early 2013 Middle 1320 ( November 25, 2013)

In imposing gift tax on profits accrued from capital reduction, it does not require that there be a purpose of tax avoidance.

In case where a corporation retires its shares or equity shares in order to reduce its capital, the amount equivalent to such profits shall be the donation value of such large shareholders in case where the large shareholders who have a special relationship with the corporation acquire profits from the retirement of such shares or equity shares, and the imposition of gift tax on profits from capital reduction does not require that there be a purpose of tax avoidance in imposing gift tax.

Donation of profits from capital reduction under Article 39-2 of the Inheritance Tax and Gift Tax Act

2014Guhap7249 Revocation of Disposition of Imposition of Gift Tax

grandchildren 00 et al.

Head of the Pakistan Tax Office

May 19, 2015

June 23, 2015

1. All of the plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

Cheong-gu Office

The Defendant’s imposition disposition of KRW 3,132,014,690 on December 4, 2012 against Plaintiff 00 on the gift tax of KRW 3,132,014,690 on April 23, 2015; imposition disposition of KRW 2,594,874,170 on the gift tax of KRW 2,596 on the Plaintiff 00 on April 23, 2015; and imposition disposition of KRW 141,672,830 on the gift tax of KRW 140 on the Plaintiff 00 on December 3, 2012, respectively.

1. Details of the disposition;

A. 00 Terminal Co., Ltd. (hereinafter “00 terminal”) is a corporation established on January 24, 2002 for the purpose of terminal transport and real estate business.

B. The representative director of the 00 terminal held 45,00 shares of the 00 terminal, and the Plaintiff’s 00 shares owned 4,000 shares of the 00 terminal as the spouse of the Plaintiff’s 00 terminal. The StateA holds 31,00 shares of the 00 terminal, StateB (Plaintiff’s 00 shares), and StateA holds 10,000 shares of the 00 terminal shares, respectively.

C. On December 7, 2006, the Defendant: (a) on December 7, 2006, the Note 31,000 shares to the 00-distance media Co., Ltd. (hereinafter “00-distance”); (b) on December 8, 2006, the Note B and the LA respectively transferred 10,00 shares to the Plaintiff 00 each; (c) on December 8, 2006, the Plaintiff 6,500 shares owned by the Plaintiff 10% out of 65,000 shares owned by the Plaintiff 10%; (d) on 400 shares owned by the Plaintiff 4,00 shares owned by the Plaintiff 10% out of 31,000 shares owned by the 00-distance media; and (d) on 31,100 shares owned by the 31,000 shares each share, 31,000 shares out of the remaining 00 shares owned by the Plaintiff 31,0000 percent shares each share.

D. From September 10, 2012 to October 19, 2012, the Central Regional Tax Office conducted an investigation into changes in stocks with respect to the Plaintiffs. On December 7, 2006, 2006, the Central Tax Office: (a) had not transferred 31,00 shares owned by it to a 00-mt media; (b) had retired 00 terminal at a price lower than that of the shares of the StateA; and (c) had retired 7,189,029,391 shares of the State; and (d) had been notified the Defendant of the said taxation data by deeming that Plaintiff 00, who is a major shareholder of the StateA with a special relationship, obtained each benefit of KRW 42,401,809.

E. Accordingly, on December 4, 2012, the Defendant separately decided and notified KRW 5,726,88,860 of the gift tax for the year 2006 to Plaintiff 00, and KRW 141,672,830 of the gift tax for the year 2006 to Plaintiff 00 on December 3, 2012 (hereinafter “Disposition imposing gift tax on Plaintiff 00”) (hereinafter “Disposition imposing gift tax on Plaintiff 00”).

F. Since then, the Defendant rendered a decision to reduce the amount of penalty tax of KRW 2,594,874,170 from the amount of penalty tax of KRW 2,59,874, and 170 from the amount of penalty tax of KRW 2,595 on March 4, 2015 on the ground that the part of the imposition of penalty tax of KRW 200 against the Plaintiff grandchild was illegal, without specifying the type of penalty tax and the basis for calculation of the amount of penalty tax (hereinafter referred to as “the imposition of penalty tax of KRW 2,594,874,170 from the amount of penalty tax of KRW 170 from the amount of penalty tax of KRW 2,59 on the amount of penalty tax of KRW 2,59 on the amount of penalty tax of KRW 2,59,874,170 on the amount of penalty tax of KRW 20 on the remaining amount of reduction determined as above). The Defendant imposed penalty tax on the Plaintiff grandchild on December 23, 2015 (hereinafter referred to as “the Plaintiff”).

