Gwangju District Court-2014-Gu Partnership-10080 ( October 23, 2014)

2013luminous0849

The fact that the title trust of shares to employees is for tax avoidance purpose.

Although the shares held in title trust with an employee are simply to meet the number of promoters, the act of establishing a tax measure, such as comparing the gift tax by title trust and the transfer income tax by stock transfer, etc. without changing the name of the actual owner during the grace period under Article 41-2 (1) 2 of the former Inheritance Tax and Gift Tax Act, can be deemed as having an objective of tax avoidance.

Donation of title trust property under Article 41-2 of the Inheritance Tax and Gift Tax Act

2014Nu6714 Revocation of Disposition of Imposition of Gift Tax

AA

BB Director of the Tax Office

Gwangju District Court Decision 2014Guhap10080 Decided October 23, 2014

September 24, 2015

October 8, 2015

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked. The defendant shall revoke the disposition of imposition of gift tax of KRW 000 against the plaintiff on January 7, 2013.

1. Basic facts

A. The Plaintiff’s capital stock of 00 tourism company on August 18, 1988 (hereinafter “instant company”)

At the time, 00 million won and 000 shares issued were established. At the time, 00 shares out of the above shares were accepted in its own name, 00 shares were transferred to Kim 00 and Ma 00 each under their own name, and each 00 shares was transferred to the title trustee (hereinafter referred to as "Ma 00 and Ma 00"), and Ma 00 shares were transferred to the plaintiff's wife and Ma 00 shares, respectively, by the plaintiff's wife and Ma 00 shares, respectively.

B. On June 26, 2003, the instant company issued 0,000 shares with capital increase issued (hereinafter “instant capital increase”) and allocated 00 shares under title trust to the title trustee each of the instant shares (hereinafter “each of the instant shares”) according to the equal allocation among the shareholders (hereinafter “instant title trust”, and “the shares allocated to Kim 00 out of the shares held in title trust” as above).

3) The allocation was made.

C. On November 27, 2007, the Plaintiff filed a lawsuit seeking confirmation of shareholders' rights against the entire shares of the instant company (titled 100 shares each owned by each title trustee) owned by the title trustee, including each of the instant shares against the title trustee (U.S. District Court 2007Gahap24766), and won the entire shares of the instant company on March 21, 2008, and the said judgment became final and conclusive on May 29, 2008.

D. On December 2012, the Director of the Regional Tax Office confirmed that the Plaintiff held a title trust with respect to each of the instant shares as above, and notified the disposition authority of each taxation data so that a title trustee may determine and notify gift tax of the value of each of the instant shares (000 won per share) by calculating the value of each of the instant shares as a supplementary assessment method.

Accordingly, on January 7, 2013, the Defendant decided 000 won of gift tax on the donation of the instant shares through capital increase with capital increase issued on June 26, 2003, and notified the Plaintiff, a donor, as joint taxpayers, pursuant to the provision on deemed donation of title trust property under Article 41-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter “former Inheritance Tax and Gift Tax Act”).

E. Accordingly, the Plaintiff filed an appeal with the Tax Tribunal on January 23, 2013, and the Tax Tribunal rejected the Plaintiff’s assertion that “the purpose of tax avoidance was not to evade in the title trust of the instant shares.” However, in calculating and assessing the number of shares issued in the instant case based on the supplementary method of assessment, the Tax Tribunal determined that “the amount of the tax payment shall be corrected based on the calculation of the net profit and loss value by reflecting the number of shares issued in the instant case’s calculation and assessment based on the supplementary method of assessment.”

F. According to the above decision, on December 20, 2013, the Defendant corrected gift tax on the donated share of this case at KRW 000,000, and notified the Plaintiff and Kim 00 (hereinafter the above imposition disposition of KRW 000,000, which was imposed as of January 7, 2013).

[Ground of recognition] Facts without dispute, Gap evidence 1 to 8, Eul evidence 1 to 1 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. The plaintiff's assertion and relevant Acts and subordinate statutes;

A. The plaintiff's assertion

① At the time of the establishment of the instant company, the Plaintiff inevitably trusted 750 shares to the title trustee in order to satisfy 7 or more promoters, who are the conditions for the establishment of the instant company pursuant to Article 288 of the former Commercial Act (amended by Act No. 5053, Dec. 29, 1995; hereinafter referred to as the “former Commercial Act”) at the time of the establishment of the instant company. ② The Plaintiff distributed shares to the title trustee according to the existing shares ratio; ③ there was no purpose of evading the income tax, deemed acquisition tax, secondary corporate tax liability and capital gains tax at the time of the instant title trust; ④ The instant company did not hold the earned surplus after the cumulative deficit at the time of the instant 203 business year following the capital increase; ⑤ The instant company’s actual avoided tax after the instant title trust was nonexistent; ② The instant proviso No. 2 of the former Inheritance Tax and Gift Tax Act was unlawful in light of the fact that there was no other tax evasion under Article 14 of the former Inheritance Tax and Gift Tax Act.

(b) Related statutes;

It is as shown in the attached Form.

3. Whether the disposition is lawful;

(a) Facts of recognition;

1) Although Article 288 of the former Commercial Act was amended and the number of promoters under the Commercial Act was no longer limited at the time of issuing new shares, the Plaintiff maintained the title trust status and allocated each of the instant shares to the title trustee.

2) The instant company planned to offer new shares for capital increase after issuing new shares for capital increase in 2007.

