National Tax Service Review and other 2010-0021 (Law No. 14, 2010)

Since the acquisition of treasury shares is null and void, it does not constitute an oligopolistic shareholder.

In light of the fact that there is no evidence that the procedures for the purchase and retirement of the treasury stocks have been conducted through the capital reduction procedures or a special resolution, it is difficult to deem that the treasury stocks have been acquired for the purpose of the retirement of the treasury stocks, and there is no data falling under the exception of the acquisition of the treasury stocks permitted otherwise by law

2010Guhap26841. Revocation of designation of the secondary tax obligor

Doz.

O Head of tax office

1. The Defendant designated the Plaintiff as the secondary taxpayer against BBBB on November 20, 2009 and revoked the disposition of KRW 145,298,900 against the Plaintiff on February 2, 2007.

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

The same shall apply to the order.

1. Details of the disposition;

A. BBB Co., Ltd. (hereinafter referred to as 'BB') purchased 10,000 won per share on February 5, 2007, 5,000 won per share on the register, 3,000 won per share, 3,000 won per share on KimCC, 5,000 won per share, 3,000 won per share on February 26, 2007, 3,000 won per share on 20,000 won per share, 20,000 won per share on 20,000 won per share, 3,000 won per share from KimCC, 20,000 won per share on March 5, 2007, 3,000 won per share, 20,000 won per share on 20,000 won per share on 20,000 won per share.

[Ground of recognition] Unsatisfy, Gap evidence 10, 11

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case, which the second taxpayer against the non-party company, is improper on the following grounds:

1) Since the acquisition of the instant treasury stocks does not constitute an exception permitted under Article 341 of the Commercial Act, it is null and void. Thus, when determining whether an oligopolistic stockholder is an oligopolistic stockholder based on the total number of issued stocks, including treasury stocks, the Plaintiff’s share holding ratio is merely 30%, and the Plaintiff does not constitute an oligopolistic stockholder under Article

2) The Plaintiff did not know at all the fact of acquiring the instant shares and the fact that the Plaintiff was an oligopolistic shareholder. As such, the Plaintiff did not have any position to exercise management rights or to exercise a dynamic shareholder rights. Therefore, it does not constitute “a person who actually exercises rights to shares” under Article 39(1)2(a) of the Framework Act on National Taxes.

B. Relevant statutes

Attached Form is as shown in the attached Form.

(c) Fact of recognition;

1) On February 26, 2007, the Plaintiff acquired the shares of the non-party company from KimCC, and on March 27, 2008, sold the whole amount of KRW 5,000 per share to the non-party company. From September 6, 2005 to February 28, 2008, the Plaintiff worked in YYYYY Co., Ltd., and worked in YYYY from June 1, 2008 to September 30, 2009, and worked in 270,000 won per month as a business management director. From July 20, 2007 to December 24, 2007, the Plaintiff has been registered as the auditor of the non-party company, as follows.

2) AD on November 26, 2006, purchased 5,000 shares per share from JungW, which was the joint representative director of the non-party company, at the time of repayment of 1.4 billion won in the shareholders' loans under the name of JungW or the joint representative director of the non-party company on November 26, 2006, and became the joint representative on December 4, 2006.

3) On December 4, 2006, Written resignation and KimU, who was the joint representative director of the non-party company, and KimCC and Lee DoD were appointed as the joint representative director on March 28, 2007, but KimCC became the sole representative director upon resignation of Lee DoD on March 28, 2007 (The GimCC became the sole representative director even though it disposed of all its shares to the Plaintiff, and thereafter acquired the instant treasury shares at KRW 1.3 billion from the State FF and Lee DoD), and on July 24, 2008, V retired from KimCC and acquired shares from the Plaintiff was appointed.

4) On March 28, 2007, the non-party company held a temporary general meeting of shareholders and a board of directors related to the resignation of the representative director in relation to the change of executive officers and the repeal of the regulations for joint representative director, and on June 8, 2007, the non-party company held this society in relation to the relocation of its head office, but did not hold a general meeting of shareholders or a

5) The non-party company built a building for the purpose of sale on or around May 2007, but was in a state of de facto capital erosion due to the high-sale price. The financial status from 2005 to 2008 according to the financial statements is as follows.

