[1] Whether the transferee shall be the investor of the corporation in determining whether the transferee is a specially related person under the provision on deemed donation of transfer at a low price (negative)

[2] The case holding that Gap's father's disposition of gift tax was permitted as a modification of the disposition grounds to the extent that the identity of the disposition is maintained, where Gap added the grounds for the disposal that Eul acquired shares at low price from his father, who was an auditor of a corporation controlled by his father at low price from his specially related person Eul, but later, the actual holder of the above shares was the father of Eul and the title trustee merely was Eul and Eul was merely the title trustee

[1] Article 19 (2) 6 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17828 of Dec. 30, 2002) provides that "a person who holds shares with a transferor, etc."; Article 13 (6) 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "a person who is in a relationship with an heir at the time of contribution with an employee" only refers to an heir's direct employee; it cannot be deemed that an heir's direct employee with a person with a special relationship with an heir is included; therefore, the heir does not belong to an employee with a special relationship with the heir. Thus, it is reasonable to interpret that the taxation requirement under the principle of no taxation without the law should be strictly interpreted. Article 19 (2) 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17828 of Dec. 30, 202) provides that "a person who invests more than 10/10 of the total number of shares issued by the transferor, etc.

[2] The case holding that Gap's father's disposition of gift tax was allowed as a modification of the disposition grounds to the extent that the identity of the disposition is maintained, where Gap added the grounds for disposal that Gap acquired shares at a low price from his father, who was an auditor of a corporation controlled by his father at a low price, and was subject to the disposition of gift tax by deeming that Eul acquired shares at a low price from his specially related person Eul, but later, the actual holder of the above shares is the father of Eul and Eul is merely the title trustee

[1] Article 35(1)1 and (2)(3) of the former Inheritance Tax and Gift Tax Act (Amended by Act No. 7010, Dec. 30, 2003; see current Article 35(1)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (Amended by Presidential Decree No. 17828, Dec. 30, 2002; see current Article 13(10)2), Articles 19(2) and 26(4)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (Amended by Act No. 17828, Dec. 30, 200); Article 35(1)1 and (2)(3) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (Amended by Act No. 17010, Dec. 30, 203); Article 13(6)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (Amended by Presidential Decree No. 17821, Dec. 30, 2013)

Plaintiff (Attorney Woo-won et al., Counsel for the plaintiff-appellant)

Daegu Tax Office (Law Firm Daegu General Law Office, Attorneys Park Jin-jin, Counsel for the defendant-appellant)

Daegu High Court Decision 2007Nu932 Decided December 19, 2008

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

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

Article 35(1)1 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010 of Dec. 30, 2003; hereinafter "the Inheritance Tax Act") provides that where the property is acquired by transfer from a "person having a special relationship prescribed by Presidential Decree" at a price lower than the market price, the transferee of the property shall be deemed to have been donated an amount equivalent to the difference between the price and the market price at the time of acquisition of the property and equivalent to the profits prescribed by Presidential Decree. Article 26(4)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 17828 of Dec. 30, 2002; hereinafter "Enforcement Decree of the Inheritance Tax and Gift Tax Act") provides that the transferor or transferee (hereinafter "transferr, etc.") as one of the "specially related persons" under Article 35(1)1 of the Inheritance Tax and Gift Tax Act and the person having a special relationship with the "employee" under Article 19(2)2 of the Enforcement Decree of the Inheritance Tax Act.

Meanwhile, Article 13(6)2 of the Enforcement Decree of the Inheritance and Gift Tax Act provides that “an employee of a corporation controlled by investment” includes “the officer of a corporation controlled by investment” under Article 19(2)2, and Article 13(8)1 provides that “a corporation controlled by investment” under Article 19(2)6 of the Enforcement Decree of the Inheritance and Gift Tax Act refers to “a corporation that falls under Article 19(2)6.” Article 19(2)6 (hereinafter “instant provision”) provides that “one stockholder, etc. (the “transferor, etc.” under the latter part of Article 26(4)1 of the Enforcement Decree of the Inheritance and Gift Tax Act) and subparagraphs 1 through 5 of Article 13(8) provide that “a corporation in which a person referred to in Article 19(2)6 (hereinafter “instant provision”) invests more than 30/100 of the total number of outstanding stocks, etc.”

