Seoul Administrative Court 201Guhap23085 (Law No. 18, 2012)

title trust with no tax avoidance purpose

In light of the fact that the sales price of stocks is appropriated for the repayment of loan bonds, it is insufficient to conclude that each of the documents submitted alone is the actual owner who received payment in kind, and there is no other evidence to acknowledge it and there is no tax avoidance purpose

2012Nu17584 Revocation of Disposition of Imposition of Gift Tax

KimAAA et al.

The Director of Gangnam District Office

Seoul Administrative Court Decision 2011Guhap23085 decided May 18, 2012

May 23, 2013

June 13, 2013

1. The defendant's appeal is all dismissed.

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

1. Purport of claim

The Defendant’s disposition of imposing gift tax of KRW 000,00, each of which belongs to the year 2007, against the Plaintiffs on October 5, 2010 is revoked.

2. Purport of appeal

The judgment of the first instance is revoked. All of the plaintiffs' claims are dismissed.

On December 27, 200, the gift tax on the gift as of December 27, 200 shall be determined and notified, and by applying Article 4(4) of the Inheritance Tax and Gift Tax Act, the plaintiff KimA designated the plaintiff KimA as a joint obligor, and at the same time the plaintiff KimA notified the plaintiff KimA of the payment of KRW 000 of the gift tax (hereinafter collectively referred to as "each disposition of this case").

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1, 5, 8, 11, 12, Eul evidence No. 4, the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The parties' assertion

1) The plaintiffs' assertion

A) The Plaintiff KimA sold the instant shares with ParkB and agreed to appropriate the price for the repayment of the loan claims against ParkB, and entered the said shares into the securities account in the name of the Plaintiff KimCC with the intent to supervise the sale procedure of the said shares. Although the said shares were not repaid in lieu of the said shares from ParkB, the Defendant applied the provision on the constructive gift of nominal trust under Article 45-2(1) of the Inheritance Tax and Gift Tax Act on the premise that Plaintiff KimA is the actual owner of the said shares, each of the instant dispositions should be revoked.

B) In light of all the circumstances, including the fact that, around December 2007, Plaintiff KimA, who held approximately 1.9 million shares issued in XX ( approximately 12% of the total number of outstanding shares) around December 2007, in order to prevent the decline of the share price due to the publication of the said monetary transaction relationship, etc., Plaintiff KimA had no choice but to enter the instant shares into the securities account in the name of Plaintiff KimCC, a third party, and even if Plaintiff KimA held the instant shares in its own name, there was no room for bearing liability for tax payment or deemed acquisition as an oligopolistic shareholder, and the fact that the said shares were entered into the securities account in the name of Plaintiff KimCC and the share price continuously decreased after the entry into the securities account in the name of Plaintiff KimCC, it is evident that Plaintiff KimA did not have the purpose of tax avoidance. Accordingly, each of the instant dispositions should be revoked

2) The defendant's assertion

A) On July 19, 2007, Plaintiff KimA lent KRW 000 to GaB, and thereafter established a pledge right on the said shares after being delivered from GaB to 800,000 shares issued in XX, the said loan claim was not repaid, and then the said 730,000 shares out of 80,000 shares were repaid to GaB during 2007 and acquired the ownership of the said shares.

B) The existence of the purpose of tax avoidance is not determined on the basis of whether there was a tax avoidance ex post, but on the basis of whether there was a possibility of tax avoidance at the time of the nominal election, and whether there was an inevitable reason irrelevant to the tax avoidance. In light of the fact that Plaintiff KimA was liable to pay capital gains tax on the transfer of the instant shares to a major shareholder who owns not less than 5% of the issued shares in XX, while Plaintiff KimCC was not a major shareholder, and thus, Plaintiff KimCC did not have a duty to pay capital gains tax on the transfer of the said shares, it is obvious that Plaintiff SPCC was acting in title for the purpose of tax avoidance.

B. Relevant statutes

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

C. Determination

1) Determination on the first argument of the plaintiffs

In general, the tax authorities have the responsibility to prove the above facts regarding the taxation of the loan 20-2 of Article 45-2 of the Inheritance Tax and Gift Tax Act. The burden of proving that the person, who was designated as the actual owner of the loan 2 of the above 70-B shares, actually acquired the ownership of the trust property is the tax authorities. In light of the above facts acknowledged as above and the fact that the 70-B shares were sold under the name of the 0-B shares, and that the 0-B shares were not sold under the 0-B shares and the 0-B shares were not sold under the 70-B shares, and that the 10-B shares were sold under the 0-B shares and the 0-B shares were not sold under the 70-B shares, and that there was no specific agreement between the Plaintiff and the 80-B shares that were sold under the 0-B shares and the 70-B shares issued under the 70-B shares shares, to the extent that there were no separate agreement between the above shares.

2) Judgment on the second argument by the plaintiffs

Article 45-2(1) of the Inheritance Tax and Gift Tax Act provides that “If the actual owner or the nominal owner of the property that requires the transfer or exercise of the right is different, the value of the property shall be deemed to have been donated to the actual owner on the date on which the registration, etc. is made to the actual owner, notwithstanding Article 14 of the Framework Act on National Taxes: Provided, That this shall not apply to the case falling under any of the following subparagraphs: 1. The legislative purport of the above provision is that “it is to effectively prevent the act of tax avoidance using the title trust system, thereby realizing the tax justice.” Since it is recognized that the title trust was made for other reasons than the purpose of tax avoidance, it is difficult to view that there was only a reduction of taxes incidental to the said title trust, and that there was no “tax avoidance purpose” from 00 to 200, 2000, 2000, Plaintiff’s stocks were transferred to the KOSDAQ account under the name of the actual owner, and that there was no possibility that the remaining shares were sold to the Plaintiff’s account under the 8B’s market value.

3) Sub-decisions

Therefore, under the premise that Plaintiff KimA is the owner of the instant shares, each of the instant dispositions by the Defendant, which deemed that the said Plaintiff was in title trust with Plaintiff KimCC for the purpose of tax avoidance, is unlawful, and thus, it should be revoked.

3. Conclusion

Therefore, each disposition of this case must be revoked illegally, and the judgment of the court of first instance is just as it is concluded, and all appeals of the defendant are dismissed as it is without merit.