Early High Court Decision 2015J3441 (Law No. 1358, Oct. 08, 2015)

The fact of title trust is not recognized inasmuch as there is no additional proof on the grounds of raising the funds for shares held in title trust.

There is a statement contrary to who is the subject of title trust, and as long as there is no additional proof on the process of raising the purchase price of shares, it is difficult to view that “the net” has sufficiently proved that he/she held title trust of the shares of this case to the Plaintiff.

Presumption of title trust donation under Article 41-2 of the Inheritance Tax and Gift Tax Act

Incheon District Court 2016Guhap418 Revocation of Disposition of Imposing Gift Tax

Maximum Ol Jin

OO Head of the tax office

November 3, 2016

January 19, 2017

1. The Defendant’s disposition imposing KRW 30,013,200 on the Plaintiff on March 9, 2015 shall be revoked.

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

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. On August 197, SS Co., Ltd. (business purpose: passenger ship operation business, health auxiliary food manufacturing business, etc.) was in legal management status due to dishonor on or around 197. Around February 1999, CCC Shipping acquired and established the passenger ship operation division of SS. Around February 199, and the Plaintiff, an attorney-at-law, provided legal advice as legal adviser of SS from July 1998 to 2008.

B. On June 6, 2001, the Plaintiff was allocated 10,000 new shares (hereinafter “instant shares”) that were non-listed shares from the capital increase issued by the CCC Shipping Co., Ltd. (hereinafter “CCC Shipping”) at the time of actual issuance of new shares (hereinafter “instant shares”).

C. From September 15, 2014 to October 15, 2010 of the same year, the director of the regional tax office conducted an investigation as to whether a title trust was held with respect to shares of CCC Shipping, etc., and then deemed that the MOO (hereinafter “the deceased”) lent the Plaintiff’s name and received the Plaintiff’s preemptive right to new shares, and notified the Defendant that gift tax should be imposed on the Plaintiff. On or around March 9, 2015, the Defendant issued a disposition to impose a reduced amount of KRW 87,124,80 in total, including the gift tax, etc. on donation on December 31, 201, pursuant to Article 41-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 18, 2002; hereinafter “former Inheritance Tax and Gift Tax Act”). A disposition to impose a reduced amount of KRW 301,000 in the original amount of gift tax, etc. as KRW 301,0300.

D. The Plaintiff filed an appeal with the Tax Tribunal on June 5, 2015, but was dismissed on December 14, 2015.

[Reasons for Recognition] Facts without dispute, Gap 1-3, 8 (including branch numbers in case of additional numbers), Eul 1-2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. Summary of the Plaintiff’s assertion

The instant disposition shall be revoked on the following grounds.

(1) The Plaintiff is a beneficial shareholder who acquired the instant shares after actually paying KRW 100 million of the share price, and is not subject to title trust by the network.

(2) Even if the title trust was made with respect to the instant shares, the title trust subject is CCC shipping rather than the network, and the said title trust does not have any purpose of tax avoidance.

(3) The Defendant assessed the instant shares as non-listed shares based on the Inheritance Tax and Gift Tax Act at the time of acquiring the instant shares based on the supplementary assessment method. However, at the time of issuing new shares, CCC Shipping, as a corporation for less than three years after commencing its business around 1999, should be calculated as the average value of the presumed profit per share calculated by an accounting firm, etc. pursuant to Article 56(2) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (wholly amended by Presidential Decree No. 17459, Dec. 31, 2001). However, since the instant shares did not have the average value of the presumed profit per share, the instant shares should be assessed on the basis of net asset value.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) The taxation requirement under Article 41-2 of the former Inheritance Tax and Gift Tax Act: The specification by the actual owner.

