early 201J 1309 ( December 13, 2011)

The increase in stock value is applicable to the donation, but the basis for calculating the value of the gift is wrong.

Article 42(1)3 of the Inheritance Tax and Gift Tax Act cannot be applied directly or by analogy in calculating the amount equivalent to the “donation” or the amount of donated property, if the value of shares increases by transferring without consideration the profits equivalent to the difference between the value of shares after the donation of shares and the value of shares before the donation of shares within the scope of shares, through the method of donation of shares.

2011Guhap16125 Revocation of Imposition of Gift Tax

GangwonAAA

Head of Central Tax Office

April 3, 2013

May 1, 2013

1. The Defendant’s disposition imposing gift tax of KRW 000,00, which was imposed on the Plaintiff on February 17, 2011, shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

"G." On October 19, 2007, GangnamB, the father of the Plaintiff, donated 4,885,110 shares (17.91% of the total number of theCCM shares, and 25,646,827,50 won as of the donation date, hereinafter referred to as "the shares of this case") toCC Co., Ltd. (which was established on May 1, 1986 and engaged in the sales of kitchen supplies and other wooden furnitures; hereinafter referred to as "CCD"). At the time of the donation, the Plaintiff was holding 39,240% of the total number of shares issued and issued (hereinafter referred to as "CCM") to 4,885,110 shares (17.9% of the total number of shares issued and outstanding, and 25,64,827,500 won as of the donation date.

C. On March 2008,CC had reported and paid KRW 000 as corporate tax for the business year 2007, by including KRW 000 in its gross income the donation of the instant stocks.

D. After investigating the change in the shares ofCCC, the director of the Seoul Regional Tax Office: (a) notified the Defendant of taxation data to impose gift tax on the Plaintiff by deeming thatCCC was donated by GangwonD with respect to the increase in the Plaintiff’s share value based on the donation of the instant shares.

E. Accordingly, on February 17, 2011, the Defendant: (a) was identified as subject to gift tax pursuant to Article 2(3) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8823, Dec. 31, 2007; hereinafter “Inheritance Tax and Gift Tax Act”); and (b) imposed gift tax of KRW 000 on the Plaintiff pursuant to Article 42(1)3 of the same Act.

F. On March 18, 2011, the Plaintiff appealed to the instant disposition and brought an appeal to the Tax Tribunal, and the Tax Tribunal dismissed the Plaintiff’s claim on December 13, 2011.

[Based on Recognition] The non-contentious facts, Gap evidence 1, 2, and 3, and Eul evidence 1 and 9, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The instant disposition is unlawful for the following reasons.

1) Even if the value ofCCC stocks held by the Plaintiff was increased due to the donation of the instant shares, it is not a clear provision that Gangwon is an indirect and reflective interest arising from the donation of the instant shares toCC. Although Articles 2(3) and 42(1)3 of the Inheritance Tax and Gift Tax Act stipulate the concept of donation as a tax basis provision, Article 2(3) of the Inheritance Tax and Gift Tax Act only defines the concept of donation as a general and abstract, and does not stipulate any taxation requirement, the said provision cannot be deemed as a basis for taxation of gift tax. Moreover, the benefits arising from the donation of the instant shares do not constitute “the profits derived from the transaction that reduces the corporation’s capital, such as acquisition, exchange, and exchange of shares,” and the acquisition of shares does not constitute “the profits arising from the change in the ownership or value of the corporation through the change in the organization and organization of the business.”

2) Article 2(2) of the Inheritance Tax and Gift Tax Act provides that gift tax shall not be imposed in cases where the donee imposes income tax or corporate tax on the donee in order to prevent double taxation, andCCC has already paid corporate tax on the donation of the instant stocks, and subsequent to the Plaintiff, where the Plaintiff receives dividends fromCCDC on the profit accruing from the receipt of the said assets, the dividend income tax shall be imposed, and whereCCDC shares are transferred, the transfer income tax shall be imposed on the increase in the value of the stocks, and it violates Article 2(2) of the Inheritance Tax and Gift Tax Act as double taxation on the same source income.

