It can not be said that there was no tax avoidance purpose in stock title trust.

Although title trust was made in order to meet the quorum of promoters, it can not be said that there was no purpose of tax avoidance.

Article 42-2 (Presumption of Donation of Title Trust Property)

2016-Gu Partnership-61144 Revocation of the imposition of gift tax

AA

O Head of tax office

2016.12

2016.09.06

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

Each disposition of imposition of KRW 431,890, respectively, of the gift tax on April 27, 2015, imposed by the Defendant against the Plaintiff on the Plaintiff and KRW 184,80,540, and May 1, 2015 shall be revoked.

1. Details of the disposition;

A. H Engineering Co., Ltd. (hereinafter referred to as “instant company”) is a company established on April 1, 1996 at KRW 50,000,000 (per stock price: KRW 5,000, total number of 10,000) with the Plaintiff on April 1, 1996.

B. The status of stock changes from the incorporation to July 1, 2005 of the instant company’s capital increase with capital increase as indicated above.

Stockholders

(Number of Shares in Incorporation)

October 21, 1998

Number of Paid-in Stocks

July 1, 2005

Number of Paid-in Stocks

Increased shares

Horse shares

(Shares)

Increased shares

Horse shares

(Shares)

5,000 (50)

15,000

20,000 (50)

15,000

35,000 (50)

BB

1,000 (10)

15,000

16,000 (40)

12,000

28,000 (40)

CCC

1,000 (10)

-

1,000 (2.5)

50

1,050 (1.5)

DD

1,000 (10)

-

1,000 (2.5)

50

1,050 (1.5)

EE

1,000 (10)

-

1,000 (2.5)

50

1,050 (1.5)

FF

500 (5)

50 (1.25)

50

1,050 (1.5)

GG

500 (5)

50 (1.25)

2,300

2,800 (4)

Consolidateds

10,000 (100)

3,000

40,000 (100)

70,000 (100)

(C) On July 1, 2005, the Defendant deemed that the Plaintiff trusted the shares of this case to BB, etc. on the aggregate of 12,100 shares (the part dealt with in the above table; hereinafter referred to as “the shares of this case”) that have been increased for consideration under the name of BB, CCC, and DD (hereinafter referred to as “B, etc.”) was nominal by BB, etc., and the Plaintiff was deemed to have donated the shares of this case to BB, etc. pursuant to Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter referred to as the “former Inheritance Tax and Gift Tax and Gift Tax and Gift Tax Act”). Accordingly, the Defendant notified the Plaintiff of the gift tax amount of KRW 184,803,540 to be paid on April 27, 2015; the Plaintiff notified each of the instant decision to the Tax Tribunal to pay the gift tax of this case to D15.

Facts without any dispute arising in recognition, Gap evidence 1-1, 2, 3, Gap evidence 2, 6, 7, and 9, and the purport of the whole pleadings

2. Determination on the legitimacy of each of the dispositions of this case

A. Summary of the plaintiff's assertion

The Plaintiff’s title trust of the shares to BB, etc. while establishing the instant company was to meet the quorum of promoters at the time of the incorporation of a corporation under the former Commercial Act (amended by Act No. 6488, Jul. 24, 2001; hereinafter “former Commercial Act”). Since there was no amount of dividends made in the instant company, global income tax was not avoided. Since there was no difference in the amount of dividends made in the instant company, the instant company did not have to pay taxes for 20 years, the secondary liability for tax payment of oligopolistic shareholders was not at issue. Since there was no transfer, inheritance, or donation of the instant shares, the transfer income tax or inheritance/ gift tax was not avoided. Accordingly, the Plaintiff’s title trust of the instant shares to BB, etc. was not for the purpose of tax evasion, and thus, it cannot be deemed that the Plaintiff donated the instant shares to BB, etc., and each disposition of this case on different premise is unlawful.

B. Relevant statutes

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

C. Determination

1) The legislative intent of Article 45-2(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 as having been conducted for any reason other than the purpose of tax avoidance and only a minor reduction of taxes incidental to the said title trust, it cannot be readily concluded that there was "the purpose of tax avoidance" (see, e.g., Supreme Court Decision 2004Du7733, May 12, 2006). However, in light of the legislative intent as seen above, it cannot be deemed that there was no objective and objective purpose of tax avoidance, such as tax avoidance, unless the purpose of the title trust is not included in the purpose of tax avoidance, and thus, it cannot be said that there was no other objective and objective purpose of tax avoidance (see, e.g., Supreme Court Decisions 97Nu1532, Jun. 26, 198; 200Du3630, Dec. 23, 2004).

2) In light of the above legal principles, comprehensively taking account of the following circumstances, which can be acknowledged by comprehensively taking account of the evidence presented above and the purport of the entire pleadings, the Plaintiff’s title trust of the instant shares to BB, etc. with the purpose of meeting the requirements of the number of promoters demanded by the former Commercial Act without any tax avoidance purpose, and there is no other evidence to acknowledge this otherwise. Therefore, the Plaintiff’s assertion is without merit.

① Although Article 288 of the former Commercial Act, which was in force at the time of the incorporation of the instant company, stipulates that the establishment of the instant company requires three or more promoters. However, it is reasonable to view that the title trust of the instant shares, which was increased for consideration as of July 1, 2005, is a title trust separate from the title trust that was made at the time of the establishment of the instant company. However, the Commercial Act, which was in force at the time of the title trust (amended by Act No. 6488, Jul. 24, 2001) as of July 1, 2005, was enforced for more than nine years after the establishment of the instant company, was without any restriction on the number of promoters necessary for the establishment of the instant company, and thus, there was no need to title trust of the instant shares to BB, etc. in order to meet the quorum of promoters.

② At the time of the incorporation of the instant company, the Plaintiff adjusted the total amount of shares in one’s name to 50% by title trust with BB, etc., and adjusted the ratio of shares in the Plaintiff’s name to 50% by title trust with BB’s new shares 15,000 shares at the time of new shares offering as of October 21, 1998. On July 1, 2005, the Plaintiff adjusted the ratio of shares in the Plaintiff’s name to 50% by title trust with BB, etc. at the time of the instant shares offering as of July 1, 2005 (in addition, the ratio of shares acquired by the shareholders in the process of the two-time new shares offering is different from that of the existing shares prior to the transfer of shares). As such, the Plaintiff did not fall under the oligopolistic shareholder liable for secondary tax payment by adjusting the ratio of shares in one’s name to shares in the instant company’s name through a title trust in addition to the time of incorporation of the instant company.

③ The surplus funds of the instant company were KRW 787,00,000, KRW 1,010,000, KRW 1,000,000 in 205, KRW 1,082,00,000 in 206, KRW 1,304,000 in 207, KRW 1,525,000 in 2008, KRW 1,525,000 in 209, KRW 759,000 in 208,000 in 200, KRW 2,181,000 in 20,00 in global income, KRW 2,313,00 in 20 in 2012, KRW 313,00 in 200, KRW 200 in 200 in 203,66,00 in 200 in 201 in 208.

3. Conclusion

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

section 3.