early 2014west 2251

In title trust, it cannot be recognized that there is a separate and obvious purpose that is not related to tax avoidance.

The nominal owner who bears the burden of proof has a clear objective of tax avoidance to the extent that there was no objective of tax avoidance in the title trust, and if there was no tax avoidance at the time of the title trust or in the future, there is no objective and objective evidence to prove that there was no tax avoidance in the future, to the extent that there is no doubt.

Donation of title trust property under Article 45-2 of the Inheritance Tax and Gift Tax Act

Seoul Administrative Court 2015Guhap1014

○ ○

○ Head of tax office

July 17, 2015

August 28, 2015

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s gift tax amounting to KRW 00,000,000 (Additional Tax) for the portion pertaining to the gift tax for the year 2004 against the Plaintiff on October 0, 000

(including) revoke all the disposition of imposition.

1. Details of the disposition;

A. From October 00, 000 to October 00, 200 of the same year, the director of the regional tax office of ○○○○○ (hereinafter referred to as the “instant company”) confirmed the title trust of the Plaintiff’s shares 1,009 shares of the instant company owned by Kim○ on December 31, 2004 (hereinafter referred to as the “instant shares”), and notified the Defendant of the taxation data.

B. Accordingly, on November 7, 2013, the Defendant decided and notified the Plaintiff of KRW 00,00,000 (including additional tax) for gift tax for 2004 pursuant to the provision on the constructive gift of title trust property under Article 45-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter “former Inheritance Tax and Gift Tax Act”). (hereinafter “instant disposition”).

C. The Plaintiff appealed and filed an appeal with the Tax Tribunal on January 29, 2014, and the Tax Tribunal dismissed the Plaintiff’s appeal on October 20, 2014.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 3, 5 through 7, Eul evidence Nos. 1 to 3, the purport of the whole pleadings

2. The plaintiff's assertion

The purpose of title trust of the company’s shares was to meet the requirements of promoters of the Commercial Act before October 1996, and thereafter, the name of the company has been changed in the case of retirement and death of employees who are nominal shareholders. Since the establishment of the company of this case, the company of this case faithfully paid all taxes until December 31, 2013. The company of this case owned 76.3% of the total issued shares on the shareholder registry as of December 31, 2013, and was already registered as an oligopolistic shareholder with secondary liability for tax payment. Since the company of this case did not implement dividends until the date of establishment, there was no omission due to the difference in global income tax rate due to the lack of dividends, and the name transfer income tax and securities transaction tax have been reported and paid faithfully. Accordingly, since the title trust of the shares of this case constitutes a reason for exception to the provisions on trust property in the name of the former Inheritance Tax and Gift Tax Act due to the lack of the purpose of tax avoidance, the disposition of this case should be revoked.

3. Relevant statutes;

Attached Form 2 shall be as listed in attached Table 2.

4. Determination

(a) Facts of recognition;

1) The instant company was established in 000 and engaged in the wholesale business of chemical substances, such as nitrogen, etc., and was in possession of 60,000 shares in total at the time of its establishment. However, the number of shares in 191 was changed from 1,000 to 10,000 shares, and the number of shares was changed to 6,000 shares. Since then, the shares were divided to 5,000 shares, and the number of shares was changed to 12,000 shares.

2) In 1982, Kim○-○ acquired the entire shares of the instant company in the name of ○○ and 9 other than ○○○ and 1982, and thereafter changed the shareholder’s name on grounds of retirement, death, etc. of employees who are the nominal holders of the shares.

3) On December 31, 2004, Kim○-○ concluded a title trust agreement with four trustees including the Plaintiff, and entered the trustee in the register of shareholders. The details of the shares and shareholders change from 1974 to 2008 of the instant company are as shown in attached Table 1.

4) As of April 14, 2005, the Plaintiff: (a) as of April 14, 2005, the instant shares were nominal in title by Kim○○; (b) when the Plaintiff exercises rights as a shareholder, the Plaintiff shall obtain prior consent from Kim○○; (c) the exercise of voting rights at a general meeting of shareholders shall be delegated to a third party designated by Kim○○ or Kim○○; (d) profits to be received as a shareholder shall be returned to Kim○○; and (e) at any time upon the request of Kim○○○, the instant shares shall be returned to Kim○○; and (e) shall be notarized and submitted to Kim○○. Meanwhile, the Plaintiff did not pay the purchase price to the investigating public official for the instant shares acquired in the course of the integrated corporate tax investigation with respect to the instant company; and (e) prepared and submitted a written confirmation confirming that the said shares

[Ground of recognition] Facts without dispute, Gap evidence 7, Eul evidence 2 and 3 (including each number, if any) and the purport of the whole pleadings

