early 2017, 3924, 3872, 3874, 3922 and 3923 (201.13)

Whether property held in title trust is deemed donated

The case holding that it is difficult to recognize that the transfer of this case was a transfer of holders due to the transaction while preparing and keeping a register of shareholders meeting the requirements under the Commercial Act, and there is no other evidence to acknowledge it.

Donation of title trust property under Article 45-2 of the Inheritance Tax and Gift Tax Act

2017Guhap61379 Revocation of Disposition of Imposition of Gift Tax

AA and five persons outside of the Republic of Korea

○ Head of tax office 5 others

November 16, 2018

November 30, 2018

1. The imposition of KRW 210,021,630 (including additional taxes) on the gift tax against Plaintiff AA on August 1, 2016 by the head of ○○○ Tax Office, the imposition of KRW 151,217,30 (including additional taxes) made by Defendant BB to Plaintiff BB on August 9, 2016, and the imposition of KRW 151,217,30 (including additional taxes) made by Defendant ○○ Tax Office against Plaintiff EE by the head of ○○ Tax Office, which was made by Defendant ○○ Tax Office against Plaintiff FF by the head of ○○ Tax Office, was made by Defendant ○○ Tax Office against Plaintiff CCC, and the imposition of each gift tax and additional tax on Plaintiff DD by the head of ○○ Tax Office is revoked.

2. The remainder of the Plaintiff EE’s claim against Defendant ○○○○○○○○, against Plaintiff FF’s Defendant ○○○○○○○○○, against Plaintiff CCC’s Defendant ○○○○○○ Tax Office, and against Plaintiff DD’s Defendant ○○ Tax Office is dismissed.

3. Of the costs of lawsuit, the part arising between Plaintiff AA, Plaintiff BB, and Defendant ○○○○○ Head of the tax office, and Defendant ○○○○ Head of the tax office is 60% of the part arising between Plaintiff EE, Plaintiff FF, Plaintiff DD and Defendant ○○ Head of the tax office, Defendant ○○ Head of the tax office, and Defendant ○○ Head of the tax office. The above Plaintiffs’ remainder is 50% of the part arising between Plaintiff CCC and Defendant ○ Head of the tax office, and the remainder is borne by the above Defendants, respectively.

Cheong-gu Office

1. Plaintiff AA, BB: As set out in paragraph (1) of this Article.

2. The remainder of the Plaintiffs: The Defendants’ imposition of gift tax and additional tax on each of the remaining Plaintiffs indicated in the separate disposition No. 1 attached hereto shall be revoked.

1. Details of the disposition;

A. The GG industry corporation (hereinafter “G industry”) is an unlisted corporation established on September 11, 1998 and conducting a housing construction business, etc., and the Plaintiffs are the title trustee of HH, a single shareholder of the GG industry.

B. The GG industry was established with a total of KRW 10,00 per share value of KRW 5,00,000, and the issue price per share was 5,000 won per share over eight times from establishment to 2010, and only registered ordinary shares were issued and stock certificates were not issued. The details of changes in the shares indicated in the specifications, etc. of changes in the stocks, etc. of the GG industry are as listed in the following table, but beneficial shareholders of the GG industry are H one person from the time of establishment to the date of establishment.

C. The Seoul Regional Tax Office (hereinafter referred to as the “Investigation Office”): (a) conducted an investigation into changes in the shares of the GG industry from November 16, 2015 to March 27, 2016; (b) deemed that HH held title trust on the total of 462,200 shares among the shares indicated as the sound management of the said Table to the Plaintiffs for the purpose of evading deemed acquisition tax on oligopolistic shareholders, evading the progressive tax rate of global income tax based on the addition of dividend income; and (c) notified the Defendants of the taxation data to impose gift tax by deeming that HH deemed that it held title trust on the said shares as the gift.

D. Accordingly, the Defendants applied Article 41-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter “former Inheritance Tax and Gift Tax Act”) and Article 45-2 of the newly established Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter “former Inheritance Tax and Gift Tax Act”) (amended by Act No. 4525, Dec. 31, 201; hereinafter “instant provision”) to the Plaintiffs as at the time of disposition of gift tax (including additional tax) as stated in attached Table 1, on the ground that the said provision was amended on December 30, 203; hereinafter “Article 45-2 of the Inheritance Tax and Gift Tax Act”).

E. On October 4, 2016, the Plaintiffs filed an appeal against the instant disposition, but the Tax Tribunal dismissed the decision on January 13, 2017.

