early 2010west259 ( December 29, 2010)

No case where the mortgagee and the nominal mortgagee are different shall be deemed to be a title trust.

Since the imposition of gift tax on title trust is recognized as an exception to the substance over form principle, its application should be strictly interpreted, and where the actual mortgagee and the nominal mortgagee are different from the actual mortgagee, it cannot be interpreted that the actual owner and the nominal owner are included in the "where the nominal owner are different."

2011Guhap7748 Revocation of Disposition of Imposition of Gift Tax

IndianA

○ Head of tax office

May 27, 2011

August 26, 2011

1. The Defendant’s disposition imposing gift tax amounting to KRW 111,464,960, which was imposed on the Plaintiff on April 6, 2010, shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. From August 25, 2009 to December 1, 2009, the director of the Seoul Regional Tax Office entered into an agreement with ○○○ M Co., Ltd. (former trade name is a stock company AAT; hereinafter referred to as “○○M”), which is a KOSDAQ-listed corporation, to conduct an integrated investigation of corporate tax. After ○○ M’s implementation of new stocks equivalent to KRW 477,60 per share of KRW 4,160 per share in the process ○○ M’s allocation of third party shares to KRW 4,160 per share, the director of the Seoul Regional Tax Office: ○○○ M Co., Ltd., Ltd. (hereinafter referred to as “△△△△”), which is a major shareholder of ○○ M, to raise funds to participate in the above capital increase; ○○○ M Co., Ltd. (hereinafter referred to as “○○”), 200, 3006, 4006, 4006, 967, 4006, and 940.

B. Accordingly, the director of the regional tax office of ○○○○ shall be deemed to have held title trust with the Plaintiff, etc. by receiving 405,600 new shares from a third party, including the Plaintiff, while participating in the capital increase with the above capital increase, and by applying Article 45-2 (1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter referred to as the “former Inheritance Tax and Gift Tax Act”), the amount calculated by multiplying 16,259 won per share of ○○○ M stocks as of December 16, 2005 by the number of shares allocated to the Plaintiff, etc. as the value of donated property [390,216,00 won per share of 390,216,259 won, 24,000 won)]. The Defendant notified the taxation data to the Defendant, etc., the disposition authority, as the penalty tax (hereinafter referred to as the “instant penalty tax”).

C. On June 7, 2010, the Plaintiff filed an appeal with the Tax Tribunal on the instant disposition, but the Tax Tribunal dismissed the said claim on December 29, 2010.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 3, Eul evidence 1 and 4, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff was allocated the instant shares in the name of the Plaintiff for the purpose of lending the new shares subscription fund to participate in the capital increase issued by ○○M and securing the return of the loan. However, the Defendant, without any grounds, deemed that △△△△ was allocated the instant shares that should have been allocated under the name of the Plaintiff pursuant to the title trust agreement concluded between the Plaintiff and △△T, and thus, imposed gift tax on the Plaintiff by applying the provisions of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act. The instant disposition was unlawful (On the other hand, while the Tax Tribunal generally denies the title trust agreement between △△△ and the financial investors, on the ground that the Plaintiff, who was allocated shares, was merely a person who lent the title to △△, the actual investors of the funds, but it is unreasonable to reject the Plaintiff’s assertion that the Plaintiff acquired shares for the purpose of securing the ownership of the allocated shares, but the conclusion

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) Around December 2005, ○○M entered into an agreement with △△△△△△ to pay an amount equivalent to 3% of the investment amount collected as service fees to △△△△△ in addition to the above interest (hereinafter referred to as “instant agreement”) with △△△△△△, a major shareholder of ○○M, to raise funds to participate in the said capital increase in early December 2, 2005. The major contents of the agreement with △△△△△, a credit business company, to raise funds to raise △△△△ on the condition that △△△△ would pay an amount equivalent to 4% of the investment amount in advance and under the name of △△△△△, △△△, on the condition that △△△ would pay an amount equivalent to 4% of the investment amount to △△△△△, a prior interest, from the above interest, to △△△△△△△.

