The legislative intent of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act and the method of determining whether there was “the purpose of tax avoidance” as prescribed by the said provision and the burden of proving that there was no such purpose (=person under whose name the name

Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007)

[Plaintiff-Appellant] Plaintiff 2007Du19331 decided Apr. 9, 2009 (Gong2009Sang, 670)

Plaintiff (Law Firm, Kim & Lee LLC, Attorneys Kim Jong-soo et al., Counsel for the plaintiff-appellant)

Head of Eastern Tax Office

Busan High Court Decision 2012Nu3385 decided April 19, 2013

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. The main text of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter the same shall apply) provides that “where the actual owner and the nominal owner are different with respect to property (excluding land and buildings; hereafter the same shall apply in this Article), the value of the property shall be deemed to have been donated to the actual owner on the date when the actual owner and the nominal owner are registered as the nominal owner (where the property is subject to a change of ownership, referring to the date 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,” and subparagraph 1 of the proviso provides that “Where the property is registered in another person’s name without any purpose of evading taxes, or the ownership is not transferred in the actual owner who has acquired the ownership.

The legislative purport of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act is to recognize an exception to the principle of substantial taxation to the purport that the act of tax avoidance using the title trust system is effectively prevented, thereby realizing the tax justice. Thus, if the title trust was recognized as having been made for any reason other than the purpose of tax avoidance, and it is merely a minor reduction of tax incidental to the said title trust, it cannot be readily concluded that there had been the purpose of tax avoidance. However, in light of the legislative purport as above, inasmuch as the purpose of the title trust is not included in the purpose of the title trust, it cannot be determined that there was the purpose of tax avoidance by applying the proviso of the above provision only when the purpose of the title trust is not included in the purpose of tax avoidance, and it cannot be said that there was an intention of tax avoidance. In addition, the burden of proving that there was no purpose of tax avoidance exists a nominal person who asserts it (see, e.g., Supreme Court Decision 2007Du

2. First of all, the court below acknowledged the following facts: ① (a) on August 25, 2005, the Plaintiff acquired 300,000 shares of the issuance of Hannet Life Health Co., Ltd. (hereinafter “instant company”) from Nonparty 1, a multi-level distribution company, and received 1.5 billion shares on September 8, 2005; (b) on February 18, 2006, 2,000 shares received 1.0 billion shares (hereinafter “the above shares”), and (c) on July 2007, the Plaintiff owned 52.51% shares of the instant company from Nonparty 1, but did not participate in the value-added tax on July 2007; and (d) on July 201, 2006, Nonparty 300,00 shares issued 1 billion shares of the instant company as the taxpayer for tax payment; and (e) on July 24, 2007, Nonparty 209.

Furthermore, in light of the fact that the acquisition fund of the instant shares was borne by Nonparty 2 and the Plaintiff did not have any unique re-refluence in preparing the acquisition fund, and the Plaintiff was appointed to the controlling shareholder of 52.51% of the shares, and there was no record of the Plaintiff’s involvement in the management at all, the lower court determined that Nonparty 2 was legitimate for the Plaintiff to avoid the secondary tax liability of Article 39 of the Framework Act on National Taxes by concealing relations between Nonparty 2 and his actual shareholder when Nonparty 2 distributed the instant shares under another trustee’s name or owned shares was naturally lower, on the ground that Nonparty 2 avoided the secondary tax liability of the instant shares due to title trust of the instant shares, and Nonparty 2 was unable to acquire the shares of the instant company under one’s name, which is the same kind of company due to the non-party 4’s duty not to engage in the competitive business.

In light of the above provisions, legal principles, and records, the judgment of the court below is just, and there is no error of law by misapprehending the legal principles as to constructive gift of title trust property, as otherwise alleged in the grounds of appeal.

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Sang-hoon (Presiding Justice)