3) Furthermore, the Defendant made the instant disposition on the premise that the purpose of tax avoidance was for improving the financial structure ofCCDC, even though it was not for any tax avoidance purpose, and the instant disposition was improper on this point.

(b) Related statutes;

As shown in the attached Form.

C. Determination

1) Introduction and purport of the complete comprehensive gift taxation

The former Inheritance Tax and Gift Tax Act (amended by Act No. 7010 of Dec. 30, 2003, hereinafter "the former Inheritance Tax and Gift Tax Act") did not stipulate the concept of donation and borrowed the concept of donation under the Civil Act. The concept of loan alone does not have any way to prevent the avoidance of gift tax through the transfer of property without consideration in the form of donation under the Civil Act and the changed donation, and the tax authorities have been taking measures with several regulations on deemed donation (Articles 32 through 42 of the former Inheritance Tax and Gift Tax Act). However, these regulations on deemed donation alone pointed out the problem that it is difficult to cope with new type of gift financial instruments or financial techniques, and new type of gift from various capital transactions, etc., to prepare the legal basis for the taxation of gift tax on the transfer of property without consideration, and introduced the so-called "Article 23 of the former Inheritance Tax and Gift Tax Act and Article 4 of the Inheritance Tax and Gift Tax Act (amended by Act No. 7010 of Dec. 30, 2003).

2) The contents of the complete comprehensive gift tax

Article 2(1) of the Inheritance Tax and Gift Tax Act amended by Act No. 7010 on December 30, 2003 provides that donated property from another person's donation shall be subject to gift tax, and the term "donation" in Article 2(3) of the same Act provides that "a transfer (including a transfer at a remarkably low price) of tangible or intangible property (including a transfer at a remarkably low price) by direct or indirect means, or an increase in the value of another person's property by directly or indirectly, means a free transfer (including a transfer at a remarkably low price) of any tangible or intangible property that can calculate economic value, regardless of the name, form, purpose, etc. of such act or transaction," thereby providing a separate concept of donation that is distinct from a donation under the Civil Act, and the provisions of Articles 33 through 42 of the same Act were converted to an example provision on the calculation of donated property

3) Whether the taxation can be made by applying Article 2(3) of the Inheritance Tax and Gift Tax Act

The issue is whether a gift tax can be imposed under the above provision even if it does not fall under the typical provision of the gift tax, and as seen earlier, in order to levy gift tax by transferring property without consideration or increasing the property value without consideration under Article 2(3) of the Inheritance Tax and Gift Tax Act, it is difficult to interpret Article 2(3) of the Inheritance Tax and Gift Tax Act simply as a confirmatory and declared provision (Article 2(3) of the Inheritance Tax and Gift Tax Act simply is difficult in light of the structure of other provisions, such as changing the existing provision into the calculation provision of the value of donated property, etc. (Article 2(3) of the Inheritance Tax and Gift Tax Act simply provides that the grounds for taxation on the issue which falls under the existing deemed donation may disappear if it is viewed as a confirmative and declared provision, and that it is reasonable to impose gift tax based on Article 2(3) of the Inheritance Tax and Gift Tax Act, and that the difference between the Plaintiff’s shares andCC’s shares can be imposed without consideration on the Plaintiff’s shares (see Supreme Court Decision 2018Du2888, Apr. 28, 20128).

4) Whether the calculation of the value of the donated property is unlawful by applying Article 42(1)3 of the Inheritance Tax and Gift Tax Act

The defendant, and the strongB donated profits equivalent to the increase in the value of theCCC stocks owned by the plaintiff to the plaintiff (hereinafter referred to as "the donation in this case") through the method of donating the stocks in this case, and such transaction constitutes "the type of transaction as provided in Article 42 (1) 3 of the Inheritance Tax and Gift Tax Act, and especially "the case where the shares owned or the value of the corporation is changed due to business acquisition, business exchange, corporate restructuring, etc.," and the above provision was applied to the calculation of the value of the donated property by applying the above provision. However, considering the following circumstances, it is not possible to directly or analogically apply Article 42 (1) 3 of the Inheritance Tax and Gift Tax Act in calculating the profits (the value of donated property) from the donation in this case, and it is also contrary to the taxpayer's predictability if interpreted otherwise, and thus, the disposition in this case by applying the above provision is unlawful without any need to further examine the remaining arguments of the plaintiff.

