Open Decision Ledger · Tax & international taxation
Corporate tax: the par-value exclusion proviso applies to ordinary companies
Supreme Court, Apr. 30, 2026, 2025Du34763 (judgment)
No holding summary · checked against points at issue. The official text publishes no summary of the holding for this decision. The quotation and factors in this record are copied verbatim from the points at issue; the evidence for each axis is taken from the points at issue, the order and the reasons.
Case name: 법인세부과처분취소
Official text on the National Law Information Center
Question
Was the proviso to Article 17(1)(i) of the former Corporate Tax Act, which removes from the exclusion from gross income the amount by which shares issued in a debt-to-equity conversion exceed market value, to be applied to corporate taxpayers generally, and was the excess over market value correctly taxed as debt-forgiveness income of the plaintiff?
Holding
Yes. The Supreme Court held that the proviso to Article 17(1)(i) of the former Corporate Tax Act is in principle to be applied to corporate taxpayers generally, and is not confined to cases such as companies under rehabilitation or companies showing signs of insolvency, for which further tax treatment was planned. It found no error in the court below treating the amount exceeding market value within the par-value excess on the shares as debt-forgiveness income included in the plaintiff's gross income, nor in its valuation of market value, its rejection of the profit-sharing right and its treatment of Article 39 of the former Inheritance and Gift Tax Act, and dismissed the appeal.
Points at issue, verbatim
구 법인세법 제17조 제1항 제1호 단서 규정은 원칙적으로 법인세 납세의무자인 일반기업 전반에 두루 적용되는지 여부(적극)
Unofficial English translation
Whether the proviso to Article 17, paragraph (1), subparagraph 1 of the former Corporate Tax Act applies, in principle, generally to all ordinary enterprises that are corporate tax taxpayers (affirmative)
Disposition
Dismissed Stated in the decision
상고를 기각한다. 상고비용은 원고가 부담한다.
Unofficial English translation
The appeal is dismissed. The costs of the final appeal shall be borne by the plaintiff.
Form of the test
Elements stated Stated in the decision
채무의 출자전환으로 주식 등을 발행하는 경우 그 주식 등의 시가를 초과하여 발행한 금액을 익금불산입 대상에서 제외하는 구 법인세법 제17조 제1항 제1호 단서 규정은 원칙적으로 법인세 납세의무자인 일반기업 전반에 두루 적용된다고 보아야 하고, 회생기업이나 부실징후기업 등과 같이 추가로 과세특례가 예정되어 있는 경우로 그 적용범위를 한정할 것은 아니다.
Unofficial English translation
Where shares, etc. are issued through a debt-to-equity swap, the proviso to Article 17, paragraph (1), subparagraph 1 of the former Corporate Tax Act, which excludes from the gross income exclusion the amount issued in excess of the fair market value of such shares, etc., must be regarded as applying, in principle, generally to all ordinary enterprises that are corporate tax taxpayers, and its scope of application should not be limited to cases where special tax treatment is additionally provided, such as enterprises in rehabilitation or enterprises showing signs of insolvency.
Factors
- 조세법규의 해석 기준
- 구 법인세법 제17조 제1항 제1호 단서의 입법 취지
- 구 법인세법 제17조 제1항 제1호 단서 규정은 원칙적으로 법인세 납세의무자인 일반기업 전반에 두루 적용되는지 여부(적극)
Unofficial English translation
• Standard for the interpretation of tax statutes
• Legislative intent of the proviso to Article 17, paragraph (1), subparagraph 1 of the former Corporate Tax Act
• Whether the proviso to Article 17, paragraph (1), subparagraph 1 of the former Corporate Tax Act applies, in principle, generally to all ordinary enterprises that are corporate tax taxpayers (affirmative)
Relation to precedent
Follows earlier decisions Stated in the decision
대법원 2012. 7. 5. 선고 2012두3972 판결 등 참조
Unofficial English translation
see Supreme Court Decision 2012Du3972 decided July 5, 2012, etc.
Decisions referred to
[1] 대법원 2012. 7. 5. 선고 2012두3972 판결
Burden of proof
Not addressed Not in the decision
Open question and revisit condition
Where the court below gave reasons the Supreme Court thought not entirely apt, how closely must the valuation of unlisted shares under Article 54(4) and (2) of the former Enforcement Decree of the Inheritance and Gift Tax Act follow the substance of the conversion?
Any amendment to Article 17(1) of the Corporate Tax Act, including one following the amendment by Act No. 16008 of 24 December 2018, or a later decision changing how market value is fixed for shares issued on conversion, would require this entry to be read again.
Cross-family AI independent reading & axis check
7 of 8 axes matched GPT-6 Astra (OpenAI, codex CLI) · 2026-10-24
A reader from another model family (GPT-6 Astra), given the official text but not the primary reading, agreed on 7 of the 8 axes; the readings differed on axis 8 (open question and revisit condition).
