Incheon District Court-2014-Gu Partnership-32510 (2015.05)

It cannot be readily concluded that there was no intention of tax avoidance in the title trust of shares.

(1) As long as it is not deemed legally impossible to allocate new shares in the name of a title truster in the course of capital increase, it is difficult to readily conclude that there exists a clear separate purpose from that of tax avoidance solely on the basis of the mere fact that new shares were allocated according to the ratio of existing shares.

Legal fiction of donation of title trust property under Article 45-2 of the Inheritance Tax and Gift Tax Act

2015Nu4770 Revocation of Disposition of Imposing gift tax

IsaA

Deputy Director of the Tax Office

September 16, 2015

October 21, 2015

1. The plaintiff's appeal is dismissed.

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

Cheong-gu Office

The judgment of the first instance court is revoked. The disposition of imposition of KRW 000,000, which the Defendant rendered to the Plaintiff on August 7, 2013, was revoked (the Plaintiff claimed at the first instance court to revoke the disposition of imposition of KRW 000,00, which reverted to the year 1999, but was withdrawn in the first instance trial).

1. Quotation of judgment of the first instance;

The reasoning for this Court’s explanation concerning this case is as stated in the reasoning of the judgment of the first instance except for the corresponding part of the judgment of the first instance as stated in the following Paragraph (2). Thus, this Court shall accept it as it is in accordance with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Parts in height:

��제3쪽 제1행의 "이 사건 처분을 하였다"를 "처분을 하였다(이하 2001년 귀속 증여세 616,324,800원 부과처분 부분을 '이 사건 처분'이라 한다)"로 고친다.

��제3쪽 제4행의 "을 제1, 13호증"을 "을 제1호증"으로 고친다.

��제3쪽 제15행의 "이 사건 각 부과처분"을 "이 사건 처분"으로 고친다.

��제5쪽 제1행부터 제7쪽 제8행까지를 아래와 같이 고친다.

2) Determination as to the assertion that there exists a separate purpose irrelevant to tax avoidance

A) According to the aforementioned facts and macroscopic evidence, the following circumstances are recognized.

(1) Article 288 of the former Commercial Act (amended by Act No. 6488 of Jul. 24, 2001) provides that three or more promoters shall be required to establish a stock company. Thus, there was a need to appoint three or more promoters around April 27, 199, which was at the time of the incorporation of the stock company. However, there was a company as promoters of the instant company, and the Plaintiff acquired the shares of the instant company as a subscriber who is not the promoters. The Plaintiff asserted in the first instance court that it was necessary for at least four promoters and subscribers to establish the company in the process of establishing the company, because it was possible for the Plaintiff to promptly establish the company in the process of solicitation rather than the incorporation procedure. However, the incorporation of the company and recruitment should be claimed for appointment of auditors in the case of an alternative incorporation under Article 290 of the Commercial Act, and therefore, the company of this case did not need to file a claim for appointment of auditors with the court in accordance with the procedure of the title trust of the instant company.

(2) As long as there is no evidence to conclude that AA borrowed the name of the Plaintiff in consideration of the title trust on the shares issued with capital increase from the time of the incorporation of the instant company, the title trust on the shares issued with capital increase on December 29, 2001, which took place after the lapse of about two years and six months after the establishment of the instant company, is a separate title trust from the title trust that took place at the time of the establishment of the instant company.

The issue of whether there was a tax avoidance purpose in the title trust on the shares issued with capital increase should be determined individually as at the time of the establishment of the instant company, not at the time of the title trust. However, unlike the Commercial Act, which was amended by Act No. 6488, Jul. 24, 2001 at the time of the title trust as of December 29, 2001 and enforced from the same date, the Commercial Act, unlike the Commercial Act, which was enforced at the time of the establishment of the instant company, did not limit the number of promoters required for the establishment of the instant company, but did not limit the number of promoters required for the establishment of the instant company.

(3) Where a corporation issues new shares for the purpose of raising funds after its establishment, the existing shareholders have the right to be allocated new shares on the basis of the number of shares held by them (Article 418 of the Commercial Act), unless otherwise stipulated in the articles of incorporation (Article 418 of the Commercial Act). In the event a shareholder voluntarily renounces such new shares without exercising such right, the so-called forfeited shares may occur. With respect to such forfeited shares, the corporation may re-examine the forfeited shares to a third party, other than the relevant forfeited shareholders, through the prescribed procedure in order to achieve

Therefore, in order to resolve the title trust on December 29, 2001, AA should have acquired the Plaintiff’s shares prior to the issuance of new shares, arrange the Plaintiff’s shares by acquiring them, or had the Plaintiff waive the preemptive rights after the issuance of new shares, and have the Plaintiff accept such forfeited shares. As long as the instant company’s allocation of new shares in the process of issuing new shares for capital increase does not seem to have been legally impossible, it is difficult to readily conclude that there exists a clear separate purpose from the purpose of tax avoidance solely on the ground that the instant company simply allocated new shares in accordance with the existing shares ratio.

Based on the Supreme Court Decision 2010Du24104 Decided March 24, 201, the Plaintiff asserts that, on December 29, 2001, the title trust as of March 29, 2001, was the obvious purpose of evading the procedure following the cancellation of the previous title trust and the restoration of the name in the AAA. However, unlike the above Supreme Court Decision, AAA owned 100% of the shares of the instant company and was operating the instant company in its own. Therefore, it does not need considerable time and effort to implement the procedure necessary for acquiring shares or taking the method of acquiring forfeited shares. Furthermore, in the above Supreme Court Decision, the previous title trust was intended to take the number of promoters required under the Commercial Act at the time of the establishment of the company. On the other hand, while the Plaintiff’s acquisition of shares of the instant company as the subscriber even if the minimum number of promoters required under the Commercial Act was met, and thus, the previous decision differs from this case. Therefore, the aforementioned Supreme Court Decision is different from this case.

B) In full view of these circumstances, the evidence submitted by the Plaintiff alone cannot be deemed to have had a clear purpose of trusting the Plaintiff’s shares of the instant company to the extent that the title trust did not exist for the purpose of tax avoidance, and there is no evidence to acknowledge otherwise, and therefore, the Plaintiff’s assertion disputing this cannot be justified.

3. Conclusion

Therefore, the judgment of the first instance court is legitimate, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.