Busan District Court-2014-Gu 21012 ( November 13, 2014)

There is no error in imposing gift tax on bypass donation using title trust.

Since it is judged that the sale is the most nominal trust, the disposition authority did not err in imposing gift tax on the time when the claimant acquired the stocks with respect to the bypass donation using the title trust, considering the time of donation as the time of donation, and imposing penalty tax on unjust and minor tax

Article 2 of the Inheritance Tax and Gift Tax Act

Busan High Court 2014Nu23079 Revocation of Disposition of Imposition of Gift Tax

AA

○ Head of tax office

Busan District Court Decision 2014Guhap21012 Decided November 13, 2014

March 13, 2015

April 10, 2015

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 defendant shall revoke the disposition of imposition of KRW 000,000,000 on July 4, 2013 against the plaintiff on July 4, 2013.

1. Details of the disposition;

A. On November 30, 2006, BB, a father of the Plaintiff, and a major shareholder of the Do, Seoul Special Self-Governing Province (hereinafter referred to as “Seoul Special Self-Governing Province”) (hereinafter referred to as “Seoul Special Self-Governing Province”) transferred the title of ownership to CCC in the form of selling 000 weeks, 000 shares to DDR, and 00 won per share to EE at a face value of 00,000 won (hereinafter referred to as “CCC, DD, and EE”), including each of the above shares, to “the shares of this case”, and the transfer of each of the above shares is referred to as “the first transfer”).

B. On May 19, 2010, CCC, etc. transferred the instant shares to the Plaintiff at a par value of KRW 00,000 per share (hereinafter “second transfer”), and reported the transfer income tax base amount with “0 won” on August 31, 2010.

C. In the process of cross-audit by the National Tax Service around 201, the Defendant demanded the Plaintiff to order the second transfer on or around August 201, 201 according to the point of cadastral records as to the overall share transaction of this case. On September 15, 2011, the Plaintiff’s shares transferred from CCC, etc. on or around September 15, 201 constituted “the gift from the transfer” under Article 35 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 10305, May 20, 201; hereinafter “former Inheritance Tax and Gift Tax Act”) and the Defendant’s total amount of KRW 00,000,000,000,000,0000,000,0000,000,000,000,000,000,000,00,00,00,00,00,00,00.

D. Since then, the Defendant notified ○○ National Tax Service of the Plaintiff’s suspected facts of title trust and investigated the Plaintiff’s consolidated investigation into the corporation in 2008 to 2012, and conducted an investigation into the change of the Plaintiff’s shares in the process.

E. The Defendant: (a) on July 3, 2013, on the basis of the results of the change of shares against the Plaintiff, held the instant shares under title trust with the CCC, etc.; (b) on May 19, 2010, the Plaintiff finally acquired the instant shares on May 19, 2010; (c) deemed the time of acquisition of donated property; (d) on the said time of acquisition, the amount of KRW 0,000,000 at the market price at the time of acquisition assessed according to the supplementary assessment method x 0,000, KRW 000, KRW 000, KRW 0000 at the Plaintiff’s account at the time of disposal (i.e., the market price at KRW 00,000 per share x KRW 000, KRW 0000, KRW 0000, KRW 0000, KRW 00000, KRW 0000 (Additional tax).

F. The Plaintiff appealed and filed an appeal with the Tax Tribunal on October 0, 2013, but the Tax Tribunal rendered a decision to dismiss the Plaintiff’s appeal on October 00, 2014.

G. Meanwhile, the value per share of the instant shares assessed by the supplementary assessment method under the former Inheritance Tax and Gift Tax Act is KRW 00,000 as of November 30, 2006, and is KRW 00,000 as of May 19, 2010.

