Cho High Court Decision 201Do2870 ( December 05, 2011)

Since the issuance of free share cannot be seen as the same as the cash dividend, the gift tax assessment is illegal.

Since there is no change in the plaintiffs' share ownership ratio, the net assets of the non-party company, or the actual values of the shares held by the plaintiffs through free capital increase, the substance of free capital issuance cannot be deemed as the same as cash dividend. Since it is difficult to view that there was an additional purpose of tax avoidance in relation to gratuitous capital allocation, the gift tax

2011Revocation of revocation of disposition imposing gift tax, 41540

KimAA and six others

Five other members of the Guro Tax Office

February 21, 2012

March 22, 2012

1. On May 11, 201, the head of the Guro Tax Office revokes the imposition of the gift tax by the head of the ○○○○○○○○○○ on the part of the head of the Guro Tax Office on the Plaintiff KimA, the imposition of the gift tax by the head of the ○○○○○○○○ on the part of the head of the e-mail on May 12, 2011, and the imposition of the gift tax by the ○○○○○○○○○ on the part of the head of the Maro Tax Office on the Plaintiff KimB, and the imposition of the gift tax by the head of the Maro Tax Office on the part of the head of the Maro Tax Office on the part of the Plaintiff KimB on the part of the head of the Maro Tax Office on the part of the head of the ○○○○○○○○ on the part of the head of the Maro Tax Office on the part of the head of the e-mail Tax Office on the part of the Plaintiff on May 111,

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

The same shall apply to the order.

1. Details of the disposition;

가. 윤HH 및 그 아들 윤II(이하 '윤HH 등'이라 한다)은 1975년경 주식회사 JJ (이하 '소외 회사'라 한다)의 주식을 인수하면서 그 주식 중 일부를 원고 김AA, 김QQ, 박KK, 윤EE, 전LL, 최GG와 망 오MM에게 명의신탁하였는 바, 윤HH 등은 1995. 12. 31. 기준으로 원고 김AA 명의로 39,081주를, 원고 김BB 명의로 75,483 주를, 원고 박KK 명의로 135,483주를, 망 오MM 명의로 63,781주를, 원고 윤EE 명의로 1,935주를, 원고 전NN 명의로 50,183주를, 원고 최GG 명의로 2,129주를 각 보유 하고 있었다.

B. On March 31, 1996, the non-party company transferred 00,00 won of earned surplus to capital, and was allocated 400,054 shares free of charge in proportion to the number of shares owned by the existing shareholders (hereinafter referred to as "free of charge"). Accordingly, the non-party company received 400,054 shares for the plaintiff Kim Young, 50,322 shares for the plaintiff Park Young, 90,322 shares for the plaintiff Park Young, 42,520 shares for the plaintiff Park Young, 1,290 shares for the plaintiff Jeon NN, 33,45 shares for the plaintiff Jeon NN, and 1,419 shares for the plaintiff Choi Dong (hereinafter referred to as "each of the above free shares"), and thereafter, the plaintiff Park Young, the heir of the plaintiff Park Young, and the plaintiff Park Dong, the general succession of the plaintiff's liability to pay the tax to the plaintiff under Article 24 of the Framework Act on National Taxes (hereinafter referred to as "CC").

C. The Defendants deemed that each of the instant gratuitous shares allocated to the Plaintiffs, separate from the existing title trust shares, constitutes the subject of deemed donation of title trust under Article 32-2(1) of the former Inheritance Tax Act (amended by Act No. 5193, Dec. 30, 1996; hereinafter the same) and imposed gift tax, such as the written order, on the Plaintiffs (hereinafter the “each of the instant dispositions”).

D. Accordingly, the Plaintiffs were dissatisfied with each of the dispositions of this case and filed an appeal with the Tax Tribunal on July 29, 201, but received each decision on December 5, 201.

E. On the other hand, the number of free capital of this case before and after the free capital of this case, and the balance between the number of stocks and shares of the plaintiffs are as listed below.

(The following table omitted):

[Ground of recognition] Facts without dispute, Gap evidence 1, Eul evidence 2-1, Gap evidence 3, Eul evidence 4-1 to 7, Eul evidence 3-1 to 4, Eul evidence 4-2 and the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiffs' assertion

Since the allocation of earned surplus without compensation following the capital transfer is merely a reclassification of earned surplus to the capital account, the division of existing title trust shares cannot be deemed as a separate trust, and there is no room to acknowledge the possibility of additional tax avoidance due to each of the instant gratuitous shares allocation. Therefore, each of the instant gratuitous shares is not subject to the provision on deemed donation under Article 32-2(1) of the former Inheritance Tax Act, and each of the instant dispositions is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

As the main text of Article 32-2(1) of the former Inheritance Tax Act is one of the exceptions to the substance over form principle under Article 14 of the Framework Act on National Taxes, and thus, is limited to the extent of realizing tax justice by preventing any abuse of title trust as a means of tax avoidance. Even if the actual owner and the nominal owner transfer of retained earnings to the nominal owner, there is no change in the net assets or profits of the issuing corporation, and even if the nominal owner transfer of retained earnings to the nominal owner without compensation, it cannot be said that there was an additional purpose of tax avoidance, other than the purpose of tax avoidance under the title trust of the existing shares. As such, the Defendants were not subject to the provision on gift donation under the main sentence of Article 32-2(1) of the former Inheritance Tax Act, which allows the transfer of new shares to the existing title trustee without compensation, based on the premise that there was no change in the equity ratio of the existing shares to be distributed without compensation, and thus, the Defendants were not subject to the said provision on gift transfer without compensation to each of the Defendants.

3. Conclusion

The plaintiffs' claims are justified, and all of them are accepted.