National Tax Service Review Transfer 2017-0086 (2017.15)

The transfer tax rate shall apply to the transfer of shares by a major shareholder of an emergency small or medium enterprise.

The "large stockholder" under Article 94 (1) 3 (a) of the Income Tax Act shall meet the requirements prescribed by the Presidential Decree in consideration of the ratio of stocks held and the total market price of stocks held by the stock-listed corporation. Since it is not necessarily required to be a stockholder of the stock-listed corporation, the transfer of the stocks in this case shall be governed by the transfer income tax rate of 20% under Article 104 (

The Seoul Administrative Court-2018-Gu -100 revocation of revocation of a request for correction of transfer income tax

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Mackn 1

November 7, 2018

January 16, 2019

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The defendant's rejection disposition of reduction of KRW 20,403,560 against the plaintiff on July 4, 2017 is revoked.

1. Details of the disposition;

A. The Plaintiff acquired 4,320 shares out of 1,192,140 shares of A Co., Ltd. (limited to a small or medium enterprise as defined in Article 2(1) of the Framework Act on Small and Medium Enterprises (hereinafter referred to as “small or medium enterprise”); but transferred the shares to B Co., Ltd. on March 2, 2016 (hereinafter referred to as “transfer of this case”); (b) the Plaintiff filed a claim for the reduction of capital gains tax for the year 2016,880,000 shares; and (c) on April 12, 2016, the Plaintiff filed a claim against the Defendant for the reduction of capital gains tax for the reason that the reduction of capital gains tax for the year 200,807,120,000 won for the scheduled return and payment of capital gains tax for the reason that Article 104(1)11(c) of the former Income Tax Act (amended by Act No. 14389, Dec. 20, 2016);

C. However, on June 30, 2017, the Defendant: (a) on the instant transfer to the Plaintiff, the former Income Tax Act;

A disposition of rejection of reduction was taken on the ground that the transfer income tax rate of 20% as provided in item (c) of Article 104(1)1(b) is applied not only to 10% as provided in item (c) of Article 104(1)11(b).

D. The Plaintiff appealed and filed a request for examination with the Commissioner of the National Tax Service on July 7, 2017, but the request for examination was dismissed on October 16, 2017.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Article 104(1)1 of the former Income Tax Act, which is stipulated in Chapter III of the former Income Tax Act, provides for the transfer income tax rate applicable to the transfer of stocks by small and medium enterprises, 10% where the transferor is a person who is not a major stockholder of the relevant small and medium enterprise, and 20% in other cases (c).

2) However, Article 94 (1) 3 (a) of the former Income Tax Act provides that "a major shareholder prescribed by Presidential Decree (hereafter referred to as "major shareholder" in this Chapter) transfers stocks of a stock-listed corporation (hereafter referred to as "stock-listed corporation") under the Act on the Financial Investment Services and Capital Markets (hereafter referred to as "stock-listed corporation")" in Chapter 3 of the former Income Tax Act, taking into account the ratio of stocks owned and the total market value of stocks owned by them." In the above provision, "the stocks of a stock-listed corporation under the Financial Investment Services and Capital Markets Act (hereafter referred to as "stock-listed corporation") as well as the portion prescribed by Presidential Decree taking into account the ratio of stocks owned by them and the total market value of the stocks owned by them," and "the stocks of a stock-listed corporation under the Financial Investment Services and Capital Markets Act (hereafter referred to as "large

3) Therefore, the term “a person who is not a major shareholder” in Article 104(1)11(b) of the former Income Tax Act refers only to a major shareholder of a small and medium enterprise which is a stock-listed corporation. Therefore, a shareholder of a small and medium enterprise who is not a stock-listed corporation shall be a person who is not a major shareholder

4) Therefore, the Plaintiff, a shareholder of the non-party company, who is not a stock-listed corporation, falls under “a person who is not a major shareholder” as referred to in Article 104(1)11(b) of the former Income Tax Act regardless of its equity ratio, and thus, the transfer income tax rate of 10

(b) Related statutes;

/ The former Income Tax Act

Article 94 (Scope of Transfer Income)

(1) Capital gains shall be the following incomes, generated in the relevant taxable period:

