Article 14 (Determination and Revision under Framework Act on National Taxes)

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

(1) The ○○ Education Co., Ltd. located in ○○○○-dong 599 (hereinafter “instant company”) was established on January 1, 2001 as 10,000 shares issued and outstanding, and 50,000,000 won in order to operate a private teaching institute business in Seoul, Seoul, Seoul, etc.

(2) The instant company issued capital increase with two occasions, including 30,000 shares on October 30, 2003 (hereinafter “first capital increase”) and 40,000 shares on August 26, 2005 (hereinafter “ second capital increase with new capital”) to expand its business.

(3) As of November 6, 2006 to November 29, 2006, the director of the Seoul Regional Tax Office confirmed that all shares held by shareholders, other than Jeju-style, ○○, ○○, ○○, and ○○, among shareholders, at the time of incorporation of the instant company through capital increase and secondary capital increase as shown in the following table, those shares held by shareholders other than shareholders through capital increase and capital increase at the time of incorporation of the instant company, and notified the Plaintiffs to the head of the tax office having jurisdiction over the Plaintiffs as taxation data.

(4) The Defendants notified of the above documents: (a) applied the provision on the constructive gift of title trust property under Article 41-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 28, 2002; hereinafter the “former Inheritance Tax and Gift Tax Act”) by deeming that the Plaintiffs were entrusted with the shares of Cho Jong-do; and (b) accordingly, each gift tax was determined and notified to the Plaintiffs, as indicated in the attached disposition list (hereinafter the instant disposition).

(5) The plaintiffs appealed and raised an objection on April 30, 2007, but all of them were dismissed. The Tax Tribunal filed an appeal with the Tax Tribunal on August 29, 2007, but the Tax Tribunal dismissed all the plaintiffs' claims on March 21, 2008.

[Grounds for Recognition] Unsatisfy, Gap 1-3, and Eul 1-16 (including additional numbers)

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

With the amendment of the Commercial Act by Act No. 5053 on December 29, 1995, the Plaintiffs limited to seven or more persons to be mitigated from three or more, and limited to the title trust in the process of inviting seven promoters at the time of establishment of the instant company on January 1, 2001, and there were no problems such as avoidance of secondary tax liability of oligopolistic shareholders and deemed acquisition tax due to title trust. Benefits from the application of the progressive tax rate on dividend income are limited to the amount of gift tax in the instant case.

Therefore, as long as the title trust in this case was conducted for other reasons, not for tax avoidance, but for other reasons, and the reduction of minor taxes incidental to the said title trust was generated, it cannot be deemed that there was a tax avoidance purpose in such title trust, and thus, the prior disposition in this case was unlawful on a different premise.

(b) Related statutes;

Article 38 (Duty to Pay Taxes in Constitution)

Article 14 (Determination and Revision under Framework Act on National Taxes)

C. Determination

(1) Article 41-2(1) of the former Inheritance Tax and Gift Tax Act, etc. recognizes an exception to the principle of substantial taxation with the purport of effectively preventing the act of tax avoidance by using the title trust system, and realizing the tax justice. Thus, if the title trust was recognized to have been made for any reason other than the purpose of tax avoidance, and only a minor tax reduction incidental to the said title trust takes place, it cannot be deemed that there was an objective of tax avoidance under the proviso of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act, and in this case, the person who asserts to bear the burden of proving that there was no purpose of tax avoidance (see Supreme Court Decision 2004Du7733, May 12, 2006). Further, it can be proved by the method of proving that there was no purpose of tax avoidance other than the purpose of tax avoidance. However, as the title holder who bears the burden of proving the burden of proof, it was obvious that there was no purpose of tax avoidance in the title trust and there was no objective and evidence that there was no future tax avoidance (see, 2000.

(2) The plaintiffs asserted that the title trust of this case was held by mistake as to 7 or more promoters under the Commercial Act prior to the amendment, despite the fact that the requirements for the incorporation of the company of this case were 3 or more. The plaintiffs asserted that ① the amended provisions of the Commercial Act with three or more promoters requirements under the Commercial Act were implemented since October 1, 1996, and about 5 years passed thereafter, it is difficult to easily understand that the requirements of promoters are 7 or more at the time of the incorporation of the company of this case (Article 203 of the Non-Contentious Case Litigation Procedure Act was amended by Act No. 5206 of Dec. 30, 196, which was enforced from January 1, 1997, but the revised contents were to be attached to the application for the establishment registration of the company of this case, and that there was no difference between the "director or inspector" under subparagraph 5 from among the documents to be attached to the application for the establishment registration of the title trustee or inspector, or the shareholders' share ratio and shares of the company of this case.

(3) The plaintiffs asserts that there is no intention of tax avoidance in relation to the title trust of this case, and that the avoided amount of tax would be extremely low. According to the evidence and the purport of the oral argument as above, the company of this case distributed KRW 100 million in 2003, and among which the dividends paid to the plaintiffs were distributed KRW 61 million in 2004, and the dividends paid to the plaintiffs in 2004 are KRW 240,400,000,000. Among them, the above dividends paid to the plaintiffs were included in income other than 000,000 won in 203,831,000 (the above dividends were included in income other than 00,000 won in 200,000 won in 204, 2000, 300,000,000 won in 20,000 won in 20,000 won in 20,000 won in total, were not accepted.

(Plaintiffs asserted that the total amount of tax evaded in relation to dividends in 2003 and 2004 is limited to KRW 29,402,00,000, and that is extremely weak. However, in light of our country’s economic scale, average wages per capita, and average income, etc., the above amount cannot be deemed to be the amount which is minor.

(4) Therefore, all of the instant dispositions are lawful.

3. Conclusion

Therefore, the plaintiffs' claim of this case is dismissed as it is without merit. It is so decided as per Disposition.