All
| TITLE | Supreme Court Decision 2017Du57899 Decided April 11, 2019 【Revocation of Rejection of Petition for Correction of Gift Tax】 [full Text] |
|---|---|
| Summary | |
|
[1] Legislative purport of Article 2(4) of the former Inheritance Tax and Gift Tax Act stipulating the imposition of taxes in a case in which gift tax is reduced unreasonably by means of conducting two or more activities or transactions by deeming such case as a single activity or transaction in succession according to the economic substance of such activity or transaction Whether a person liable to pay taxes may be subject to taxation of gift tax pursuant to the foregoing provision on the sole ground of the consequence that emerged after the person conducted several steps of transaction (negative) [2] In the case where a party to the transaction acquired profits from the transaction conducted between persons with no special relationship, but there existed reasonable grounds underpinning the belief that the party to the transaction conducted a transaction by appropriately reflecting the objective exchange value, or the grounds deemed justifiable from the perspective of a rational economic person for conducting a transaction under such transaction terms, whether such a case can be deemed the case where “justifiable grounds exist as a transactional practice,” as prescribed in Articles 35(2) and 42(3) of the former Inheritance Tax and Gift Tax Act (affirmative), and whether a gift tax can be imposed on the grounds of the foregoing provisions (negative in principle) [3] In the case where: (a) Incorporated Company A issued bonds with warrants through a private placement; (b) Incorporated Company B acquired the pertinent bonds with warrants on the same day and immediately sold the right to be allotted new stocks (hereinafter “preemptive right”) detached from the pertinent bonds to Party C, the CEO and the majority shareholder of Company A; (c) Party C filed a gift tax return on the profits accruing from the acquisition and exercise of the preemptive right and paid the tax accordingly; (d) subsequently, Party C filed a claim for correction seeking refund of the gift tax it had paid; (e) however, the tax authority refused Party C’s claim, the case holding that, in view of the entirety of the circumstances, the lower court was justifiable to have determined that the gift tax cannot be imposed by applying Article 40, etc. of the former Inheritance Tax and Gift Tax Act, and the imposition of the tax on the basis of Articles 35(2) and 42(1)3 of the same Act was likewise impermissible |
|
