Article 46 (Tax Special Cases for Exchange of Stocks, etc. Between Businesses)

Where the controlling shareholders, shareholders, or their special relations (hereinafter referred to as "controlling shareholders, etc." in this Article) of a domestic corporation (hereinafter referred to as "corporation to be exchanged" in this Article) transfer all of their stocks or equity interests (hereinafter referred to as "stocks, etc." in this Article) in accordance with a financial structure improvement plan prescribed by Presidential Decree (limited to those approved by a person prescribed by Presidential Decree, hereinafter referred to as "financial structure improvement plan" in this Article) by December 31, 2017, and acquire stocks, etc. of another domestic corporation (hereinafter referred to as "corporation to be acquired by exchange" in this Article) that is not a special relation of the corporation to be exchanged, as prescribed by Presidential Decree, by one of the following methods, in proportion to their ownership ratio, the capital gains tax or corporate tax on the amount equivalent to the capital gains arising from the transfer of stocks, etc. (including capital gains arising to the corporation to be acquired by exchange and its controlling shareholders, etc.) may be deferred until the stocks, etc. acquired are disposed of (including inheritance or gift), as prescribed by Presidential Decree. 1. Method of acquiring stocks, etc. already held or newly issued by the corporation to be acquired by exchange 2. Method of acquiring all of the stocks, etc. held by the controlling shareholders, etc. of the corporation to be acquired by exchange [Limited to cases where the corporation to be exchanged and the corporation to be acquired by exchange belong to different business groups (referring to business groups under Article 2(11) of the Monopoly Regulation and Fair Trade Act. The same applies hereinafter in this Article)]

Where the shareholders, etc. of the corporation to be exchanged who transferred stocks, etc. under Article 1(2) fall under any of the following subparagraphs, the tax that was not paid for the tax year in which such reason occurred shall be paid, or the amount deducted as an expense when calculating taxable income shall be included in gross income. In this case, interest equivalent to the calculated amount as prescribed by Presidential Decree shall be added and paid as capital gains tax or corporate tax, and such tax shall be deemed as the tax payable under Article 64 of the Corporate Tax Act or Article 76 of the Income Tax Act. 1. Where a corporation managing the same business as the corporation to be exchanged belongs to the same business group to which the corporation to be exchanged belonged, within five years from the end of the business year in which the stocks, etc. were transferred. 2. Where the controlling shareholders, etc. re-hold the stocks, etc. of the corporation to be exchanged within five years from the end of the business year in which the stocks, etc. were transferred.

The person who approved the financial structure improvement plan of the corporation to be exchanged that transferred stocks, etc. under Article 1(2) shall submit the content of the financial structure improvement plan and its implementation results annually to the head of the tax office having jurisdiction over the taxpayer's location, as prescribed by Presidential Decree.