumstances, it cannot be asked whether the existence of the principle of no taxation without law exists.

D. Our tax law not only imposes secondary liability on oligopolistic shareholders for national and local taxes, but also imposes a secondary liability for acquisition tax on real estate, etc. under Article 105 (6) of the former Local Tax Act, because it recognizes a serious exception to the principle of shareholder's limited liability, which is the foundation of the company system, in order to enhance the equity of taxation and achieve the public interest purpose of securing appropriate means for tax collection, the provisions of the laws and regulations on the scope of oligopolistic shareholders should be strictly interpreted, and it is not allowed to expand the scope of application without any specific legal basis as the majority opinion. In the same purport, the Supreme Court has consistently agreed to limit the scope of the requirements of oligopolistic shareholders, on the ground that the provisions on oligopolistic shareholders can not be expanded or analogically interpreted without permission (see Supreme Court Decisions 80Nu403, Jan. 13, 1981; 92Nu1138, May 24, 1994; 20Nu1464, May 24, 1995).

In particular, considering that Article 105(6) of the former Local Tax Act does not acquire real estate, but rather becomes an oligopolistic shareholder by acquiring stocks of a juristic person holding real estate, etc., and it is an exceptional system that exceptionally expands the scope of taxation of acquisition tax by deeming that the real estate, etc. is acquired, and it is difficult to find similar legislation cases, it is desirable to strictly limit the application requirements to one story. Nevertheless, even if it is apparent that a person who does not fall within the scope of oligopolistic shareholder as provided in the above provision on the ground of the principle of substantial taxation is an oligopolistic shareholder on the ground of the principle of substantial taxation, if it is apparent that he/she is an oligopolistic shareholder, the external extension of the scope of taxation requirements of acquisition tax, such as real estate, would result in the unfair restriction of the taxation requirements of real estate, etc. differently from

From this point of view, Article 22 Subparag. 2 of the former Local Tax Act provides that the above provision is premised on the premise that a shareholder or partner with limited liability should be defined as an oligopolistic shareholder when it comes to be a shareholder or partner with limited liability. In this context, “shareholders” or “members with limited liability” should be interpreted by limiting the meaning of “shareholders” or “members with limited liability” under the Company Act in order to ensure legal stability and predictability, as the concept borrowed from the Company Act does not have any separate definition provision, and the Supreme Court and the Constitutional Court have expressed the same opinion (see Supreme Court Decisions 2003Du1615, Jul. 9, 2004; 2008Du983, Sept. 11, 2008; 2004Hun-Ba8, Jun. 29, 2006, etc.). Accordingly, in order to be deemed an oligopolistic shareholder, in principle, the status of a shareholder or partner under the Company’s shareholder registry or employee registry under the Company Act should be recognized.

In addition, according to Article 22 subparagraph 2 of the former Local Tax Act, a shareholder or a partner with limited liability of the pertinent corporation may hold more than 51% of the corporation’s shares together with a person who has a special relationship with such shareholder or partner. As such, in the relationship between the parent company and the subsidiary company, even if the parent company, which is the central parent company, holds more than 51% of the corporation’s shares even if the parent company holds a part of the corporation’s shares, it cannot be said that the parent company and the subsidiary company together hold more than 51% of the corporation’s shares on the ground that they do not constitute an oligopolistic shareholder. This study deals with the transactions between the subsidiary companies in wrongful calculation division under the Corporate Tax Act, even if the parent company is not a party to the transaction, the transaction between the subsidiary companies shall be subject to the application of the avoidance of wrongful calculation even if the parent company is not a party to the transaction. This difference is rather than due to a mere negligence or error in legislation, it is reasonable to view that the legislative intent to limit