F. During the instant lawsuit, the Defendants added a preliminary disposition to the effect that “The shareholder registry of the GG industry exists at the time of the instant stock transaction, and the entry of a change in the shareholder registry was made.” As such, the Defendants are liable to pay gift tax under Article 41-2(1) of the former Inheritance Tax and Gift Tax Act and Article 45-2(1) of the Inheritance Tax and Gift Tax Act, even if the shareholder registry of the GG industry does not exist, it can be deemed that the transfer was made in accordance with the statement of change in stocks, etc. submitted by the GG industry, and thus, the Defendants are liable

Facts without dispute over the basis of recognition, Gap evidence 1, 2, 7, Eul evidence 1 and 5 (including each number), and the purport of the whole pleadings

2. The plaintiffs' assertion

A. Since the absence of the register of shareholders and the scope of the application of Article 45-2(3) of the Inheritance Tax and Gift Tax Act, the GG industry did not have prepared the register of shareholders meeting the requirements of the Commercial Act from the time of its establishment to the date of its establishment and thus, the shares of this case were not transferred to the transfer of ownership, Article 41-2 of the former Inheritance Tax and Gift Tax Act [Article 41-2(1) of the Inheritance Tax and Gift Tax Act and Article 45-2(1) of the Inheritance Tax and Gift Tax Act cannot be applied only to the shares held in title after January 1, 204, and Article 45-2(3) of the Inheritance Tax and Gift Tax Act can be applied only

(b) exemption from the application of deemed donation regulations;

Inasmuch as the instant shares are merely changed in the name of the trustee or issued new shares in proportion to the number of the existing shares held in title trust, it cannot be deemed that a new title trust was made. Therefore, the provision on deemed donation cannot be applied.

C. Non-existence of tax avoidance purpose

HH held shares in title in order to meet the requirements of promoters required under the Commercial Act at the time of the establishment of the GG industry, and held title trust with HA, HB, and Plaintiff EE. After that, the Plaintiffs merely acquired shares held in title trust in a formal manner or acquired shares issued with capital increase, and thus, it cannot be said that there was a new purpose of tax avoidance.

D. The essence of the exclusion period of imposition of 15 years and the imposition of additional tax on title trust, which is premised on the duty to report, is administrative penalty, so there is no possibility of expectation of voluntary report of gift tax base, and the imposition of obligation to report is forced and led a person who considers that there is no purpose of tax avoidance to make a person to evade tax, thus infringing the right to refuse to make a statement, the presumption of innocence, the principle of conscience, and the freedom of conscience, and the obligation to report gift tax cannot be recognized. Therefore, the provision for exclusion period of imposition of 15 years, the additional tax on non-return, and the additional tax on non-return, which are based on the premise of the duty to report, cannot be applied. Thus, the portion on title trust and the imposition of each of the above additional tax on

(e) Existence of justifiable grounds for non-performance of obligation to report;

In light of the purpose or purport of title trust, it is unreasonable to expect the title trust party to fulfill the obligation to report gift tax, and there is a justifiable reason for not performing the obligation to report and pay gift tax. Therefore, the imposition of penalty tax is unlawful.

F. Violation of the calculation of tax amount

In cases where a transfer is determined based on the statement of change in stocks, etc. under Article 45-2(3) of the Inheritance Tax and Gift Tax Act, gift tax and additional tax shall be imposed on the basis of the date on which the GG industry submitted the said statement (31 March 31 of the following year). Furthermore, Article 55(1)1 of the Inheritance Tax and Gift Tax Act separately provides for the tax base of gift tax pursuant to the legal fiction of donation of title trust property, so the previous donation aggregate provision under Article 47(2) of the Inheritance Tax and Gift Tax Act is not applicable. Nevertheless, the Defendants assessed the value of donated property by applying the previous donation provision as of

3. Relevant statutes;

Attached Table 4 shall be as stated in the relevant statutes.

4. Whether the instant disposition is lawful

A. Legal principles on the application of the provision on deemed donation of title trust of stocks

According to Article 337(1) of the former Commercial Act (amended by Act No. 12591, May 20, 2014; hereinafter the same), since the transfer of registered shares does not oppose the company unless the name and address of the acquisitor are entered in the register of shareholders, the transfer of registered shares constitutes “where the actual owner and the nominal owner are different in property where a transfer of a right is required for a transfer or exercise of a right, which is the requirement for a deemed donation to be a change of entry in the register of shareholders, in the name and address of another person who is not a de facto owner of the register of shareholders.” (see, e.g., Supreme Court Decisions 93Nu14196, Feb. 22, 1994; 2005Du1020, Feb.

