Cho High 2013 Jeon 4410 (Oh 18, 2014)

The instant title trust is not for the purpose of tax avoidance, but for other obvious purposes.

Since Kim 00 worked for an investment advisory company and could not acquire listed stocks on its own account pursuant to the Indirect Investment Asset Management Act, it does not constitute title trust to the Plaintiff for the purpose of evading taxes as the title trust of the instant stocks.

Daejeon District Court 2014Guhap104543 Revocation of Disposition of Imposing gift tax

Kim*

Daejeon Head of the District Tax Office

o October 07, 2015

November 04, 2015

1. The Defendant’s disposition of imposition of gift tax of KRW 277,293,697, and KRW 102,078,345, and KRW 551,224,124, and KRW 94,574, and KRW 60,872,871, as of December 31, 2005, the gift tax of KRW 102,07,078,345, and KRW 551,224,124, and KRW 94,574,144, and gift tax of KRW 60,872,871, as of August 6, 2007, respectively, against the Plaintiff on March 7, 2013.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. The circumstances leading up to the title trust

1) 원고의 제부(弟夫)인 김00는 2005년경 자산운용회사인 00투자신탁운용 주식회사에서 근무하다가 2006. 4. 30. 퇴사한 후, 2006. 5. 1.부터 2007. 4. 30.까지는 투자자문회사인 00투자자문 주식회사에서 근무하였다.

2) Officers and employees of an investment advisory company and an asset management company are prohibited from trading listed stocks pursuant to Articles 15 and 148 of the former Indirect Investment Asset Management Business Act (repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, Act No. 8635, Aug. 3, 2007; hereinafter “Indirect Investment Act”). In order to avoid such restrictions, Kim 00 held listed stocks (hereinafter “instant listed stocks”) after opening a securities account in the Plaintiff’s name on January 25, 2005 in order to conduct trading of listed stocks (hereinafter “instant title trust”).

(Omission of List)

3) From March 14, 2012 to April 10, 2012, the Director of the Regional Tax Office: (a) conducted a tax investigation on Kim00; and (b) Kim00 deemed that the acquisition of the instant shares through the securities account under the Plaintiff’s name constitutes a title trust of shares, and thus, (c) demanded the Kim0 and the Plaintiff to return and pay gift tax pursuant to Article 45-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter “Inheritance Tax and Gift Tax Act”).

4) On May 31, 2012, the Plaintiff paid KRW 1,981,428,081 upon filing a return after the deadline for gift tax to the Defendant. After reviewing the Plaintiff’s return after the deadline for gift tax, the Defendant: (a) deemed that some of the gift tax was omitted; and (b) deemed that there was an omission in the gift tax; (c) increased the gift tax of KRW 17,005,390 on March 7, 201

5) On March 25, 2013, the Defendant confirmed that there was an error in the calculation of the tax amount in the disposition of imposition of March 7, 2013, which was issued on March 2013, and re-issued and notified as follows (hereinafter “instant disposition”).

(Omission of List)

6) The Plaintiff dissatisfied with the instant disposition on June 3, 2013, and raised an objection to the head of the local government ** the head of the local government, but * the commissioner of the regional tax office dismissed the Plaintiff’s objection on June 28, 2013. On October 1, 2013, the Tax Tribunal dismissed the Plaintiff’s request for adjudication on August 18, 2014.

Facts that there is no dispute for recognition, Gap evidence 1 through 8 (if there is a number, each number number;

(2) Each entry and the purport of the whole pleading;

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Kim 00 was a relationship in which an asset management company and an investment advisory company had worked, and was unable to trade listed stocks under their own name pursuant to Articles 15 and 148 of the Indirect Investment Act. Kim 00 was a transaction of the instant stocks using the securities account in the Plaintiff’s name in order to avoid such regulation and trade listed stocks. The primary purpose of the title trust of this case is not to avoid tax avoidance but to avoid regulation under the Indirect Investment Act. Accordingly, the title trust of this case was made without the purpose of tax avoidance, and thus, it does not constitute subject to gift tax.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) The legislative purport of Article 45-2(1) of the 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 by using the title trust system is effectively prevented, and thus, it is possible to apply the proviso of the same Article only if the purpose of tax avoidance is not included in the purpose of the title trust, and in such a case, the burden of proving that the purpose of tax avoidance has not been achieved (see, e.g., Supreme Court Decision 2003Du13649, Dec. 23, 2004). Meanwhile, if it is recognized that the title trust was made for any reason other than the purpose of tax avoidance, and it cannot be deemed that the purpose of tax avoidance exists if there is no reduction incidental to the said title trust, or that there is only a minor reduction of taxes, and the mere reason that there exists a possibility of future tax reduction may arise, it cannot be deemed that the purpose of tax avoidance exists (see, e.g., Supreme Court Decision 2004Du7333, May 12, 206).

2) According to the purport of the entire pleadings and arguments, the following facts can be acknowledged.