Facts having no dispute over recognition, Gap's evidence Nos. 1, 2, 3, 5, 6, 7 (including a serial number; hereinafter the same shall apply), Eul's evidence Nos. 1 and 2, and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

BB recognizes that the Plaintiff took the form of the first and second transfers in order to make a bypass donation of the instant shares. However, the instant disposition should be revoked on the grounds that the following illegal grounds exist:

1) In calculating the value of donated property of this case, ① BB intended to donate the shares of this case to the Plaintiff through the second transfer, and thus, the time of acquisition of the Plaintiff’s shares of this case is November 30, 2006, which is the first transfer day, and ② it is treated differently from the free transaction in calculating the value of donated property under the former Inheritance Tax and Gift Tax Act. The Plaintiff acquired the shares of this case by means of a onerous transaction that paid KRW 00,000 in return. Thus, the Plaintiff is deemed to have obtained the amount of gift tax pursuant to Article 35 of the former Inheritance Tax and Gift Tax Act. Thus, the Plaintiff’s acquisition time of this case shall be considered as the second transfer day, and the disposition of this case is unlawful for calculating the value of donated property of this case without any deduction under Article 35

2) The Plaintiff reported and paid the gift tax, etc. on September 15, 201 through consultation with the Defendant following the audit and cadastral records by ○○ National Tax Service and the Defendant’s solicitation. The Defendant deemed the transfer of shares in this case as “pro rata donation” in violation of such public opinion expression, and additionally disposed of the shares in this case around 2013, it was unlawful in violation of the principle of good faith as stipulated in Article 15 of the Framework Act on National Taxes.

3) Since the Plaintiff filed a report on both the first and second transfers, it cannot be deemed that the Plaintiff concealed whether the transfer of shares in this case constitutes “pro rata gift”, and even if the Plaintiff did not seem to have made it impossible or significantly difficult to impose and collect the gift tax on the Plaintiff, the disposition of this case imposing penalty tax on the Plaintiff is unlawful.

4) Although additional tax should not be imposed on KRW 000,000,000 as principal tax paid through a report after September 15, 2011, from September 15, 201 to the date of the instant disposition, the instant disposition that was imposed repeatedly is unlawful.

B. Relevant statutes

Attached Form 3 is as listed in the "relevant Acts and subordinate statutes".

C. Determination

1) Whether the calculation of the value of donated property of this case is unlawful

A) The time of acquisition of the instant shares

Article 31(1) of the former Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22516, Dec. 30, 2010; hereinafter the same shall apply) provides that the scope of donated property which is a basis for the assessment of donated property includes all the things having economic value that can be converted into money and all the rights having property value. Article 23 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 22516, Dec. 30, 2010; hereinafter the same shall apply) provides that the time of acquisition of donated property shall be 1. With respect to property which needs to be registered for transfer or exercise of rights, the date of its registration, 2. (Omission), 3. 1 and 2, the date of delivery or de facto use, and if the donated property is a stock, the date objectively confirmed that the receipt of the relevant stocks, etc. was made as the time of acquisition.

In accordance with the above legal principles, even if BB transferred the instant shares to the Plaintiff in a manner that allows the Plaintiff to donate each of the instant shares to the Plaintiff, considering the following circumstances: (a) even if BB did not work for the Plaintiff at the time of the first transfer; (b) in view of the fact that BB still did not have exercised a substantive right in managing each of the instant shares; (c) the Plaintiff entered the Republic of Korea in around 2010 and entered the Si/Gun/Gu in order to manage each of the instant shares; and (d) if BB (B) was deemed to immediately donate each of the instant shares to the Plaintiff at the time of the first transfer, it would not be deemed that the second transfer was delayed for more than three years; and (d) in light of the fact that the time when the Plaintiff acquired rights to the instant shares within and outside of Korea and the time when the Plaintiff increased the Plaintiff’s property value, it is reasonable to deem the time of the Plaintiff’s acquisition of the Plaintiff’s shares to be the second transfer date.

