Seoul Administrative Court-2015-Guhap-5646 ( October 07, 2015)

Seocho 2012west 4162 ( November 26, 2014)

It constitutes a new title trust to receive new shares in the name of the nominal owner by participating in shareholders allocation method;

In the title trust relationship, the actual owner’s participation in the shareholder allocation method and the receipt of new shares under the name of the nominal owner constitutes a new title trust. The issue price of the instant company’s capital increase is not equivalent to the market price at the time of

Articles 45-2 and 63 of the Inheritance Tax and Gift Tax Act, and Articles 56 and 81-4 of the National Techniques Act;

2015Nu63540 Revocation of Disposition of Imposing gift tax

Gangwon A

BB Director of the Tax Office

Seoul Administrative Court 2015Guhap5646

June 15, 2016

July 6, 2016

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

1. Purport of claim

The imposition of gift tax by the Defendant against the Plaintiff on August 8, 2012 is revoked.

2. Purport of appeal

The judgment of the first instance shall be revoked around, and the lawsuit of this case shall be dismissed.

Preliminary, as set forth in the Disposition.

1. Details of the disposition;

A. The Plaintiff was an employee of DDD Co., Ltd. (EEE, Co., Ltd. prior to the change; hereinafter referred to as “instant company”). The RedF, the representative director of the instant company, acquired the entire shares of the instant company owned by GGG Co., Ltd., a Japanese corporation, in 2004, 41,465 shares among them (30% shares), and held a title trust with the Plaintiff, 27,643 shares (20% shares), respectively.

B. After December 28, 2005, the Plaintiff received 18,000 shares (hereinafter referred to as “instant shares”) equivalent to 30% of the shares held by the Plaintiff (hereinafter referred to as “instant shares”) in its name due to the Plaintiff’s offering of 60,000 shares by means of a shareholder allocation method (hereinafter referred to as “instant shares”) on December 28, 2005, and the shares of the instant company held under the Plaintiff’s name as of the end of 2005 were to reach a total of 59,465 shares (30%).

C. On February 2012, the commissioner of HH Regional Tax Office assessed the value of the shares issued with capital increase allocated under his/her name as KRW 00,000 per share, and notified the Defendant of the rectification of gift tax by applying Article 45-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8139, Dec. 30, 2006; hereinafter “former Inheritance Tax and Gift Tax Act”) to the fact that the Plaintiff acquired shares issued with capital increase.

D. On August 8, 2012, the Defendant issued a notice of correction and notification of gift tax0, OO, OO, and OO on the donated portion to the Plaintiff on December 28, 2005, and the Plaintiff filed an appeal with the Tax Tribunal.

E. On November 26, 2014, the Tax Tribunal decided that “The tax Tribunal calculated the net profit and loss value reflecting the number of shares issued by the instant company through capital increase with consideration when calculating the net profit and loss per share for the assessment of the shares issued through capital increase with consideration, and corrected the tax base and tax amount.”

F. Accordingly, the director of HH Regional Tax Office assessed the value of the instant shares trusted to the Plaintiff as KRW 000,000 per share, and notified the Defendant. On December 17, 2014, the Defendant rendered a decision to reduce the amount of KRW O,OO, andOO of the amount of gift tax imposed on the Plaintiff (hereinafter “the disposition of this case”).

2. Determination on the defense prior to the merits

A. The defendant's assertion

Since the decision of the Tax Tribunal on November 26, 2014 is limited to cases where it is expressly stated that the reexamination shall be conducted in the text, the decision of the Tax Tribunal does not fall under the re-examination decision, and as long as the above decision was served on the plaintiff's inquiry agent on November 28, 2014, the period for filing the lawsuit shall be calculated from November 28, 2014, the service date, and thus, the lawsuit of this case filed on March 2, 2015 is unlawful.

B. Determination

1) Article 56 of the Framework Act on National Taxes provides that administrative litigation shall be filed within 90 days from the date of receipt of a decision on a request for examination or adjudgment (Paragraph 3). The above period is a peremptory term (Paragraph 4).

The re-examination decision, which is a procedure for objection to the disposition imposing tax, is conducted in practice in the form of a decision on the request for examination or adjudgment as to the disposition imposing tax, takes the form of re-auditing the matters pointed out in the relevant decision on all or part of a single taxable unit to correct the tax base and tax amount or maintain the initial disposition according to the result. Accordingly, the claimant who received the notice of the re-examination decision can specify the subject and scope of objection in the next stage litigation procedure only after he received the notice of the subsequent disposition.