In light of such legislative intent, even though it is necessary to expand the scope of oligopolistic shareholders liable for secondary tax liability or deemed acquisition tax liability in a specific case, this is not a matter to be resolved through the legislative amendment of the relevant statutes or through its interpretation (see, e.g., Supreme Court Decision 201Da1548, Apr. 2, 2011). The proviso of Article 106(1)1 of the Enforcement Decree of the Corporate Tax Act requires that a substantial representative, other than the representative in the corporate register, should be included in the scope of the representative, who is the other party to the disposition, to whom the disposition is taken, shall also be deemed to include a person who actually controls the management of the corporation and owns more than 30% shares in the comprehensive provision. However, as such, Article 22 subparag. 2 of the former Local Tax Act does not explicitly state the provisions that include the substantial oligopolistic shareholder in the scope of the oligopolistic shareholder, it is difficult to expand the appearance of oligopolistic

In the instant case, the Plaintiff did not acquire shares in the Liber Industry or AD stocks, and was not registered in the registry of shareholders or the registry of shareholders. The Plaintiff did not have any possibility to recognize the instant subsidiaries as its employees or shareholders. Therefore, the Plaintiff did not meet the premise that the Plaintiff could become an oligopolistic shareholder because it could not become an employee or a shareholder of Liberal Industry and AD under the Company Act. Furthermore, as long as the Plaintiff was not an employee or a shareholder of Liberal Industry and IDD, even if the instant subsidiaries owned 51% or more of the shares and IDD shares in the Liberal Industry in combination with the instant subsidiaries, the instant subsidiaries cannot be deemed an oligopolistic shareholder on this ground. Nevertheless, the Majority Opinion that the Plaintiff is liable to pay deemed acquisition tax under Article 105(6) of the former Local Tax Act, based on the premise that the Plaintiff constitutes an oligopolistic shareholder of Liberal Industry and IDD, violates the legislative intent of the aforementioned provision.

E. Ultimately, even if the economic effect of the instant subsidiary’s acquisition of the instant stocks, etc. extends to the Plaintiff, it cannot be denied the legal personality of the instant subsidiary, and the intent of the Plaintiff and the instant subsidiary may be known that the instant subsidiary will own the instant stocks, etc., and it would be deemed that the Plaintiff is an oligopolistic shareholder of Linginging Industries and Ienna on the ground that the instant subsidiary would have economic effect due to the acquisition of the instant stocks, etc. notwithstanding the existence of specific provisions on the scope of oligopolistic shareholders, deeming the Plaintiff as an oligopolistic shareholder solely on the ground that the Plaintiff would have economic effect due to the acquisition of the instant stocks, etc. is in violation of the essence of the principle of substantial taxation. Therefore, the lower court’s judgment that held the instant disposition unlawful on a different premise is justifiable, and there is no error of misapprehending the legal principles as to the principle of substantial taxation.

For the foregoing reasons, I express my concurrence with the Majority Opinion.

6. Concurrence with the Majority by Justice Park Poe-dae

A. Regarding the scope and effect of substance over form principle

The substance over form principle in the tax law aims to realize the equity of taxation by regulating tax evasion acts. If the substance of transactions and the ownership of property and income are the same in substance, regardless of its form or appearance, whether a taxpayer is liable for tax payment should also be attributed. It can be realized only through the principle of tax justice and tax equity. It is extremely unreasonable to exempt a taxpayer from liability for tax payment solely on the ground that the appearance took an unreasonable and abnormal form for the purpose of tax avoidance, and to ensure that a taxpayer bears a normal transaction form consistent with the substance. The relevant provisions of the Framework Act on National Taxes are the basic principle of the tax law, which serves as a means to remove such unreasonable, and the relevant provisions of the Framework Act on National Taxes can be said to be a provision to confirm it. Of course, if the substance over form principle is applied by excessively expanding the scope of taxation, there may be side effects that the principle of no taxation without the law can be invalidated and abused. However, if the Majority Opinion’s application of the principle of no taxation without the law is contrary to the principle of no taxation without the law, it can be limited to exceptional cases where it is deemed as necessary to be within the scope of boundary.