B) Calculation of specific donated value

Article 60(1) of the former Inheritance Tax and Gift Tax Act provides that the value of the property on which the gift tax is levied shall be the market price as of the date of donation. With regard to the calculation of the specific value of donated property, the method of calculating the value of donated property by individual type under Articles 33 through 42 of the same Act shall be an example of the method of calculating the value of donated property by type of donation. Therefore, in the case of the imposition of the gift tax under Article 2(3) of the former Inheritance Tax and Gift Tax Act, the amount equivalent to the donated market price, in principle, shall be considered as the value of donated property: Provided, That in cases where the taxation requirements, type of transaction, economic substance, etc. are identical or similar to those under Articles 33 through 42 of the same Act, the said value shall be calculated by applying mutatis mutandis only when the said taxation requirements, type of transaction, and economic substance are identical or similar [Article 32 of the Inheritance Tax and Gift Tax Act (Article 32) amended by Act No. 11609, Jan. 1, 2013].

According to the above legal principles, the following facts revealed by the evidence revealed as follows: (i) there is no dispute between the parties that the shares of this case were transferred from BB to the Plaintiff in the form of transfer Nos. 1 and 2; (ii) the Plaintiff paid 00,800,000 won to CCC, etc.; (iii) the CCC, which is a trustee of the shares of this case, did not clearly explain the source of the above money and the method of payment; and (iv) there is no reason to receive the transfer price of the shares from the Plaintiff; and (iii) the Plaintiff calculated the remaining money after deducting KRW 00,000,000 from the market price of the shares of this case that the Plaintiff paid to CCC, etc. from the market price of the shares of this case, it is difficult to view the Defendant as the gift value of this case as the gift of this case’s 10th,000 won and the market price of the shares of this case’s 2nd, not the acquisition price of the shares of this case.

Accordingly, when calculating the value of donated property, the amount of KRW 0,00,000,00, which is the market value of the shares of this case assessed according to the supplementary evaluation method as of May 19, 2010 (i.e., the market value of KRW 000,000 per share x 0,000) shall be deemed to be the value of donated property. However, considering the Plaintiff’s circumstances, the Defendant accepted the Plaintiff’s assertion that in the process of acquiring the shares of this case, the Defendant spent KRW 00,00,000 in the process of acquiring the shares of this case, and determined that the amount was calculated as the actual value of the Plaintiff’s property after deducting the above amount, considering that the actual value of the property was decreased as of May 19, 2010 (the portion is considered to have been substantially increased due to the “contributed donation,” which is more favorable to the Plaintiff, and it cannot be deemed to have any illegality in the calculation process.

C) Ultimately, the Defendant calculated the value of donated property lawfully under the former Inheritance Tax and Gift Tax Act, and the Plaintiff’s aforementioned assertion on a different premise is without merit.

2) Whether the principle of good faith is violated

In general, in order to apply the principle of trust and good faith to the acts of tax authorities in tax legal relations, first, the tax authorities must express the public opinion that is the object of taxpayer trust, second, there is no reason attributable to the taxpayer for the taxpayer to believe that the tax authority’s statement of opinion is justifiable, third, the taxpayer must trust the name of the opinion and engage in the act in which it is in breach of the above statement of opinion. Fourth, the tax authorities’ disposition against the above statement of opinion should result in a violation of the taxpayer’s interest (see Supreme Court Decision 2001Du9103, Nov. 26, 2002). Such principle of trust protection or the principle of respect for tax practices provided for in Article 18(3) of the Framework Act on National Taxes applies only in special circumstances where the taxpayer’s trust is deemed to conform to the concept of justice (see Supreme Court Decision 201Du1253, Oct. 25, 2002).