However, unlike the requirement of a transfer of ownership to a registered shareholder pursuant to Article 337(1) of the Commercial Act, in the case of subscription of new shares, a shareholder’s rights and obligations arise from the date immediately following the due date for payment if an underwriter of new shares pays the subscription price on or before the due date pursuant to Article 423(1) of the Commercial Act. Therefore, even if a share certificate was not issued and whether the subscription price has been entered as to the new shares because the shareholder registry was not kept within the company, there is no difficulty in exercising the shareholder’s rights as to the new shares, so long as the value of new shares acquired under the name of the title trustee was paid, it constitutes “where the actual owner and the nominal owner are different in the property requiring a transfer of ownership or transfer of ownership, which is the requirement for deemed donation under Article 41-2(1) of the Inheritance Tax and Gift Tax Act,” and constitutes “where the actual owner and the nominal owner are different in the property requiring transfer

Meanwhile, in applying Article 45-2(3) of the Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; Act No. 7013, Jan. 1, 2004; hereinafter referred to as “the Inheritance Tax and Gift Tax Act”) newly established pursuant to Article 45-2(1), where the list of shareholders or the list of members has not been prepared, it shall be determined by the documents and the statement of changes in stocks, etc. submitted to the head of the tax office having jurisdiction over the place for tax payment pursuant to Articles 109(1) and 119 of the Corporate Tax Act. This is the legislative purpose of imposing gift tax even in cases where the list of shareholders or the list of members does not carry the name of the owner differently from the actual owner, even if the change in the name of the owner is entered in the list of shares, etc., even if the name of the owner is entered differently from the actual owner, if the title holder is not the nominal owner, then the gift tax cannot be imposed by applying Article 14(1.

In addition, Article 41-2(1) of the former Inheritance Tax and Gift Tax Act and Article 45-2(1) of the Inheritance Tax and Gift Tax Act stipulate the date of registration as the holder of a title deed, namely, the date of deemed donation in cases where each of the above provisions is applicable. However, in cases where a transfer of a title is determined based on the statement, etc. of changes in stocks, etc. pursuant to Article 45-2(3) of the Inheritance Tax and Gift Tax Act, the date of deemed donation in accordance with the purpose of the gift tax is the date of submission of a statement, etc. of changes in stocks, etc., which can be deemed as clearly indicated on the outside by the actual owner and the nominal owner (see

(b) Whether Article 41-2 (1) of the former Inheritance Tax and Gift Tax Act and Article 45-2 (1) of the Inheritance Tax and Gift Tax Act are applicable (the grounds for the prime disposition);

1) Paid-in capital increase in the course of the instant stock transaction (hereinafter “instant issued-in capital increase”)

A) The fact that Plaintiff CCC, DD, EE, and FF (E) received new shares from each capital increase with consideration as indicated in [Attachment 1] and the acquisition price was paid is not a dispute between the parties concerned. Thus, this constitutes a case where the actual owner and the nominal owner are different in the property subject to transfer or exercise of the right, which is a requirement for deemed donation under Article 41-2(1) of the former Inheritance Tax and Gift Tax Act and Article 45-2(1) of the Inheritance Tax and Gift Tax Act.

B) The Plaintiffs asserts that in the instant case without the shareholder registry, Article 45-2(3) of the Inheritance Tax and Gift Tax Act is applicable, and Article 41-2(1) of the former Inheritance Tax and Gift Tax Act, and Article 45-2(1) of the Inheritance Tax and Gift Tax Act is not applicable. However, in light of the following circumstances, it is reasonable to deem that Article 41-2(1) of the former Inheritance Tax and Gift Tax Act and Article 45-2(3) of the Inheritance Tax and Gift Tax Act are applicable regardless of the existence of the shareholder registry, and that Article 45-2(3) of the Inheritance Tax

(1) In the application of the provision of Article 45-2(3) of the Inheritance Tax and Gift Tax Act, where the register of shareholders or the register of members is not prepared, it shall be determined by the statement, etc. of changes in the number of stocks, etc., so it is necessary to determine whether to transfer the ownership, which is the requirement of deemed donation under the language and text thereof. As seen earlier, in the case of the acquisition of new shares different from the transfer of the registered shares, Article 41-2(1) of the former Inheritance Tax and Gift Tax Act, and Article 45-2(1) of the latter Inheritance Tax

(2) The legislative intent of Article 45-2(3) of the Inheritance Tax and Gift Tax Act is to supplement the problems in which the provision on deemed donation cannot be applied in cases where a transfer of ownership is not effected because the shareholder registry was not entered in the statement, etc. on the statement, etc. on the change of stocks, etc. entered differently from the actual owner (see, e.g., Supreme Court Decision 2011Du1099, supra) and to levy gift tax even in such a case (see, e.g., Supreme Court Decision 2011Du10999), and the said provision does not mean that the case of new stocks

(3) If, as alleged by the plaintiffs, if there is no list of shareholders since the newly established Article 45-2(3) of the Inheritance Tax and Gift Tax Act does not exist, it is deemed that Article 45-2(3) of the Inheritance Tax and Gift Tax Act applies to the case of acquisition of new shares, the issue of capital increase during 2003, such as capital increase with consideration as of December 27, 2003, was made at the time of the enforcement of Article 41-2 of the former Inheritance Tax and Gift Tax Act, and thus, it is possible to impose heavy taxation in 2003 pursuant to the legal principles of the judgment above 99Du3843, Jan. 1, 2004, although the date of submission of the statement on the change of stocks, etc. is later applicable pursuant to Article 45-2(3) of the Addenda (Law No. 7010, Dec. 30, 2013). This is different from the date of submission of the statement on changes in stocks, etc.

