Article 42 of the Inheritance Tax and Gift Tax Act shall not apply where a specific corporation meets the taxation requirements of gift tax under Article 41 of the same Act.

Article 2(3) of the Inheritance Tax and Gift Tax Act provides that the calculation of the value of donated property shall be made by applying mutatis mutandis the same or similar return requirements, etc. under Articles 33 through 42 of the Inheritance Tax and Gift Tax Act. Article 42 of the Inheritance Tax and Gift Tax Act provides that where Article 41 of the same Act is applicable, it shall not apply. Thus, Article 42 of the Inheritance Tax and Gift Tax

Article 42 of the Inheritance Tax and Gift Tax Act

2014Guhap5068 Revocation of Disposition of Imposition of Gift Tax

Kim 00 Other

00. Head of tax office

November 05, 2014

on January 28, 2015

1. The Defendant’s imposition of KRW 2,03,260,510 of the gift tax against Plaintiff AA on June 1, 2012, the imposition of KRW 852,497,60 of the gift tax against Plaintiff BB, the imposition of KRW 5,042,424,140 of the gift tax against Plaintiff CCC, the imposition of KRW 5,042,424,140 of the gift tax against Plaintiff CCC, and the imposition of KRW 5,042,424,140 of the gift tax against Plaintiff DD, respectively.

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

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiffs are shareholders of EE (hereinafter “instant Company”); Plaintiff AA owns 7,000 shares out of 3,500 shares issued by the instant Company; Plaintiff BB, the spouse of Plaintiff A, owns 3,500 shares out of 3,500 shares; Plaintiff CCC and DD, the children of Plaintiff AA and BB, respectively.

B. On May 3, 2010, the FF, the mother of Plaintiff AA, donated to the instant company 169,000 shares of EXE (hereinafter “instant shares”) (hereinafter “instant donation”).

C. As to the donation of the instant shares from FF, the instant company included KRW 74.1 billion, which is the value of the instant stock, as assets increase profit.

D. Of the stock value of this case on August 31, 2010, with respect to KRW 4,991,00,000, which falls under the losses of the company of this case on May 3, 2010 at the time of the said donation, the Plaintiffs deemed as gift gains equivalent to their respective shares of the Plaintiffs, and pursuant to Article 41 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 10411, Dec. 27, 2010; hereinafter the same shall apply), Article 31 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22579, Dec. 30, 2010; hereinafter referred to as the “Enforcement Decree of the Inheritance Tax and Gift Tax Act”) and Article 31 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 207,447,480, Feb. 9, 2016; hereinafter referred to as the “Plaintiff”) reported and paid gift tax to Plaintiff 639,639,637D.

E. In addition, on March 13, 2011, the instant company reported and paid KRW 69.1 billion to the Defendant, excluding KRW 4,991,00,000 from the value of the instant shares 74.1 billion, in addition to the corporate tax base for the business year 2010, in addition to the corporate tax base for the business year 2010.

F. The head of GG regional office conducted an investigation of the change of shares on the instant company, etc. and notified the Defendant that the instant company should levy gift tax on the Plaintiffs pursuant to Articles 2 and 42(1)3 of the Inheritance Tax and Gift Tax Act by deeming that the Plaintiffs were donated by FF to the FF.

G. Accordingly, on June 1, 2012, the Defendant: (a) rendered a gift tax of KRW 2,033,260,510 to Plaintiff AA; (b) KRW 852,497,660 to Plaintiff BB; (c) KRW 5,042,424,140 to Plaintiff CCC; and (d) KRW 5,042,424,140 to Plaintiff CCC; and (b) imposed a gift tax of KRW 5,042,424,140 to Plaintiff DD, respectively (hereinafter “instant disposition”).

[Reasons for Recognition] Unsatisfy, entry in Gap evidence 1 to 4 (including a tentative number; hereinafter the same shall apply),

The purport of all pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

In the case where the individual gift gift gift tax law applies, the tax authority shall exclude the provision and shall not impose it on other general provisions. The gift of this case satisfies all the requirements under Article 41, which is the individual gift tax and gift tax law, and the plaintiffs have paid all the gift tax pursuant to the above provision. Thus, the disposition of this case, which is subject to Article 2 (3) of the Inheritance Tax and Gift Tax Act and Article 42 of the Inheritance Tax and Gift Tax Act, which is the supplementary provision, is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) The relationship under Articles 2, 41, and 42 of the Inheritance Tax and Gift Tax Act

A) Introduction and purport of the complete comprehensive gift taxation

The former Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter the same) borrowed the concept of donation under the Civil Act with no definition provision on the concept of donation. The concept of donation borrowing alone does not have any way to prevent the avoidance of gift tax through an irregular donation without following the form of donation under the Civil Act. As such, the tax authorities have several regulations on deemed donation (Articles 32 through 42 of the former Inheritance Tax and Gift Tax Act). However, the regulations on individual donation donation alone pointed out the problem that it is difficult to cope with new types of modified donation due to financial instruments, financial techniques, and various capital transactions, etc., and the legal basis for the imposition of gift tax on the transfer of such various forms of donation was prepared, and the so-called comprehensive donation donation under the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter referred to as the "former Inheritance Tax and Gift Tax Act") and Article 23 of the former Inheritance Tax and Gift Tax Act (3).

