Cho Jae-2013-Seoul Government-2478 ( October 29, 2013)

Article 41-3 (2) of the Inheritance Tax and Gift Tax Act shall not be deemed to violate the principle of equality under Article 11 of the Constitution, or the provision of Article 23 (1) of the Constitution.

It is difficult to regard the date of the settlement of the profits from donation as the date on which three months have elapsed from the date of listing of the shares, and the documents related to the fixed public offering price do not constitute "documents confirming the substantial increase in corporate value".

Donation of profits from the listing, etc. of stocks or equity shares under Article 41-3 of the Inheritance Tax and Gift Tax Act

2013Guhap19523 Revocation of Disposition of Imposition of Gift Tax

Park AA

00. Head of tax office

January 24, 2014

March 25, 2014

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of KRW 1,346,963,520 against the Plaintiff on February 4, 2013 is revoked.

1. Details of the disposition;

A. From December 29, 2005 to April 8, 2011, the Plaintiff served as the managing director of LO00 corporation* (LO00 CO., LTD., hereinafter the non-party company). On December 1, 2008, the Plaintiff received 100,000 shares of the non-party company from the non-party company from KimB, the largest shareholder of the non-party company and the representative director of the company, and thereafter received 128,131 shares of the non-party company held by the Plaintiff as of the end of 2009 through par value division and free increase. Meanwhile, the shares of the non-party company were listed in the securities market on January 28, 2010.

B. As a result of the investigation of changes in stocks against the non-party company, the director of the regional tax office notified the defendant of the value of donated property of the plaintiff pursuant to Article 41-3 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201; hereinafter referred to as the "Inheritance Tax and Gift Tax Act") on the ground that the plaintiff received a donation of the shares of the non-party company from KimB having special relation and obtained profits above the standard prescribed by Presidential Decree within five years from the date of acquisition. Accordingly, on February 4, 2013, the defendant calculated the value of donated property to the plaintiff as follows as KRW 2,947,877,079 as KRW 1,346,963,520 (including additional taxes) for the gift tax for the year 2008 (hereinafter referred to as "disposition of this case").

(1) When settlement is made.

Price per share

(2) Acquisition time;

Price per share

(3) A share;

Corporate Value

Increased Benefits

(4) A share;

Value of donated

(i) ①-B-3)

(5) Number of shares.

(6) Gift tax.

Taxable Value

29,007 won

3,902 won

2,098 won

23,007 won

128,131 Shares

2,947,877,079 Won

C. The Plaintiff, who was dissatisfied with the instant disposition, filed an appeal on April 8, 2013, but was not notified of the decision within the period for decision making, and subsequently, filed the instant lawsuit.

[Ground of recognition] Facts without dispute, Gap evidence 1, Eul evidence 1, Eul evidence 1, 2 and 3, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) 15,700 won determined at the time of listing of the non-party company is the most objective price at the time of listing including profits from stock listing, and thus, the price per stock at the time of settling accounts shall be 15,700 won, which is the fixed public offering price at the time of settling accounts. Therefore, the value of the property per stock shall be 9,700 won (15,700 won per stock at the time of settling accounts - 3,902 won per stock at the time of acquisition - 2,098 won per stock value increase per stock at the time of acquisition, and even if the value of property is calculated by multiplying the number of stocks acquired by 128,131 by 128,131, the value of property to be donated shall be calculated as 1,242,870,700 won

(2) Even if the final public offering price cannot be considered as one share price at the time of settlement of the final public offering price, the final public offering price is the most objective price indicating the corporate value at the time of listing, and is confirmed as the "profit from the substantial increase in corporate value" to be deducted from the value of the donated property. Accordingly, the related data or documents include "documents confirming the substantial increase in corporate value" under Article 31-6 (6) 3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22151, May 4, 2010; hereinafter "Enforcement Decree of the Inheritance Tax and Gift Tax Act"). Therefore, the value of the donated property per share includes 13,307 won (29,07 won per share - 15,700 won per stock at the time of settlement calculated by the Defendant, and the value of the donated property is calculated as 1,705,039,217 percent per share by multiplying the number of acquired shares, notwithstanding the calculation of the value of the donated property.