2) In the case of acquisition by transfer among the stock transaction of this case (hereinafter “instant acquisition by transfer”).

A) In the case of transfer of registered shares such as the acquisition of shares, the person acquiring the shares cannot oppose the company unless the name and address of the person acquiring the shares are entered in the register of shareholders (Article 337(1) of the Commercial Act). Therefore, in the case of property requiring a change of change of ownership in the name of another person who is not the actual owner of shares in the register of shareholders, which requires a change of ownership in the name of a person who is not

In this case, the register of shareholders is prepared to clarify the matters concerning shareholders and share certificates, and it does not have any special restriction in its form, but at least has the form that can include the contents stipulated in Article 352(1) of the Commercial Act, such as the name and address of shareholders, the type and number of shares held, and the date of acquisition, and is prepared and managed in the principal office or the business office of the transfer agent, as stipulated in Article 396 of the Commercial Act, so that shareholders or creditors can be perused or copied at any time.

B) Meanwhile, the existence and transfer of the register of shareholders is a taxation requirement to determine whether the provisions of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act, Article 45-2(1) of the Inheritance Tax and Gift Tax Act, or Article 45-2(3) of the Inheritance Tax and Gift Tax Act is applicable, and the date of deemed donation, which serves as the base point for assessing the value of stocks held in title trust, as such, the burden of proving that the register of shareholders exists as a premise for applying Article 41-2(1) of the former Inheritance Tax and Gift Tax Act and Article 45-2(

C) The following facts are established without any dispute between the parties, or comprehensively taking account of the overall purport of Gap evidence Nos. 2-4, Eul evidence Nos. 2-8-11, 15, 16, and 18 (including each number), and the overall purport of pleadings. ① When a stock company issues stocks, it shall state the name and address of shareholders, the class and number of shares held by each shareholder, and the date of acquisition of each share (Article 352(1) of the Commercial Act). ② When it distributes shares, the company shall stop the change of entry in the register of shareholders for a certain period of time or take the procedure for determining the shareholders recorded in the register of shareholders as the right holder as of a certain date (Article 354(1) of the Commercial Act), ③ the list of shareholders shall be kept in the principal office (Article 396(1) of the Commercial Act); ④ If a transfer of shareholders is not made without good cause, or a domestic corporation fails to make entry in the register of shareholders, etc., the company may prepare and keep the register of shareholders under Article 18(1).

(1) On March 31, 2001, the GG industry submitted a document (No. 2-2) under the name of the representative director HH, stating that "a shareholder's name and the number of shares as of June 29, 200, the aggregate amount of shares, and one share price, are recorded, and that it is proved that it is not proper by comparing it with the shareholder's list kept on the main company." In addition, under the title of "the shareholder's list, a notary public's certificate as to the minutes of the board of directors as of June 9, 2008 of the GG industry is accompanied by a document (No. 3) under the name of the representative director stating the name and the number of shares of the shareholders as of June 18, 200, and the aggregate amount of stock values as of June 18, 2008, which is attached to the shareholder's list as of March 30, 2012."

(2) On April 22, 2014, when Plaintiff EE entrusted 70,200 shares issued by the GG industry to ○○ Bank under the Public Service Ethics Act, the representative director of the GG industry prepared a written statement (Evidence No. 4-4 of the A) stating that “A shareholder’s name, resident registration number, and number of shares is to be reported to the competent tax office according to the changed list of shareholders according to the changed list of shareholders,” and submitted it to the ○ Bank as the title stating that “A certificate of change of shares was confirmed that the above shares owned by Plaintiff EE were transferred to ○○ Bank under the name of the ○○ Bank.”

(3) On June 2015, the Investigative Agency demanded the GG industry and its shareholders to submit explanatory materials about stock changes. As such, HH’s wife and HAC recognized the fact of title trust and voluntarily paid after filing a gift tax on shares issued under the name of the GG industry at the time of capital increase issued on June 30, 2000.

(4) The director KK of the GG industry stated that the Council of Tax Judges held in relation to the instant disposition did not enter the list of shareholders meeting the requirements of the Commercial Act, but, whenever necessary, prepared and submitted the list of shareholders to financial institutions.