B. Whether the instant disposition is lawful

1) Article 45-2(1) of the former Inheritance Tax and Gift Tax Act provides that where the actual owner and the nominal owner are different from the property (excluding land and buildings) which requires a registration, etc. for the transfer or exercise of rights, the value of the property shall be deemed to have been donated to the actual owner on the day (where the property is subject to a transfer of ownership, referring to the day following the end of the year following the year in which the date of acquisition of ownership falls) on which the actual owner registers, etc. as the nominal owner, notwithstanding Article 14 of the Framework Act on National Taxes, but where the property is registered, etc. under another person’s name or the transfer of ownership is not made under the actual owner’s name without any tax avoidance purpose, the title trust property shall not be deemed to have been donated. Meanwhile, the main sentence of Article 45-2(2) provides that where the property is registered, etc. under another person’s name, and where the title holder fails to transfer it, it shall be presumed that there is tax avoidance purpose.

2) 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 by effectively preventing the act of tax avoidance using the title trust system, 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 the taxes provided for in the proviso thereof cannot be limited to the gift tax. Therefore, the burden of proving that there was no purpose of tax avoidance in the title trust can be proved by the method of proving that there was no purpose of tax avoidance, other than the purpose of tax avoidance. However, the nominal owner of the burden of proving the existence of the non-purpose purpose in the title trust can be proved by the method of proving that there was no objective of tax avoidance in the title trust. However, the nominal owner of the burden of proof was not superior to the tax avoidance in the title trust, and there was no tax avoidance at the time of the title trust or in the future (see, e.g., Supreme Court Decision 2004Du12401, Sept. 224, 2006).

3) In light of the following circumstances that are acknowledged by comprehensively taking account of the overall purport of the pleadings as a whole with respect to the instant case’s health team, the facts of the recognition and the evidence mentioned above, as well as evidence Nos. 5-1 and 2, the Plaintiff’s assertion and submitted evidence alone have a clear and obvious purpose irrelevant to the avoidance of tax evasion in the title trust of the instant shares, and it is insufficient to recognize that there was no tax evasion or tax evasion at the time of the title trust, and there is no other evidence to acknowledge this otherwise. Accordingly,

① The Plaintiff alleged that the initial Kim ○○’s title trust of the shares of the instant company was for satisfying the requirements for promoters under the Commercial Act, and thereafter, that the name was changed customarily if an employee who is a nominal shareholder dies or dies. However, the requirements for the number of promoters of the instant company under Article 288 of the former Commercial Act (at least seven persons prior to October 1, 1996, at least three persons prior to July 24, 2001) were abolished on July 24, 2001, the transfer of title trust of the instant shares. In addition, the aforementioned requirements are applicable at the time of the establishment of the instant company [where there is only one shareholder under the Commercial Act (Article 517), and the Supreme Court also recognized the existence of a new company under the name of the title trustee or an employee of the instant company for which only one shareholder existed before the expiration of the said requirements (see, e.g., Supreme Court Decision 6Da18188, Sept. 20, 196).

② The Plaintiff asserts that, regardless of whether or not the title trust of the instant shares was made with respect to the oligopolistic shareholder status of the instant company from the date of title trust, the Plaintiff’s secondary tax liability or deemed acquisition tax under the Framework Act on National Taxes and the Local Tax Act, regardless of whether or not the title trust of the instant shares was made. However, as seen earlier, the Plaintiff’s secondary tax liability of oligopolistic shareholder under the former Framework Act on National Taxes (amended by Act No. 7930, Apr. 28, 2006) is the oligopolistic shareholder holding 50% or more of the shares issued by the instant company continuously from 1991 to 2008. However, the secondary tax liability of oligopolistic shareholder under the former Framework Act on National Taxes (amended by Act No. 7930, Apr. 28, 2006) is determined by the shareholder’s shareholding ratio (Article 39 of the above Act). In the event that the Plaintiff’s delinquent tax amount occurs in the instant company under the name of the nominal shareholder of the instant shares, the secondary tax liability of Kim○

(3) The holding of shares cannot necessarily take into account the occurrence of dividend income, regardless of the existence of an actual distribution of shares by a corporation or of the amount that can be distributed, and current income tax is levied.

Under the system, dividend income of unlisted stocks is subject to global taxation, and as such, if the Plaintiff distributes dividends under the status of the nominal owner of the instant stocks, the amount of tax evasion may occur due to the difference in global income tax.

④ In fact, in the business year 2002, 927,88,233 won, and 1,032,773,552 won in the business year 2003, and 1,190,280,834 won in the business year 2004, and there was a considerable possibility that shareholders will be distributed to the shareholders in the future. The each letter submitted by the Plaintiff to Kim○ at the time of title trust of the instant shares, also includes that “the profits that the Plaintiff would have become the nominal owner of the instant shares, shall be refunded to Kim○.”

5. Conclusion

The plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.