Seoul Administrative Court 2013Guhap62119 ( October 23, 2014)

Tax Tribunal 2012 Schedules 4195 (Law No. 12, 2013)

It is reasonable to determine the special relation based on the date of resolution of the general meeting for capital reduction.

Since the calculation of profits arising from capital reduction is stipulated as the date of the resolution of the general meeting of shareholders for capital reduction, it is reasonable to judge whether or not the special relation is determined as the date of resolution of the general meeting of shareholders for capital reduction.

Article 39-2 of the Inheritance Tax and Gift Tax Act (Donation of Benefits Arising from Capital Reduction)

2014Nu52130 Revocation of Disposition of Imposing gift tax

JAA

BB Director of the Tax Office

May 23, 2014

March 10, 2015

April 14, 2015

1. Quotation of judgment of the first instance;

The reasoning of this court's explanation concerning this case is as follows: Article 8 (2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act cited the reasoning of the judgment of the court of first instance in addition to the use of Article 2. D. (2) of the judgment of the court of first instance (from 6 to 10.3 of the judgment of the court of first instance) as follows.

2. Parts to be dried;

(2) As to the special relationship

(A) The plaintiff's assertion

Since compulsory retirement and voluntary retirement under the Commercial Act take effect only through special resolution of the general meeting of shareholders, procedures for protecting creditors, and procedures for the retirement of shares, the gift of profits from capital reduction should be deemed to have been made at the time of completion of the procedures. Therefore, whether there is a special relationship should be determined not on the date of resolution of the general meeting of shareholders for capital reduction, but on the date of completion of the procedures for the retirement of shares. In light of the date of completion of the procedures for

Meanwhile, an employee refers to an officer, a commercial employee, and other persons in an employment contract (see Article 4 of the Enforcement Rule of the Inheritance Tax and Gift Tax Act). As seen in the phrase “other persons in an employment contract”, an employee is premised on an employment contract relationship (actual subordinate relationship). However, the instant company invested 80% by ○○○○, and was established by investing 20% on the condition that the Plaintiff is in an employment contract. Therefore, prior to the resolution of the general meeting of shareholders for capital reduction, the Plaintiff and ○○○ was in a joint management relationship, and thus did not constitute an employee, since the Plaintiff and ○○○○ was merely the instant company’s manager, and did not constitute the instant company solely with 10% shares after the effect of capital reduction.

(B) Determination

Article 21 of the Framework Act on National Taxes, which was applied at the time of May 27, 2008, the resolution date of the general meeting of shareholders for capital reduction, is the date of acquisition of property by donation, and Article 31(1) of the former Inheritance Tax and Gift Tax Act, which was applied at the time, includes all the things belonging to the donee and having economic value that can be realized in money and all the de facto or de facto rights having property value." Article 39-2(1) of the same Act provides that "where a corporation retires stocks or shares of some shareholders in order to reduce its capital, and a large shareholder obtains 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 the value of property donated to the large shareholder." Article 23(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "Except where the provisions of Articles 33 through 45-2 of the Act are applied, the time of acquisition of donated property shall be as follows:

In full view of the above provisions, the issue of “special relationship” under Article 39-2(1) of the former Inheritance Tax and Gift Tax Act is reasonable as of the date of resolution of the general meeting of shareholders for capital reduction.

In addition, Article 29-2(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that "a major shareholder in a special relationship with one shareholder, etc. under Article 39-2(1) refers to a major shareholder under Article 28(2), who is in a relationship under any subparagraph of Article 19(2)." Article 28(2) of the Enforcement Decree of the same Act provides that one of the major shareholders holds at least 1/100 of the total number of outstanding stocks of the relevant corporation. Meanwhile, Article 13(9)2 of the Enforcement Decree of the same Act provides that "an employee (including an employee of a corporation under control by investment; hereinafter the same shall apply) under the Ordinance of the Ministry of Strategy and Finance." Article 19(2)2 of the Enforcement Decree of the same Act provides that "an employee of a corporation under control by investment" includes "an employee of a corporation under control by a person with a special relationship" (see Supreme Court Decision 2011Du689, Nov. 10, 2012).

Article 13(7)1 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, which was applied at the time of May 27, 2008, provides that "an officer (referring to an officer under Article 43(6) of the Enforcement Decree of the Corporate Tax Act and a person who was an officer for whom five years have not passed since his/her retirement; hereinafter the same shall apply)" and Article 43(6)1 of the former Enforcement Decree of the Corporate Tax Act, which was applied at the time, provides that all the officers such as a representative director of a corporation and a liquidator of the board of directors, and Article 4 of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act provides that "an employee, a

○ As of May 27, 2008, the date of resolution of the general meeting of shareholders for capital reduction, as of May 27, 2008, ○○ was the largest shareholder holding 80% of the shares issued by the instant company, and controlled the instant company by investment. The Plaintiff was one of its employees (representative) and the major shareholder holding 20% of the shares issued by the instant company. As such, based on ○○○ upon retirement of shares, the Plaintiff was an employee of the instant company that ○○○ invested and controlled by ○○○○ and was the major shareholder with a special relationship with ○○○

Therefore, we cannot accept all the plaintiff's above argument.

3. Conclusion

Therefore, the plaintiff's claim is dismissed, and the judgment of the court of first instance is just in conclusion, and the plaintiff's appeal is dismissed as it is without merit, and it is so decided as per Disposition.