Article 13(6)2 of the Enforcement Decree of the Inheritance and Gift Tax Act provides that a person holding shares shall be deemed to be an employee directly engaged in the business of an heir at the time of contribution, and Article 13(6)2 of the Enforcement Decree of the Inheritance and Gift Tax Act provides that “the person holding shares shall be deemed to be an employee directly engaged in the business of an heir.” Therefore, the heir shall not be deemed to be an employee of a corporation whose person having a special relationship with an heir with an heir without making any contribution to the former does not constitute an employee of the heir. Therefore, if the transferor does not make any contribution, and only the person under Article 19(2)1 through 5 shall be deemed to be included in the “employee” under Article 19(2)2 of the Enforcement Decree of the Inheritance and Gift Tax Act, and the scope of the person having a special relationship with an heir shall be excessively expanded by 10/100 or more of the total number of outstanding shares issued and outstanding shares of the corporation without any contribution by the transferor, etc., and the requirement for taxation without the principle of no taxation without law shall be construed.

According to the reasoning of the judgment below, the court below held that the Plaintiff’s transfer of the shares of this case from Nonparty 1 to Nonparty 2’s auditor does not constitute a lower-value acquisition among specially related parties, on the premise that the Plaintiff’s transfer of the shares of this case from Nonparty 2’s auditor does not constitute a corporation under Article 19(2)1 through 5 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (hereinafter “the shares of this case”), while Nonparty 3 owned 5.67% (25,050 shares) out of the total number of shares issued as representative director, the Plaintiff is not a director of Nonparty 2, and Nonparty 1 is an auditor of the non-party 2, and the Plaintiff is not a director of the non-party 1, and the auditor of the non-party 1 is an auditor of the non-party 2, under the premise that the Plaintiff’s transfer of the shares of this case does not constitute a corporation under Article 19(2)1 through 5 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act (hereinafter “the judgment”).

2. Regarding ground of appeal No. 2

Since the subject matter of a taxation disposition lawsuit is objective existence of the tax amount determined by the tax authority, the tax authority may submit new data that can support the legitimacy of the tax base or amount of tax recognized in the relevant disposition, or exchange and change the reasons within the scope that maintains the identity of the disposition, and the tax authority shall not necessarily be able to determine the legitimacy of the disposition by only the data at the time of the disposition or to assert only the reasons for the disposition at the time of the disposition (see Supreme Court Decision 2001Du1994, Oct. 11, 2002). In addition, even if the tax authority recognized the title truster as the donor at the time of the initial disposition of gift tax as the donor at the time of the initial disposition of gift tax, it does not change the basic fact of taxation within the scope of the same taxable cause (see Supreme Court Decision 93Nu14059, Dec. 21, 1993).

The court below imposed the gift tax of this case on Nonparty 1, a related party, as an auditor of Nonparty 2 Co., Ltd., the plaintiff's father of Nonparty 3, who is a corporation under its control by investment, and imposed the gift tax of this case on Nonparty 1. However, the court below added the grounds that the actual holder of the shares of this case was acquiring the shares of this case at a low price from Nonparty 3, a related party, merely because Nonparty 3 was merely the title trustee, to which Nonparty 1 added the grounds that the plaintiff acquired the shares of this case at a low price from Nonparty 3, a related party.

Nevertheless, the lower court’s rejection of the Defendant’s conjunctive assertion on the premise that the disposition is not identical, is erroneous in the misapprehension of the legal doctrine as to the change of the grounds for disposition, thereby failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment.

3. Conclusion

Therefore, 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 by the assent of all participating Justices on the bench.

Justices Kim Nung-hwan (Presiding Justice)