The main text of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act provides that “where the actual owner and the nominal owner are different from the property that requires a registration, etc. for the transfer or exercise of the right, the value of the property shall be deemed to have been donated to the actual owner on the date when the actual owner and the nominal owner are registered, etc., notwithstanding Article 14 of the Framework Act on National Taxes.” According to the language and text of the above provision, if the actual owner and the nominal owner are different, the actual owner shall be deemed to have been donated the property from the actual owner, and therefore, identifying who are the actual owner and the donor constitutes a taxation requirement that serves as the premise for applying the above provision, and the burden of proof therefor shall be borne by the tax authority (see

Pursuant to the proviso of Article 41-2(1)1 of the former Inheritance Tax and Gift Tax Act, the main provision shall not apply in cases where a person registers his/her property under another person’s name without any purpose of tax avoidance. The purpose of tax avoidance is to determine the actual owner who owns the property under another person’s name as the subject of tax avoidance. Thus, if the actual owner is not specified, it is difficult to prove that the nominal owner does not have any purpose of tax avoidance. Article 4(3) of the former Inheritance Tax and Gift Tax Act imposes a joint payment obligation on the donor in certain cases where it is difficult to secure tax claims on the donee. Article 53 of the former Inheritance Tax and Gift Tax Act provides that a certain amount of amount shall be deducted from the value of donated property depending on whether the donor is the donor. Considering the fact that the actual owner is not specified, it is unreasonable to interpret that the main provision of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act can be applied only on the basis that the actual owner is not the actual owner.

O The Defendant only cited the fact that the Plaintiff received title trust from the Deceased as the grounds for disposition of the instant disposition. Considering that the shares were allocated through the person who gave rise to the reason for the instant disposition, the key issue of the instant case is whether “the deceased” is recognized by the evidence submitted by the Defendant to the effect that “the deceased acquired the preemptive right to the instant shares when it was issued with capital increase by CCC Shipping (hereinafter referred to as “the fact of dispute”).

(2) Review

First, comprehensively taking account of the overall purport of the arguments in Eul 6, 10-13, 15-19, KimO (on March 25, 2010, working as the representative director of the CCC Shipping) stated "I think I think I would do not appear to have disclosed in the document, but I think I would have a substantial error in CCC Shipping", "I would like to be the next name. I would like to say I would like to say I would like to be the next. I would like to say I would like to say I would have been before I would have taken office as the representative director. I would like to say I would like to say I would like to say I would like to say I would like to say I would have been the employee of CCC Shipping from October 1, 200 to May 31, 2014, I would like to find the fact that I would not know that I would have made a statement to the plaintiff 29-K's shares since June 24, 2014."

As above, insofar as there is a statement contrary to who is the subject of title trust, and there is no additional proof on the process of raising the purchase price of shares, etc., it is difficult to view that “the deceased” has sufficiently proved that he/she held the title trust of the shares of this case to

Even if the actual owner of the instant shares is the deceased, such as the Defendant’s assertion, the name of the shares.

The fact that the Plaintiff is different from the actual owner is to be attested by the tax authority (see, e.g., Supreme Court Decision 2009Du5404, Sept. 24, 2009); the circumstances acknowledged by the respective descriptions and arguments stated in the Plaintiff 5-8, and 10-2, namely, the circumstance in which the Plaintiff’s assertion that the Plaintiff participated in the capital increase at a cost due to the solicitation of an officer of the CCC shipping that the legal advice of the SCC would be adequate and that it is difficult to accept it; and the acquisition of shares (in light of the Plaintiff’s occupation or income relationship at the time of the acquisition of shares, etc., it is difficult to deem that the Plaintiff did not have an economic ability to raise the funds for the acquisition of shares. Although the Plaintiff did not make an accurate statement on the revenue source corresponding to KRW 100,000,000, such circumstance alone is difficult to readily conclude that the Plaintiff is not the actual shareholder); the principal related person’s statement (see, e.g., Supreme Court Decision 2000Da3248)., the Plaintiff’s.

The disposition of this case, without examining the remaining arguments of the plaintiff, on a different premise

Sector is illegal.

3. Conclusion

The plaintiff's claim is justified, and it is so decided as per Disposition.