Donation of title trust

As long as the title trust is recognized, the claimant bears the burden of proving that there was no purpose of tax avoidance.

Article 45-2 of the Inheritance Tax and Gift Tax Act;

2015Guhap81911 Revocation of Disposition of Imposition of Gift Tax

AAA and one other

BB Head of the tax office and one other

October 13, 2016

November 10, 2016

1. The plaintiffs' claims against the defendants are all dismissed.

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

The imposition of gift tax of KRW 25,328,990 (including additional tax) imposed on Plaintiff DD on March 19, 2015 by the director of the tax office on March 19, 2015 and the imposition of KRW 21,765,350 (including additional tax) imposed on Plaintiff EE on March 13, 2015 shall be revoked.

1. Details of the disposition;

A. The FFFF Co., Ltd. (hereinafter referred to as “FFF”) is a company that runs a general book and textbook publishing business on January 15, 1990.

B. On November 15, 2004, GGG, which served as the representative director of the non-party company, transferred 60,000 shares of the non-party company owned by it (hereinafter referred to as “instant shares”) to the officers and employees of the non-party company including the plaintiffs, and completed the transfer.

C. The Defendants: (a) applied Article 45-2(1) 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”) on the grounds that the Plaintiffs’ shares at issue were title trust with HH, the actual owner of the non-party company’s company; (b) Defendant BB director of the tax office, on March 19, 2015, imposed a gift tax of KRW 25,328,90 (including penalty tax) on Plaintiff DD on March 19, 2015; and (c) Defendant CCC director of the tax office, on March 13, 2015, notified Plaintiff EE of the determination and notification of KRW 21,765,350 (including penalty tax) of gift tax (hereinafter “instant disposition”).

D. The Plaintiffs were dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on April 20, 2015, but was dismissed on August 12, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 11, Eul evidence Nos. 1 and 11 (including additional numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

The Plaintiffs received title trust from the JJJ, not HH, but the JJJ. As such, the JJJ is exempt from taxation of custom-making business as a religious organization, there is no room to acknowledge the purpose of tax avoidance. Furthermore, the JJJ also has the same way of operation of various companies including non-party companies as well as non-party companies, because the non-party companies may become shareholders of non-party companies that engage in profit-making business, concerns that non-party companies may suffer disadvantages when they become a legal entity operated by the JJJJJ, and that non-party companies may be treated as non-party companies and their officers and employees are likely to suffer disadvantages.

B. Relevant statutes

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

C. Determination

1) The title truster of the issue shares

The Defendants asserted that the title truster of the shares at issue is HH, but it is insufficient to acknowledge the above alleged facts solely on the basis of the evidence stated in Section B-2 through Section B-17, and Section 19 through Section 24. However, the Plaintiffs are the title truster of the shares at issue who is the JJJ. The Plaintiffs are the title truster of the shares at issue who is the JJJJ, and the Defendants also add the same content through the preparatory brief dated September 23, 2016 as the grounds for the same disposition. Thus, if the aforementioned disposition is allowed, the instant disposition based on Article 45-2(1) of the former Inheritance Tax and Gift Tax Act is lawful as long as it satisfies the requirements

Therefore, the subject matter of the taxation disposition lawsuit is objective existence of the tax amount determined by the tax authority. Thus, the tax authority is in the pertinent disposition by the time of closing argument in fact-finding proceedings.

In order to support the legitimacy of the tax base or amount of tax recognized, a new material can be submitted or exchanged or changed to the extent that the identity of the disposition is maintained, and it does not necessarily mean that only the material at the time of the disposition should be determined whether the disposition is lawful or only the reason at the time of the disposition can be asserted (see, e.g., Supreme Court Decision 2009Du1617, Jan. 27, 2011).

According to the background of the above disposition, the grounds for the disposition added to the original grounds for the disposition of this case and the ancillary grounds for the disposition of this case can only be deemed as HH with respect to an objective factual relationship in which the title trust of the shares in question was made in the future of the plaintiffs, or only the legal evaluation of whether the ownership of the shares in question is deemed as HH or as JJJ is different, and it does not differ from the facts that constitute the grounds for taxation. Thus, an addition of the grounds for the ancillary disposition by the Defendants constitutes an addition or modification of the grounds for disposition made within the scope that maintains the identity of the disposition (see Supreme Court Decision 96Nu3272, Feb. 1

2) Whether there was no purpose of tax avoidance

As long as the fact of title trust is acknowledged, the claimant has the burden of proving that there was no purpose of tax avoidance. The nominal owner who bears the burden of proving 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 that there was no tax avoidance in the future at the time of the title trust or in the future, it shall be proved to the extent that the ordinary person is not doubtful, based on objective and correct evidence (see, e.g., Supreme Court Decision 2007Du17175, Sept. 8, 2011).

On the other hand, Article 3 (1) and (2) of the former Corporate Tax Act (amended by Act No. 8141 of Dec. 30, 2006) provides that a non-profit domestic corporation shall impose corporate tax on income earned from profit-making business. Each statement in Gap evidence Nos. 4 and 22 (including the serial number) is insufficient to recognize that there was a non-taxation practice that grants a permanent exemption from corporate tax, etc. to a religious organization. Rather, according to the evidence No. 18 of Eul, the non-party company’s non-party company’s non-indicted 2003 business year surplus was 9.3 billion won, and even according to the plaintiffs’ assertion, the shares issued by the non-party company or its affiliates (excluding some affiliates holding shares under the name of the JJJJJ) were in title trust under the name of the new JJJ court, and thus, it is difficult to conclude that the purpose of the JJJJ under the former Local Tax Act was to avoid the application of the provisions of the JJ under the Framework Act on National Taxes.

3. Conclusion

Therefore, the plaintiffs' claims against the defendants are dismissed since they are without merit.

this decision is delivered with the assent of all Justices.