(5) The GG industry continues to be audited by an external auditor from the fiscal year 2006 to the date, and publicly announces the audit report to the outside, and the shareholder composition details as of the end of each fiscal year as of the end of each fiscal year are stated in the statement of financial statements of the audit report. In addition, the GG industry passed a resolution on cash dividend for earned surplus for the first 201 fiscal year after its establishment at a regular general shareholders’ meeting on March 30, 2012, and prepared a withholding receipt (No. 5-3) stating the shareholder’s name, resident registration number, amount, etc. as of November 29 and December 4, 2012.

D) However, in full view of the following circumstances, it is difficult to acknowledge that the transfer of the instant shares was made by preparing and keeping a register of shareholders meeting the requirements of the Commercial Act at the time of the transaction, and there is no other evidence to acknowledge that the transfer of the instant shares was otherwise made by taking account of the aforementioned evidence, Gap evidence Nos. 8, 9, Eul evidence Nos. 12, 17, 19, and 20, as well as the purport of the entire arguments and arguments, since the facts acknowledged earlier and the deliberation by the court pursuant to the relevant laws cannot be maintained any longer, and there is no other evidence to acknowledge that the transfer of the instant shares was made by the transfer of the instant shares. Accordingly, the transfer of the instant shares cannot be applied to the instant transaction, and therefore, the main reason for the transfer of the instant shares is not acknowledged.

(1) Even if the GG industry prepared and submitted a list of shareholders (Evidence No. 3, No. 2-2, etc.) in the title of the list of shareholders at that time with respect to a financial institution or notary public, etc., it cannot be viewed as a list of shareholders under the Commercial Act, regardless of the fact that the existence of the above document is a ground for supporting the existence of the list of shareholders and the change of entry into a register of shareholders, since the document does not meet the form requirements to include the contents prescribed in the Commercial Act because the name of a shareholder under Article 352(1) of the Commercial Act and the date of acquisition of shares held by each shareholder is omitted. Furthermore, the instant disposition is based on the premise that the transfer of shares in this case was made on each date of change of ownership due to the transaction, and there is no confirmation of the fact that the above document was prepared at the time of transfer of shares

(2) Around June 2015, the Investigation Agency demanded that the GG industry submit a list of shareholders (the date of transfer, etc.) and a list of shareholders related to rights offering, including the list of shareholders, as explanatory materials related to the instant stock transaction. The GG industry did not submit a list of shareholders (Evidence No. 20 No. 4) as stated in [Attachment 1] on the shareholder’s name, resident registration number, and date of transfer of rights offering (the date of transfer, etc.), and the date of transfer of rights offering (the date of transfer, etc.), and did not submit a list of shareholders. The Investigation Agency thereafter conducted an on-site investigation on the change of rights in the GG industry from November 16, 2015 to March 27, 2016. However, the existence of the list of shareholders was not confirmed.

(3) The actual shareholders of the GG industry are one person continuously from the time of establishment, and all the title trustees, including the Plaintiffs, are the family members of HH, family members, former employees, employees of the GG industry, and HH is a representative director of HG industry, and HA was established by finding HA as its representative director, and it continued to serve as the representative director since it took office directly from June 15, 199 as the representative director.

As can be seen, where HH actually owns or controls the GG industry as a single shareholder and a representative director, there is a real need to prepare a register of shareholders, and even if it does not take various procedures prescribed under the premise of the existence of a register of shareholders, it is difficult to view it as an exceptional. Therefore, it cannot be presumed as a matter of course that the duty to prepare a register of shareholders is stipulated under the law, and that the register of shareholders was prepared and transferred to a transfer.

(4) In the event that the GG industry pays cash and Plaintiff EE entrusted its stocks to ○○ Bank, all of the acquisition of the instant case was made after a considerable period of time from the time of the transaction (the last acquisition of the instant case was made in 2006) and the cash dividend and the performance of the income tax obligation to withhold therefrom is possible even if there is no stockholders’ list. Furthermore, since the shareholders of the GG industry continued to be four including H since the establishment of the company excluding the cases where five persons were from June 201 to June 2003, it seems that there was a need to prepare and keep a stockholders’ list under the Commercial Act prepared for the purpose of processing the legal relationship related to a large number of shareholders in a form and uniform standard.