Axis 8 (Open question and revisit condition): Primary “Where the court below gave reasons the Supreme Court thought not entirely apt, how closely must the valuation of unlisted shares under Article 54(4) and (2) of the former Enforcement Decree of the Inheritance and Gift Tax Act follow the substance of the conversion?” vs Independent “Under what circumstances would a separate special tax provision alter the treatment of debt forgiveness income arising from a debt-to-equity conversion?”
The primary asks how unlisted share valuation should reflect the substance of the conversion, while the independent asks when separate tax relief changes the treatment of debt forgiveness income.
구 법인세법 제17조 제1항 제1호 단서 규정은 원칙적으로 법인세 납세의무자인 일반기업 전반에 두루 적용되는지 여부(적극)Raw responses and comparison record: Protocol · Blind readings (JSONL) · Axis comparison (JSONL) · SHA-256 (JSON)
Lower-court contrast & scope of application
Lower-court reading vs. Supreme Court holding
Lower-court context: The Suwon High Court, in its judgment of 25 July 2025 (2022Nu15628), held that the amount exceeding market value within the par-value excess on the shares issued on conversion was debt-forgiveness income to be included in the plaintiff's gross income. It held that the defendant's market value, computed under Article 54(4) and (2) of the former Enforcement Decree of the Inheritance and Gift Tax Act, was reasonable in light of the substance and practice of the transaction. It rejected the claim that the profit-sharing right to revenues from the messenger platform outside Japan had to be reflected in market value, and held that Article 39 of the former Inheritance and Gift Tax Act, which presupposes an unequal capital increase, did not apply.
Supreme Court standard: The Supreme Court found no error. It held that the court below was right to treat the amount exceeding market value as debt-forgiveness income included in the plaintiff's gross income, and that the proviso's scope had not been misread. On the market value, it noted that some of the reasons given below were not entirely apt, but that the conclusion applying the valuation methods of the former Enforcement Decree of the Inheritance and Gift Tax Act was correct. It likewise upheld the rejection of the profit-sharing right and the treatment of Article 39 of the former Inheritance and Gift Tax Act, and dismissed the appeal on the unanimous opinion of the participating Justices.
Distinguishing conditions
- Shares issued otherwise than in a debt-to-equity conversion, where the main clause of Article 17(1)(i) of the former Corporate Tax Act governs the par-value excess as a capital transaction.
- Shares issued at market value or below it, so that no amount exceeds market value and no debt-forgiveness income arises.
- An unequal capital increase among shareholders, in which Article 39 of the former Inheritance and Gift Tax Act, which presupposes such an increase, may apply first.
Record verification notes
Match the transaction date with the statute then in force: the Corporate Tax Act before the amendment by Act No. 16008 of 24 December 2018, the Inheritance and Gift Tax Act before the amendment by Act No. 13557 of 15 December 2015, and its Enforcement Decree before the amendment by Presidential Decree No. 26069 of 3 February 2015. Then set the shares issued on conversion against the market value the tax authority computed, and against any right to share revenues the company claims from a parent, since the Court did not reflect such a right for a company in business under three years. Note that the Court accepted the valuation method although it thought part of the reasoning below was not apt, so read the reasons of the court below before relying on them.
From the official text
Points at issue
[1] 조세법규의 해석 기준 [2] 구 법인세법 제17조 제1항 제1호 단서의 입법 취지 / 구 법인세법 제17조 제1항 제1호 단서 규정은 원칙적으로 법인세 납세의무자인 일반기업 전반에 두루 적용되는지 여부(적극)
Unofficial English translation
[1] Standard for the interpretation of tax statutes [2] Legislative intent of the proviso to Article 17, paragraph (1), subparagraph 1 of the former Corporate Tax Act / Whether the proviso to Article 17, paragraph (1), subparagraph 1 of the former Corporate Tax Act applies, in principle, generally to all ordinary enterprises that are corporate tax taxpayers (affirmative)
Summary of the holding
The official text publishes no summary of the holding for this decision. The quotation and factors in this record are copied verbatim from the points at issue; the evidence for each axis is taken from the points at issue, the order and the reasons.
Order
상고를 기각한다. 상고비용은 원고가 부담한다.
Unofficial English translation
The appeal is dismissed. The costs of the final appeal shall be borne by the plaintiff.
Provisions referred to
[1] 국세기본법 제18조, 지방세기본법 제20조 / [2] 구 법인세법(2018. 12. 24. 법률 제16008호로 개정되기 전의 것) 제17조 제1항 제1호
Read 2026-10-24 · Cross-read 2026-10-24. All quotes matched against the official text. The Chinese-character placeholders the court used for anonymised parties are given in their Korean readings, and parenthetical Chinese-character glosses are omitted.
Every entry is published only after all quotes have been matched character by character against the official text, and audited by an independent second reading from a different model family across all eight axes. Both agreed axes and text-grounded interpretive divergences are recorded openly. The ledger is a research record, not an assessment of the court or advice on any matter.
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