1. Case summary

A. Non-nbC Co., Ltd. (hereinafter “non-nbC”) is a non-listed corporation established on October 9, 2003 and dissolved on May 20, 2016, and Plaintiff 1 was a person who was in the position of the representative director from August 16, 2005 to September 2, 2008.

B. On October 10, 200, B&C issued 30,000 shares when it was established on March 31, 2004; 70,000 shares when it was issued on December 29, 2004; 50,000 shares when it was issued on December 30, 2005; and 20,000 shares when it was issued on December 30, 2005; Plaintiff 1 entered into a title trust agreement with Plaintiff 2, 3, and 4, and Nonparty 1 on December 10, 200, respectively; and accordingly, Plaintiff 51,00 shares when it was 2,45,90 shares when it was Plaintiff 3,444,00 shares when it was 34,400 shares when it was issued on December 30, 204; and thereafter, Plaintiff 1 entered into a title trust agreement with Nonparty 1.

C. On July 28, 2010, Nonparty 1 died and transferred 39,100 shares of non-party 1’s heir Nonparty 2 and non-party 3’s heir, respectively, to change 19,550 shares.

D. The Defendants deemed that Plaintiff 2, Plaintiff 3, Plaintiff 4, and Nonparty 1 received title trust from Plaintiff 1 each on the date of the above establishment and the date of capital increase with consideration, and accordingly, determined and notified each of the gift tax (including additional tax) on December 1, 2015 to Nonparty 2, Plaintiff 3, Plaintiff 4, and Nonparty 1’s heir Nonparty 2, and Nonparty 3, respectively. On the other hand, the Defendants designated Plaintiff 1, a title truster, as a joint obligor and notified each of the gift tax amount equivalent to the same amount (hereinafter “each of the instant dispositions”, including additional tax, and the imposition of additional tax on each of the instant dispositions is referred to as “each of the instant dispositions”).

2. Regarding ground of appeal No. 1

A. Article 41-2(1) main text of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter “former Inheritance Tax Act”) and Article 45-2(1) main text of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter “Revised Inheritance Tax and Gift Tax Act”) provide that “where the actual owner and title holder are different from those of property subject to transfer or exercise of rights, the value of such property shall be deemed to have been donated to the actual owner on the day when the actual owner registers, etc. as the title holder notwithstanding Article 14 of the Framework Act on National Taxes.” Meanwhile, Article 45-2(1) main text of the former Inheritance Tax and Gift Tax Act provides that “where property is registered, etc. in the name of another person without any purpose of avoidance, this shall not apply to the case where the title holder registers, etc. in the name of another person.”

B. Based on its stated reasoning, the lower court determined that each of the instant title trusts did not constitute the purpose of tax avoidance. Examining the record in accordance with the aforementioned provision and related legal principles, the lower court did not err by exceeding the bounds of the principle of free evaluation of evidence inconsistent with logical and empirical rules, or by misapprehending the legal doctrine on the purpose of tax avoidance.

3. Regarding ground of appeal No. 2

A. Article 47(1) of the previous Inheritance and Gift Tax Act provides that the taxable amount of gift taxes shall be the amount calculated by subtracting the amount acquired by the donee from the aggregate amount of the donated property under the provisions of Articles 31 through 45 of the same Act as of the date of donation, which is the debt secured by the donated property concerned, as of the date of donation. Article 47(2) of the same Act provides that where the aggregate amount of the donated property received from the same person within 10 million won or more within 10 years before the date of the relevant donation, the value of the donated property shall be added to the taxable amount of gift taxes, and Article 55(1) of the same Act provides that “The tax base of the gift tax shall be the amount obtained by subtracting the amount of the donated property deduction under Article 53 of the same Act and the amount of the disaster loss deduction under Article

Meanwhile, Article 47(1) of the amended Inheritance and Gift Tax Act provides that the gift tax amount shall be the amount calculated by subtracting the amount taken over by a donee as a debt secured for the pertinent donated property from the total sum of donated property under the provisions of the same Act as of the date of donation [excluding the value of the donated property under the provisions of Articles 40(1)2, 41-3, 41-5, and 42(4) (hereinafter “ donated property excluded from summing up”)]. The main text of Article 47(2) of the previous Inheritance and Gift Tax Act provides that “in case of a re-donation within 10 years as same as Article 47(2) of the previous Inheritance and Gift Tax Act, the value of the donated property shall be added to the taxable amount of gift taxes.” Furthermore, Article 55(1) of the same Act provides that the gift tax base of the relevant donated property shall be deducted from the amount of the relevant donated property under the provisions of Article 45-2 (1) 3,000 won deducted from the amount of the donated property under Article 47(37) of the same Act.

As such, the purport of Article 47(2) of the amended Inheritance and Gift Tax Act, which provides for aggregate taxation with respect to the previous donated property within 10 years, is to prevent the act of donation by dividing the two or more donated property received from the same person without making a single donation in order to avoid cumulative tax rate by subjecting comprehensive taxation with respect to the multiple donated property, as the original gift tax constitutes separate taxation requirements for each individual gift act, and thus, if there is a multiple donation different time.