① From January 1, 2005 to April 30, 2006, Kim 00 worked at 00 Investment Advisory Company, an asset management company, and 00 Investment Advisory Company, an investment advisory company, from May 1, 2006 to April 30, 2007, and it was impossible to acquire listed stocks pursuant to Articles 15 and 148 of the Indirect Investment Act.

② While a certified copy of his resident registration is submitted to the company, Kim* in the name of his spouse, Kim* in the name of his spouse. As such, there is concern that the violation of the Indirect Investment Act would be easily discovered when acquiring listed shares, Kim* in title trust the shares of the stock company 00 brokerage companies, which is non-listed shares, and acquired them in the name of the Plaintiff.

③ The instant title trust resulted in KRW 10,083,684 of dividend income belonging to year 2006, and KRW 30,220,000 of dividend income belonging to year 207.

④ At the time of 2006, the Plaintiff’s dividend income for the year 2006 was terminated as it was not subject to the total sum of financial income, and the dividend income for the year 2007 was subject to the total sum of financial income in 2007. Meanwhile, when the dividend income accrued from the instant stocks is deemed to be the dividend income for the year 200, Kim 00 constitutes the subject of the total sum of financial income at the time of 2006, and the dividend income for the year 2006 is terminated as the subject of the total sum of financial income, while the dividend income for the year 2007 is not subject to the total sum of financial income.

⑤ The global income tax that was evaded by Kim 00 or the Plaintiff due to the instant title trust is equivalent to KRW 2,117,574, regardless of the reduction of the dividend income attributed to year 2006 by being subject to separate taxation, not comprehensive taxation. On the other hand, Kim 00 or the Plaintiff additionally paid the global income tax equivalent to KRW 3,626,40, as the dividend income that is subject to separate taxation for the dividend income belonging to year 2007 was assessed comprehensively.

⑥ On April 30, 2007, Kim 00 retired from the Investment Advisory Company, an investment advisory company, and all of the shares of this case that were under the name of the plaintiff were returned to its own name.

(7) Even if the shares were acquired under his own name, Kim 00 does not constitute a major shareholder under Article 157 of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 20618 of Feb. 22, 2008), a major shareholder under Article 105(6) of the Local Tax Act (wholly amended by Act No. 10221 of Mar. 31, 2010), or a secondary taxpayer under Article 39 of the Framework Act on National Taxes (wholly amended by Act No. 9263 of Dec. 26, 2008) liable to pay acquisition tax.

3) The following circumstances revealed from the above fact of recognition, namely, ① Kim 00 appears to have acquired the instant stocks in the name of the Plaintiff for the purpose of evading the restriction on acquisition of listed stocks under the Indirect Investment Act, such as acquiring listed stocks under the Plaintiff’s name, on the grounds that the violation of the Indirect Investment Act might be easily discovered with respect to listed stocks, unlike those acquired in the name, Kim**. ② The global income tax omitted from the title trust of this case by the Plaintiff or Kim 00 is less than 2.1 million won of global income tax for the year 2006 and more than 3.6 million won was paid in 207, thereby increasing tax burden due to the title trust of this case. ③ It appears that there was no tax reduction incidental to the title trust of this case other than the global income tax as above, ④ Kim 00 is difficult to view that the restriction on acquisition of listed stocks under the Indirect Investment Act was lost due to retirement of the Investment Investment Investment Investment Advisory Company, and immediately returned the Plaintiff’s stocks under the name of the Plaintiff to the title trust of this case.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.

[Attachment]

Relevant statutes

m. former Indirect Investment Asset Management Business Act (repealed by Article 2 of Addenda to Act No. 8635 of Aug. 3, 2007)

Article 15 (Restrictions on Sale, Purchase, etc. of Securities by Officers and Employees)

(1) No executive or employee of any asset management company shall trade securities, trade exchange-traded derivatives and over-the-counter derivatives on his/her own account regardless of in whose name the accounts stand in except as prescribed by Presidential Decree.

Article 148 (Executives, Supervision, etc.)

Articles 8, 9 (2) and 15 of this Act, Articles 35, 37, 47, 48, subparagraphs 2 and 3 of Article 52, Articles 56 through 61 and 63 of the Securities and Exchange Act shall apply mutatis mutandis to investment advisory companies.

(1) The former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007)

Article 45-2 (Presumption of Donation of Title Trust Property)

(1) Where the actual owner and the nominal owner are different in property (excluding land and buildings; hereafter the same shall apply in this Article), the value of which is required to be registered, etc. for the transfer or exercise of rights, notwithstanding Article 14 of the Framework Act on National Taxes, the nominal owner shall be deemed to have donated, from the actual owner, the value of such property on the date when it is registered, etc. to 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

1. Where any property is registered in the name of another person or transfer is not made in the name of the actual owner who has acquired the ownership without an intention of tax avoidance;

(2) Where any property is registered, etc. under another person's name, and a transfer of ownership is not made under the name of the actual owner, and where the title of stocks, etc. is not converted under the name of the actual owner during the grace period, it shall be presumed that there exists an objective of tax avoidance: Provided, That the same shall not apply to cases where the transferor files a report on the change of ownership along with a report under Articles 105 and 110