2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

A. On December 26, 2012, the Plaintiff did not report capital gains tax even though 10,000 shares of ○○○○○ (hereinafter referred to as “○○○○”) that had been registered in his/her name on the register of shareholders were transferred to Korea Securities Finance Corporation due to the enforcement of the collateral pledge on December 26, 2012, and was subject to tax investigation by the Defendant on capital gains tax.

B. The Defendant determined that the beneficial shareholder 10,000 shares of the above ○○○○ was the Plaintiff’s pro-friendly job offering. On December 16, 2002, the Plaintiff issued 7,000 shares of the above ○○○○○○○ (hereinafter “the shares of this case at the time of ○○○○○○’s total number of shares issued 70,000 shares, whichever is later than 10% of the total number of shares issued 70,000 shares). On December 19, 2012, ○○○○ was a person with free interest of 30,000 shares, and thus, ○○○ shares of the Plaintiff’s name were 10,000 shares totaled with 3,00 shares increase, and thus, the Plaintiff was subject to the application of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 18, 202; hereinafter referred to as “the gift Tax”) and gift Tax Act.

C. On July 13, 2015, the Plaintiff appealed and filed a tax appeal with the Tax Tribunal on May 1, 2015, but was dismissed on December 23, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 3, Eul evidence No. 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Around 2002, the Plaintiff heard that it is necessary to diversify ○○○ shares in preparation for listing from Gambling○. Around 2002, the Plaintiff paid 175 million won per share (250 million won per share) to Gambing○○, thereby purchasing the instant shares. Accordingly, the instant disposition based on the premise that the Plaintiff is a title trustee of the instant shares is unlawful.

2) Even if the Plaintiff received the instant shares from ○○○○○ in title trust, it was only for the purpose of share distribution for the listing of ○○○○, and there was no possibility of evading or evading the taxes imposed by ○○○○. Therefore, it does not constitute a title trust of shares subject to the gift tax pursuant to the proviso of Article 41-2(1) and 1 of the Inheritance Tax and Gift Tax Act.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) As to the existence of title trust

A) Facts of recognition

The following facts are acknowledged according to the purport of Gap evidence Nos. 4 through 10, 13, 14 (including branch numbers, hereinafter the same shall apply), Eul evidence Nos. 2 through 8 and the whole pleadings.

(1) According to the statement on the change of stocks, etc. in 2002, ○○○○’s statement on the change of stocks, etc. in the year of 2002, ○○○○’s representative director was the following table. Gab○○ was the ○○○’s representative director until December 27, 2006, and thereafter, ○○○ became the dynamic representative director of ○○○○○.

(unit: State)

Name

Basic

Number of Stocks

Basic

Ratio of Shares

Transfer Limits

Free capital increase;

Horsema

Number of Stocks

Horsema

Ratio of Shares

Major Shareholder Relation

Park ○

24,500

35%

10,500

35,000

35%

Principal

Park ○

30,100

43%

-7,000

9,900

30,000

33%

Punishment;

Park ○

8,400

12%

3,600

12,000

12%

Parents

○ Kim

7,000

10%

3,000

10,000

10%

Other

0

7,000

3,000

10,000

10%

Other

Total

70,000

100%

0

30,000

100,000

100%

(2) On December 16, 2002, the Plaintiff and Park ○○ prepared a share sales contract stating the date of preparation. The main contents thereof are that: (a) the Plaintiff acquires the instant shares from Park○○○○ in the amount of KRW 175 million; (b) the purchase price shall be paid in full on the contractual date (Article 1); and (c) all rights to shares shall be transferred to the Plaintiff at the same time as Park○○ received the full payment of the purchase price (Article 2).

(3) On December 10, 2002, the Plaintiff deposited approximately KRW 110 million in the previous deposit passbook, and withdrawn KRW 296 million in cash on December 16, 2002. Moreover, on December 17, 2002, the Plaintiff deposited KRW 175 million in cash or cashier’s checks up until January 30, 203, as the Plaintiff began to receive KRW 175 million in total as of December 30, 2003. The Plaintiff prepared six copies of receipts to the effect that KRW 175 million in cash or cashier’s checks were received as of December 17, 2005 for each deposit date.

(4) ○○○ paid cash dividends to the Plaintiff’s account as listed below, and the Plaintiff again paid them to Park○○○.

(unit: Won)

○○ - Details of payment of cash dividends for the plaintiff

Date of payment

Total Dividend Amount

Withholding Tax Amount

Actual Payment

Date of payment

Amount paid

April 30, 2008

6,300,000

970,200

5,329,800

May 6, 2008

5,329,800

April 29, 2009

8,400,000

1,293,600

7,106,400

May 4, 2009

7,106,400

April 29, 2010

8,600,000

1,324,400

7,275,600

April 29, 2010

7,275,600

April 28, 2011

7,500,000

1,155,000

6,345,000

April 29, 2011

6,345,000

April 27, 2012

7,600,000

1,170,400

6,429,600

May 3, 2012

6,429,600

Consolidateds

38,400,000

5,913,600

32,486,400

32,486,400

(5) On April 12, 201, 201, Co., Ltd., ○○○○, which is run by ○○○○○, received project financing from ○○○○○○, a loan. In this context, 33,00 shares in the name of ○○○○, and 10,00 shares in the name of the Plaintiff, were offered as security for the said loan. Since then, ○○○○○, Inc., a stock company, ○○○○, a stock company, took over the above loan claim and the right of pledge created over shares of ○○○○○○○, and was appropriated for the repayment of the loan claim by exercising the right of pledge that was acquired.