2) After December 8, 2005, ○○○○○ entered into an investment agreement (hereinafter referred to as the “instant investment agreement”) with the content of receiving new subscription money on the condition that 11 investors, such as AB (the Plaintiff’s seat), are recruited pursuant to the instant funding agreement, and that 4% of the investment amount is paid as interest. The main contents of the said agreement (Evidence A) are as follows.

(The following table omitted)

3) 11 investors, including YB, entered into the instant investment agreement with ○○○○○○, and raised KRW 1,687,296,00 in total with the subscription fund for new shares of ○○○○○○○. Pursuant to the instant funding agreement, △△△△ was issued a cashier’s check equivalent to KRW 7% of the subscription fund raised from △△△△△△△△ for service fees and interest, and KRW 338,00,000 in the amount of security, and issued the said cashier’s check to the investors in amount equivalent to 4% of the subscription fund raised as interest pursuant to the instant investment agreement, and issued the said cashier’s check to the investors.

4) Meanwhile, △△△△ was allocated 405,60 shares out of 477,600 shares out of 477,600 shares of new shares that ○○M participated in the capital increase with the capital increase made on December 9, 2005 and agreed to be issued by ○○M in the name of investors or a third party designated by the investors, and the specific details are as follows.

(The following table omitted)

5) Following the sales order of △△△ for the settlement of new shares subscription funds, 11 investors, including NAB, etc., sold 405,600 new shares allocated five times from December 23, 2005 to February 1, 2006 to 7,425,078,440 won, after deducting the remaining sales price of KRW 1,687,296,000 from the investment principal, and returned cashier’s checks worth KRW 5,737,782,440, and KRW 338,000,000, which were offered as security, to △△△△△△△. △△△△ has returned them to △△△△△.

[Ground of recognition] Facts without dispute, Gap 2 through 4, Eul 1, 2 (including paper numbers; hereinafter the same shall apply) and 3, the purport of the whole pleadings

D. Determination

1) In order to establish a deemed donation of title trust for shares pursuant to Article 45-2(1) of the former Inheritance Tax and Gift Tax Act, a transfer of title to the name of the actual owner and the nominal owner should be made in the future under an agreement between the actual owner and the nominal owner on the title trust, i.e., the agreement on the title trust of shares, or communication. If a change of title to the nominal owner was made without an agreement on the title trust, the said provision cannot be applied (see, e.g., Supreme Court Decision 2007Du15780, Feb. 14, 2008). In addition, in cases where a title of shares owned by an obligor is transferred to a creditor for the purpose of collateral security for a claim, the said provision does not merely have the nominal ownership of the shares on behalf of the debtor, but has a security right

2) In light of the above legal principles, comprehensively considering the following circumstances, which can be acknowledged as a whole in light of the health stand, the facts acknowledged earlier, the evidence, and the purport of the entire pleadings, and the following circumstances, such as the process of making difference between the actual owner of the instant shares and the nominal owner, and the process of disposal of the actual shares after the acquisition of the shares, and the process of settlement of the price settlement, even though the Plaintiff is different from △△, the actual owner of the instant shares, and the Plaintiff, the nominal owner, the mere fact cannot be deemed to have held that △△ entrusted the instant shares to the Plaintiff, and there is no evidence to

A) In the instant financing agreement between △△△ and △△△, until △△△△ was returned the principal and interest of the investment funds raised by △△△△△△, the instant agreement provides that △△△△△△△ shall have a cashier’s check issued by △△△△ in an amount equivalent to 20% of the investment funds (Articles 2(5) and 5(2)), and the new stocks to be acquired through participation in capital increase with new stocks shall be distributed in the name of △△△△△△, and the preemptive rights to new stocks and new stocks shall be held as security shall be held by △△△△△ (Article 6(11)), and where the total market price of new stocks and the cashier’s check provided as security does not exceed 150% of the investment funds raised by △△△△△△△△△△△△△△△△△△△△, which provides additional security and grants rights to △△△△△△△△△ in an agreement to secure the principal and interest of the investment funds.

