It is the fact that gift tax is levied by adding the title trust shares to the re-donation property within 10 years.

Since the exclusion of adding up the title trust property is not prescribed, no disposition imposed by adding up the property subject to re-donation is erroneous, and the purpose of legislation is to effectively prevent the tax avoidance act using the title trust system, thereby realizing the tax justice, so the additional tax on non-declaration should be applied in light of the non-declaration of illegal act.

Article 47-2 (2) of the Framework Act on National Taxes

Seoul Administrative Court 2014Guhap61200 ( October 29, 2015)

Han △△△

○ Head of tax office et al.

December 4, 2014

January 29, 2015

1. All of the plaintiff's claims are dismissed.

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

With respect to title trust of CCC stocks for the year 208, the portion exceeding KRW 1,822,017,728 out of the disposition of KRW 2,257,876,110 imposed on the Plaintiff on August 1, 2013 ( KRW 435,858,382), the portion of KRW 109,058,609 ( KRW 109,058,610), the portion of KRW 109,058,609 ( KRW 109,058,610), the portion of the disposition of KRW 148,529,098, KRW 74,264,549, KRW 549, and the portion of the disposition of KRW 2010, KRW 207, KRW 309, KRW 307, KRW 309, KRW 1975, KRW 2097, KRW 309, KRW 1975, and the portion of the gift tax imposed on the Plaintiff.

1. Details of the disposition;

A. DDD Co., Ltd. (hereinafter referred to as "CCC") is changed to CCC on July 12, 2005, hereinafter referred to as "CCC") by joint investment of the Plaintiff, EE, FF, GG et al. on October 13, 1997.

Since then, 199 to 2012, the capital was increased to 4.45 billion won (8,700,000 shares for total issuance, and 500 won per share) through nine capital increase and two capital increase from 199 to 2012.

B. On December 26, 2006, the Plaintiff acquired 24,000 shares of the CCC from Nonparty BB, and 12,000 shares from Nonparty A to its par value, and became the largest shareholder. On February 26, 2007, the Plaintiff was appointed as the representative director of CCC.

C. From May 21, 2013 to June 25, 2013, in the course of the corporate integration investigation with respect to CCC, the Central Regional Tax Office: (a) acquired shares of CCC from around 1999 to June 8, 2010 as indicated below [mark]; (b) confirmed that the shares of CCC, which were held in title, were held in title by AA and BB, etc. (hereinafter “AA, etc.”); and (c) imposed a gift tax on the Defendants by applying the provisions of Article 45-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 2011; hereinafter “the Inheritance Tax Act”).

D. According to the above notification, in the title trust of this case, the plaintiff who is jointly and severally liable for the gift tax of AA, etc., which is deemed to be a gift; the head of Seodaemun-gu Tax Office calculated on August 1, 2013; KRW 8,648,150; KRW 11,02,640; KRW 10,640; and KRW 104,89.6.6.9 of gift tax on June 9, 200; KRW 39,39,32,730; KRW 19,90; KRW 20.6.9,000; KRW 29,00,000; KRW 29,000; KRW 108,701,670, May 29, 201; and KRW 196.9,00,000,000; and KRW 16.9,000,000.

F. The Plaintiff dissatisfied with each of the dispositions in this case and filed an appeal with the Tax Tribunal on November 4, 2013. However, upon dismissal on March 25, 2014, the Plaintiff appealed and filed the instant lawsuit on June 23, 2014. [The grounds for recognition: (a) the facts that there is no dispute; (b) the entries in Gap’s subparagraphs 1, 2, and Eul’s subparagraphs 1 through 8; and (c) the purport of the entire pleadings]

2. The assertion and judgment

A. The plaintiff's assertion

1) Since the deemed donation of a title trust excluded from cumulative taxation is not a donation based on its nature, it shall be deemed that Article 47(1) of the Inheritance and Gift Tax Act stipulating that the donation received within 10 years from the same donee should be added to the donated property is not applicable. Nevertheless, the Defendants calculated the tax base by adding all the donated property to each donee in disposing of the instant case, which is unlawful.

2) If the title trust of shares held by an illegal non-reported additional tax is the means for the title trust of shares and the tax on dividend income, capital gains, etc. was omitted, the relevant tax should be deemed to constitute an illegal non-reported tax and thus, the relevant tax should be imposed. However, the portion exceeding KRW 11,860,198,50,59, and the portion exceeding KRW 109,609,000,000,000,000,000,000,0000,000,0000,000,0000,000,0000,000,000,000,000,000,0000,000,000,000,000,000,000,000,000,000,000,000,00,000,00,00.

