Seoul Administrative Court 201Guhap7366 ( October 02, 2011)

National Tax Service Review Donation 2010-0081 (2010.07)

Gift tax is illegal for a transaction with justifiable grounds.

Although it is true that a public offering was made for embezzlement, considering that there was no difference between the transfer price of stocks and the transfer price of stocks before transferring stocks or there was a higher amount of money, it does not constitute a transfer of assets at a price significantly higher than the market price without justifiable grounds under the transaction practice.

2011Nu34209 Revocation of Disposition of Imposition of Gift Tax

New XX 2 others

Head of the Yongsan Tax Office and one other

Seoul Administrative Court Decision 201Guhap7366 decided September 2, 2011

June 29, 2012

August 31, 2012

1. Revocation of a judgment of the first instance;

2. On June 14, 2010, the head of Yongsan Tax Office’s imposition of KRW 000,000, which the Plaintiff’s newA on the part of June 14, 2010, and each imposition of KRW 000,00, which the director of the tax office imposed on the Plaintiff headB on June 10, 2010, and KRW 00,00, which was imposed on the Plaintiff HeadCC.

3. Of the total costs of litigation, the part arising between the Plaintiff New A and the Head of Yongsan Tax Office shall be borne by the Head of Yongsan Tax Office, and the part arising between the Plaintiff headB, the headCC and the Head of the Songpa District Tax Office shall be borne by the Head of the Songpa Tax Office, respectively.

The same shall apply to the order.

1. Details of disposition;

The reason for this part of the judgment is as stated in the corresponding part of the judgment of the court of first instance. It shall be quoted in accordance with Article 8(2) of the Administrative Litigation Act, and the main sentence of Article 420

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

A. The plaintiffs' assertion

The purpose of acquiring the management right of the non-party company was to acquire the shares of the non-party company owned by the plaintiffs et al., the former representative director of the non-party company. Therefore, since the transfer price of the above shares transferred by the plaintiffs to DooD includes the price for transfer of management rights in addition to the share exchange value, the transfer price of the above shares constitutes a case where the plaintiffs' transfer of the above shares to the price higher than the market price is justifiable under the transactional practice.

(b) Fact of recognition;

1) The non-party company was listed in the KOSDAQ market around January 2002 with a company established around 1984 for the purpose of receiving and accessing electric and electronic parts, devices, etc. related to telecommunication and telecommunications, and the trade name was changed to XX around March 2006.

2) Around November 2005, the non-party company entered into a comprehensive share swap contract with the OO shareholders around December 2005 in order to incorporate the non-party company for the development, manufacture, and sale of drugs, health, food, etc. into the subsidiary. As a result, the non-party company became a complete parent company of the OO. During this process, the original EE was the two shareholders of the non-party company, who were the largest shareholders of the OO, and was appointed as the representative director of the non-party company on November 1, 2005.

3) The two major shareholders of the non-party company, who did not secure the right of management as a whole, have to secure the right of management by securing the right of management, and have requested the FF to invest in the non-party company to the non-party company and become a favorable share by investing in the non-party company. This FF would accept the request of the E according to the advice of the KimGG that had consulted on the said share swap contract, and as a result, recommended the plaintiffs to make an investment, the plaintiffs became a favorable share by acquiring approximately 350,00 shares of the non-party company from December 2, 2005.

4) On June 2007, CE decided to transfer the shares and management rights of the non-party company, and delegated the above KimG with the authority to transfer the shares and management rights of the non-party company. Accordingly, KimGG concluded a memorandum of understanding that it would sell the shares and management rights of the non-party company to KRW 200,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000

5) Around September 2007, the Plaintiffs, etc. entered into a share acquisition agreement with Dadd, Dad, and Hah H with the content that the shares of the non-party company will be transferred to Dod, Dod, Dod, Dod, and Hahh to Dod and Hahh. On the same day, HaE also entered into a share acquisition agreement with Dod, Dod and Hahh with the content that the shares of the non-party company will be transferred to Dod, 857 shares and the management rights of the non-party company at KRW 7 billion.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 3 through 13, witness KimG's testimony in this court and the purport of the whole pleadings

C. Determination

1) Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter the same)

Article 35(2) provides that "If property is acquired or transferred between a person other than a person in a special relationship, without justifiable grounds, the amount equivalent to the difference between the price and the market price shall be presumed to have been donated, and the amount equivalent to the profits prescribed by Presidential Decree shall be deemed to be the value of property donated to the person who has acquired such profits, only when the property is acquired or transferred at a price significantly lower than the market price

In general, in light of the fact that the tax authority bears the burden of proving the fact of taxation requirements in a lawsuit seeking revocation of taxation, and the language, content, and form of the above provision, the tax authority should prove not only that the transferor transferred the property at a significantly higher price than the market price to a person other than the person having a special relationship, but also that there is no justifiable reason in light of transaction practices (see Supreme Court Decision 2011Du2075, Dec. 22, 201).

