Daegu District Court-2015 Guhap-563 (Law No. 19, 2016)

Seoul High Court Decision 2014Seoul High Court Decision 4412 ( December 30, 2014)

It can not be deemed that a title trust of unlisted stocks was made solely on the ground that the capital established in the account was deposited.

It is difficult to conclude that the acquisition of shares is based on a nominal trust solely on the circumstance that the capital has been deposited in the account without any assertion or proof as to the cause of the acquisition of shares or the actual relationship. In light of the business contents before and after the incorporation process, it is reasonable to view that the capital, goods, and labor have been invested in the partnership business relationship, and that the shares in question have been distributed according to the shares in the partnership business, so it is not a nominal trust shares

Article 45-2 Presumption of Donation of Title Trust Property

2016Nu4462 Revocation of Disposition of Imposing gift tax

○○○ 3

○ Head of tax office

Daegu District Court Decision 2015Guhap563 Decided January 19, 2016

September 30, 2016

October 28, 2016

1. All appeals by the defendant against the plaintiffs are dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

The Defendant: (a) on September 1, 2003, the gift tax of KRW 37,032,00 (including additional taxes) on the donated portion, which was granted to Plaintiff ○○○ on February 6, 2014 to the Plaintiff ○○○○ on September 1, 2003; (b) on February 10, 2014, the gift tax of KRW 37,032,00 (including additional taxes) on the donated portion on September 1, 2003, and the gift tax on the donated portion on December 31, 204.

9,624,030 won (including additional taxes), 5,46,720 won (including additional taxes), 5,46,720 won (including additional taxes), 58,849,550 won (including additional taxes), 23,852,390 won (including additional taxes) for donated portion on December 10, 201, which was made to ○○○○○ on October 28, 2010, and 182,553,760 won (including additional taxes) for donated portion on December 31, 2003, 205, and 23,852,390 won (including additional taxes) for donated portion on April 9, 2014.

2. Purport of appeal

The judgment of the first instance is revoked. All of the plaintiffs' claims are dismissed.

1. Details of the disposition;

A. △△ (hereinafter referred to as the “instant company”) was established on July 31, 2003 and operated road packaging construction business at ○○○○-ro 160, 160, and the Plaintiffs are those who are employed as an internal director or auditor of the instant company. Meanwhile, Plaintiff ○○○, ○○○, and ○○○○ is all the group of siblingss of ○○○○○○○○, and Plaintiff ○○○○○○.

B. From October 31, 2013 to November 27, 2013, the director of the regional tax office of ○○○○ (hereinafter referred to as the “instant shares”) investigated whether the instant company’s shares were changed due to a nominal trust with the Plaintiffs from September 1, 2003 to December 10, 2005, and notified the Defendant that the instant company’s shares 51,500 shares of the instant company acquired by ○○○○, ○○, and ○○○○, and October 28, 2010 (hereinafter referred to as “the instant shares”), acquired by ○○○○○, a company’s shares 14,500 shares of the instant company (hereinafter referred to as “the instant shares”) were transferred to the Plaintiffs for the purpose of evading tax.

C. Accordingly, the defendant decided and notified each of the gift tax (including additional tax) to the plaintiffs (hereinafter referred to as the "disposition in this case").

D. The Plaintiffs filed an objection against the instant disposition on April 9, 2014, but the director of the regional tax office of ○○○○ rendered a decision to dismiss it on May 23, 2014. The Plaintiffs filed an appeal with the Tax Tribunal on August 22, 2014, but the said Tribunal dismissed the appeal on December 30, 2014.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 3 (including each number, hereinafter the same shall apply), Gap evidence Nos. 1, 2, 4, and 6, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) With respect to the legal fiction of title trust property, the detailed statement on the state of changes in stocks, etc. cannot be deemed the same as the list of shareholders. In the absence of the list of shareholders, Article 45-2(3) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201; hereinafter “former Inheritance Tax and Gift Tax Act”) which allows the determination of the change of ownership based on the detailed statement on the state of changes in stocks, etc. applies from January 1, 2004. In the case of 45,000 shares transferred to Plaintiff ○○,○○, and○○, before December 31, 2003 among the shares in this case, the change of ownership was not made on the list of shareholders. Therefore, even though the provision on the legal fiction of title trust cannot be applied to the above shares 45,000 shares, the disposition of this case based on the detailed statement on the change in stocks, etc. submitted by the Defendant is unlawful.

