Seoul Administrative Court-2015-Gu Group-5605 ( October 05, 2016)

Cho Jae-2015-S-081 (2015.09)

The provision on the scope of large shareholders under the Income Tax Act does not constitute unconstitutionality

The provisions of the Enforcement Decree of the Income Tax Act do not constitute unconstitutionality since the provisions of the Enforcement Decree of the Income Tax Act do not constitute unconstitutionality since the provisions of the Enforcement Decree of the Income Tax Act do not constitute unconstitutionality because the shareholder who owns listed stocks can pay attention to and pay attention to little amount of money.

Article 157 (4) of the Enforcement Decree of the Income Tax Act

2016Nu70309 Revocation of disposition of imposing capital gains tax, etc.

The United States of America

Head of the District Tax Office

on October 17, 2017

on October 24, 2017

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The disposition of imposition of capital gains tax of KRW 25,347,890 against the plaintiff on December 9, 2014 by the defendant shall be revoked.

1. Quotation of judgment of the first instance;

This court's reasons are as follows: (a) adding "additional part of the relevant Acts and subordinate statutes" to the corresponding part of the relevant Acts and subordinate statutes (10-11 pages) of the judgment of the court of first instance; and (b) adding the judgment identical with paragraph (2) as the reasons for the judgment of the court of first instance; and (c) cite it in accordance with Article 8(2)

2. Additional determination

A. Whether the amended Enforcement Decree of the Income Tax Act applies retroactively

(1) Summary of the Plaintiff’s assertion

The Enforcement Decree of the Income Tax Act amended by Presidential Decree No. 27074 on March 31, 2016, which was amended by Presidential Decree No. 27074, to exclude the major shareholder who is not the largest shareholder from the list of lineal ascendants and descendants, spouse, and natural parents adopted by another person as full adoption, and relatives other than their spouse and lineal ascendants and descendants from the list of shares holding ratio or the total market value. The amendment realizing the scope of relatives among related parties. The above amendment was made in favor of taxpayers due to reflective consideration to resolve unconstitutional elements, thereby eliminating the disadvantage of the people. Accordingly, the amended Enforcement Decree of the Income Tax Act shall apply retroactively to the transfer of shares. According to the amended Enforcement Decree of the Income Tax Act, the transfer of shares does not require capital gains tax because the Plaintiff does not fall

(2) Determination

In principle, an administrative disposition is governed by the amended Act and subordinate statutes enforced at the time of the disposition, unless otherwise prescribed by the transitional provision (see, e.g., Supreme Court Decision 2008Du9324, Sept. 10, 2009): Provided, That even if the statute is retroactively applied, where there is no direct relation to the interests of the general public, the retroactive application of the statute is allowed only in exceptional cases where there are special circumstances, such as where the benefit is promoted, where disadvantage or pain is removed (see, e.g., Supreme Court Decision 2004Da8630, May 13, 2005).

Even if the above revised provision is applied retroactively on the ground as alleged by the Plaintiff, if there is no direct relation with the interests of the general public, it cannot be deemed that there are special circumstances, such as promoting the benefit, and removing disadvantages or pains. Article 157(4) of the Enforcement Decree of the Income Tax Act is effective from April 1, 2016 according to the transitional provision of the Addenda, and it is only applicable to the transfer of shares after its enforcement date. The Plaintiff’s assertion is without merit.

B. Whether the delegation scope exceeds the delegation scope

(1) Summary of the Plaintiff’s assertion

Although the Income Tax Act limits the transfer margin of listed stocks to the "large stockholder", the Enforcement Decree of the Income Tax Act, which was delegated to the large stockholder, expanded the scope of the "large stockholder" to the large stockholder who is in a special relationship with the large stockholder by setting the requirements of the "large stockholder", and it was unlawful to include the large stockholder to the individual investors who are not the large stockholder by setting the criteria of the total market

(2) Determination

In order to prevent modified donation using listed stocks which are one of the legislative purposes of the instant legal provisions, it is necessary to identify and taxation as a whole the shares of not only one shareholder who transfers the relevant shares, etc., but also the shares of relatives and other related persons. In light of the provision of Article 1-2 of the Enforcement Decree of the Framework Act on National Taxes, the scope of a related party is clearly defined. In light of the major shareholder’s corresponding standard under the Enforcement Decree of the instant Act and the accessibility of information about the status of stockholding of major shareholders, etc., the shareholder who owns listed stocks can anticipate whether he/she is subject to taxation of stock transfer income tax if he/she pays attention and attention to the extent that he/she is subject to taxation pursuant to the provision of the instant Enforcement Decree. In full view of these factors, the Enforcement Decree of the instant legal provisions are properly prescribed within the delegation scope to achieve the legislative purpose of the instant legal provisions, and therefore, the provision of the instant Enforcement Decree cannot be deemed as invalid beyond the delegation scope of the parent law (see Supreme Court Decision 2006Du4394, Nov. 10, 2006).

3. Conclusion

The judgment of the first instance is justifiable. The plaintiff's appeal is dismissed.