Considering the form and purport of the re-audit decision, and the unique nature of tax and legal relations that are complicated and professional in the autonomous administrative control function of the administrative appeals system, the re-audit decision is bound to be a modified decision in which the agency's results of re-audit on the matters pointed out in the decision, and the agency's intent to take part in the decision on the request for a trial, etc. Accordingly, the re-audit decision becomes effective as a decision on the request for a trial, etc. by supplementing its contents by the subsequent disposition of the agency. Therefore, it is reasonable to deem that the period of the request for a review, the period of the request for a trial, or the period of filing an administrative litigation according to the re-audit decision should be counted as the date when the claimant, etc. received the notification of the subsequent disposition (see Supreme Court en banc Decision 2007Du12

2) Comprehensively taking account of the above evidence and the purport of Gap evidence No. 3, the plaintiff filed an appeal with the Tax Tribunal on September 10, 2012 regarding the disposition. The Tax Tribunal rendered a decision on November 26, 2014 to the plaintiff on August 8, 2012, imposing gift tax O,OO,O, andOOO on the 20th of December 28, 2012. The disposition of imposing KRW 20 on the 20th of the above 0th of the 20th of the 20th of the 20th of the 20th of the 20th of the 20th of the 1st of the 20th of the 1st of the 20th of the 20th of the 1st of the 20th of the 20th of the 1st of the 20th of the 1st of the 1st of the 20th of the 1st of the 20th of the 1st of the 0th of the 0th of the 10 shares.

3) The following circumstances revealed in light of the aforementioned legal principles, i.e., ① calculated the net value reflecting the number of shares issued by the instant company for the purpose of assessing the net profit and loss per share of the shares issued with capital increase, and the tax base and tax amount shall be corrected. The content of the determination by the Tax Tribunal alone does not know how much the corrected tax amount is, and there is room for interpretation to the effect that the Defendant, the disposition authority, should fix the net profit and loss value per share of the instant company so that tax base and tax amount can be corrected according to the result. ② Even if the above determination contains the content that “the dilution effect caused by capital increase with capital increase pursuant to Article 29 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act,” the value per share of the instant shares can be considered as 00,000 won per share, which is 20 won per share, and thus, it is difficult to see that the Defendant’s determination of tax base and tax amount can be seen as having been made within 70 days from the date of the determination of the instant tax office’s disposition.

Therefore, the defendant's defense prior to the merits is without merit.

3. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Although the Defendant had already imposed a tax on the instant shares by applying the provision on deemed gift under title trust through a tax investigation in 2011, a tax investigation by the HH regional tax office was conducted on the gift value in around 2012, and thus, the instant disposition was unlawful as it was conducted through an unlawful duplicate tax investigation.

2) Furthermore, the instant capital increase increase is based on the shareholder allocation method that shares are allocated to the existing shareholders according to the share ratio. In the case of capital increase by shares allotment method, it does not fall under the subject of gift tax under Article 45-2 of the former Inheritance Tax and Gift Tax Act, and the purpose of tax evasion is not recognized in the title trust of the instant shares. Therefore, the instant disposition that imposed gift tax

3) Even if the instant shares constitute the subject of gift tax, the value per share of the instant shares falls under the market price, and thus, should be calculated according to the above market price under Article 60(1) of the former Inheritance Tax and Gift Tax Act. Even if the value of the instant shares is assessed according to the supplementary assessment method other than the market price, it is unreasonable to assess the value of shares pursuant to Article 54(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1933, Feb. 9, 2006; Presidential Decree No. hereinafter referred to as the “former Enforcement Decree of the Inheritance Tax and Gift Tax Act”) by reflecting the effect of capital increase based on the net asset value only under Article 54(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act. Therefore, it is unlawful to assess the value of shares in accordance with Article 60(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act or Article 54(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.

B. Relevant statutes

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

(c) Fact of recognition;

1) The RedF acquired all shares 91,301 shares of the instant company around 2004, and accordingly, 41,465 shares among them to the Plaintiff, and 27,643 shares to the KimCC respectively, the shares ratio of the instant company in its name became 50% of the red FF, 30% of the Plaintiff, and 20% of the KimCC.

2) The instant company paid dividends in the same year. Of the dividend amounting to KRW 50 million, KRW 150 million, the Plaintiff, a holder of 30% share in the name of the Plaintiff, was treated as having been paid to KimCC, a holder of 20% share in the name of the Plaintiff, according to the above share ratio.

3) While the HongF was holding part of the shares of the instant company in the name of the Plaintiff and KimCC, on December 28, 2005, the Plaintiff and KimCC paid the acquisition price (00,000 won per share) for the new shares under the name of the Plaintiff and KimCC. Accordingly, as the shares increased by the new shares issued by the new shares issued by the instant capital increase were allocated according to the existing shares shares shares shares ratio, the shares ratio of the instant company was maintained at 50% for red FF, 30% for 205, and 20% for KimCC.

4) On January 19, 2007, the Plaintiff calculated 59,465 shares of the instant company as KRW 00,000 per share, and transferred all of them to RedF, and reported and paid the transfer income tax on the transfer value OO, OO, and OO.

