It is insufficient to recognize that the nominal trust of shares has a clear purpose of tax avoidance and that there was no tax avoidance at the time of the nominal trust or there was no tax avoidance in the future.

In the case of title trust, there was a clear objective of tax avoidance to the extent that there was no objective of tax avoidance, and there was no tax avoidance in the future at the time of the title trust or in the future, to prove that there was no objective and objective evidence to prove that there was no tax avoidance in the name trust to the extent that it would not be doubtful.

Legal fiction of donation of title trust property under Article 45-2 of the Inheritance Tax and Gift Tax Act

2015Guhap6432 Revocation of Disposition of Imposition of Gift Tax

Park ○

○ Head of tax office

May 2, 2016

May 31, 2016

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

On January 6, 2015, the Defendant rendered a judgment that the imposition of ○○ (including additional tax) gift tax (including additional tax) against the Plaintiff is revoked.

1. Details of the disposition;

A. On December 24, 2012, PP acquired shares 250,000 shares of Dcare Co., Ltd. (hereinafter “instant shares”) from the headCC at the price of KRW 500,000,000, and completed the transfer of ownership in the name of the Plaintiff, which is one’s mother, with respect to the said shares.

B. On January 6, 2015, the Defendant determined that the foregoing transfer is a title trust deemed to be a donation pursuant to Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11609, Jan. 1, 2013; hereinafter referred to as the “former Inheritance Tax and Gift Tax Act”), and determined and notified the Plaintiff of ○○○○ (including additional taxes) of the gift tax reverted to year 2012 (hereinafter referred to as the “instant disposition”).

C. The Plaintiff appealed and filed an appeal with the Tax Tribunal on March 3, 2015, but was dismissed on June 5, 2015.

[Ground of recognition] Facts without dispute, Gap evidence 1, 3, 7, Eul evidence 9, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

ParkP loaned KRW 500 million to the headCC as funds necessary for the acquisition of H&C, and agreed to be transferred the instant shares owned by the headCC as collateral for the above loan claims. On the completion of the acquisition procedure of the above H&C, the headCC appointed Park PP as an advisory lawyer for the H&C Co., Ltd. and decided to incorporate the DB as a subsidiary of the H&C Co., Ltd. in substance, but in this process, Park PP, a shareholder of the DBC, becomes an advisory lawyer for the H&C Co., Ltd., was likely to conflict with the status of investors and advisory lawyer. Accordingly, it was true that ParkP trusted trusted the title of the instant shares to the Plaintiff, which was the student of the PP, but there was no possibility that it would be avoided not only in the future, but also in the future, due to any tax evasion purpose or other tax evasion purpose at the time of the establishment of a loan claim amounting to KRW 500 million against the headCC.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Relevant legal principles

The legislative purport of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act is to recognize an exception to the substance over form principle in order to realize tax justice by effectively preventing the act of tax avoidance using the title trust system. Thus, if the title trust was recognized to have been made for reasons other than the purpose of tax avoidance and it is merely a minor reduction of tax incidental to the said title trust, it cannot be readily concluded that there was such a purpose of tax avoidance. However, in light of the legislative purport as seen above, only when the purpose of the title trust is not included in the purpose of tax avoidance, it cannot be deemed that there was a deemed donation by applying the proviso to the above provision, so it cannot be deemed that there was an intention of tax avoidance. In addition, the burden of proving that there was no purpose of tax avoidance is against the person who asserts it (see, e.g., Supreme Court Decision 2013Du9779, Oct. 17, 2013).

Furthermore, as the nominal owner who bears the above burden of proof, there was an obvious objective irrelevant to the tax avoidance to the extent that it is deemed that there was no tax avoidance purpose in the title trust, and the fact that there was no tax avoidance at the time of the title trust or in the future is proved to the extent that the ordinary person is not doubtful, based on objective and conclusive evidence (see Supreme Court Decision 2004Du11220, Sept. 22, 2006). Whether there was such tax avoidance purpose or not should be determined at the time of the title trust of stocks at the time of the title trust, and it should not be determined as to whether there was any tax evasion thereafter (see Supreme Court Decision 2012Du546, Nov. 28, 2013).

2) In the instant case:

Comprehensively taking account of the following circumstances acknowledged by the evidence adopted earlier, the evidence alone, which was presented in the instant case, is insufficient to recognize that ParkP had a clear purpose not to evade tax or to have no tax to be avoided at the time of title trust or at the time of title trust, and there is no other evidence to acknowledge otherwise.

① In relation to the process of title trust of this case, the Plaintiff asserts that the Plaintiff’s status as a shareholder of the company and the status as an advisory attorney-at-law may conflict. However, such assertion is insufficient to regard it as “a clear purpose irrelevant to the avoidance of taxes” by itself.

② The Plaintiff is a person subject to the application of the global income tax rate of 15%, and ParkPP, which is the person subject to the application of 35% of the global income tax rate. If Dcare Co., Ltd., Ltd., which had accrued earned surplus in the year 2012 and 2013, paid dividends to the Plaintiff, the dividend would have accrued to the Plaintiff, the lower income tax rate would have been applied.

③ At the time of the PP’s acquisition of the instant shares by the headCC on December 24, 2012, “PP and the headCC” entered into an agreement with the transferor to receive 15% interest per annum in addition to the amount already paid to the transferor when the transferee re-sales the shares to the transferor within one year, the transferee entered into an agreement to receive 50 million interest per annum from the transferor. This appears to be a nominal interest on the loan. However, if the said amount (75 million won = 500 million won x 15%) reverts to the Plaintiff, the lower rate of income tax, etc. is applied, as stated earlier.

3. Conclusion

Thus, the plaintiff's claim is dismissed as it is without merit.