[1] Criteria for determining whether an oligopolistic shareholder is an oligopolistic shareholder under Article 39 subparagraph 2 of the former Framework Act on National Taxes and Article 20 of the former Enforcement Decree of the Framework Act

[2] The burden of proving the existence of shares

[1] Article 39 subparag. 2 of the former Framework Act on National Taxes (amended by Act No. 4672 of Dec. 31, 1993) and Article 20 subparag. 2 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 14076 of Dec. 31, 1993) provide that a member of a group of shareholders who holds at least 51/100 of the total amount of outstanding shares of a corporation shall be an oligopolistic shareholder and thus the secondary tax liability shall be imposed on such oligopolistic shareholder. The reason is that the number of shares owned is likely to actually control the company's management through the exercise of voting rights at a general meeting of shareholders. Thus, whether a person is an oligopolistic shareholder under Article 39 of the same Act shall be determined based on the truth unless there are special circumstances such as the company reorganization procedure, and it shall not be determined specifically as an oligopolistic shareholder, even if there is no specific fact that he does not participate in the company management.

[2] The facts of stock ownership are to be proved by the tax authorities’ list, list of stock transfer status, register of corporate register, etc.; however, even in cases where it appears to be a single shareholder in light of the above data, where there are circumstances such that the actual shareholder was stolen or registered in a name other than the real shareholder’s name, the actual shareholder should not be deemed to be a shareholder, but the nominal owner who asserts that he is not a shareholder should prove that he is not a shareholder.

[1] Article 39 subparagraph 2 of the former Framework Act on National Taxes (amended by Act No. 4672 of Dec. 31, 1993), Article 20 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 14076 of Dec. 31, 1993) / [2] Article 39 subparagraph 2 of the former Framework Act on National Taxes (amended by Act No. 4672 of Dec. 31, 1993), Article 20 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 14076 of Dec. 31, 1993), Article 26 of the Administrative Litigation Act [liability]

[1] [2] Supreme Court Decision 93Nu23411 delivered on March 11, 1994 (Gong1994Sang, 1219), Supreme Court Decision 94Nu622 delivered on August 12, 1994 (Gong1994Ha, 2314), Supreme Court Decision 94Nu797 delivered on January 20, 1995 (Gong195Sang, 930), Supreme Court Decision 94Nu13077 delivered on March 24, 1995 (Gong195Sang, 1768) / [2] Supreme Court Decision 91Nu1721 delivered on July 23, 1991 (Gong191, 2264), Supreme Court Decision 109Nu19631 delivered on December 12, 199 (Gong1964, 192)

Plaintiff 1 and one other (Attorneys Ha Chang-soo et al., Counsel for the plaintiff-appellant)

Head of Seocho Tax Office

Seoul High Court Decision 94Gu5658 delivered on August 10, 1995

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

As to the Grounds of Appeal

Article 39 subparagraph 2 of the Framework Act on National Taxes (amended by Act No. 4672 of Dec. 31, 1993) and Article 20 of the Enforcement Decree of the same Act provide that a member of a group of stockholders who owns not less than 51/100 of the total issued and outstanding stocks of a corporation shall be deemed to be in a position of de facto controlling the company operation through the exercise of voting rights at a general meeting of shareholders depending on the number of stocks owned. Thus, whether a member is an oligopolistic stockholder under Article 39 of the same Act shall be determined based on the truth unless there are special circumstances such as the company reorganization procedure, etc., and it shall not be determined as an oligopolistic stockholder even if there is no specific fact in the company operation. However, even if the tax office appears to be a large stockholder in light of the above data, it shall be proved by the list of stockholders, the list of stocks movement situation, the list of stocks register, etc., and if it appears to be a de facto stockholder, it shall not be deemed to constitute a stockholder under 197.294.

In the same purport, the court below is justified in holding that the plaintiffs are subject to secondary tax liability on the grounds that there are insufficient special circumstances in light of the various circumstances at the time of original adjudication, and there are no errors in violation of the rules of evidence, such as theory of lawsuit, or in misunderstanding of facts due to incomplete deliberation, unless the plaintiffs prove that their names were stolen or facts were merely a nominal shareholder, not a substantial shareholder, and merely a nominal shareholder. The arguments are without merit.

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing plaintiffs. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Jong-sik (Presiding Justice)