B) In this case’s investment agreement between △△ and 11 investors, △△△△△, etc., in order to secure investors’ principal and interest on investment, she issued a check of 20% of the investment funds to investors (Article 2) and provided that when △△△△ has repaid investors’ full amount of investment funds, investors shall return their stocks and secured goods (Article 8). According to this, △△△△, upon entering into the instant investment agreement with investors, given the same authority as the said security rights and substituted by the said investment rights granted by △△△△△△△△△△ in lieu of the said rights to investors.

C) In fact, investors, such as △B, received the agreed interest rate of KRW 100 million through KRW 200 million, and invested funds in KRW 100,000 through KRW 200,000,00 in accordance with the instant investment agreement, and kept the new shares issued by ○○M in the name of their or a third party designated by them (the Plaintiff in this case), and sold them in accordance with △△△’s order and returned the total sales amount after deducting the investment principal from the investment principal to △△△△△. △△ also collected investors pursuant to the instant investment agreement and received the agreed interest and service fees from △△△△△, and returned the remaining new shares sales amount after deducting the investment principal received from the investors to △△△△

D) At the time of receiving a tax investigation regarding the instant case, △△△△, who was the representative of △△△△△, was in charge of mediating the mutual between △△△ and investors. However, △△△△△, the actual ownership of the new shares acquired through the instant capital increase with the capital increase with the purpose of securing the return of the investment amount was stated to the effect that the investors would pay the capital increase with the capital increase with the name of △△△△△, and that some investors would know about the reason why some investors would have paid the capital increase with the capital increase with the capital increase with the capital increase, and that △△△△△△, who was in charge of the business at the time, kept the new shares as a security for the investment amount, and that the substantial ownership of the

E) On the other hand, it does not seem that there was a personal trust relationship to the extent that only the title of shares owned was trusted between △△△ or △△△ and investors, and there is no clear ground to deem that there was an agreement among them to trust the title of new shares issued by ○M.

F) Meanwhile, even though shares can be the object of security by establishing a pledge right on shares, the creation of a security right by means of security by transferring the name of shares to a secured party is much more easy in terms of securing and recovering a security right. Therefore, from the standpoint of a secured party, it seems that there is more incentive to establish a security right on shares than establishing a pledge right on shares.

3) Furthermore, even if B was allocated new shares for the purpose of transfer by means of transfer, as seen above, under the name of the Plaintiff, it eventually results in title trust with the Plaintiff, and even in the case of title trust with respect to whether the provision on deemed donation under Article 45-2(1) of the former Inheritance Tax and Gift Tax Act may apply to the case of title trust with respect to the right of transfer by means of transfer other than ownership, in the case where the actual owner and the nominal owner are different with respect to the property requiring the transfer or exercise of the right, the gift tax is levied by deeming that the nominal owner have been donated to the actual owner. The legislative intent of the above provision is to recognize an exception to the substance over form principle in order to realize tax justice by effectively preventing the act of tax avoidance using the title trust system (see, e.g., Supreme Court Decision 2003Du13649, Dec. 23, 2004). In light of the fact that the application thereof should be interpreted strictly, the case where the actual owner and the nominal owner of the shares are not included in the title title.

Therefore, even if HB made a title trust on the instant shares to the Plaintiff, it is not deemed that the title trust relationship between △△ and the Plaintiff is not recognized. Therefore, it is reasonable to deem that the gift tax cannot be imposed on the Plaintiff by applying the provisions of Article 45-2(1) of the former Inheritance Tax and Gift

4) Sub-committee

The Defendant’s disposition of this case based on the premise that △△△ was the title trust of the instant shares to the Plaintiff is unlawful.

3. Conclusion

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