(5) Whether a shareholder registry exists and a transfer of ownership is a matter to be confirmed by the tax authority having the authority to conduct a field investigation, etc. in a superior position with respect to taxpayers. However, even though the investigating authority does not seem to have any special difficulty in confirming the shareholder registry in the course of the tax investigation on the GG industry, it does not appear that the investigating authority specifically investigated whether the GG industry is preparing and keeping a shareholder registry (the investigating authority appears to have investigated the source of funds for acquiring shares and the details of use of dividends, etc. on the premise of the existence of the shareholder registry). In the instant lawsuit, the Defendants filed an application for the order to submit documents with the ○ Accounting Firm (2012 audit report on the GG industry) and the ○○ Construction Mutual Aid Association (hereinafter “Credit Guarantee and Credit Assessment Review”) to verify the existence of the shareholder registry. However, the submission of documents with which the aforementioned accounting firm and the Association can verify the shareholder registry was not a copy of the shareholder registry, but a statement of changes in stocks, etc. and an audit report.

C. Whether Article 45-2(3) of the Inheritance Tax and Gift Tax Act applies to the transfer of the instant case and the scope of application thereof (the grounds for preliminary disposition)

1) In the application of the provisions of Article 45-2(3) of the Inheritance Tax and Gift Tax Act, where the list of shareholders is not prepared in accordance with the documents and statement of changes in stocks, etc. under Articles 109(1) and 119 of the Corporate Tax Act, the date of deemed donation under the above provisions shall be determined by the entry of a transfer of ownership in accordance with the documents and statement of changes in stocks, etc.

In light of the legislative purport, structure, and content of the foregoing Addenda provisions and Article 45-2(3) of the Inheritance Tax and Gift Tax Act, in cases where: (a) the submission of a statement on the state of fluctuation of stocks, etc. on or after January 1, 2004; and (b) the transfer of ownership was determined accordingly, the requirement for deemed donation of title trust was completed on the date of submission; and (c) the gift tax liability arising therefrom was established after January 1, 2004; and (d) even if a title trust agreement was concluded or a transfer of stocks, etc. was made, gift tax may be imposed by applying Article 45-2(3) of the Inheritance Tax and Gift Tax Act (Supreme Court Decision 2018Du36172 Decided June

2) The Plaintiffs are those persons who have no list of shareholders of the GG industry. The fact that the GG industry submitted to the tax authority a statement on March 31 of the following year after the stock transaction in this case was conducted by the instant company, stating the details of stock changes in accordance with the stock transaction in this case, does not conflict between the parties. Thus, the transfer of this case can be taxed by applying Article 45-5(3) of the Inheritance Tax and Gift Tax Act to the transaction made after 2003 among the transaction in this case, but it cannot be taxed by applying this provision to the transaction made after 2001 and 202

3) Therefore, the part on the acquisition by transfer in 2001 and 2002 of the instant disposition (the respective imposition measures against Plaintiff AA and BB and the partial imposition measures against Plaintiff CCC and FF) is not applicable to both Article 41-2(1) of the former Inheritance Tax and Gift Tax Act and Article 45-2(3) of the Inheritance Tax and Gift Tax Act, and is unlawful (except as otherwise provided in the following, the transaction from 2003 out of the instant stock transaction is called “the instant stock transaction,” and “the instant stocks” refers to “the instant stocks,” and only the Plaintiffs except Plaintiff AA and BB are referred to as “the Plaintiff”).

D. Whether it constitutes a new title trust

The legislative purport of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act and Article 45-2(1) of the Inheritance Tax and Gift Tax Act, which provides for a constructive gift of title trust property, is to recognize an exception to the substance over form principle in the purport that the tax justice is realized by effectively preventing tax avoidance by using the title trust system. Therefore, in cases where the actual owner of the property acquires again the property under the name of a new title trustee after the termination of the existing title trust relationship according to its intent, a new title trust relationship that is distinguishable from the existing title trust was created. Therefore, it is reasonable to deem that there is a need to regulate by applying the provision on deemed donation

In addition, as long as the acquisition price under the name of the Plaintiffs, a title trustee, was paid in the procedure for capital increase in the name of the actual owner of the nominal shares, and the shares for capital increase in the name of the title trustee have been acquired (Article 12 of the Act), the new shares for capital increase in the name of the Plaintiffs should be deemed to have been held in title trust with the Plaintiffs. As such,

Therefore, this part of the plaintiffs' assertion is not accepted.

E. Whether the purpose of tax avoidance exists

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).

However, the circumstances and the evidence presented by the Plaintiffs revealed that the purpose of this case’s title trust was not superior to the tax avoidance and that there was no tax avoidance or tax avoidance in the future at the time of the title trust. Rather, in full view of the aforementioned evidence and the purport of the entire pleadings, HH maintained a long-term title trust relationship while changing the title trustee after the establishment of the company, HH maintained the entire shares in the name of HA, HAC, and the shares in the name of Plaintiff EE in the title trust to Plaintiff CCC, AAA, and BB, thereby failing to impose secondary tax liability or deemed acquisition tax on the oligopolistic shareholder under the Framework Act on National Taxes and the Local Tax Act. After that, HH’s capital increase and acquisition by transfer of shares in the GG industry would also be recognized as being subject to the income tax lower than the income tax rate applicable to the future dividend income that would have accrued in the name of oligopolistic shareholder through transactions (i.e., the income tax rate applicable to the dividend income that would be applicable to the instant title trust year).