2) The instant disposition is premised on the premise that ○○○ is the actual owner of the instant shares. As such, the Plaintiffs’ acquisition of the instant shares is difficult to view ○○ as the actual owner of the instant shares, since they are paid a reasonable price by each party and acquired the instant shares. Therefore, the instant disposition is unlawful.

3) Even if the Plaintiffs received the instant shares from ○○○○, the instant disposition that imposed gift tax on the total of 66,000 shares of the taxable shares at the time of the instant disposition is unlawful, since it merely is 30,000 shares subject to taxation at the time of the instant disposition.

B. Relevant statutes

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

(c) Fact of recognition;

1) The instant company established September 1, 2003.

2) On March 31, 2004, the instant company reported corporate tax for the business year 2003 to the head of ○○ Tax Office on March 31, 2004, and submitted a detailed statement of the status of changes in stocks, etc., stating the above details

3) Before the establishment of the instant company, Plaintiff ○○○ was qualified as a master driver, a driver of Mazers, and a driver of roller, and was engaged in road packaging business using vibrationls owned by himself. Plaintiff ○○○ was engaged in the instant company’s construction business prior to the establishment of the instant company, and was engaged in the instant company’s construction business after the establishment of the said company. From around around 2008, Plaintiff 208, respectively, obtained a license as a master of roller driving technician, a asphalt driver, and a log driver.

4) To establish the instant company, the cash of KRW 450 million was deposited into the securities subscription account with ○○○○○ on July 31, 2003. On August 1, 2003, 2003, KRW 450 million was transferred from the said account as ○○○○○○○○○○, which was a promoter. On July 31, 2003, 2003, the Plaintiff○○○○○ and the Plaintiff○○○○ received KRW 31,500 shares of the instant company as the promoters. On the same day, the Plaintiff○○○ subscribed for and accepted KRW 1350 shares. At the time of July 31, 2003, the Plaintiff○○○○○○○ was recorded as ○○○○○, the representative director, 1000 shares, 13,50 shares, and 13,50 shares as ○○○○○○○○○○, respectively.

5) After that, the ○○○○ and the Plaintiffs did not clearly explain the source of the purchase price of shares by preparing a written answer between the tax official and the tax official at the time of receiving an on-site investigation on the change of shares by ○○○○○ and the Plaintiffs, revealing that the payment, etc. of the purchase price of the shares of this case

6) After the incorporation of the instant company, various construction costs, equipment leasing costs, corporate expenses, and employees’ benefits related to the instant company were deposited and withdrawn from the ○○○ account in the name of ○○○○.

[Reasons for Recognition] Each evidence, Gap evidence Nos. 4 through 8, 18, Eul evidence Nos. 3, 7, 8, 10, and the purport of the whole pleadings

D. Determination

1) Determination on the first argument

A) Relevant legal principles and regulations

The transfer of registered shares cannot be effective against the company unless the name and address of the acquisitor are stated in the register of shareholders. Thus, the transfer of shares constitutes a case where the actual owner and the nominal owner are different in property requiring a transfer or exercise of rights which are the requirements for deemed donation under Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (see, e.g., Supreme Court Decision 2005Du10200, Feb. 8, 2007). Since shares and equity shares, which are documents to be submitted at the time of reporting the tax base and tax amount of corporate tax, cannot be the same as the list of shareholders, even if the statement on the change of shares and equity shares are stated and reported, the transfer of shares cannot be deemed to have been made (see, e.g., Supreme Court Decision 93Nu14196, Feb. 22, 1994).On the other hand, the former Inheritance Tax and Gift Tax Act (wholly amended by Act No. 7010, Dec. 30, 2003).

B) Whether a transfer is determined based on a detailed statement on the change of stocks

In the instant case, as seen earlier, the acquisition date of the Plaintiff ○○○, ○○○, and ○○○○ on September 1, 2003 and December 1, 2004, which was the date of acquisition of each share of the Plaintiff ○○○, ○○○, and ○○○○, and on December 31, 2003, prior to the date of enforcement of the amended Act. However, the fact that the instant company reported corporate tax for the business year 2003, which was after the date of enforcement of the amended Act, to the head of the tax office on March 31, 2004, and submitted a detailed statement on the change of shares, etc., stating the change of shareholder’s name, is also identical as seen earlier. Accordingly, the Defendant may determine whether to transfer ownership based on the statement on change of shares, etc. submitted by the instant company pursuant to Article 10 of the Addenda