3. Income generated from transfer of stocks or investment shares falling under any of the following items (including preemptive rights to new stocks, and securities depository receipts prescribed by Presidential Decree; hereafter in this Chapter, the same shall apply):

(a) The stocks, etc. of a stock-listed corporation (hereinafter referred to as "stock-listed corporation") under the Financial Investment Services and Capital Markets Act, which are determined by Presidential Decree, taking into account the ratio of stocks owned, total market value, etc. of

C. Determination

1) The meaning of "large stockholder" under Article 94 (1) 3 (a) of the former Income Tax Act

It is considered whether major shareholders under Article 94 (1) 3 (a) of the former Income Tax Act (hereinafter referred to as the "Act of this case") exist only in a stock-listed corporation.

A) Interpretation of language and text

Under the principle of no taxation without law, the elements for taxation, non-taxation, or tax exemption should be avoided, and the interpretation of tax laws should be interpreted in accordance with the text of the law, barring any special circumstance, and it is not allowed to expand or analogically interpret without reasonable grounds (see, e.g., Supreme Court Decision 2012Du3972, Jul. 5, 2012). Furthermore, the normative meaning of the law is the principle to interpret the language as a language and text as a language and legal rescue unit (see, e.g., Supreme Court en banc Decision 98Du1857, Aug. 19, 199). Such principle should be more emphasized in the interpretation of the tax law.

The legal provisions of this case are as follows (the indication and bottom of the Act, such as <1> and <2>

In light of the above legal principles, it is interpreted that the term "stocks, etc. of a stock-listed corporation (hereinafter referred to as "stock-listed corporation") under the Act on the Establishment of Financial Investment Services and Capital Markets and Capital Markets (hereinafter referred to as "stock-listed corporation") shall be defined as "transfer -2" and "the part prescribed by Presidential Decree taking into account the ratio of stocks and the total market value of stocks determined by Presidential Decree" as "the major shareholders of the Republic of Korea-2 (hereinafter referred to as "major shareholders" in this Chapter)" respectively. In other words, the provision of this case shall be construed as "the major shareholders prescribed by Presidential Decree (hereinafter referred to as "the major shareholders" in this Chapter)", and "the stocks, etc. of a stock-listed corporation (hereinafter referred to as "stock-listed corporation") under the Act on the Establishment of Financial Investment Services and Capital Markets and Capital Markets of Korea," and it is natural to view it as the context.

The plaintiff's assertion can be understood as "shareholders prescribed by Presidential Decree in consideration of the ratio of stocks held, total market value, etc. among the shareholders of a stock-listed corporation under the Financial Investment Services and Capital Markets Act (hereinafter referred to as "stock-listed corporation")" (hereafter referred to as "major shareholders" in this Chapter)" and persuasively.

B) A logical and systematic interpretation

① According to the Plaintiff’s assertion, not only the portion prescribed by Presidential Decree by taking into account the ratio of stocks held by the Plaintiff-1 and the total market value, but also the portion of “stocks, etc. of a stock-listed corporation (hereinafter “stock-listed corporation”) under the Act on the Establishment of Korea-1 Financial Investment Services and Capital Markets (hereinafter “stock-listed corporation”) as well as the portion of “the stocks, etc. of a stock-listed corporation,” which is not the subject of rights and obligations, can be considered as a major stockholder of any corporation.

② The legal provision of this case provides that “The transfer of stocks, etc. of a stock-listed corporation by a large shareholder prescribed by Presidential Decree in consideration of the ratio of stocks owned and the total market value, etc.” is required to impose capital gains tax on cases where listed stocks are traded in order to prevent abnormal donation using listed stocks and to ensure the equity of taxation in cases where other assets, such as real estate, are transferred. However, rather than for all listed stocks, it reflects the legislative intent to gradually expand the scope when the capital market is developed in a sound manner (see Constitutional Court Decision 2004Hun-Ba32, 2005Hun-Ba63102, 104, 104, 105, and 105, etc.). However, it is difficult to interpret the provision to recognize the concept of a large shareholder only with respect to a stock-listed corporation.