On the other hand, it was difficult to review various tax issues such as gift tax, acquisition tax, transfer income tax, etc. when capital increase in 00 tourism, and to take measures such as "the most desirable for conversion of real name through the cancellation of title trust rather than the real name by the method of capital increase or transfer," and "the other party's 00 et al. are more remarkably less than the present appraised value per share at the time when stocks are acquired, it was difficult to take tax measures such as "the reason for the return and payment of gift tax by deeming the nominal trust rather than the reporting and payment of transfer income tax by transferring the shares of other party 10 et al.

3) The earned surplus of the instant company was 000 won in the year 2004, 000 won in the year 2005, 0000 won in the year 2006, 0000 won in the year 2007, 0000 won in the year 2008, 0000 in the year 2009, 0000 in the year 2009, 000 in the year 2010, 000 in the year 2011, and 000 in the year 2012.

[Ground of recognition] Facts without dispute, entry of evidence Nos. 2, 3, and 5 (including paper numbers), the purport of the whole pleadings

B. Determination

1) Article 41-2(1) of the former Inheritance Tax and Gift Tax Act provides that "where the actual owner and the nominal owner are different from the property which requires a transfer or exercise of the right, the value of the property shall be deemed to have been donated to the actual owner by the nominal owner on the day (where the property is subject to a transfer of ownership, it refers to the day following the end of the year following the year in which the date of acquisition of ownership falls), notwithstanding the provisions of Article 14 of the Framework Act on National Taxes, the title holder shall be deemed to have received a donation from the actual owner: Provided, That this shall not apply to cases falling under any of the following subparagraphs."

The legislative intent of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act is to effectively prevent the act of tax avoidance using the title trust system and realize 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 reduction of tax incidental to the said title trust takes place, it cannot be readily concluded that there was such purpose of tax avoidance. However, in light of the above legislative purpose, only if the purpose of the title trust is not included in the purpose of tax avoidance, it is impossible to determine that there was an intention of tax avoidance by applying the proviso of the above provision, so it cannot be deemed that there was no intention of tax avoidance. In this case, the burden of proving that there was no purpose of tax avoidance can be proved by the method of proving that there was another purpose of tax avoidance, not the purpose of tax avoidance, but the fact that there was no purpose of tax avoidance, not the purpose of tax avoidance. 200 after being declared as the title trust or the burden of proving that there was no intention of tax avoidance in the future (see, 200. 17. 20.

2) Facts acknowledged earlier, the evidence as seen earlier, Gap evidence Nos. 9, 10, and Eul evidence No. 5

Comprehensively taking account of the overall purport of the pleadings, the following circumstances are revealed.

① Even if it was necessary for the Plaintiff to meet the number of promoters at the time of the establishment of the instant company, Article 41-2(1)2 of the former Inheritance Tax and Gift Tax Act provides that the provision on deemed donation shall not apply in the event that the shares trusted in title are converted into the actual owner’s name during the grace period from January 1, 1997 to December 31, 198. However, the Plaintiff did not return to the title trustee each 00 shares trusted in title during the grace period. In addition, the title trust was made against the title trustee at the time of the instant capital increase with consideration to the title trustee at the time of the instant capital increase with consideration. As such, there was no reason for the Plaintiff to maintain the title trust on the grounds that there was no limit

② The Plaintiff was under title trust with 15,175 shares (each of 8.20%) of the shares of 000 Construction Co., Ltd. (formerly: 00 Construction Co., Ltd.) that he had been a major shareholder with 15,00 and 175 shares (each of 8.20%) in 197, but was converted into the real name in 1997. Accordingly, the shareholders of the said Construction Co., Ltd. were remaining 20,000 Plaintiff (each of 00 shares, 9.75%) and 00 (00 shares, 00 shares, 0.25%) and in light of this, the Plaintiff seems to have been aware of the amendment of the Commercial Act and the Inheritance Tax and Gift Tax Act as above.

③ In light of the fact that: (a) the instant company received tax measures, such as the transfer of shares and the payment of gift tax on title trust in the process of planning new capital increase with capital increase after issuing new shares in 2007; and (b) at the time of issuing the said tax measures, the said provisions were identical to those of the Commercial Act and the Inheritance Tax and Gift Tax Act, such as (i) at the time of issuing new capital increase, the said company considered the tax issues arising from title trust even at the time of issuing new capital increase.

④ At the time of the instant company’s offering of new shares, the net income amount of KRW 000,00, which was the time of the instant company’s offering of new shares, resulted in a significant decrease in the amount of the previous net income. The net income amount of KRW 000,000, which was generated in 2004, and the earned surplus amount of KRW 000,000, which was subsequently increased continuously, and 2007, was reached in 2007. Considering the above circumstances and the possibility of distribution of earned surplus, the Plaintiff compared all the shares of the instant company with those of receiving profits under its own name when compared to those of receiving profits. As such, there was a possibility that the Plaintiff could reduce the global income tax burden.

3) Examining the above circumstances in light of the legal principles as seen earlier, it is difficult to deem that the Plaintiff, the title truster, was in title trust with the instant shares to the Kim 00 without any purpose of tax avoidance, on the ground that there was no tax evasion at the time of the instant title trust or there was no tax evasion in the future. Accordingly, it is difficult to deem that the Plaintiff, without the purpose of tax avoidance, has held the title trust with respect to the instant shares, and that there was no distribution in the instant company after the instant title trust.

Therefore, the plaintiff's assertion is without merit.

4. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit, and the judgment of the court of first instance is with merit.

Since the plaintiff's appeal is legitimate, it is dismissed as it is without merit. It is so decided as per Disposition by the assent of all participating Justices.

(c)