Transfer rate of shares transferred by a major shareholder of a small and medium enterprise

It is reasonable to apply the concept of 'large shareholder' to the shareholders of the non-listed corporation, and to apply the transfer tax rate of 20% to the plaintiffs who belong to the large shareholders.

Article 104 (1) 11 of the Income Tax Act; and

Suwon District Court 2018Gudan7055 Revocation of Disposition Rejecting Transfer Income Tax Correction

AA

00. Head of tax office

on July 20, 2018

on October 10, 2018

1. All of the plaintiffs' claims are dismissed.

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

Cheong-gu Office

Defendant 00 rendered against Plaintiff AA on August 17, 2017, with respect to Plaintiff BB on August 21, 2017, revoked each transfer income tax correction refusal disposition against Plaintiff CC on August 22, 2017.

Defendant 00’s head of the tax office’s disposition of refusal to correct each transfer income tax against Plaintiff EE on August 10, 2017, which was rendered against Plaintiff EE on August 16, 2017, revoked on August 17, 2017 with respect to Plaintiff FF.

1. Details of the disposition;

(1) As of December 31, 2015, the Plaintiffs held the shares issued by jj Transport Co., Ltd., a non-standing small and medium enterprise, as follows:

B. On December 15, 2015, the Plaintiffs transferred KRW 486,570 to KK totaling KRW 40,104 per share of the non-listed shares issued by j Transport Co., Ltd., and thereafter, the Plaintiffs deemed that the shares transferred by the major shareholders were shares of small and medium enterprises transferred by the major shareholders, and applied the tax rate of 20% as stipulated in Article 104(1)11(c) of the former Income Tax Act (amended by Act No. 13558, Dec. 15, 2015; hereinafter the same shall apply) by applying the tax rate of 20% as stipulated in Article 104(1)11(c) of the former Income Tax Act.

on June 23, 2017, the plaintiffs filed a request for correction on the grounds that Article 104 (1) 11 (b) of the former Income Tax Act should apply to the rate of 10% as stipulated in Article 104 (1) 11 (b) of the former Income Tax Act.

Article 104 (1) 11 (c) of the former Income Tax Act applies to the shares transferred by a major shareholder of a non-permanent small and medium enterprise, and accordingly, the Defendants issued a refusal to revise the transfer income tax to the plaintiffs as stated in the purport of the claim (hereinafter referred to as the "each disposition of this case").

Applicant The Plaintiffs appealed against each of the dispositions in this case and filed an appeal with the Tax Tribunal, but the decision to dismiss the appeal was made on January 22, 2018.

Facts without dispute over the basis of recognition, Gap evidence 1-1-6, Gap evidence 2-1 through 6, Gap evidence 3-1, 2, Eul evidence 1, and the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

(1) The former Income Tax Act provides for the liability to pay capital gains tax of a resident in Chapter III and provides for the income accruing from the transfer of any of the following stocks or equity shares (including preemptive rights and securities depository receipts prescribed by Presidential Decree; hereafter referred to as "stocks, etc." in this Chapter) as one of the capital gains subject to capital gains tax under Article 94(1)3, and provides for the transfer of stocks, etc. of a stock-listed corporation under the Financial Investment Services and Capital Markets Act (hereafter referred to as "stock-listed corporation" in this Chapter) by a major shareholder prescribed by Presidential Decree (hereafter referred to as "major shareholder" in this Chapter) in consideration of the ratio of stocks owned, the total market value thereof, etc., and transfers stocks, etc. of a corporation which is not a stock-listed corporation in the securities market (hereafter referred to as "securities market" in this Chapter) under the same Act, and provides for the tax base for capital gains tax under Article 104(1)11 through 94(1)3 and 10/100 of capital gains tax base for such stocks, etc.