B) 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 is subject to gift tax. Article 2(3) of the Inheritance Tax and Gift Tax Act provides that “The term “the transfer of tangible or intangible property (including the transfer of property at a remarkably low price) by direct or indirect means, which can calculate economic values, without regard to the act or the name, form, purpose, etc. of the transaction, or an increase of property values of another person," thereby providing a separate concept of donation that is distinct from donations under the Civil Act. Articles 33 through 42 of the Inheritance Tax and Gift Tax Act amended by Act No. 7010 on December 30, 200, the term “donation”

C) Provisions concerning the calculation method of donated property

Article 2(3) of the Inheritance Tax and Gift Tax Act only provides for the taxable object subject to the application of the "total comprehensive taxation principle of gift tax", and does not provide for the method of calculating the value of donated property acquired through the gift. This seems to be due to the impossibility of the legislative form of the "total taxation principle of gift tax" with respect to various and new types of donations that are not in accordance with the form of gift under the Civil Act. As seen earlier, the legislators introduced the "total taxation principle of gift tax" and expanded the scope of taxation of gift tax, while regarding the calculation of the value of donated property (which is calculated on the basis thereof) under the title of the "Calculation of the value of donated property" under the title of the "Calculation of the value of donated property" in Chapter 2 of the Inheritance Tax and Gift Tax Act (Articles 32 through 42 of the former Inheritance Tax and Gift Tax Act), the provisions of Articles 33 through 42 were applied mutatis mutandis to the calculation of the value of donated property. In light of the background, legislative intent, etc. of the introduction of the comprehensive taxation principle of gift tax and the legislative purpose thereof, it cannot be considered as an economic predictability of taxation requirement or tax.

D) The relationship under Article 41 and 42 of the Inheritance Tax and Gift Tax Act

Article 42(1) of the Inheritance Tax and Gift Tax Act provides that "if profits falling under any of the following subparagraphs, other than donations under Articles 33 through 41, 41-3 through 41-5, 44, and 45, are gains above the standard prescribed by Presidential Decree, such profits shall be deemed the value of donated property to the person who has acquired such profits." As seen earlier, even after the full comprehensive taxation principle has been introduced, the existing individual deemed donation provision remains in the form of the calculation provision of donated property (individual deemed provision). Considering the legislative intent of the legislators that stipulate special taxation conditions that restrict the scope of transaction or act, predictability and legal stability of taxpayers related to the legal system of taxation, it shall be reasonable to deem that it set the limit of donation under the tax law if the provisions stipulate the taxable object and scope of taxation by presenting a specific type of taxation, and further, Article 42(1) of the Inheritance Tax and Gift Tax Act shall be interpreted as a supplementary provision that does not apply to the individual case under Article 41(1) of the Inheritance Tax and Gift Tax Act.

2) Whether the donation of this case constitutes Article 41 of the Inheritance Tax and Gift Tax Act

Article 41 (1) of the Inheritance Tax and Gift Tax Act provides that where a person in a special relationship with a stockholder or investor of a corporation having losses or under suspension or closure of business (hereinafter referred to as a "specified corporation") makes transactions such as donation of property to the specified corporation and thereby the stockholder or investor of the specified corporation obtains profits, the amount equivalent to such profits shall be deemed the value of property donated to the stockholder or investor of the specified corporation, and Article 31 (1) 1 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "specific corporation" means a corporation having losses under Article 18 (1) 1 of the Enforcement Decree of the Corporate Tax Act until the business year in which the date of donation falls among the corporations not listed on

As to the instant case, the instant company constitutes a specific corporation on May 3, 2010, since there was losses of 4,91,000,000 won, which was donated the instant shares to an unlisted company, and thus, constitutes a case where FF, which is a shareholder of the instant company, obtains profits for the Plaintiffs, who are shareholders of the instant company through a transaction of donating the instant shares to the instant company. In light of the foregoing, the instant donation constitutes a type of transaction under Article 41(1) of the Inheritance Tax and Gift Tax Act, and thus, constitutes a requirement for imposing gift tax under the said provision.

3) Whether the instant disposition applied Article 42 of the Inheritance Tax and Gift Tax Act to the instant donation is lawful

As seen earlier, the instant gift satisfies the taxation requirements of the gift tax under Article 41 of the Inheritance Tax and Gift Tax Act, and Article 2(3) of the Inheritance Tax and Gift Tax Act provides that the calculation of the value of donated property shall be made by applying mutatis mutandis the same or similar taxation requirements, etc. among the exceptional provisions of Articles 33 through 42 of the Inheritance Tax and Gift Tax Act. Article 42 of the Inheritance Tax and Gift Tax Act provides supplementary provisions that are not applicable in cases where Article 41 of the Inheritance Tax and Gift Tax Act is applicable. Thus, Article

Furthermore, in the latter part of Article 42 (1) 3 of the Inheritance Tax and Gift Tax Act, the benefit derived from the change in the ownership shares or the price of the company due to the "business acquisition/business exchange/business exchange" and the change in the company's organization, etc., the type of transaction mentioned above shall not be deemed to mean all the transactions whose shareholder's shares or the price is changed (the term "all transactions whose shares are changed in the shareholder's shares" means all the transactions of the company, which are different from that of the company's shares or all the transactions whose shares are changed in the shareholder's shares or the price of the company's shares, and at least the same time the term "business acquisition/business exchange", and the change in the company's organization is a donation of the shares of this case from the FF individual, and therefore it is difficult to view the donation of this case as a type of transaction defined in Article 42 (1) 3 of the Inheritance Tax and Gift Tax Act.

Therefore, Article 42 of the Inheritance Tax and Gift Tax Act is unlawful without examining further.

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and it is so decided as per Disposition by accepting it.

(c)