5) From August 16, 2010 to August 30, 2010, the Defendant conducted a tax investigation on the Plaintiff’s above capital gains tax return and completed the investigation as it acknowledged the Plaintiff’s reported content as it is.

6) On March 201, the JF director of the JCC entered into a contract with the Plaintiff, etc. on the condition that the Plaintiff and the GGGG Co., Ltd will take over the entire shares 91,301 shares of the instant company in light of the fact that the Plaintiff, the managing director of the instant company at the time of the Plaintiff and the head of the finance team at the time of the acquisition of the instant company shares, and the Plaintiff was paid the purchase price for the instant company’s funds. After checking the fact that each shares acquired by the Plaintiff and the KimCC were transferred to HongF again and was not actually paid the transfer margin, the Plaintiff determined that the instant shares were trusted from the RedF to the Plaintiff, etc., and notified the Plaintiff of the imposition of gift tax.

7) Accordingly, on June 8, 2011, the Defendant sent to the Plaintiff a notice of prior notice of taxation audit results that “The instant shares trusted in title on December 28, 2005, which was deemed to have been donated by RedF to have been resolved on the gift tax determination.” On August 23, 2011, the Defendant issued a notice of prior notice of taxation regarding the Plaintiff on August 23, 201 of the instant shares (hereinafter referred to as “the first disposition imposing gift tax”) of KRW OO,OO, and OOO based on the issue price of the instant shares (hereinafter referred to as “the first disposition imposing gift tax”).

8) In February 2012, the commissioner of HH Regional Tax Office: (a) assessed the value of the instant shares under the former Inheritance Tax and Gift Tax Act as KRW 000,000 per share and notified the Defendant of the assessment of the value of the instant shares under the said Act; and (b) calculated gift tax by assessing the value of the instant shares as KRW 00,000 per share (the amount shall be reduced to KRW 00,000 per share as a result of the decision of the Tax Tribunal); and (c) calculated gift tax by deducting the amount imposed on the said first gift tax from the Plaintiff.

9) In the process, HH regional tax office: (a) notified the Plaintiff of the tax items to be investigated as gift tax; (b) the tax period subject to the investigation from January 1, 2004 to December 31, 2005; and (c) notified the Plaintiff of the pre-announcement of the tax investigation, i.e., “the low-price acquisition level of stocks and title trust”; and (d) notified the expected tax amount as eitherOO,OO,OO, orOOO.

D. Determination

1) Whether the instant disposition was made by an unlawful duplicate tax investigation, and is unlawful

A) In order to determine or correct the tax base and amount of national tax, a tax investigation means an act of asking questions to taxpayers, etc. or inspecting, investigating, or ordering submission of the relevant account books, documents, or other things (see, e.g., Article 81-2(2)1 of the Framework Act on National Taxes and Article 170 of the Income Tax Act) and Article 81-4 of the former Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 2013; hereinafter the same) and Article 63-2 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 24366, Feb. 15, 2013) to prohibit double tax investigations as well as to prevent abuse of the authority to conduct a tax investigation.

B) On the other hand, the following circumstances revealed in light of the above legal principles, i.e., ① the JJ Director’s review of the documents already submitted at the time of investigating the capital gains tax in 2010 during the regular audit against the Defendant, and determined that the instant shares were held in title trust to the Plaintiff. The HH Director only changed the value of the instant shares based on the materials related to the imposition of the first gift tax, and did not appear to have made a separate questioning or a demand for submission of materials against the Plaintiff. ② The HH Director’s prior notice of tax investigation and notice of taxation regarding title trust of the instant shares was recognized as having been given to the Plaintiff at the time of the instant disposition, but there was no other evidence to acknowledge that the HH Director or the Defendant exercised the right to ask the Plaintiff for questioning or questioning, or that the submission of books, documents or other articles was carried out by the inspection or order. As such, the instant disposition cannot be deemed unlawful since it violated the provision prohibiting double tax investigation.

Therefore, this part of the plaintiff's assertion is without merit.

2) Whether the instant shares are subject to the provision on constructive gift of title trust property under Article 45-2 of the former Inheritance Tax and Gift Tax Act

A) Article 45-2(1) of the former Inheritance Tax and Gift Tax Act provides that where the actual owner and the nominal owner are different from the real owner, the value of the property shall be deemed to have been donated to the actual owner on the date when the property is registered, etc. as the nominal owner (where the property requires a change of ownership, referring to the date following the end of the year following the year in which the date of acquisition of ownership falls), but the same shall not apply where the property is registered, etc. under another person’s name or the transfer of ownership is not made in the name of the actual owner who acquired the ownership without any purpose of tax avoidance. In addition, Article 45-2(2) of the same Act provides that where the property

