Writtenby: Jaesun Kim

Translatedby: Jooyeon Han

1.Overview

This report is to figure out whether the tradingvalue of listed stocks within 6 months before and after the valuation date canbe regarded as the current market price.

(1) The value of the property on which inheritance tax or gift tax is levied pursuant to this Act shall be based on tis current market price as at the commencement date of inheritance, or as at the date of donation (hereinafter referred to as "base date of assessment"). In such cases, the value (excluding cases falling under Article 63 (2))) assessed in accordance with the assessment methods prescribed in Article 63(1)1 (a) shall be deemed the current market value of the property. <Amended by Act No. 14388, Dec 20, 2016)

(2) The current market price prescribed in paragraph (1) shall be the value deemed to be normally established when many and unspecified persons engage in transactions freely, and include what is accepted as the current market price, as prescribed by Presidential Decree, such as price of expropriation, price of public auction, appraised value, etc.

(3) Where it is impracticable to calculate the current market price in applying paragraph(1), the value assessed by the methods stipulated under Articles 61 through 65, based on the kinds, scale, transaction circumstances, etc. of the relevant property, shall be deemed the current market price.

(4) For the purposes of paragraph (1), the value of the donated property added to the value of the inherited property pursuant to Article 13 shall be based on the current market price as at the date of donation.

(5) In determining the appraised value prescribed in paragraph (2), requests shall be made for at least two appraisal institutions, as prescribed by Presidential Decree, In such cases, where grounds prescribed by Presidential Decree exist, such as that the value appraised by an appraisal institution is below 80/100 of the value appraised by another appraisal institution, etc., the head of the competent tax office or the Director of a regional National Tax Service may designate the relevant appraisal institution as an appraisal institution whose appraisal of market price is not approved within a fixed period not exceeding one year following procedures prescribed by Presidential Decree, as prescribed by Presidential Decree, and the value appraised by an appraisal institution designated as an appraisal institution whose appraisal of market price is not approved while it is designated such shall not be deemed a market price. <Newly Inserted by Act No.13557, Dec.15, 2015;Act No. 14388, Dec. 20, 2016>

=>Article 63 Inheritance tax and gift tax act (Assessment of Securities, etc.)

(1) Securities shall be assessed by any of the following methods: <Amended by Act No. 11845, May 28, 2013; Act No,15488, Dec.20, 2016>

1. Assessment of shares of stock, etc.:

(a) With regard to shares, etc. prescribed by Presidential Decree (hereinafter referred to as "exchange-listed shares" in this subparagraph) among shares of corporations listed on the stock exchange, traded in the stock market prescribed by Presidential Decree, which is provided for in the Financial Investment Services and Capital Markets Act, the average amount (where it is inappropriate to calculate the average amount for two months before and after the base date of assessment because any grounds for the increase of capital, merger, etc. arise during that period, the average amount shall be calculated for the period prescribed by Presidential Decree during the period of two months before and after the base date of assessment) of closing market prices (irrespective of whether trading was conducted or not) on a daily basis in the stock exchange permitted pursuant to the Finantial Investment Services and Capital Markets Act publicly announced for two months before and after the base date of assessment (where the base date of assessment is no trading day prescribed by Presidential Decree, such as a public holiday, the base date of assessment shall be the day before the date): Provided, That where profits generated from a merger are calculated pursuant to Article 38, market prices of exchange-listed shares owned by a corporation that ceases to exist or is acquired, or newly incorporated or surviving corporation through a merger (including a merger after division) shall be closing market prices in the stock exchange as of the base date of assessment;

(b) Item (a) shall apply mutatis mutandis to stocks and investment shares prescribed by Presidential Decree, among those of a stock-listed corporation prescribed by the Financial Investment Services and Capital Markets Act, which is prescribed by Presidential Decree;

(c) Deleted; <by Act No. 14388, Dec.20, 2916>

2. Shares of stock, etc.; other than those prescribed in subparagraph, 1 shall be assessed in accordance with methods prescribed by Presidential Decree, based on assets, earnings, etc. of the relevant corporation.

(2) Notwithstanding paragraph (1) 1, any of the following stocks, etc. shall be assessed according to the methods prescribed by Presidential Decree, based on the business feasibility, transaction circumstances, etc. of the relevant corporation: <Amended by Act No. 11845, May 28, 2013; Act No. 13557, Dec 15, 2015>

1. Stocks, etc. of a corporation that has reported on its securities to the Financial  Services Commission for the purpose of public offer within the period prescribed by Presidential Decree;

2. Of the stocks, etc. mentioned paragraph (1) 1 (c), stocks, etc. of a corporation that has applied for listing to the securities exchange prescribed by the Finantial Investment Services and Capital Markets Act, which is prescribed by Presidential Decree, within the period prescribed by Presidential Decree for the purpose of trading its stocks, etc. on the securities exchange;

3. Of the stocks of a corporation listed on an exchange, new stocks acquired as a result of an increase in capital of the relevant corporation, but not listed as at the base date of assessment.

(3) In applying paragraphs (1) 1 and (2), and Article 60 (2), stocks, etc. (excluding the stocks, etc. prescribed by Presidential Decree, such as those of a corporation that has continued to have deficits under Article 14 (2) of the Corporate Tax Act during three or less business year prior to the business year in which the base date of assessment falls) of the largest shareholder or the largest investor prescribed by Presidential Decree and a shareholder, etc. who are specially related to the largest shareholder or the largest investor (hereafter referred to as "largest shareholder, etc" in this paragraph) shall be calculated by adding 20/100 (10/100, in cases of a small or medium enterprise prescribed by Presidential Decree) of the value assessed in accordance with paragraphs (1) 1 and (2) or the value recognized in accordance with Article 60 (2) to such value, but where the largest shareholder, etc. owns in excess of 50/100 of the total number of issued shares with voting rights or the total amount of invested capital of the relevant corporation, 30/100 (15/100, in cases of a small or medium enterprise prescribed by Presidential Decree) shall be added thereto. In such cases, the method of calculating stocks, etc. held by the largest shareholder, etc. shall be prescribed by Presidential Decree. <Amended by Act No. 11130, Dec. 31, 2011; Act No. 13557, Dec. 15, 2015; Act No. 14388. Dec. 20, 2016>

(4) Deposits, savings, installment savings, etc. shall be assessed, based on the value derived by deducting an amount equivalent to the withholding tax prescribed in Article 127 (1) of the Income Tax Act from the aggregate of the total amount of deposits and receipts as at the base date of assessment and teh amount of accured interest receivavle as at the same date.

 3. Conclusion

In accordance with Article 63 paragraph 1sub-paragraph 1 of Inheritance Tax and Gift Tax, the valuation of listed stocksis stipulated to be based on the average two month value of the daily marketprice announced by Korea Exchange. Therefore, even if there is a sale pricewithin 6 months before or after the valuation date, the sale price value cannotbe regarded as current market price.