(b) Related statutes;

Attached Form is as shown in the attached Form.

C. Determination

1) Article 47(2) of the Inheritance Tax and Gift Tax Act provides that “where the aggregate amount of the value of donated property received from the same person within 10 years prior to the date of the relevant donation exceeds 10,000 won, such value shall be added to the taxable value of donated property: Provided, That this shall not apply to donated property excluding any summing-up; however, Article 47(1) of the Inheritance Tax and Gift Tax Act provides that the donated property excluding summing-up shall include the value of donated property.” Article 47(1) of the Inheritance Tax and Gift Tax Act provides that “The donation of profits gained by converting, etc. into stocks with convertible bonds, etc. or by transferring convertible bonds, etc. from among the donations of profits arising from the conversion, etc. of stocks or equity shares (Article 40(1)2), donation of profits arising from the listing, etc. of stocks or equity shares (Article 41-3), donation of profits arising from the merger (Article

In light of the aforementioned provisions, each disposition of this case, which was taken by calculating the tax base of each of the above donated properties deemed to be lawful for the following reasons. Since the legislative intent of Article 45-2(1) of the Inheritance Tax and Gift Tax Act is to effectively prevent the act of tax avoidance using the title trust system and to realize the tax justice, the proviso of the same Article is applicable only to cases where the purpose of tax avoidance is not included in the title trust, and the burden of proving that there was no purpose of tax avoidance is against the title holder. Furthermore, the application of the provision on presumption of gift cannot be avoided solely on the ground that the title holder does not have any purpose of tax avoidance (see, e.g., Supreme Court Decision 2010Du24968, Mar. 28, 2013). Meanwhile, Article 47(2) of the Inheritance Tax and Gift Tax Act provides that the total amount of donated properties that were received from the same person within 10 years prior to the pertinent date should be added to the original amount of gift tax calculated by applying the provisions of this case.

In addition, Article 47(2) and (1) of the Inheritance Tax and Gift Tax Act stipulate only four cases as mentioned above as donated property, and there is no room to include the case of deemed donation of trust property under the name of Article 45-2(1) of the Inheritance Tax and Gift Tax Act in the interpretation of the explicit interpretation. In addition, the above 4 cases are cases where it is difficult to determine the source of donor or its receipt, and even if it is based on a teleological interpretation, it is judged that the deemed donation of trust property under the name of Article 45-2(1) of the Inheritance Tax and Gift Tax Act, which is clearly specified by the title truster,

Therefore, we cannot accept this part of the plaintiff's argument.

2) According to Article 47-2(2)1 of the former Framework Act on National Taxes (amended by Act No. 10405, Oct. 27, 2010; hereinafter referred to as the “Enforcement Decree of the Framework Act on National Taxes”), where there exists a tax base without filing a return by improper means (referring to a taxpayer’s violation of the duty to report the tax base or amount of national taxes, which is determined by the Presidential Decree, on the basis of the concealment or pretending all or part of the fact that serves as the basis for calculating the tax base or amount of national taxes), an amount equivalent to 40/100 of the amount calculated by multiplying the tax base without filing a return by the calculated tax amount shall be added to the tax amount payable or deducted from the amount to be refunded. Article 27(2) of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 23592, Feb. 2, 2012; hereinafter referred to as the “Enforcement Decree of the Framework Act on National Taxes”) which provides for the preparation and concealment of the account books or fraudulent transactions, or fraudulent transactions.

However, as seen earlier, the part where the Plaintiff did not report the gift tax base in accordance with the provision on the constructive gift of title trust even though it held in title trust with AA, etc. for the purpose of tax avoidance (the Plaintiff bears the burden of proof that there is no objective of tax avoidance, or the Plaintiff did not assert or prove it in the lawsuit in this case) constitutes “the concealment of property” under Article 47-2(2) of the Framework Act on National Taxes and Article 27(2)5 of the Enforcement Decree of the Framework Act on National Taxes, which is provided as one of the unfair methods. As such, among each disposition in this case, the part where the Defendants imposed the gift tax base of the trust in title of this case by applying the unfair non-reported penalty tax rate (40%) to the gift tax base of the

3. Conclusion

Therefore, all of the plaintiff's claims are dismissed as it is without merit. It is so decided as per Disposition.