6) On May 23, 2007, the Financial Supervisory Service’s audit report on the non-party company of the fiscal year 2007 fiscal year stated that “in order to promote the simplification of management, the non-party company purchased KRW 5,000 shares of KRW 266,00 per share from the major shareholders, after evaluation by KK Accounting Corporation, and expected to retire the relevant treasury shares from profits accrued from the anticipated completion of the sale at the time, but it is expected that the sale would be due to the low sale of shares to a third party for the benefit of the 2008 fiscal year or our company.”

7) Meanwhile, in calculating the stock value as of April 30, 2007, KK Accounting Corporation’s “the stock value assessment report under the Inheritance Tax and Gift Tax Act” written on May 11, 2007 stated that “the process for verifying the authenticity and adequacy of the materials presented in the evidence verification and external inquiry, etc. of the present materials was not performed. In particular, the presumption financial statements of the non-party company were prepared under a certain family, and thus, the estimated profit and loss or cash flow during the analysis period may vary depending on the family change for the future’s economic situation and presumption.”

[Ground of recognition] Facts without dispute, Gap evidence 1 through 9, Gap evidence 12 to 22, Eul evidence 1 to 5, the purport of the whole pleadings

D. Determination

The secondary tax liability system of oligopolistic shareholders is a system established as a measure to secure tax claims in cases where the company's profits and assets revert to the shareholders and losses by controlling the corporation at its own will, and is established as a measure to secure tax claims in respect of the company. "The liability of the shareholders of a stock company is limited to the acceptance price of their shares (Article 331 of the Commercial Act)," and it is an exception to other provisions that do not bear any other property obligations, so it is likely to infringe on the taxpayer's property rights. Therefore, strict application is needed

However, for oligopolistic shareholders with secondary tax liability pursuant to Article 39 of the Framework Act on National Taxes, the formal requirements that the aggregate of shares owned exceeds 50/100 of the total number of shares issued by the relevant corporation and the substantive requirements that the person who actually exercises the rights to the said shares must be satisfied. In this case, in relation to the formal requirements, it is necessary to examine whether the Plaintiff exercises the substantive rights as oligopolistic shareholders in relation to the validity of the acquisition of the instant treasury shares and the substantive requirements.

In principle, the Commercial Act prohibits a stock company from acquiring its own shares on its own account as it threatens to harm the interests of the company, shareholders, and creditors, undermine the principle of shareholder equality, and cause unfair corporate control by its representative directors, etc. In principle, since the Commercial Act uniformly prohibits the acquisition of its own shares for general preventive purposes, such as where the company explicitly permits the acquisition of its own shares in accordance with Articles 341, 341-2, 11342-2 of the Commercial Act or the Securities and Exchange Act, and where the company gratuitously acquires its own shares or where it acquires its own shares on another’s account, it is exceptionally allowed to acquire its own shares in cases where it is obvious that it may not endanger the company’s capital foundation or undermine the interests of shareholders, etc., but in other cases, the acquisition of its own shares is not allowed even if there are inevitable circumstances to avoid serious damage to the company, shareholders, and creditors, etc., even if it is possible to avoid the above prohibition provisions (see Supreme Court Decision 201Da4109, May 16, 2003).

In addition, according to the provisions of Articles 343 and 343-2 of the Commercial Act, shares may be retired only pursuant to the provisions on the reduction of capital, and shares may be retired or purchased at the general meeting of shareholders through a special resolution pursuant to Article 11434 of the Commercial Act (at least 2/3 of the voting rights of shareholders present and at least 1/3 of the total number of issued shares).

However, although the audit report for the fiscal year 2007 stated that the non-party company acquired the shares of this case for the purpose of the retirement of shares, the non-party company did not provide for the retirement of shares with profits to be distributed to shareholders in its articles of incorporation (Evidence A). Thus, there is no evidence to the effect that the non-party company completed the procedure for the purchase and retirement of its shares through the capital reduction procedure or the special resolution above.

In addition, in light of the fact that the non-party company did not have any profit or profit to distribute dividends at the time of the acquisition of the shares of this case, and it was hard to view that there was an objective valuation process because the stock value per share was higher than 226,00 won and the stock value per share was higher than 226,00 won, etc., it is difficult to view that the non-party company acquired the shares for the purpose of the retirement of shares, and there is no evidence to deem that the non-party company falls under the exception to the acquisition of the shares, which is otherwise permitted by law, and therefore, the disposition of this case which judged the oligopolistic shareholder on the premise that the acquisition of the shares of this case was null

Therefore, the instant disposition is inappropriate without examining the practical requirements for imposing secondary tax liability on oligopolistic shareholders.

3. Conclusion

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