Therefore, we cannot accept this part of the plaintiffs' assertion.

F. Whether the exclusion period has expired

A person who is deemed to have received a donation by agreement between the parties as well as a person who is deemed to have received a donation under the laws and regulations shall be deemed to have a duty to report the taxable value and tax base of the gift tax (see, e.g., Supreme Court Decision 2002Du2826, Oct. 10, 2003); recognition of such duty to report is difficult to be deemed to infringe the taxpayer’s right to refuse to make statements or infringe on the freedom of conscience by forcing a criminal unfavorable statement; and it is clearly stipulated in the Acts and subordinate statutes as to whether his/her act constitutes the subject of a gift tax; thus, it cannot be deemed impossible to expect a taxpayer to report his/her own awareness of the subject of a gift tax; even if there is no separate form for using a taxpayer to report the gift tax on title trust under the Enforcement Rule of the Inheritance Tax and Gift Tax Act, it is not impossible to report on all legal relations or acts subject to the gift tax, and such circumstance alone is not impossible (see, e.g., Supreme Court Decision 2002Du1415).

However, the plaintiffs' assertion that the exclusion period of imposition has lapsed is acceptable, since both gift tax on the stock transaction of this case was imposed within the exclusion period of 15 years from the deadline for submission of each return.

G. Whether the imposition of additional tax is lawful

Under the tax law, in order to facilitate the exercise of the right to impose taxes and the realization of tax claims, where a taxpayer violates a duty to report and pay taxes under the tax law without justifiable grounds, the taxpayer’s intent or negligence is not considered as administrative sanctions which are imposed under the tax law, while such sanctions should be imposed on the taxpayer for failure to fulfill his/her duty, unless there are justifiable grounds, such as where the taxpayer is deemed to have been unable to know his/her duty, or where it is unreasonable for him/her to expect the fulfillment of his/her duty (see, e.g., Supreme Court Decision 2010Du16622, Apr. 28, 2011).

As seen earlier, the gift tax based on the deemed donation of title trust does not exempt the obligation to report the taxable value and tax base of the gift tax, and the fact that it is difficult for the Plaintiffs to actually report the title trust of the instant shares to the tax authority, it cannot be deemed that there is a justifiable ground for failing to fulfill such obligation to report. Therefore, the Plaintiffs’ assertion on

H. Whether the calculation of tax amount is lawful

(i)the date of deemed donation;

The date of deemed donation under Article 45-2 (3) of the Inheritance Tax and Gift Tax Act is the date when the actual owner and the nominal owner submit a statement, etc. of changes in stocks, etc. that can be deemed to have clearly indicated the fact of change in stocks other than the nominal owner, and thus, it is unlawful to assess the tax base by assessing the value of stocks based on the date of deemed donation of ownership change in the

2) Whether the previous provisions on the aggregate of donations apply

Article 55(1) of the Inheritance Tax and Gift Tax Act (hereinafter referred to as the "Revised Inheritance Tax and Gift Tax Act") which was amended by Act No. 7010 on December 30, 2003 and has been amended by Act No. 111130 on December 31, 2011 (hereinafter referred to as "the Inheritance Tax and Gift Tax Act") provides that the tax base of gift tax shall be the amount of property under title trust (title 1) in the case of a deemed donation of property under title trust; (2) in the case of property under title trust, the amount (title 2) calculated by deducting 30 million won from the relevant donated property; (3) in the case of property other than those under subparagraphs 1 and 2, the deduction of donated property under Article 53 of the same Act from the taxable amount of gift tax under Article 47(1) of the same Act and the amount of deduction of disaster loss under Article 54 of the same Act shall be added to the amount obtained by subtracting the relevant donated property from the total amount of donated property (excluding any aggregate donation property) as of gift tax on the date.

In light of the following circumstances, it is reasonable to view that, in the case of a constructive gift of a title trust property, the value of the property subject to the previous title trust may not be added when calculating the tax base. Accordingly, the Defendants’ calculation of the tax base by applying Article 47(2) of the amended Inheritance Tax and Gift Tax Act is unlawful. In short, it is unlawful to determine the tax base by adding up the value of the property subject to the previous title trust by applying Article 47(2) of the same Act to the calculation of the tax base for the constructive gift of a title trust property.

