Suwon District Court 2009Guhap851 (2009.09)

Examination award No. 2008-0042 ( October 31, 2008)

Whether there was an objective of tax avoidance in stock title trust

The fact that a beneficial shareholder was able to avoid acquisition tax to be paid as an oligopolistic shareholder by title trust, and that the comprehensive income tax pursuant to the dividend seems to have been reduced. However, the fact that a corporation’s bankruptcy does not make a dividend payment is merely an incidental circumstance that occurred after the acquisition of stocks.

The contents of the decision shall be the same as attached.

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 disposition of imposition of KRW 217,861,450, which the Defendant rendered against the Plaintiff on May 9, 2008, shall be revoked.

1. Quotation of judgment of the first instance;

The reasoning of the judgment of this court is as stated in the reasoning of the judgment of the court of first instance except for the following addition or dismissal. Thus, it is acceptable to accept it as it is in accordance with Article 8(2) of the Administrative Litigation Act and Article 402 of the Civil Procedure Act.

The following judgments shall be added to the 6th third sentence of the first instance court, and the bottom of the 6th sentence shall be referred to as "NoA".

"(1) The transfer of business is a transfer of the whole body organized by a certain business purpose, that is, the human and material organization, to be entirely transferred, and is distinguished from the transfer of shares. (2) The former Mutual Saving and Finance Company Act provides that the acquisition of 30/100 or more of the voting shares shall be subject to reporting, but the exercise of voting rights shall be restricted for the acquisition of the shares for which the obligation to report is not fulfilled, and its treatment shall not be denied, and it shall not be deemed that the acquisition of the shares in this case shall also be subject to authorization, such as the transfer of business, in light of the fact that the former Mutual Savings and Finance Company Act provides that the acquisition of the shares with voting rights shall be subject to reporting, and that the latter provides that the disposal may be ordered, and that the latter

The attached Form of the first instance judgment shall be added to the attached Form of the first instance judgment.

2. Determination on the additional argument in the trial

A. Determination as to the assertion that it is not subject to deemed acquisition tax

The Plaintiff asserts that the Trade Union and Labor Relations Commission, as an oligopolistic shareholder of the Ulsan Metropolitan City Treasury, failed to perform its duty to report to the Financial Supervisory Service under the provisions related to the Mutual Savings and Finance Company Act, and thus, it is not able to exercise voting rights. Therefore, the Plaintiff asserts that the deemed acquisition tax was not able to be imposed because it was not in a position to exercise voting rights.

However, in order to determine whether there was a purpose to avoid taxes due to the title trust of shares in this case, it is necessary to examine whether the tax imposed when the Trade Union acquired shares under its own name without title trust and exercised a normal shareholder's right by fulfilling all the obligation to report in accordance with the relevant laws and regulations, was exempted by the title trust of shares, and it cannot be determined by submitting a case where the trade union could not exercise a normal shareholder's right due to a reason such as deviation from law or illegality. According to the evidence received earlier, it is sufficiently recognized that the trade union can be subject to the deemed acquisition tax under the Local Tax Act as an oligopolistic shareholder because the trade union is in a position where the trade union actually holds the right to dispose of all shares of the Ulsan National Treasury and is able to exercise a shareholder's right as a person with the right to dispose of all shares

B. Judgment on the unconstitutionality argument

(1) The Plaintiff asserts that the instant disposition is unlawful since Article 41-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002), which served as the basis of the instant disposition, is unconstitutional since it violates the principle of no taxation without the law, ② the principle of proportionality (in particular, the suitability of the means and the balance of the legal interests), ③ the principle of tax equality.

(2) However, for the following reasons, it is determined that the above legal provision does not violate the Constitution.

A) Whether the substance goes against the principle of no taxation without the law

The imposition of gift tax on a person who does not receive a gift may be contrary to the principle of substantial taxation. However, the imposition of gift tax within the limited scope recognized as the purpose of tax avoidance by means of punishing a person who uses a title trust by concealing or evading a gift. The imposition of gift tax may be allowed as an exception to the principle of substantial taxation, since it is recognized as appropriate means to realize the equity of tax justice and tax, and thus, it does not go against the principle of proportionality or the principle of equality as delineated below. Therefore, even if the Plaintiff’s assertion is deemed that the existence of economic benefits that may be considered as the object of gift tax and that the title trust, which is not recognized as not likely to have been enjoyed by a person who is deemed to receive a gift, is deemed to have been donated, the purpose or content of the donation cannot be deemed to be in violation of the constitutional ideology that guarantees fundamental rights, and thus, it does not contravene the principle of substantial taxation without law (see, e.g., Supreme Court Decisions 207Du8652, Mar. 12, 2009>

B) Whether it is against the principle of proportionality

The avoidance of taxes under the title trust is not only a gift tax, but also a national and local tax, such as inheritance tax, income tax, acquisition tax, and judgel, and thus, there is a need to prevent and punish other taxes other than the gift tax by means of the title trust. Moreover, the imposition of the gift tax on the title trust intending to avoid taxes other than the gift tax may not be deemed as imposing any more damage on the taxpayer compared to the case where the violator is subject to criminal punishment or the penalty is imposed on a reasonable amount of penalty, etc. In addition, the tax justice and the public interest such as tax name, which are achieved by the imposition of the gift tax as above, are significantly high. Accordingly, if the title trust is used for the purpose of evading taxes other than the gift tax, it is deemed as a gift, and there is a reasonable reason in the legislative decision that requires the imposition of the tax rate higher than the tax for the purpose of avoidance, the method is appropriate to achieve the legislative purpose, and it is not contrary to the principle of proportionality of the Constitutional Court Decision 200Hun-Ba4, 2004.

C) Whether it violates the principle of tax equality

The imposition of gift tax, which is a significant high rate on the act of tax avoidance using title trust, is a substantial monetary burden on the trustee. However, this is limited to cases where the purpose of tax avoidance is recognized. The trustee is bound to be held liable for the tax avoidance by lending his/her name. As such, the disadvantage that the trustee would incur through the imposition of gift tax is not grossly unreasonable, but cannot effectively block the tax avoidance scheme if the trustee does not do so. Therefore, even if the trustee who has no tax-bearing capacity imposes a high rate gift tax by treating the same as the person who actually received a donation, this does not violate the principle of tax equality (see, e.g., Constitutional Court Order 2002Hun-Ba66, Nov. 25, 2004; Constitutional Court Order 2004Hun-Ba40, Jun. 30, 2005).

(3) Therefore, the plaintiff's above assertion on the premise that the above legal provision is in violation of the Constitution is without merit.

3. Conclusion

The judgment of the court of first instance must dismiss the plaintiff's claim. The judgment of the court of first instance is same as this conclusion, and the plaintiff's appeal is just and dismissed as