G. Meanwhile, on March 4, 2013, the Plaintiffs were dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal, but the Tax Tribunal dismissed the said appeal on November 25, 2013.

[Ground of recognition] Facts without dispute, Gap's 1 to 8, 12, 13 evidence, Eul's 1 to 11 (including each number number), the purport of the whole pleadings

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

A. The plaintiffs' assertion

1) The Plaintiffs agreed to make an investment in the form of a 00-ray media and an investment association in order to return 1,689,500,000 won, including down payment, paid by the Plaintiffs at the request of the StateA, in the form of a 00-ray and an investment association. Pursuant to the above agreement, a 00-ray medium takes over the 31,00 shares of a secondary terminal owned by the StateA, and the acquisition price was set at KRW 1,689,50,000, the initial amount invested by the StateA was set at KRW 31,689,500,000, which was the 31,689,500,000 won, which was paid at the first investment by the State. However, the said 1,689,500,000 won could not be refunded to the StateA, and thus, each disposition imposing gift tax against the Plaintiffs was unlawful.

2) On December 4, 2012, the Defendant imposed penalty tax of KRW 2,594,874,170 on Plaintiff Bah 00 on December 4, 2012, on the ground that there was an error of law that does not specify the type of penalty tax and the grounds for calculation of the amount of penalty tax, etc., and subsequently, imposed penalty tax on Plaintiff Bah 00 on April 23, 2015. In short, even if the Defendant rendered a decision to reduce penalty tax internally, it cannot be said that there was a valid decision to reduce penalty tax. Accordingly, the imposition of penalty tax on Plaintiff Bah 00 is unlawful as it imposed double taxation on the same grounds for taxation.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination on the legitimacy of imposition of each gift tax on the Plaintiffs

6. In light of the following circumstances: ① after the head of a regional tax office decided to collect investment funds from 00 terminals in the course of tax investigation into the Plaintiffs, Plaintiff 1’s 00 media, the representative director of 00 media did not acquire shares of other corporations in the above tax investigation process; ② 00 times the head of the 00-use media did not prepare a sales contract for shares with the Plaintiff 10-use media; ③ 00-use of shares were 00-use stocks were 000-use stocks were 000-use stocks; ④ 100-use stocks were 00-use stocks were 00-use stocks were 00-use stocks were 00-use stocks were 100-use stocks were 00-use stocks were 000-use stocks were 00-use stocks were 00-use stocks were 10-use stocks.

As to this, the plaintiffs asserted that since there was no purpose of evading gift tax due to the reduction of capital by unequal consideration, it cannot be subject to gift tax even if they gain profits, it cannot be subject to taxation of gift tax. However, Article 39-2 (1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201; hereinafter the same) stipulates that in case where a corporation retires stocks or shares of some shareholders in order to reduce its capital, the amount equivalent to such profits should be the value of donated property of the relevant large shareholder in case where the large shareholder gains profits from the retirement of shares or shares of some shareholders in order to reduce its capital, the amount equivalent to such profits shall be deemed the value of donated property of the relevant large shareholder. Accordingly, the above argument

In addition, according to the rules and regulations of the property tax and-244 (as of June 28, 2012), property-101 (as of February 17, 2010), written 4 team-200 (as of February 6, 2006), and 4 team-1039 (as of July 7, 2004), where capital reduction takes place without the purpose of evading gift tax under the Debtor Rehabilitation and Bankruptcy Act, it is reasonable to exclude the subject of gift tax from the subject of gift tax if capital reduction takes place without the purpose of evading gift tax. In accordance with the Corporate Restructuring Promotion Act, the Company Reorganization Act, etc., it is reasonable to exclude the subject of gift tax from the subject of gift tax if capital reduction takes place, not with the purpose of evading the transfer of management right or gift tax, and thus, it is consistently interpreted that the taxation of gift tax should be determined by confirming the mutual relation, the reason why the former Inheritance Tax and Gift Tax Act was amended and the contents of the established rules adopted by the Plaintiffs, even if comprehensive examination is conducted by the Plaintiffs’ intent to avoid bankruptcy due to its financial difficulties.