③ Article 94 (1) 3 (b) of the former Income Tax Act stipulates the scope of capital gains as "stocks of a corporation which is not a stock-listed corporation", and in the case of unlisted stocks, it seems that the scope of capital gains does not belong to shareholders who are not large shareholders

④ In accordance with the delegation of the provisions of this case, Article 157 (4) of the former Enforcement Decree of the Income Tax Act provides that, as of the end of the business year immediately preceding the business year in which the date of transfer of stocks, etc. of a corporation belongs, where the total amount of stocks, etc. owned by a person (such as lineal ascendant or descendant, kinship, etc.; hereinafter referred to as "other stockholders") as of the end of the business year immediately preceding the business year in which the date of transfer of stocks, etc. belongs is 1/100 or more, the relevant 1 stockholder and other stockholders (title 1) to 2.5 billion won or more of the market value of the relevant corporation's stocks, etc. owned by the relevant stockholder and other stockholders as of the end of the business year immediately preceding the business year in which the date of transfer of stocks, etc. belongs, the relevant 2.5 billion won or more of the market value of the relevant corporation as of the end of the business year

⑤ Article 157(4) and (5) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17032, Dec. 29, 2000) separates the transfer of the stock certificates listed on the securities market and the stock certificates not listed on the Korea Stock Exchange. Article 157(4) and (5) of the former Enforcement Decree (amended by Presidential Decree No. 17032, Dec. 29, 2000) stipulate only major shareholders of a stock-listed corporation. However, even under the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17032, Dec. 29, 2000), the concept of major shareholders of a stock-listed corporation is interpreted to be equally applied even though the concept of a stock-listed corporation is defined as a major shareholder of a stock-listed corporation (see Supreme Court Decision 2006Du18041, Nov. 29, 200), the amended Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17032, Dec. 29, 2000).

(6) The former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18988, Aug. 5, 2005) provides that the requirements to fall under 'large stockholder' to 'large stockholder' shall be different from 'large stockholder's shares of KOSEX-listed corporation', 'stocks of KONEX-listed corporation', 'stocks of venture business' and 'stocks of other corporations' from 'large stockholder' to 'large stockholder'. Such provision should also be regarded as a provision on the premise that there is a 'large stockholder' in the case of

7. Article 157 (4) 2 of the former Enforcement Decree of the Income Tax Act provides the concept of 'large stockholder' in accordance with the total market value of the stocks held by 'large stockholder'. Article 157 (6) 1 of the former Enforcement Decree of the Income Tax Act provides the basis for calculating the total market value of 'stocks held by stock-listed corporations' and 'all other stocks, etc.' under Article 157 (6) 2 of the former Enforcement Decree of the Income Tax Act.

C) Sub-decision

From the perspective of literal interpretation and logical and systematic interpretation, in order to constitute a "large stockholder" as prescribed by the legal provision of this case, it is reasonable to view that it does not necessarily require that a stock-listed corporation be a stockholder if it satisfies the requirements prescribed by the Presidential Decree in consideration of the ratio of stocks owned and the total market price of stocks, etc. according to delegation of the legal provision

2) Whether the Plaintiff constitutes “a person who is not a major shareholder” under Article 104(1)11(b) of the former Income Tax Act

According to the above evidence, among the 1,192,140 shares issued by the non-party company as of the end of the business year immediately preceding the business year to which the transfer date of this case belongs, the plaintiff held 4,320 shares (the shares transferred in this case: 0.36%) and the plaintiff's mother held 3,60 shares (3.02% shares). According to the above facts, according to the above facts of recognition, the share ratio of the non-party company of the plaintiff and the parent's mother reaches 3.38% (0.36% + 3.02%). Thus, the plaintiff satisfies the requirements of the major shareholder under Article 157 (4) 1-1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 27617, Nov. 29, 2016). Therefore, the plaintiff does not constitute "major shareholder" under Article 104 (1) 1-11 (b) of the former Income Tax Act.

3) Sub-decisions

Therefore, the transfer of this case is not a case where a person who is not a major shareholder of a small and medium enterprise transfers shares. As to this, the transfer income tax rate of 20% as stipulated in item (c) of Article 104 (1) 11 (b) of the former Income Tax Act shall not be applied to the transfer of shares. The disposition of this case is legitimate.

3. Conclusion

The plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.