Meanwhile, the Income Tax Act amended by Act No. 14389 on December 20, 2016 provides for a resident's liability to pay capital gains. Chapter III provides for ① the stocks, etc. falling under any of the following subparagraphs by amending Article 94 (1) 3 (a), and 1) provides for "stocks, etc. transferred by a large stockholder of a stock-listed corporation prescribed by Presidential Decree in consideration of the ratio of owned stocks, the total market value, etc.," and 2) "stocks, etc. transferred by a person who does not fall under the large stockholder under subparagraph (i) through transaction in the securities market (hereinafter referred to as "securities market") under the Financial Investment Services and Capital Markets Act." Article 104 (1) 11 of the Income Tax Act amended, and Article 104 (1) 11 of the same Act provides for "stocks, etc. transferred by a person who is not the large stockholder (hereafter referred to as "large stockholder" in this Chapter)" in this Chapter, and Article 94 (1) 3 (b) provides for "stocks, etc." in this Chapter 30/10/10 of the tax base of capital gains.

The plaintiffs asserted that the instant disposition is unlawful on the following grounds.

'Large shareholder' under Article 94 (1) 3 (a) of the former Income Tax Act is based on the premise that a stock-listed corporation is a stock-listed corporation's shares, so it cannot be determined as a major shareholder on the basis of the above provision.

Article 104 (1) 11 (b) of the former Income Tax Act provides that "stocks, etc. of small and medium enterprises (limited to cases where a non-large stockholder transfers them): 10/100 of the tax base of capital gains; however, it does not separately provide for the concept of "large stockholder" as stipulated in the above overall subparagraph. This is a lack of legislation, and thus, does not exclude the application of Article 104 (1) 11 (b) of the former Income Tax Act to the plaintiffs who transfer stocks of non-large stockholders.

Therefore, it is unlawful to apply the tax rate of 10% as stipulated in Article 104 (1) 11 (b) of the former Income Tax Act to the plaintiffs, i.e., the above general provision, i.e., the tax rate of 10% as stipulated in Article 104 (1) 11 (c) of the former Income Tax Act, and the disposition of this case applying the tax rate of 20% as stipulated in Article

Article 20 of the Civil Code provides that the disposition of this case is legitimate, and the plaintiffs' assertion pointing out its illegality is without merit.

Pursuant to Article 104(1)11 of the Income Tax Act (amended by Act No. 14389, Dec. 20, 2016; Act No. 14389, Dec. 20, 2016; Article 104(1)11 of the same Act, the tax rate of 10% shall apply to the stocks, etc. of small and medium enterprises prescribed by Presidential Decree, which are transferred by a person other than a large shareholder, while (a) the tax rate of 30% shall apply to the stocks, etc. of a corporation other than a small and medium enterprise, which is owned by a large shareholder for less than one year; and (b) the tax rate of 20% shall apply to other

On the contrary, Article 104 (1) 11 of the former Income Tax Act provides that the tax rate of 30% shall apply to the stocks, etc. of a corporation other than small and medium enterprises prescribed by the Presidential Decree, which the large shareholder holds less than one year (a) and the tax rate of 10% shall apply to the stocks, etc. of small and medium enterprises (limited to the transfer by a person other than the large shareholder), and the tax rate of 20% shall apply to other stocks, etc. (b) and the tax rate of 20% shall apply to other stocks, etc.

However, Article 94 (1) 3 (a) of the former Income Tax Act provides that "A major shareholder prescribed by Presidential Decree in consideration of the ratio of shares owned, the total market price, etc. (hereafter referred to as "major shareholder" in this Chapter)." Since Articles 94 and 104 of the former Income Tax Act all belong to Chapter III, "major shareholder" referred to in the overall subparagraph of Article 104 (1) 11 (b) of the former Income Tax Act shall be deemed the same concept as a major shareholder under Article 94 (1) 3 (a) of the former Income Tax Act, and it shall not be deemed a lack of legislation. The provisions of each item of Article 104 (1) 11 of the former Income Tax Act, amended by Act No. 14389, Dec. 20, 2016, clearly express the provisions of each item of Article 104 (1) 11 of the former Income Tax Act.

