Seoul Administrative Court 201Gudan4810 ( October 15, 2011)

Cho High Court Decision 2010Du0513 ( December 03, 2010)

The disposition imposing capital gains tax on the large shareholders who hold 3% or more of the shares is legitimate.

The reason why a company becomes a shareholder of at least 3% of the shares in the process of issuing new shares is that it has made an application for new shares according to its own judgment, and once more than 3% of the shares have been held, it is still subject to taxation as a major shareholder even if the shares have been sold thereafter. Therefore, the disposition of imposition of capital gains tax is legitimate

Article 157 of the Enforcement Decree of Income Tax Act

2011Nu28303 Revocation of disposition of imposing capital gains tax

Maximum XX

Head of the District Tax Office

Seoul Administrative Court Decision 2011Gudan4810 decided July 15, 2011

January 18, 2012

February 15, 2012

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 defendant shall revoke the disposition of imposition of capital gains tax of KRW 227,960,970 for the plaintiff on January 14, 201.

1. cite the judgment of the first instance;

The reasons why this Court is used for this case are as follows, except for the addition of the judgment of the plaintiff to the corresponding part of the reasoning for the first instance judgment, the same as the reasons for the first instance judgment and the main sentence of Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

O The following shall be added later than the 7th day below the third day:

In particular, since the non-party company discounted 70% of the market price when determining the issue price at the time of capital increase with capital increase, the plaintiff did not participate in the capital increase with capital increase, it was in the situation of property loss due to dilution.

6th below the 8th day to the 7th day above the 6th day shall be as follows:

According to the statement No. 8, where the number of shares subscribed at the time of subscription for new shares through the allotment of shares on January 14, 2005 falls short of the number of shares subscribed, and the forfeited shares occur, it shall be dealt with by the resolution of the board of directors, and the issue price shall be determined at the board of directors in accordance with the provisions on the issuance of securities and the Corporation Act. The Plaintiff appears to have subscribed for all new shares allocated to himself under the circumstance that it could have anticipated that the shares will fall short of the shareholding ratio if some of forfeited shares are not issued. The Plaintiff’s becoming a shareholder holding 3% or more in the process of subscription for new shares during the process of offering for new shares is merely a result of self-determination. As long as the issue price is set lawfully in accordance with the relevant provisions, whether the Nonparty company has made an subscription for new shares, including the concern of dilution of stock value, is a matter of determination by the Plaintiff itself, and thus, the Plaintiff could not sell shares prior to the resumption of the sale, as seen below, even if the Plaintiff held shares more than 3% thereafter, it does not affect the status of the Plaintiff.

2. Additional matters to be determined;

A. The plaintiff's assertion

At the time of capital increase, the non-party company allocated 50 million shares out of 66 million shares to its insiders, and most of the shareholders allocated 3% of the forfeited shares to avoid capital gains tax by allowing them to be avoided. Unlike the internal shareholders, imposing capital gains tax on the plaintiff who became a shareholder holding 3% of the shares as a general shareholder is contrary to tax equity.

B. Determination

Under the statutes, the Defendant imposed capital gains tax on the Plaintiff, a shareholder who owns more than 3%, and did not impose capital gains tax on the shareholder who has less than 3% of the capital gains tax.

3. Conclusion

The appeal is dismissed.