Revocation of Disposition Imposing Gift Tax

An officer for whom five years have not passed after his retirement falls under a specially related person under Article 35 of the former Inheritance Tax and Gift Tax Act, and the transfer of this case constitutes a transfer at a low price between the specially related persons.

Article 35 of the former Inheritance Tax and Gift Tax Act (Amended by Act No. 11130, Dec. 31, 201)

2016Guhap61984 Revocation of Disposition of Imposition of Gift Tax

*

*The Director of the Tax Office

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposing gift tax of KRW 80,129,280 (including additional tax) against the Plaintiff on July 1, 2015 shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a shareholder (share ratio: 41%) of ○ Engineering Co., Ltd. (hereinafter “instant company”) with the aim of civil engineering, construction, engineering and technology services, etc. established on August 6, 2002, and is a director and director.

B. On April 10, 2006, the Plaintiff sold 3,600 shares of the Plaintiff’s 15,000 shares, which were owned by the head of the ground business division of the instant company, to Ansan, for KRW 5,000 per share, and the Korea-B also sold 3,600 shares out of 15,00 shares of the Plaintiff’s shares to Ansan on the same day, and the Korea-B acquired 7,200 shares out of the total shares issued by the instant company for KRW 5,00 per share.

C. On July 23, 2008, the instant company acquired 600 shares of the instant company according to its equity ratio of 5,000 won per share (120,000 shares issued before capital increase: 120,000 shares, and 130,000 shares issued after capital increase). The AA additionally acquired 60 shares of the instant company according to its equity ratio.

D. On March 14, 2010, AA retired from office as the vice president of Me△△△△△, Inc., and retired from office on March 17, 2010, and on May 1, 2010, A transferred 3,900 shares of the shares of the said company (hereinafter “instant shares”) to the Plaintiff at KRW 5,000 per share (hereinafter “instant transfer”).

E. The Defendant: (a) assessed the instant shares as KRW 110,313 (total amount of KRW 430,220,700) per share in accordance with the supplementary evaluation method under the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 2011; hereinafter the same shall apply); (b) assessed the instant shares as KRW 110,313 (total amount of KRW 430,220,700) on July 1, 2015, deeming that the Plaintiff acquired the instant shares at a low price from Ansan, a person with a special relationship, and imposed gift tax on the Plaintiff pursuant to Article 35(1) of the former Inheritance Tax and Gift Tax Act (hereinafter referred to as “instant disposition”).

F. The Plaintiff appealed and filed an appeal with the Tax Tribunal on September 21, 2015, but the Tax Tribunal dismissed the said appeal on December 23, 2015.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 4, Eul evidence 1 to 6, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The instant disposition: (a) deemed that there was a special relationship between the Plaintiff and Ansan; and (b) deemed the instant transfer as a gift transaction between specially related parties; (c) however, it cannot be deemed that there was a special relationship between the Plaintiff and Ansan, since it was not an officer of the said company at the time of the instant transfer, as the Plaintiff resigned from office before the instant transfer

2) Unless there are special circumstances, a transaction between a person who is not a specially related person shall not be deemed a gift transaction, and the defendant shall prove the special circumstances, but the defendant shall not prove it, and the transfer of this case was made in accordance with the reasonable decision of an economic person between the parties, and the disposition of this case is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) First, we examine whether the Plaintiff and Ansan are “a person having a special relationship”.

A) Article 35 of the former Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22579, Dec. 30, 2010; hereinafter "the former Enforcement Decree of the Inheritance Tax and Gift Tax Act") provides that "a person in a special relationship" refers to a person in a relationship falling under any of the following subparagraphs with a transferor or transferee, and Article 19 (2) 1, 2, 4 through 8 of the Enforcement Decree of the same Act provides that "a person who falls under any of subparagraphs 1, 2, 4, and 8 of Article 19 (2) 2 of the same Enforcement Decree provides that "a person who is not an employee or employee and who maintains his livelihood with the property of the relevant stockholder, etc." under Article 26 (4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.

Article 13 (9) 2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "employee" refers to an employee prescribed by Ordinance of the Ministry of Strategy and Finance (including an employee of a corporation controlled by investment; hereinafter the same shall apply). Article 4 of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 223, Jul. 26, 201; hereinafter the same shall apply) delegated by the Enforcement Decree provides that "an employee means an employee, an employee, a commercial employee, or any other person in an employment contract." Article 13 (7) 1 of the former Enforcement Decree of the Corporate Tax Act provides that "an employee means an employee who has been an officer under Article 20 (1) 4 of the Enforcement Decree of the Corporate Tax Act and five years have not passed since his/her retirement; hereinafter the same shall apply) and Article 20 (1) 4 of the former Enforcement Decree of the Corporate Tax Act provides that "all members of the board of directors."

B) As seen earlier, Article 4 of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act includes the scope of an employee, and Article 13(7)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act includes a person who was an officer in whose case five years have not passed since his/her retirement due to the definition of an officer, and Articles 13(7)1 and 13(9)2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act stipulate that "an officer" and "an employee" shall be defined as "an officer" and Articles 26(4) and 19(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act stipulate that all of the above Article 13 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act are stipulated as "a person in a special relationship under Article 26(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act," and thus, it is reasonable to interpret that the person

C) Meanwhile, as the Enforcement Decree of the Inheritance Tax and Gift Tax Act was amended by Presidential Decree No. 23591 on February 2, 2012, Article 26(4) provides that "a related person prescribed by Presidential Decree" means a person who has a relationship falling under any of the subparagraphs of Article 12-2(1) with a transferor or transferee, and Article 12-2(1)3 of the Enforcement Decree of the same Act explicitly provides that "a person who has a special relationship under Article 20(1)4 of the Enforcement Decree of the Corporate Tax Act and for whom five years have not passed since his/her retirement" includes a person who has been an executive in a special relationship under Article 35 of the former Inheritance Tax and Gift Tax Act. In light of the reasons for the amendment of the above Enforcement Decree, the provisions of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, as mentioned above, are not newly established within the scope of "specially related person under Article 12-2(1)."

D) Ultimately, on March 17, 2010, Ansan retired from the position of director of the instant company, as seen earlier, and on May 1, 2010, the Plaintiff was deemed to have acquired the instant shares from Ansan on May 1, 2010, at a price lower than their market price. This constitutes a low-price transfer between persons in a special relationship under Article 35 of the former Inheritance Tax and Gift Tax Act.

2) Therefore, the Defendant’s disposition of this case by determining the transfer of this case as a low-price transfer transaction between the parties with a special relationship and imposing gift tax on the Plaintiff is justifiable, and without having to further examine the remainder of the argument premised on the premise that AA is not a person with a special relationship with the Plaintiff, the Plaintiff’

3. Conclusion

Thus, the plaintiff's claim of this case is dismissed as it is without merit.