2) Judgment on the second argument

A) Relevant legal principles

Article 45-2(1) of the former Inheritance Tax and Gift Tax Act provides that “The provisions on deemed donation of trust property in the name of a shareholder registry shall apply to cases where the actual owner and the nominal owner are different from those of the actual owner in the property (excluding land and buildings) which requires the transfer or exercise of the right, and at this time, the fact that the nominal owner of the property differs from the actual owner shall be attested by the tax authority (see, e.g., Supreme Court Decision 2009Du5404, Sept. 24, 2009). Meanwhile, a person registered as a shareholder in the register of shareholders is presumed to be a shareholder of the company, and a person who is presumed to be a shareholder in the register of shareholders bears the burden of proving that he/she has the burden of proving that he/she was the nominal owner of the shares (see, e.g., Supreme Court Decision 84Meu2082, Mar. 26, 1985).

B) Whether title trust with 45,000 shares of the instant case was held

First, as to whether 4500 shares out of the shares of this case acquired by the Plaintiff ○○○○, ○○○○○, and 13 until December 31, 2003 received title trust from ○○○○○○, the Health Center: (a) deposited all the amount of KRW 450 million capital of the company of this case in the account of ○○○○○○○; and (b) the fact that the above plaintiffs failed to clearly explain the source of the purchase price of the shares of this case at the time of the on-site investigation of changes in shares was as seen earlier; (c) however, in light of the following circumstances, the overall purport of the pleadings can be acknowledged by comprehensively considering each of the evidence mentioned above, A through 17, 20 through 24, and Eul’s evidence submitted by the Defendant, it is insufficient to acknowledge that ○○○○ was title trust of 45,00 shares out of the shares of this case, and there is no other evidence to acknowledge otherwise.

(1) The plaintiffs stated that 450 million won of the incorporated capital of the company of this case was borrowed at the same time and repaid with interest including 450 million won, and the actual capital was deposited at KRW 450 million and withdrawn on the following day. ○○○ also appears to have not contributed to the payment of the stock price, and the procedure was well known, it is difficult to readily conclude that the acts of acquiring the plaintiffs' shares are based on title trust solely on the fact that ○○○○○’s capital was deposited in the account under the name of ○○○○○○○○ in the complex, in light of the fact that ○○○○ was entrusted to Broer and was well aware. Rather, it cannot be ruled out that the reason why ○○○○○ was responsible for the president or the first representative director was more severe punishment between the plaintiffs than by establishing the company of this case.

(2) Before the establishment of the instant company, ○○○ was engaged in the cargo vehicle management business in Seoul, etc., and had no experience and knowledge, while Plaintiff ○○○ was engaged in the road packing business prior to the establishment of the instant company, received various construction costs and equipment leasing costs to its account, and disbursed various expenses incurred in the operation of the instant company, including employees’ benefits. In light of this, the person who led and operated the instant company appears to have been the Plaintiff ○○○○ rather than the Plaintiff ○○○.

(3) In light of the fact that ○○○○○ engaged in the construction of the instant company and obtained the pertinent license while engaging in the road packaging construction business after the establishment of the instant company, and Plaintiff○○○ offered the road packaging machinery (vibration) owned by the principal during the process of the establishment of the instant company. At the time of the establishment of the instant company, ○○○○ was appointed as the representative director, Plaintiff○○○○, and Plaintiff○○○○ was appointed as the auditor by the representative director, and that ○○○○○ resigned resigned from the representative director and the Plaintiff○○○○ was employed as the representative director, it is reasonable to view that ○○○○○○, Plaintiff○○○, and ○○○○○○ was in a partnership relationship by investing capital, goods, and labor in the process of the establishment of the instant company, and 45,000 out of the shares of the instant company were distributed in accordance with the share of the instant company. Moreover, it appears that the instant company was merely a company that had been divided into the construction work relationship between Plaintiff○○○ and other employees.

(4) On December 31, 2003, Plaintiff ○○○ stated that the amount of the existing loan credit against Plaintiff ○○○○ shall be paid to ○○○○○○○, plus part of Plaintiff ○○○○’s wage, and that ○○○○ acquired 18,00 shares of the instant company from ○○○○○○, and that the statement of ○○○○○○○ and ○○○○, a relative relationship between Plaintiff ○○○○○○ and the Plaintiffs, also combines with it.In addition, Plaintiff ○○○ on December 31, 204 and December 10, 2005, Plaintiff ○○○ transferred its shares to ○○○ and ○○○○○○○○○○ on the ground of transfer of its own shares, and thus, Plaintiff ○○○ transferred its shares to acquire funds for opening a restaurant, and Plaintiff ○○○ and its statement accords with this.