(3) The Defendant calculated the acquisition value of KRW 500,00,00 per share at the time of acquisition by dividing the acquisition value of KRW 128,131 by the total of KRW 100,00 and KRW 28,131 of the shares increased through par value division and capital increase without compensation, while the “net asset value per share at the time of acquisition” and “net asset value per share on the day preceding the date of listing”, the former calculated the “net asset value per share at the time of acquisition” on the basis of KRW 100,000 of the shares originally acquired without considering the increased shares through face value division and capital increase without compensation, and the latter calculated the “net asset value per share at the time of acquisition” on the basis of KRW 128,131 of the total number of shares acquired without consideration of the increased shares through face value division and capital increase without compensation. However, there is no reason to treat differently the number of shares when calculating the “net asset value per share” and “net asset value per share at the time of acquisition.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) Whether Article 41-3(2) of the Inheritance Tax and Gift Tax Act is unconstitutional

(a)the meaning of the provisions governing the donation of profits resulting from the listing of stocks;

The amendment of the Inheritance Tax and Gift Tax Act, on December 28, 1999, Article 41-3 was newly established in order to prevent an irregular transfer of the transferred stocks by imposing appropriate taxation on the listing marginal profits, even though the donation of unlisted stocks prior to listing to the related parties such as children, etc. for the purpose of obtaining large-scale marginal profits from listing or KOSDAQ listing is intended to contribute marginal profits from listing.

As a result, in case where a person who has a special relationship with the largest shareholder, etc. receives a donation of stocks of the relevant corporation or obtains a compensation therefor within five years from the date of donation acquisition, if the value increases due to the listing of the relevant corporation, the gift tax was levied on the person who has acquired the relevant profits as the value of donated property if there is a difference between the

If shares are listed after the largest shareholder, etc. of an unlisted corporation donated stocks or funds for acquisition of such stocks to a specially related person, the assets received by a specially related person are the value of unlisted stocks or the funds for acquisition of listed stocks on the pretext of the donation.

The gift tax is imposed on the actual donation profits at the first stage of donation of unlisted stocks at the time. However, in the event that the increase in value occurs after the listing, the gift tax is imposed by including the value of the donated property in accordance with Article 41-3 of the Inheritance Tax and Gift Tax Act. In other words, Article 41-3 of the Inheritance Tax and Gift Tax Act provides that, only when the listed stocks for which the evaluation of unlisted stocks was reserved at the time of the donation of unlisted stocks are listed and it is possible to evaluate them, the amount of the listed profits, which is calculated

(B) Calculation method of profits from listing stocks and calculation of amount of gift tax

In cases where the difference between the appraised value per share as of the date of settlement (the appraised value under Article 63 of the Inheritance Tax and Gift Tax Act) [the value of donated property + the profit arising from a substantial increase in corporate value per share as stipulated in Article 31-6(5) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act as of the date of donation of stocks] exceeds 3/100 of the taxable value of each share as of the date of donation of stocks, or [the appraised value per share as of the date of settlement of stocks - the taxable value of the gift tax per share as of the date of donation of stocks] * the number of stocks donated or acquired for value 300 million won or more (the value of the gift tax per share as of the date of donation of stocks - the actual increase in corporate value * the number of stocks acquired for value) - the tax base and tax amount of gift tax can be calculated by adding the original taxable value of stocks to the original taxable value of the gift tax (the taxable value of the donated property where stocks are acquired with the donated property). The settlement of gift tax is made based on the difference between the current taxable base and value of stocks.

Benefits accruing from the listing of stocks = [(1) Value per share as of the date of settlement of accounts - [The acquisition value per share as of the date of acquisition in case of acquisition) of the taxable value of the gift tax per share as of the date on which the stocks are donated + (3) Profits arising from the substantial increase of the value of the company per share] * the number of

(C) Whether Article 41-3(2) of the Inheritance Tax and Gift Tax Act is unconstitutional

Article 41-3 (2) of the Inheritance Tax and Gift Tax Act provides that the profits from the listing of stocks shall be calculated on the basis of the date when three months have elapsed from the listing date of the stocks concerned (hereinafter referred to as the "settlement date").