A) Article 42(1)3 of the Inheritance Tax and Gift Tax Act provides that "the transactions that increase or decrease the corporation's capital by means of investment, reduction, merger, division, and conversion, acquisition, and exchange of stocks through convertible bonds, etc." shall be deemed as the value of property. The transactions that have donated the stocks of this case toCC is not only the capital transaction that increases or reduces the company's capital but also the transaction that generates assets increase, acquisition, and exchange, etc., and do not fall under the types of transactions that are stipulated in the former part of the above provision.

B) Article 42(1)3 of the Inheritance Tax and Gift Tax Act provides that the gift tax shall be the value of property donated by taking into account the following facts and circumstances comprehensively taking into account the respective descriptions and the entire purport of arguments as stated above, and the gift of this case shall not be deemed to fall under the "business acquisition", "business exchange, business exchange, and organizational change of a corporation", or "corporate change" under the latter part of Article 42(1)3 of the Inheritance Tax and Gift Tax Act.

(1) The latter part of Article 42(1)3 of the Inheritance Tax and Gift Tax Act provides that "the shareholding or value of the company should change due to the acquisition of the business, the exchange of the business, the restructuring of the corporation, the restructuring of the company, etc.", and thus, the ownership shares or the reason for the change of the company does not restrict the business transfer, the exchange of the company's business, and the organizational change, cannot be seen as all the transactions whose shareholder's shares or value is changed (if the shareholder's shares or value are considered to be changed, it is too broad that the target is almost all the transactions and actions of the corporation and there is no meaning of the above separate provision as mentioned above), and it is reasonable to view that the acquisition of the business, the restructuring of the company, and the change of the company's shares or value as stated in the above provision 1.6.1.6.1.6.1.6.

(2) Therefore, in order to fall under the category of transaction similar to the transfer of business, business exchange, and corporate restructuring, at least there is a significant change in the business contents or corporate organization ofCCD due to the donation of the instant shares, and ① the following circumstances are as follows: (a) the largest shareholder ofCC metal before and after the donation of this case was changed from CCD to d.C.; (b) even if the Plaintiff had increased the value of the instant shares due to the donation of this case, it is difficult to view that the Plaintiff had no change in the number of 5% of the total CC stocks (27.91%) since it was difficult to find that there was a change in the number of 5% of the total CC stocks (17.91%) from 30% of the total CC stocks (10%) to 30% of the total 5% of the total CC stocks (20% of the total CC stocks) since it was difficult to find that there was a change in the number of 5% stocks issued by the Plaintiff.

C) Meanwhile, Article 41(1) of the Inheritance Tax and Gift Tax Act provides that where a person who has a special relationship with a shareholder, etc. of a corporation, etc., who has losses or is under business suspension or closure (hereinafter “lo specific corporation”) obtains profits from such transaction, such as donation of property to the specific corporation, an amount equivalent to such profits shall be the value of donated property of the specific corporation concerned. The donation of this case constitutes a case where a person who has a special relationship with the shareholder, etc., (CCB) receives profits (the profits equivalent to the increase in stocks owned by the plaintiff) from the relevant corporation through the transaction of donation of property (CCC). This case’s gift of this case constitutes a case where a shareholder of the corporation (CCB) has a similar interpretation as provided in Article 41 of the Inheritance Tax and Gift Tax Act, and it does not correspond to 70 of the Inheritance Tax and Gift Tax Act and Article 41 of the Inheritance Tax Act, the taxation authority imposed tax on the gift of this case on the taxpayer, referring to the above 200-20 of the Inheritance Tax Act.

3. Conclusion

If so, the plaintiff's claim of this case is reasonable, it is decided to accept it, and it is decided like the order.