It does not necessarily require recognition by linking the application of substance over form principle with the civil legal composition of the act which caused it. Even if the content of the act of civil law, such as the form of transaction or the subject of transaction chosen by the parties is not reconcepted, it is sufficient to understand the substance and the relationship of attribution within the scope of the purpose to determine whether the act falls under the taxation requirement from a tax law perspective. In the case of denial of wrongful calculation under the Corporate Tax Act, which is understood as the legal basis of the substance over form principle, even if the transaction concerned is denied as wrongful calculation, it does not deny the effects of the legal act agreed between the parties concerned or create a new legal act. Therefore, the Majority Opinion, within the scope of calculating taxable income, deeming the Plaintiff as liable for acquisition tax under Article 105(6) of the former Local Tax Act to have been established by the principle of substance over form, does not necessarily mean that the instant shares, etc. are actually reverted to the Plaintiff within the scope of the tax law relationship to which the said provision applies, and further, it does not necessarily mean that the Plaintiff’s shareholder or the subsidiary company’s shareholder under the Commercial Act does not belong to the Plaintiff.

In the same context, the Dissenting Opinion points out that the Plaintiff is liable to pay the acquisition tax of this case only if it can be deemed that the Plaintiff had the intent to revert the legal effect of the acquisition transaction of stocks, etc. of this case to the Plaintiff, not the subsidiaries, and that the intention of the Plaintiff or the subsidiaries of this case was erroneous on the ground that the Plaintiff did not so. However, in view of the facts examined in the Majority Opinion, it is doubtful whether the Plaintiff and the subsidiaries of this case’s intent to deliberate on the instant stocks, etc. of this case can be deemed to have actually reverted to the subsidiaries of this case. Rather, it appears that there is more room to deem that the Plaintiff’s intent to deliberate on the real estate of this case may be deemed to have acquired the right to control the real estate of this case, such as the building owned by the Plaintiff, in legal, economic, and factual form, and directly directly directly directly, the Plaintiff acquired the right to control the real estate of this case, such as the building owned by the said subsidiaries, etc., on the ground that it was not imposed as a duty to impose tax on the instant subsidiaries, and its employees or shareholders.

On the other hand, the Supreme Court has expressed in several cases the position that it cannot be denied its validity on the grounds that it constitutes an act of tax avoidance under the substance over form principle, unless it does not constitute an act of pretending to do so. However, it does not need to be understood as the same concept as the act that does not recognize its validity in Article 108 of the Civil Act. Since false representation under the Civil Act which lacks internal intent between the parties does not have a judicial effect, it is necessary to determine whether it falls under the taxation requirement based on the actual transaction act concealed behind the act without applying the principle of substantial taxation. Areas requiring application of the principle of substantial taxation are not the scope of the act under the Civil Act, but are different from appearance and substance, and it is extremely unreasonable to exempt the Plaintiff from its substance. In fact, the Supreme Court precedents have recognized that the act of substantial taxation, such as this case’s appearance, is not the most unfair act, and thus, it does not constitute the act of tax evasion under the Civil Act, even if it does not constitute the act of tax avoidance under the Civil Act.

In addition, in order to bring about the effect of the tax law due to the acquisition of the instant shares, etc. to the Plaintiff, it is not a prerequisite to deny the legal personality of the instant subsidiaries. The substance over form principle is merely based on the identity of the person who is the person who is the actual owner of the instant subsidiaries. It is not on the legal basis of denying the legal personality of the nominal owner under the Company Act, rather than on the legal basis of denying the legal personality of the nominal owner. The existence of the substance over form principle in the case where the existence of the substance over form principle does not reach the degree of denying the legal personality of the nominal owner, but it can be deemed that there is a separate entity to whom the substance belongs.