A) Article 55(1)1 of the amended Inheritance Tax and Gift Tax Act explicitly states that “the amount of the pertinent title trust property” as the gift tax base in relation to the constructive gift of title trust property. Therefore, in calculating the tax base, there is no room to apply Article 47, which is a provision on the taxable amount of gift taxes, in calculating the tax base. Nevertheless, construing that the previous provision on the donation under Article 47(2) is applicable in calculating the tax base based on the constructive gift of title trust property goes beyond the bounds of literal interpretation and thus contravenes the principle of no taxation without law.

(1) Article 55 (1) of the former Inheritance Tax and Gift Tax Act prior to the amendment by Act No. 7010 of December 30, 2003 provides that "the tax base of a gift tax shall be the amount calculated by subtracting the gift tax amount under Article 53 of the same Act from the taxable amount of gift tax under Article 47 of the same Act, and the amount of the deduction of disaster loss under Article 54 from the taxable amount of gift tax under Article 57 (1) of the same Act, and Article 47 (2) of the same Act provides that the total amount of the gift tax received from the same person within 10 million won or more from the same person within 10 years prior to the date of the relevant donation shall be added to the taxable amount of gift tax under Article 55 (1) of the same Act, which does not distinguish the case where the provision on the constructive gift of property under title trust is applied to the tax base from the general donation. However, if Article 55 (1) of the revised Inheritance Tax and Gift Tax Act separately prescribes the tax base under Article 57 (2) of the same Article 4).

(2) It seems clear that Article 47 of the amended Inheritance Tax and Gift Tax Act provides that Article 55 (1) of the amended Inheritance Tax and Gift Tax Act provides that Article 45 (1) of the amended Inheritance Tax and Gift Tax Act shall be applied only to subparagraph 3, separately from subparagraph 13, because the taxable amount of gift taxes under Article 47 (1) of the amended Inheritance Tax and Gift Tax Act is naturally premised on the application of Article 47 (2) and (3).

B) The purport of the provision that the donated property received from the same person within 10 years is to be added to the taxable amount of gift taxes for a general gift is that each individual gift act constitutes a separate taxation requirement, and thus, the imposition of a separate gift tax should be separately imposed when there exist multiple gifts different from the same person. However, the purpose of the provision is to prevent the act of donation by dividing the total amount of assets, which are damaged by the progressive tax rate, instead of one lump sum donation (see, e.g., Supreme Court Decision 2003Du9800, Dec. 10, 2004). However, since the title trust of stocks is not expected and carried out from the beginning, it is difficult to think of the cases of title trust with a view to evading the gift tax, the provision on the deemed gift of title trust property is an exception to the substance over form principle to prevent the act of title trust for the purpose of tax avoidance, and thus, it is also necessary and appropriate to prevent the act of tax avoidance (see, e.g., Supreme Court Decision 2017Du417.

(i) Small amount of tax;

1) The imposition of the gift tax and the additional tax on the Plaintiff AA and BB is not subject to Article 41-2(1) of the former Inheritance Tax and Gift Tax Act, and Article 45-2(3) of the Inheritance Tax and Gift Tax Act is also applicable to the transaction conducted in 2001 and 2002. Thus, the imposition of the gift tax and the additional tax on the said Plaintiffs is unlawful.

2) The part on the transaction executed in 2001 and 2002 among the disposition imposing gift tax and additional tax on Plaintiff CCC and FF also cannot be applied Article 41-2(1) of the former Inheritance Tax and Gift Tax Act and Article 45-2(3) of the Inheritance Tax and Gift Tax Act. Thus, the disposition on this portion is unlawful.

3) As to the issue of capital increase with respect to the issue of this case, the date of ownership change is deemed as the date of deemed donation with respect to the transaction after 2003 among the acquisition limit of this case, the tax base is calculated pursuant to Article 55(1)1 of the amended Inheritance Tax and Gift Tax Act by excluding the date of submission of the specification of change of stocks, etc. from the date of donation with respect to the transaction after 2003 among the acquisition limit of this case, and the tax amount calculated according to the transaction of this case with Plaintiff CCC, DD, EE, and FF by calculating the additional tax as of the date of each deemed donation with respect to the above transaction of this case is as stated in the attached tax amount. However, among the above details, the additional tax on capital increase with respect to the issue of capital increase with respect to Plaintiff EE and CCC as of December 27, 2003, and the principal tax and additional tax on Plaintiff FFF as of January 2, 2006, the original tax amount imposed on the above Plaintiffs exceeds the tax amount originally assessed tax amount.

5. Conclusion

Thus, the claims of plaintiffs AA and BB are accepted as reasonable. Since the claims of plaintiffs CCC, DD, EE, and FF are reasonable within the above scope of recognition, they are accepted, and the remaining claims are dismissed as they are without merit. It is so decided as per Disposition.