(2) Where a person in special relationship under Article 1-2 (1) and (3) 1 of the Enforcement Decree of the Framework Act on National Taxes (hereafter referred to as "other stockholders" in this Chapter) owns stocks or equity shares of a corporation (including preemptive rights to new stocks, securities depository receipts under paragraph (1); hereafter the same shall apply in this Chapter) under Article 157 (4) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 27074, Mar. 31, 2016; hereinafter the same shall apply), which provides for the concept of a major stockholder under Article 94 (1) 3 of the former Income Tax Act, separately owns stocks, etc. of the relevant corporation as of the end of the business year immediately preceding the business year in which the date of transfer of stocks, etc. belongs, and owns stocks, etc. of the relevant corporation and other non-listed corporations as of the end of each business year immediately preceding the relevant business year, and owns more than 10/100 of the total amount of stocks, etc. owned by the relevant stockholder and other non-listed corporations as of the immediately preceding business year.

Meanwhile, Article 157 (4) 2 of the former Enforcement Decree of the Income Tax Act provides for the concept of "large stockholder" in accordance with the total market value of stocks, etc., and Article 157 (6) 1 of the former Enforcement Decree of the Income Tax Act provides for the evaluation of total market value as of the end of the business year immediately preceding the business year immediately preceding the date of the transfer of stocks, etc. (if there is no market value as of the end of the immediately preceding business year, the market value as of the immediately preceding business year), and Article 165 (4) 2 of the former Enforcement Decree of the Income Tax Act provides that "in the case of stocks, etc. other than subparagraph 1, the appraised value under Article 165 (4) 2 of the former Enforcement Decree of the Income Tax Act shall be the average weighted value of profits and losses and net asset value of 3 and 2, respectively, the valuation of total market value under Article 99 (1) 4 (hereafter referred to as "non-listed stocks, etc." in this subparagraph) shall also be based on the acquisition value of non-listed stocks.

In this respect, Article 94 (1) 3 (a) of the former Income Tax Act provides that "... as a stock-listed corporation's stocks, etc., the majority shareholder prescribed by Presidential Decree in consideration of the ratio of stocks held and the total market value thereof shall be determined by Presidential Decree" cannot be interpreted as limited to the majority shareholder of a stock-listed corporation.

As of December 31, 2015, which was the end of the business year immediately preceding the business year to which the date of transfer belongs, at least 1% of the shares issued by jj transportation company as of December 31, 2015, it is clear that the Plaintiffs fall under a major shareholder as prescribed in Article 157(4) of the former Enforcement Decree of the Income Tax Act. Thus, the tax rate of 10% as prescribed in Article 104(1)11 (b) of the former Income Tax Act shall be applied

3. Conclusion

Therefore, the plaintiffs' claims are dismissed in entirety due to the lack of reasonable grounds.

1) One existing rate of capital gains tax has been applied regardless of whether it is a major shareholder or not to transfer the shares of a small or medium enterprise. However, in the case of a major shareholder of a small or medium enterprise, the rate of capital gains tax is adjusted upward from 10% to 20%, taking into account the low need for preferential treatment in taxation of capital gains tax separately from the small or medium enterprise.

2) Article 157 (4) of the former Enforcement Decree of the Income Tax Act before it was amended by Presidential Decree No. 26982 on February 17, 2016 shall include (1) one stockholder or investor (hereafter referred to as "one stockholder" in this Chapter) who owns stocks or equity shares (including preemptive rights and securities depository receipts under paragraph (1); hereafter the same shall apply in this Chapter) of a corporation; 2/100 or more of the total sum of stocks of the relevant corporation as of the end of the fiscal year immediately preceding that whereto belongs the date of the transfer of stocks, etc. [in cases of other stockholders under Article 1-2 (1) and (3) 1 of the Enforcement Decree of the Framework Act on National Taxes, referring to the KONEX as of the date of acquisition of stocks, etc. of the relevant corporation; 2/100 or more of the total amount of stocks, etc. listed on the KOSDAQ market (referring to the KONEX as of the date of acquisition of stocks, etc. under Article 8 (1) of the Enforcement Decree of the Financial Investment Services and Capital Markets Act];

However, Article 157(4) of the former Enforcement Decree of the Income Tax Act was amended by Presidential Decree No. 26982, Feb. 17, 2016. In the case of securities market and unlisted stocks, the scope of major shareholders subject to capital gains tax on stocks, etc. is adjusted in cases where the relevant one shareholder and other shareholders own 1% or more of the stocks, etc. of the relevant corporation or 2.5 billion won or more of the market price of the relevant corporation as of the end of the business year immediately preceding the