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| TITLE | Supreme Court Decision 2015Du1984 Decided December 13, 2017【Revocation of Dispositions Collecting Corporate Tax and Imposing Securities Transaction Tax】 [full Text] |
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| Summary | |
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[1] Whether a transfer of shares issued by a domestic corporation upon a merger between foreign corporations constitutes “share transfer” under Article 93 Subparag. 10(a) of the former Corporate Tax Act (affirmative) Whether this same doctrine is applicable in a case where a surviving corporation, prior to a merger, owns the entire shares of a merged corporation (affirmative) Whether in such case the same holds true even if the surviving corporation’s shares are not issued or the merger-related cash payment is not made to the merged corporation’s shareholders (affirmative) [2] Whether a transfer of shares due to a merger constitutes “share certificate transfer” under Articles 1 and 2(3) of the former Securities Transaction Tax Act (affirmative) [3] Meaning of “nondiscrimination principle” under Article 24(1) of the Agreement between the Republic of Korea and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital [4] In a case where: (a) a foreign corporation (“Company A”) established under German law merged with another foreign corporation (“Company B”) whom Company A had owned a 100% stake before the merger took place; (b) the merger led to the transfer of a domestic corporation’s listed shares, which Company B had owned as assets, to Company A; (c) however, upon the transfer of shares, Company A did not issue new shares or provide the merger-related cash payment to either Company B or its shareholders; and (d) consequentially, the competent tax agency reached a decision on the imposition of corporate tax and securities transaction tax and issued a notice thereof, on the ground that the aforementioned share transfer fell under a transfer of marketable securities issued by a domestic corporation, the case holding that: (i) the transfer of a domestic corporation’s listed shares, which Company B had owned as assets, to Company A following the merger between Companies A and B constituted “share transfer” and “share certificate transfer” under Article 93 Subparag. 10(a) of the former Corporate Tax Act and Article 2(3) of the former Securities Transaction Tax Act; and (ii) the taxation disposition, as seen above, did not go against the nondiscrimination principle under Article 24(1) of the Agreement between the Republic of Korea and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital |
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