D. Whether the imposition of additional tax on the Plaintiff’s seat is legitimate

A disposition of reduction or exemption is a beneficial administrative disposition that revokes a part of the initial taxation disposition, but it is an administrative disposition with the other party, and thus, in principle, it takes effect. However, if a disposition of reduction or exemption has been taken, it is merely an effect of revoking a part of the initial taxation disposition, not to determine the balance of the balance, but to determine the tax liability. It is not an original disposition and a separate legal effect as to the part of the amount of tax reduced thereby, and it is not an independent from the original disposition, and it can be done by a method that can objectively know the purport of revocation, such as changing the initial disposition and cancelling the disposition, and making a new disposition on the premise of cancellation of the disposition, without a special form. In light of the fact that a disposition of reduction or exemption does not require a special form, it shall take effect, unless there are special circumstances, in the case of a disposition of reduction or exemption, as well as by a method that can objectively inform the taxpayer of the intent of reduction or exemption (see, e.g., Supreme Court Decisions 2001Da9137, Apr. 111, 2003).

However, according to the evidence Nos. 12, 8, and 9, the Defendant, on March 4, 2015, corrected the amount of property tax of KRW 2,594,874, and 170 for the Plaintiff 100 on March 4, 2015, as well as the amount of property tax of KRW 2,594,874, and around that time, notified the Plaintiff 100 on such purport.

In light of the above facts in light of the legal principles as seen earlier, the part of the imposition imposition of penalty tax on Plaintiff 100 on December 4, 2012, which was duly revoked and extinguished. Thus, the above imposition of penalty tax is effective, and the above argument of Plaintiff 1 kn Chang-man, who is the double taxation, is without merit.

3. Conclusion

Therefore, all of the plaintiffs' claims are dismissed as it is without merit. It is so decided as per Disposition.

section 3.

Relevant statutes

/ former Inheritance Tax and Gift Tax Act (Amended by Act No. 11130, Dec. 31, 201)

Article 39-2 (Donation of Profits Following Reduction of Capital)

(1) Where a corporation retires the stocks or equity shares of some stockholders in order to reduce its capital, and thus its large stockholders who fall under any of the specially related persons prescribed by Presidential Decree have acquired profits, the amount equivalent to such profits shall be deemed the value of donated property of such large stockholders.

(2) In applying paragraph (1), the method of calculating profits shall be prescribed by Presidential Decree.

Article 29-2 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (Amended by Presidential Decree No. 23591, Feb. 2, 2012);

(1) "Person in special relationship prescribed by Presidential Decree" in Article 39-2 (1) of the Act means a person in relationship falling under any subparagraph of Article 2-2 (1) with one stockholder, etc.

(2) The profits accruing from the reduction of capital pursuant to the provisions of Articles 39-2 (1) and 42 (1) 3 of the Act shall be any of the following profits:

1. The relevant profits in case where the value obtained by subtracting the amount per stock paid by the retirement of stocks from the appraised value per stock of capital reduction is not less than 30/100 of the appraised value per stock of capital reduction or the amount calculated by the following formula is not less than 300 million won:

(The appraised value per stock of the capital reduction - the amount per stock paid at the time of stock retirement) ¡¿ Total number of capital reduction ¡¿

The ratio of shares held by the large shareholder after the reduction of capital ¡¿ the number of shares held by the large shareholder in a special relationship with him/her.

Number of Stocks

2. Where the appraised value per stock of the reduced stocks is not more than their face value (where the price paid for the retirement of stocks is not more than their face value, referring to the relevant consideration; hereafter in this subparagraph, the same shall apply), and where the price has been paid for the stocks in excess of their appraised value, the relevant gains (where the appraised value per stock of the reduced stocks, which has been paid for the retirement of stocks, is not less than 30/100 of the appraised value per stock of the reduced stocks, or the amount calculated by the following formula, is not less than 300 million won, the relevant gains (the appraised value per stock paid for the retirement of stocks - the appraised value of the reduced stocks per stock) ¡¿

(3) The calculation of profits under paragraph (2) shall be based on the date on which a resolution of the general meeting of shareholders is passed for capital reduction.