(5) Plaintiff ○○○ was engaged in the construction business on or before May 31, 2003, where the instant company was established, on the grounds that Plaintiff ○○○ was registered as an auditor of the instant company. According to the construction work day report from September 25, 1992 to December 2015 of the instant company, Plaintiff ○○○○○ was registered as an auditor of the instant company, and Plaintiff ○○○○ was engaged in the construction business on or after December 31, 2003, including where Plaintiff ○○○ continues to operate packaging machines on or after the total number of construction days from September 25, 1992, with the trade name of ○○○ Construction Machinery, or engaged in construction machinery rental business from December 4, 2002 to December 30, 2002.

(6) The defendant alleged that ○○○ was nominal trust of the shares of this case with the intent to avoid paying a high-amount delinquent tax amount. However, the time when ○○○○ and ○○○ acquired the shares of this case on July 31, 2003, which was a tax investigation conducted with respect to ○○○ on August 25, 2003, or on August 31, 2003, which was a notice of the amount of national taxes in arrears. ○○○ paid all the amount of taxes in arrears on July 15, 2003. In addition, if ○○ intended tax avoidance, it appears that there was no reason to accept 18,000 shares at the time of incorporation of the company of this case under its own name.

(7) Although ○○○○ was merely 26 years old at the time of acquiring the instant shares, it was merely 31 million won per year, it is probable that part of the instant shares were paid as salary, while serving as an employee of the instant company. In fact, according to the company’s construction work daily report of the instant company, Plaintiff○○○ participated in at least half of the total construction days of the instant company from 2011 to 2015. Furthermore, considering the company’s operational status, etc. as seen earlier, the Plaintiff○○○’s statement that received shares in lieu of salary is credibility.

(8) At the time of the incorporation of the instant company, ○○○ and other Plaintiffs, other than Plaintiff ○○○ and other Plaintiffs did not operate any business other than the instant company. As such, it appears that ○○○ and other Plaintiffs invested in the instant company labor, capital, etc., or worked in the instant company. Even in the case of Plaintiff ○○○, even though the Plaintiff ○○ operated or belonged to ○○ and ○○○○○, the said company was merely an incorporated company that carried out road packaging machines (vibrationls), and it cannot be deemed that the Plaintiff ○○ and other Plaintiffs did not actually operate the instant company by operating another company. In addition, the fact that Plaintiff ○○○ was used in the instant company’s construction by deeming that ○○○ was located in the purchase column of the total tax invoice for individual suppliers of the instant company.

(9) According to the letter of answer prepared by ○○○ and the Plaintiffs, there was no clear statement on the acquisition price of shares, but it seems that ○○ and all the Plaintiffs do not know the source or the procedure for the establishment of a company by paying the shares in the fictitious payment form through a broker for the establishment of a company. On the contrary, each of the above written answers does not state any content recognizing the title trust or suggesting the fact of title trust, and is relatively consistent between the written answers.

C) Whether the remaining shares of this case are title trust

Of the instant shares, 1,500 shares acquired by Plaintiff ○○○ on December 31, 2004, 5,000 shares acquired by Plaintiff ○○○○○○○○○○○○○○○○○ on December 10, 2005, and 14,50 shares (total 21,00 shares) acquired by Plaintiff ○○○○○○○ on October 28, 2010, as stated in the foregoing B), transferred in sequence 45,00 shares out of the instant shares acquired by Plaintiff ○○○○○○○○○○○○○○, and ○○○○○○○○○○○○, as seen earlier. As long as it cannot be deemed that the title trust was held against Plaintiff ○○○○, ○○○, and ○○○○○○○○○○, it cannot be deemed that the instant shares transferred in succession from the perspective of each of the Plaintiffs’ title trust.

D) Sub-committee

Therefore, the actual owner of the instant shares is ○○○, and the disposition of this case, based on the premise that the Plaintiffs received the title trust from ○○○○, was unlawful without having to examine the third proposal of the Plaintiff.

3. Conclusion

Then, the plaintiffs' claims are justified and all of them are accepted, and the judgment of the court of first instance is accepted.

As such, the Defendant’s appeal against the Plaintiffs is justifiable, and all of the appeals are dismissed as it is so decided as per Disposition.