Article 60(1) of the Inheritance Tax and Gift Tax Act provides that, in principle, the evaluation of listed shares shall be based on market price principle, but in order to ensure objectivity and exclude arbitraryness in the evaluation, the average amount of the average of the closing prices of the exchange values per day publicly announced for two months before and after the evaluation base date, namely, two months before and after the evaluation base date, and four months after the total of two months, shall be regarded as the market price. If the evaluation is based on the "listed date" under Article 41-3(1) of the Inheritance Tax and Gift Tax Act, the issue arises that the last value of the exchange values as prescribed in Article 63(1)1 (a) of the Inheritance Tax and Gift Tax Act is not secured.

In addition, the fixed public offering price of stocks of the non-party company is determined through the process of measuring the value of the company by experts and the application for a demand forecast by a large number of institutional investors. However, in addition to the result of the presumed corporate value demand forecast, it is difficult to regard the non-party company and the Korea Investment Securities Company as an amount determined by consultation with the company and the Korea Investment Securities Company in consideration of the stock market situation, and thus, it is difficult to regard the newly listed shares as an "value that is normally recognized as being constituted if a transaction is made freely between a large number of unspecified persons."

Article 41-3(2) of the Inheritance Tax and Gift Tax Act provides that “The date on which three months have elapsed from the date of listing stocks” shall be determined by the legislators as “the date on which the date of calculating the profit from donation on the listing of stocks falls within the scope of the market price based on the market price principle within the scope of the assessed value based on the market price principle (see Constitutional Court Order 2005Da39, Jun. 20, 2006).” The legislators have the legislative discretion to choose the method of choosing the method of appraisal close to the market price principle (see Constitutional Court Order 2005Da39, Jun. 20, 2006).” It is difficult to deem that the legislators intended to exclude the data of the final tax on new listed stocks for the four-month period from the date of listing, which is the method of assessing the value of the listed stocks, as well as to exclude the data of the market price for one month immediately after listing, from affecting the assessment of the value.

Therefore, Article 41-3 (2) of the Inheritance Tax and Gift Tax Act does not violate the principle of equality under Article 11 of the Constitution or the provision of guarantee of property rights under Article 23 (1) of the Constitution.

(2) As to the Plaintiff’s first argument

As seen earlier, Article 41-3(2) of the Inheritance Tax and Gift Tax Act cannot be deemed to violate the principle of equality under Article 11 of the Constitution or the provision of guaranteeing re-right under Article 23(1) of the Constitution. As such, the assessment value per share as of the date of settlement pursuant to Articles 41-3(2) and 63(1)1(a) of the Inheritance Tax and Gift Tax Act shall be calculated as 29,007 won as of the date of settlement, and the Defendant’s disposition of this case based on this is lawful, and otherwise, the Plaintiff’s assertion that the amount of 15,700 won as of the date of listing the Non-Party Company’s company should be

(3) As to the second argument of the Plaintiff

The profits accrued from the listing of shares under Article 41-3 of the Inheritance Tax and Gift Tax Act shall be calculated by calculating the number of stocks donated or acquired at a cost as of the date of settlement [i.e., the appraised value per share as of the date of acquisition of shares (the acquisition value per share as of the date of acquisition in cases of acquisition) + the number of stocks acquired at a cost. The appraised value per share as of the date of settlement calculated as above may include a substantial increase in the value of stocks by the business performance of the relevant company in addition to the stock value increased by listing. The substantial increase in the value of stocks by the business performance of the relevant company should be excluded from the subject of gift tax. As such, Article 31-6 (6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the portion arising from the increase in the value of the relevant company shall be deducted from the subject of gift tax. In addition, Article 31-6 (6) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the actual profits arising from the increase in the value of the relevant company can not be confirmed by the Plaintiff’s statement on the balance sheet.

(4) As to the third argument by the Plaintiff

Article 41-3(6) of the Inheritance Tax and Gift Tax Act provides that the acquisition of stocks, etc. shall include new stocks acquired or allocated by the corporation upon the issuance of new stocks in order to increase its capital (including the amount of investments) and that such calculation shall be based on the total number of stocks acquired at the time of acquisition and the stocks acquired by the capital increase without compensation. On the other hand, "the profit of increase in corporate value per share" shall be calculated to exclude the portion caused by the substantial increase in corporate value from the appraised value per share as of the date of settlement of accounts, so the net asset value per share should be calculated by dividing the net asset value per share into the total number of stocks issued at the time of acquisition by the financial statements, etc.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.