In light of the above legal principles, the Plaintiff’s statement No. 4, and witness EE’s testimony and argument, even if ○○ National Tax Service’s cross-audit in 201, the auditor conducted an audit on the change of shares in △△, etc. on the Defendant at the time of cross-audit of ○○○ National Tax Service, and immediately thereafter, the Plaintiff received shares at low price from CCC, etc. on September 15, 201, and paid gift tax, etc., and the Defendant requested the Plaintiff to submit explanatory materials, etc. on the acquisition of the shares of this case from CCC, etc. around that time. However, in light of the above evidence and the purport of the entire pleadings, it is difficult to find that the tax authority did not merely rectify the Plaintiff’s tax disposition or taxpayer’s return for error, and it is difficult to find that the Plaintiff did not have any public duty deliberation on the acquisition of shares by transfer during the period of 200,000 won or more.

Ultimately, the instant disposition cannot be deemed to have violated the principle of good faith, and thus, the Plaintiff’s above assertion is without merit.

3) Whether the imposition of an unfair return penalty tax is illegal

A) Article 47-2(1) of the former Framework Act on National Taxes (amended by Act No. 10405, Dec. 27, 2010; hereinafter “former Framework Act on National Taxes”) provides that where a taxpayer fails to file a tax base return by the statutory deadline for filing a tax return, an amount equivalent to 20/100 of the calculated tax under the tax-related Acts shall be added to the payable tax amount or deducted from the refundable tax amount. Paragraph (2) of the same Article provides that where a taxpayer violates the duty to report national tax base or tax amount by improper means (referring to a violation of the duty to report national tax, as prescribed by Presidential Decree, on the basis of the concealment or pretending of all or part of the fact that the taxpayer serves as the basis for calculating the tax base or the amount of national tax; hereinafter referred to as “former Framework Act on National Taxes”). Article 47-2(1) provides that the amount equivalent to 40/100 of the amount calculated by multiplying the calculated tax base by the ratio occupied by the amount of tax base in the tax base, “an act of concealment or concealment of false records”, or concealment of books, etc.

Therefore, in order to fall under the above unfair method, it means that there is a deceptive scheme or other active act that makes it impossible or considerably difficult to impose and collect taxes as a means of tax evasion, and without accompanying such an act, the fact that a tax return under the tax law is not simply made or by underreporting the tax base does not constitute such act (see, e.g., Supreme Court Decision 2005Do370, Mar. 25, 2005).

B) According to the aforementioned relevant statutes and legal principles, the following circumstances are revealed through health care in the instant case, namely, ① the ownership of the instant shares was transferred to CCC, etc.; ② the stock acquisition agreement between BB and CCC appears to have been prepared by means of appearance only to transfer the title; ② the CCC et al. concluded a false stock acquisition agreement with the Plaintiff to conceal the actual fact of donation even though the Plaintiff did not have the right or position to sell the instant shares to the Plaintiff; ③ the Plaintiff voluntarily recognized the fact of donation; ③ such term “the gift” was made for the purpose of evading gift tax; ④ Accordingly, the tax authority could not accurately capture the transfer of donated property from BB to the Plaintiff (if it did not grasp the actual behavior of the overall transaction through additional investigation, it appears that it could not be difficult or difficult for the tax authority to impose the tax base by means of fraudulent means, such as making a false tax report.)

C) Therefore, the Plaintiff’s above assertion is without merit.

4) Whether the penalty tax is imposed doublely on the part of the nonperformance of payment

The fact that the Defendant, while imposing the gift tax of this case, deducts not only the principal tax of the gift tax paid through a return after the deadline for the total amount of tax assessment, but also the penalty tax for unfaithful return and payment. Therefore, the Plaintiff’s assertion that the penalty tax for unfaithful payment was imposed for KRW 000,000 for the principal tax of the gift tax already paid is without merit.

5) Sub-committee

Therefore, the disposition of this case is legitimate to impose additional gift tax, additional tax on the gift tax, additional tax on improper return, and additional tax on insincereful payment on the remaining portion after deducting the amount deemed to have been disbursed by the Plaintiff from the market price as of May 19, 2010 as the gift tax of this case.

3. Conclusion

Therefore, the judgment of the first instance court is just, and the plaintiff's appeal is dismissed as it is without merit.