On the other hand, if the parties to a transaction have made a transaction with reasonable knowledge of facts and information about the transaction and free on the basis of a legal order based on private autonomy and freedom of contract, it shall be careful to recognize that the transaction is not a general and ordinary transaction, on the ground that there is a substantial difference between the market price at the time of the transaction and the price agreed by the parties to the transaction after the objective evaluation. Therefore, when the application of the above provision is at issue, it shall not be easily recognized that there is no justifiable reason in light of the transaction’s practice with the key mark that there is a substantial difference between the price agreed by the parties

2) We examine the instant case based on the foregoing legal doctrine.

In full view of the following circumstances revealed based on the above facts and evidence, the transfer by the plaintiffs of the shares of the non-party company to JungD does not constitute the transfer of the shares of the non-party company at a price significantly higher than the market price without justifiable grounds under the practice of transaction. Therefore, each of the dispositions of this case on different premise is unlawful.

A) In full view of the fact that NA which acquired the Plaintiffs’ shares in collusion with E, acquired the company’s shares and management rights without equity capital and acquired the company’s personal benefits in an unlawful manner, and accordingly, NA embezzled the funds of the non-party company, and the judgment of conviction was rendered, the Defendants asserted that the transfer value of the Plaintiffs was an abnormal transaction which lacks economic rationality in light of sound social norms and commercial practices, rather than by a reasonable method of a normal economic person.

According to the evidence evidence Nos. 4, 6, and 7, it can be found that he was convicted of the fact that he embezzled the funds of the non-party company in collusion with the originalE. However, it cannot be concluded that the transfer of the plaintiffs' shares constitutes an abnormal transaction, and in the case of the original EE, it cannot be concluded that he conspired to engage in the above embezzlement. However, as seen below, considering that there was no difference between the transfer price of the shares of this case before transferring the shares of the non-party company to the non-party company to the non-party company, or there was a higher acceptance scheme, it cannot be concluded that the transfer price of the shares of this case was determined on the premise of the above embezzlement act, and there is no evidence to find that the plaintiffs had any relation to the above embezzlement act, the circumstance alleged by the defendants alone does not constitute a justifiable reason under the transaction practice.

B) The Defendants also have to deem that there is no justifiable reason in light of transactional practice, and there is a difference between the transfer value per share of the E and the plaintiffs, ② there is a difference between the contents of the instant stock acquisition agreement and the disclosure of the company, and the number of shares traded in the contents of the instant stock acquisition agreement and the payment date, ③ there is a clear situation up to the date of the acquisition of the shares of the non-party company, and ③ the transfer of

However, in the case of ① the total transfer price is determined at KRW 000, and it seems that there is only a difference in the internal distribution of the acquisition price between the Plaintiffs and the originalE operated by the non-party company. ② In the case of ②, it cannot be said that there is a circumstance that may affect the determination of whether the transfer price of the instant shares was determined without any justifiable reason under the transactional practice.

C) As seen in the above facts, the share acquisition agreement of this case was promoted by delegation of the authority of KE and the plaintiffs to KimG who have experienced in processing the company's shares and management rights transfer contract, and the transaction price was set through free negotiations between both parties. According to the testimony in this court of law between Gap and 20, Kim GG prior to the decision to sell the non-party company's shares to SDR, it was revealed that the non-party company was an investor who wants to acquire the non-party company's shares from DDR securities with an intention to acquire KRW 000 or KRW 000,000. In fact, it can be recognized that four investors with the intention to acquire the non-party company's shares and management rights have presented the acquisition price of KRW 00 to KRW 00,000 without any justifiable reason for the transaction practice or any abnormal transaction with the non-party company's management rights. In light of the above legal principles, it cannot be seen that there is no reasonable reason for the plaintiffs to acquire the shares (the non-party company's shares acquisition price of this case).

3. Conclusion

If so, all of the claims of the plaintiffs should be accepted due to the reasons. Since the judgment of the first instance is unfair with different conclusions, the appeal of the plaintiffs is accepted and the judgment of the first instance is revoked, and each of the dispositions of this case is revoked