In addition, the Majority Opinion’s criticism that Article 14(3) of the Framework Act on National Taxes newly established on December 31, 2007 constitutes a retroactive application against the principle of no taxation without law is difficult to accept. The Majority Opinion argues that a taxpayer of deemed acquisition tax due to the acquisition of stocks, etc. of this case, which was enforced at the time of the imposition of the instant tax pursuant to the purport of Article 14(1) of the former Framework Act on National Taxes, is not the subsidiaries of this case, which are its nominal holders, but the Plaintiff, who is the actual owner of ownership. In addition, even if Article 14(3) of the Framework Act on National Taxes newly established after the disposition of this case is applied as the Dissenting Opinion, the Majority Opinion does not provide the basis for the above provision, and thus, it is inappropriate to point out that Article 2-2 of the Adjustment of International Taxes Act was newly established and introduced in Korea to regulate the tax avoidance of a nominal company in the course of capital transfer, and it is difficult to recognize that the existing provisions were more specific to the real owner of this case.

B. As to the uncertainty of the applicable requirements

The Dissenting Opinion’s pointed out that the Majority Opinion denies the subject of the subsidiaries’ acquisition of the instant shares, etc., but fails to present objective and reasonable standards on what is the requirements for the acquisition thereof.

However, there is a problem of fact-finding and evaluation as to whether there exists a gap between substance and substance in the area where the principle of substantial taxation is operated. Although it is clear whether the substance of substance-over-form is a taxation requirement under a specific taxation basis law, it is the inherent nature of the assessment area to determine whether there is a reason to recognize or deny a tax liability differently from its appearance, and it is unclear whether it is a taxable object within the scope of the taxation. It goes against the principle of clarity of taxation requirements. Notwithstanding the principle of clarity of taxation requirements, the operation of the substance-over-form principle is close to the logic that denies the fundamental reasons that declared the principle of substantial taxation. Notwithstanding the principle of clarity of taxation requirements, even if the substance falls under the form of taxation basis, it does not fall under the function of protecting taxpayers by denying the tax liability on the grounds that it is different, or contrary, the substance does not fall under the requirement of taxation formally, and thus, the fairness of taxation by recognizing the tax liability regardless of its form. In other words, the application of the substance-over-form principle should not be determined separately in individual form or form of taxation.

As pointed out in the Majority Opinion, the issue of whether the transaction subject to the disposition of this case may actually belong to the Plaintiff is to be determined by further examining, assessing, and determining various relevant factors as indicated in the Majority Opinion. As seen in the Dissenting Opinion, the Majority Opinion presented as examples of the factors that form the basis for such determination. As seen in the Dissenting Opinion, the mere fact that the subsidiaries of this case were established prior to a considerable period of time from the time they acquired the stocks of this case, etc. of this case, or that there was an independent paid-in capital does not necessarily mean that the subsidiaries of this case, the title holder, are in the actual attribution of the transaction of the stocks of this case. Even if a corporation intends to be the subject of the transaction, it is very rare in the case where the company does not formally have the authority to become

C. Regarding the issue of expanding the concept of oligopolistic shareholders

The Majority Opinion does not mean that the scope of the concept of “point shareholder” should be expanded without permission by interpretation. In addition, in order to constitute “point shareholder” as provided by Article 22 subparag. 2 of the former Local Tax Act, the party himself/herself must have the status of a shareholder or employee who owns the company’s stocks, etc., and the Plaintiff is merely the parent company of the subsidiary of this case and is not a shareholder or a member of Linna, and thus does not immediately fall under an oligopolistic shareholder under the above provision, it is reasonable to interpret that the Plaintiff is not a parent company of this case. The Supreme Court precedents cited by the Dissenting Opinion on the grounds that the concept of the former oligopolistic shareholder should be understood based on the concept of the shareholder, etc. under the

However, even though it is not an oligopolistic shareholder in the form, it is logically different from that the substance over form principle is subject to the substance over form principle, and the legal effect such as the oligopolistic shareholder is given to the oligopolistic shareholder. The Majority Opinion does not directly mean that the Plaintiff is an oligopolistic shareholder in the Dolbong industry. Although Article 105(6) of the former Local Tax Act, which is a basis provision imposing the duty to pay deemed acquisition tax on an oligopolistic shareholder, and Article 22 subparag. 2 of the former Local Tax Act, which provides the scope of the concept of oligopolistic shareholder, is not an oligopolistic shareholder, the Plaintiff would have the same legal effect as the oligopolistic shareholder if Article 14(1) of the former Framework Act on National Taxes, which prescribes the substance over form principle overlaps with that of the oligopolistic shareholder. It does not conflict with the existing precedents that should be strictly construed.