(6) Around August 2014, the Plaintiff received a notice of report on capital gains tax from the Defendant on the transfer of ○○○ ○○ ○○ ○○ ○ ○○ ○ ○ ○ ○○ ○○ ○○ ○ ○○ ○, so a statement explaining that “The actual ownership of ○ ○○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

(7) On April 28, 2015, the Plaintiff filed a civil lawsuit against ○○○○ in which the Plaintiff filed a claim for reimbursement of KRW 175 million against ○○○○○’s claim for reimbursement of KRW 100,000,00, due to the Plaintiff’s exercise of the right of pledge 10,000 shares, and received a favorable judgment on April 28, 2015.

B) Determination

In full view of the fact that: (a) the beneficial shareholder of the instant shares was ○○ and himself was the title trustee before the disposition of the instant shares was at issue; (b) the Plaintiff provided 10,000 shares, including the instant shares, as security for a company’s loan run by ○○○○; and (c) immediately paid dividends received from ○○○ from 2008 to 2012 during the period of 2012, the Plaintiff may recognize the fact that the instant shares was nominally held in trust by ○○.

In addition, as of the end of 2012, as of the time when the instant shares were transferred in the name of the Plaintiff, ○○○ had a surplus of KRW 4.5 billion (see appropriation of retained earnings attached to the Defendant’s reference document as of May 23, 2017), KRW 560 million in 201, and KRW 770 million in 2012. In light of the ○○○○’s financial status, the acquisition price of the instant shares as asserted by the Plaintiff was considerably low, and the Plaintiff withdrawn KRW 296 million in cash on December 16, 2002, but it is difficult to view that the Plaintiff did not have the right to acquire shares in the name of the Plaintiff and ○○○○○○○○○○○○○○○○○○’s share purchase price, based on the fact that the Plaintiff did not have the right to acquire shares during the period from December 17, 202 to January 30, 2013.

Therefore, this part of the plaintiff's assertion is without merit.

2) Whether the title trust had no purpose of tax avoidance

A) The legislative intent of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 18, 2002; hereinafter the same) is to recognize an exception to the principle of substantial taxation to the purport that the act of tax avoidance using the title trust system is effectively prevented, thereby realizing the tax justice. Thus, the proviso to the above Article is applicable only to a case where the purpose of tax avoidance is not included in the purpose of title trust. In this case, the burden of proving that the purpose of tax avoidance was not included in the purpose of title trust exists on the claimant, and the purpose of tax avoidance should be determined at the time of title trust (see, e.g., Supreme Court Decisions 2010Du24968, Mar. 28, 2013; 2014Du786, May 16, 2014). In short, where only circumstances exist that could have a possibility of tax reduction in the future, it cannot be deemed that the purpose of title trust exists (see, May 37, 20127.

B) According to the purport of Gap evidence Nos. 7 and 9 and the entire pleadings, the following facts are acknowledged: (a) Park○ stated to the defendant that "in relation to the purpose of title trust of the shares of this case, the purpose of reducing the gift tax burden arising from the donation of shares, etc. when there is a reason to ask the following to the children of the company; (b) the amount of distributable retained earnings of ○○○○ has continuously increased from approximately 4.58 billion to about 7.8 billion won as of the end of 2002 to around 7.8 billion won as of the end of 2011; and (c) the plaintiff reported and paid only 14% withheld tax amount with respect to the dividends received from ○○○ from 2008 to 2012.

However, according to the overall purport of Gap evidence Nos. 11, 16, 17, and Eul evidence Nos. 11 and Eul evidence Nos. 11, the following facts are acknowledged: (i) The global income amount of Park○ in the title trust of the shares of this case was approximately KRW 280 million, and the plaintiff was subject to the highest global income tax rate of KRW 150 million; and (ii) the plaintiff was subject to the highest tax rate of KRW 80 million by obtaining the global income amount exceeding KRW 2002,00,000 per year from 2002 to 2011.

However, Article 14 (4) of the former Income Tax Act (amended by Act No. 7006 of Dec. 30, 2003) which was applied to global income for 2002 provides that the dividend income received by the shareholders of an unlisted company shall be imposed based on the global income tax base in principle, unless it falls under the dividend income received as a member of an employee stock ownership association as a member of the employee stock ownership association. Thus, it may be deemed that Park○ has no possibility of tax evasion due to the holding of the shares in this case under his name at the time of title trust or dividend income, and furthermore, it is difficult to view that Park○○ was a title trust with the aim of reducing the comprehensive income tax by expecting that the dividend income exceeding KRW 40 million should be imposed as the separate taxation, and that the dividend income exceeding KRW 40 million should not be considered as the comprehensive taxation.

In addition, considering the fact that the transfer income tax rate of the instant shares is a single tax rate, there is no evidence that ○○○○ acquired assets subject to deemed acquisition tax, and that there is no concern about the likelihood of corporate tax delinquency in light of the earned surplus of ○○○○○○○, etc., it is not reasonable to deem that Park○○ was likely to avoid capital gains tax, deemed acquisition tax, and secondary tax liability, etc. by title trust of the instant shares, and it is difficult to view that the mere mere fact that ○○ was “the purpose of reducing the subsequent gift tax burden”

C) Therefore, this part of the Plaintiff’s assertion is with merit.

3. Conclusion

The plaintiff's claim is justified and the costs of lawsuit are assessed against the losing defendant. It is so decided as per Disposition.