Cho High Court Decision 2010Du0247 ( October 16, 2010)

Gift tax is legitimate unless the purpose of title trust other than tax avoidance is obvious.

At the time of the first title trust, it is recognized that the number of promoters was no longer at issue after the completion of the incorporation, and when the dividend income is added to the income of the title truster, the more tax amount is imposed and the purpose of tax avoidance is deemed to be legitimate.

2010Guhap2556 Revocation of Disposition of Imposition of Gift Tax

Kim XX et al.

O Head of tax office

August 19, 2011

August 19, 2011

1. All of the disposition imposing gift tax for the year 2004 among the instant lawsuit is dismissed.

2. All of the plaintiffs' remaining claims are dismissed.

3. 1/2 of the costs of lawsuit are assessed against the plaintiffs, and the remainder is assessed against the defendant.

The Defendant respectively revoked the disposition of imposition of KRW 3,582,380, gift tax on title trust on October 13, 2009, KRW 3,582,380, gift tax on title trust on February 4, 1999, KRW 3,582,380, gift tax on title trust on March 15, 1999, KRW 6,719,040, gift tax on 2000, KRW 103,423,890, gift tax on 204, respectively.

1. Details of the disposition;

A. On July 1, 1996, KimA and KoB made payment of 1/20,00 shares of shares to the shares issued on 20,000 shares and made a title trust of 1,600 shares of each of their own shares to SCC and AD. On June 30, 1997, GoB made a title trust of 3,20 shares in the process of offering new shares on 40,00 shares, thereby holding 4,80 shares of XX group (=1,600 shares + 3,200 shares).

B. From the HighB on February 4, 1999, the Plaintiff Kimchi acquired the entire shares of 4,800 shares in the name of Jung-CC, and the Plaintiff Kim E-E, under a title trust agreement, all shares of 4,800 shares in the name of AnD and received them in the form of trade from AD.

C. On March 15, 199, Article XX group shares issued with capital increase and allocated 4,800 shares to each of the plaintiffs, a nominal shareholder (hereinafter referred to as "shared with the first capital increase"). On October 5, 2000, each of 6,400 shares issued with capital increase and allocated 6,400 shares to the plaintiffs (hereinafter referred to as "shared with the second capital increase"). The shares paid by Gohap and trust its name to the plaintiffs.

D. XX short aid transferred 50 million won of earned surplus to capital on December 21, 2004 and increased 100,000 capital free of charge. During this process, each of the Plaintiffs, a nominal shareholder, was allocated 8,000 shares (hereinafter referred to as “assignment pursuant to free increase”).

E. On October 13, 2009, the Defendant: (a) restricted each of the above shares held in title or offered free of charge to the Plaintiffs as gift from tin, and (b) imposed gift tax on each of the Plaintiffs as listed below (the content of each disposition against the Plaintiffs is identical).

[Ground of recognition] Facts without dispute, Gap 1 to 3 evidence, Eul 1 to 7 evidence (including each number), the purport of the whole pleadings

2. We examine ex officio prior to the determination on the legality of a lawsuit on the imposition of gift tax on the part of the year 2004.

The Defendant’s revocation ex officio of the imposition of each gift tax for the year 2004 on July 29, 201 due to title trust without compensation is without dispute between the parties. The Plaintiffs’ respective lawsuits on this part are against a disposition not already extinguished, and is unlawful as there is no benefit of the lawsuit.

3. Whether the imposition of remaining gift tax is lawful;

A. The plaintiffs' assertion

Although the plaintiffs lent the name to high-B upon the request of KimA, this is merely to meet the statutory number of promoters, the imposition of the remaining gift tax except for the gift tax attributed to year 2004 is unlawful since there was no purpose of tax avoidance related to global income tax, status as oligopolistic shareholders, secondary tax liability, inheritance tax, etc.

(b) Related statutes;

C. Determination

The legislative purport of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act is to effectively prevent the act of tax avoidance using the title trust system, thereby recognizing an exception to the principle of substantial taxation. Thus, if the title trust was recognized to have been made for any reason other than the purpose of tax avoidance, and it is merely a minor reduction of taxes incidental to the title trust, it cannot be deemed that there was the purpose of tax avoidance provided for in the proviso of the same Article, but the burden of proving that there was no purpose of tax avoidance in the title trust has been made (Supreme Court Decision 2004Du13936, May 25, 2006). The burden of proving that there was no purpose of tax avoidance, other than the purpose of tax avoidance, can be proven by the method of proving that there was a purpose of tax avoidance, but the nominal owner who bears the burden of proof has no intention of tax avoidance, which is obvious to the extent that there was no objective and objective purpose of tax avoidance in the title trust or in the future, and there has to be no doubt that there was no objective and evidence (see Supreme Court Decision 200202.

However, if Gap evidence Nos. 4-1 through 6, and Gap evidence No. 5 added the purport of the entire argument, the annual income amount of highB exceeds 80 million won subject to the highest tax rate of Article 55 of the Income Tax Act (88 million won after 2008), which is the maximum tax rate of 80 million won under Article 55 of the Income Tax Act, and even though Article XX does not have any tax arrears as of September 18, 2010, it is found that each title trust was made, and there is no other evidence to deem that there was a clear purpose different from that of tax avoidance against the plaintiffs.

Rather, if each of the above evidence and evidence Nos. 8 through 11 are added to the purport of the entire pleadings, Article 288 of the Commercial Act amended by Act No. 5053 of Dec. 29, 1995 should not be less than seven promoters. However, the actual number of promoters at the time of establishment of Article XX was not more than nine including KimA and high-B, and three or more promoters were mitigated after the enforcement of the above amendment, and the establishment of Article XX was completed at the time of the first title trust with the plaintiffs, and the number of promoters was no longer problematic (which does not fall under the cause of dissolution even if the shareholder of the company was only one person after the incorporation of the company) and the amount of dividend income to the plaintiffs and the amount of dividend income of BB is added to the income of the plaintiffs is more recognized.

Therefore, the plaintiffs' assertion that there was no purpose of tax avoidance in the title trust of this case is without merit.

4. Conclusion

Therefore, the lawsuit of this case against the imposition of gift tax for the year 2004 by the plaintiffs is unlawful, and all of them are dismissed. Since the imposition of the remaining gift tax is legitimate, each of the remaining claims by the plaintiffs are dismissed.