According to the Dissenting Opinion, even if the parent company does not participate in a transaction between subsidiaries under the Corporate Tax Act, the relationship between the parent company and the subsidiary company in relation to the deemed acquisition tax under Article 22 subparag. 2 of the former Local Tax Act should be considered as reflected in the legislative intent to limit the expansion of the scope of application to the greatest extent possible. However, it is doubtful whether the legislative progress is that it should be interpreted or not. Rather, at the time of legislation, it is only prescribed as above because it was not anticipated until the change of the type of transaction through the multi-level structure of the parent company and the subsidiary, such as this case, and it seems to be more close to the fact that the parties to the transaction intend to avoid tax burden by selling the empty space. Accordingly, it is not always contrary to the legislative intent to enforce the principle of substantial taxation, which is the general principle of tax law.

(d)With respect to the specificity of the deemed acquisition tax:

The purpose of the deemed acquisition tax system is to impose acquisition tax on an oligopolistic shareholder who is in a position to dispose of, or manage and operate the assets of the relevant corporation in fact, and thus, it is not significantly different from the actual possession of the relevant assets. Therefore, it is the purpose of the deemed acquisition tax system (see Supreme Court Decision 92Nu1138, May 24, 1994). In particular, with regard to the acquisition of real estate under the Korean tax system, the acquisition tax shall be imposed on the acquisition of real estate, but the acquisition tax is not imposed on the acquisition of stocks, etc., and it is a system prepared to cope with the taxation reality, such as the character and conduct in the transactional system. The transaction that the Plaintiff acquired the stocks, etc. of this case through the instant subsidiary is a typical case in which the Plaintiff directly takes place for such purpose.

In light of the purport of the deemed acquisition tax system, acquisition tax imposed on the pertinent corporation which directly acquired the ownership of real estate is a taxation on the acquisition of real estate by the said corporation, while deemed acquisition tax is a taxation instrument to substantially acquire the control over the real estate owned by the said corporation by acquiring the stocks, etc. of the said corporation, which is separate from each other. In this case, the acquisition tax borne at the time of the instant subsidiaries’ acquisition of the said stocks or shares is irrelevant to the Plaintiff or the instant subsidiaries, and the acquisition of the substantial control over the said real estate by the instant subsidiaries is irrelevant to the Plaintiff or the instant subsidiaries. Therefore, it is deemed that the deemed acquisition tax is imposed on the said subsidiaries by acquiring the instant stocks, etc. under the substance over form principle, and it does not necessarily mean that the said acquisition tax is deemed as a result of double legal fiction. If the acquisition of the instant stocks, etc., transaction of the instant stocks, etc., or the actual purpose of acquiring the real estate owned by the ASEAN industry is to acquire the acquisition tax by means of bypassing methods, and thus, it does not appear to constitute a tax evasion of the principle of excessive taxation.

E. Conclusion

In short, the principle of substantial taxation is sufficiently acceptable to the effect that there is a mutual complementary relationship in relation to the principle of no taxation without law, while it is likely to conflict if it is excessively emphasized. However, considering the fact that there is a substantial gap between appearance and substance in the acquisition of the instant stocks, etc., the main purpose of which is to transform the transaction method in order to avoid acquisition tax under Article 105(6) of the former Local Tax Act is to change the transaction method, and to allow the avoidance of acquisition tax is considerably contrary to the principle of no taxation without law, it is not illegal to apply the principle of no taxation without law to the acquisition of the instant stocks, etc. even if it is necessary to apply the principle of no taxation without law strictly.

Justices Yang Sung-tae (Presiding Justice)