B. Considering the legislative intent, system, and history of the amendment of the provision on the addition of re-donations within 10 years, it is reasonable to interpret that Article 47(2) of the amended Inheritance and Gift Tax Act, which is the additional provision on re-donations, applies even in cases where the title trust of the same person is deemed as a donation within 10 years. The reasons are as follows.

(1) Article 47(2) of the amended Inheritance and Gift Tax Act, which is an additional provision on re-donation, does not explicitly stipulate that the former Inheritance and Gift Tax Act does not include the same provision as Article 47(2) of the former Inheritance and Gift Tax Act except for the addition of the provision on donated property excluded from adding, and Article 47(1) of the amended Inheritance and Gift Tax Act does not stipulate that the title trust property value deemed as a gift constitutes donated property excluded from adding.

(2) Article 55(1) of the amended Inheritance and Gift Tax Act provides that the tax base of gift tax shall be an amount calculated by subtracting the fees for appraisal of donated property from the amount falling under any of the following subparagraphs. subparagraph 2 of the same Article separately provides that “in case of donated property excluded from summing up, the amount calculated by subtracting 30 million won from the relevant donated property.” Meanwhile, subparagraph 1 of the same Article provides that “in case of the deemed donation of trusted property under the provisions of Article 45-2, the amount of the relevant trusted property shall be the amount of the relevant trusted property,” which is separate from

(3) Article 55(1) of the amended Inheritance and Gift Tax Act does not provide a separate provision as to whether to exclude the provision on the addition of re-donations, and rather, comparison with the following provisions is made (Article 55(1) of the amended Inheritance and Gift Tax Act does not provide for mutual aid for the property held in title trust (Article 1 of the title trust property; subparagraph 2 of the title trust property does not provide for mutual aid, and subparagraph 3 of the remaining property provides for mutual aid for 30 million won and deduction for deductible property and disaster loss deductible amount pursuant to Articles 53 and 54 of the same Act, and Article 47(1) of the same Act provides for only how to provide for mutual aid in calculating the tax base for each donated property under the name of the trust property and that Article 55(1) of the same Act does not recognize any mutual aid for the property excluded from addition to the trust property or recognize only a smaller amount than other donated property.

(4) The legislative purpose of imposing gift tax by deeming title trust as a gift is to effectively prevent tax avoidance and to recognize exceptions to the principle of substantial taxation in order to realize tax justice (see Supreme Court Decision 2007Du17175, Sept. 8, 2011). Therefore, in determining gift tax on title trust property deemed as a gift, the failure to stipulate a deduction system of donated property, etc. differently from other donated property in determining gift tax on title trust property is to give disadvantages to the title trustee in comparison with the donee in order to achieve the legislative purpose to effectively prevent the act of tax avoidance. From this perspective, in the case of title trust deemed as a donation under the amended Inheritance Tax and Gift Tax Act, unlike the previous Inheritance Tax and Gift Tax and Gift Tax Act, the legislators cannot be deemed to have excluded the system of re-donation, thereby enabling the title trustee to evade the progressive tax rate.

(5) Meanwhile, the current Inheritance Tax and Gift Tax Act amended by Act No. 16102, Dec. 31, 2018 stipulates that, in the case of a deemed donation of title trust under Article 45-2, a person liable to pay the gift tax is changing from the nominal owner to the actual owner (Article 4-2(2)), and that, in the case of a deemed donation of title trust under Article 45-2, the title trust property under Article 45-2 is a donated property excluded from the gift tax amount of the donee’s gift tax amount (Article 47(1)). However, the said provision constitutes a creative provision following the change of a person liable to pay the gift tax on the property of title trust deemed as a donation, and thus, cannot

C. In light of the aforementioned legal principles and records, the lower court did not err by misapprehending the legal doctrine on the provision on the addition of re-donation in rejecting the Plaintiffs’ assertion that the imposition of re-donation gift tax (including additional tax) after 2004 among each of the dispositions of this case was erroneous.

4. As to the grounds of appeal Nos. 3 and 4

A. According to the main text of Article 68(1) and the main text of Article 4(1) of the amended Inheritance and Gift Tax Act, a donee who is liable to pay a gift tax shall file a report on the taxable value and tax base of the gift tax with the head of the competent tax office within three

B. The lower court rejected the Plaintiffs’ assertion on other premise on the ground that: (a) not only the person who received the gift by an agreement between the parties but also the person who is deemed to have received the gift by an agreement, is deemed to have the duty to report the gift tax (see Supreme Court Decision 2002Du2826, Oct. 10, 2003); (b) it is difficult to deem that the duty to report is imposed on the trustee that it infringes on the freedom of conscience or the right to refuse to make a statement under the Constitution of the title trustee; and (c) the trustee of stocks also bears the duty to report the taxable value and tax base of the gift tax; (d) insofar as the Plaintiffs did not submit the gift tax report, the exclusion period for imposition of the gift tax on each of the donations as of Oct. 10, 2003; and (d) the Plaintiffs’ failure to submit the gift tax report on Dec. 29, 2004 is 15 years.

C. Examining the record in accordance with the aforementioned provisions and relevant legal principles, the lower court did not err in its judgment by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal doctrine on the justifiable grounds for exempting from the duty to report and additional tax on deemed donation

5. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Min You-sook (Presiding Justice)