The provision on constructive gift of title trust property under Article 45-2(1) of the former Inheritance Tax and Gift Tax Act is one of the exceptions to the substance over form principle, and the title trust system is limited to donation to the extent that it is intended to effectively prevent the abuse of the title trust system as a means of tax avoidance, and does not change the ownership of the property under title trust. Thus, the actual owner of the title trust property is still a title truster notwithstanding the provision on constructive gift. In addition, only when the purpose of tax avoidance is not included in the purpose of the title trust, the proviso of the same Article can be applied, and in this case, the burden of proving that there was no purpose of tax avoidance. The burden of proving that there was no purpose of tax avoidance exists other than the purpose of tax avoidance can be proved by the method of proving that there was no other purpose of tax avoidance. However, the title truster responsible for the burden of tax avoidance was not superior to the tax avoidance in the title trust, and there was no tax avoidance at the time of the title trust or in the future.

B) In full view of the following circumstances revealed in light of the aforementioned legal principles, it cannot be readily concluded that there was no tax avoidance purpose in the title trust of the instant shares. Therefore, the instant shares are subject to the provision on deemed donation of title trust property under Article 45-2 of the former Inheritance Tax and Gift Tax Act.

Therefore, this part of the Plaintiff’s assertion on a different premise is without merit.

① In the instant case where HongF’s shares were held in title trust with the Plaintiff, the preemptive right to the shares issued in question belongs to RedF, the actual owner of the first nominal shares, and HongF’s title trust with the Plaintiff by exercising the above preemptive right, and HongF’s title trust with the Plaintiff by paying the subscription price for new shares under the name of the Plaintiff. There is no ground to deem that the subject of deemed donation was limited to the payment made by HongF with the purchase price for new shares. Only in this case, there is no ground to restrict the application of the provision on deemed donation of trust property under Article 45-2 of the former Inheritance Tax and Gift Tax

② From among the dividends paid by the instant company around 2004, KRW 1.5 million, the Plaintiff, the holder of 30 million shares in the name of KRW 50 million, was treated as being paid to KimCC, the holder of 20% shares in the name of KRW 100 million, and the HongF would have been able to avoid the application of the high-rate global income tax rate at the time of filing a global income tax base return for the amount of 2005. Thus, the fact that the instant shares were acquired in the Plaintiff’s name and were not actually paid dividends to the HongF again until they were transferred to the HongF cannot be readily concluded that the redF had no tax avoidance purpose at the time of title trust of the instant shares.

③ Even if the shares shares shares before and after the issuance of the instant shares are equal, it is insufficient to view that there was an obvious purpose irrelevant to tax avoidance or tax avoidance in the title trust of the instant shares, and that there was no tax avoidance in the future at the time of the title trust or in the absence of tax avoidance, to have been proven to the extent that there was no doubt, by the evidence objectively acceptable and acceptable. Rather, under the above facts, RedF may avoid becoming an oligopolistic shareholder of the instant company by maintaining its shares shares shares by 50% under the title trust of shares, and thereby, there was room for avoiding the secondary tax liability of oligopolistic shareholder under the former Framework Act on National Taxes and the former Local Tax Act (amended by Act No. 7843, Dec. 31, 2005).

3) Whether the method of appraising the value of the instant shares is unlawful

A) According to Article 60(1) and (2) of the former Inheritance Tax and Gift Tax Act, the value of the property on which the gift tax is levied shall, in principle, be based on the market price as of the date of donation (hereinafter “date of appraisal”), and the market price shall include the value which is generally recognized as the market price in the case of free transactions between many and unspecified persons under the conditions as prescribed by the Presidential Decree. According to Article 49(1) of the Enforcement Decree of the same Act, the term “those recognized as the market price under the conditions as prescribed by the Presidential Decree” under Article 60(2) of the former Inheritance Tax and Gift Tax Act means, in the case of the donation, the price verified by each of the following provisions in the case of sale, appraisal, expropriation, auction, or public sale during the period of three months before or after the date of appraisal, and under subparagraph 1,

Meanwhile, Article 60 (3) of the former Inheritance Tax and Gift Tax Act provides that where it is difficult to calculate the market price, it shall be based on the value appraised by the supplementary assessment method under Articles 61 through 65 of the same Act. Under Article 63 (1) 1 (c) of the former Inheritance Tax and Gift Tax Act and Article 54 (1) of the Enforcement Decree of the same Act, stocks not listed on the Korea Stock Exchange shall be appraised by the weighted average value of profit and loss and the net asset value per share, respectively, by 3 and 2. Notwithstanding Article 54 (4) of the Enforcement Decree of the same Act, "1."

B) First of all, the issue value of the instant shares cannot be deemed as the market value, and the value that is generally recognized as being established in the event that the instant shares are freely traded between many and unspecified persons as of December 28, 2005, which is the base date of appraisal. There is no proof that the instant shares were traded, appraised, expropriated, sold, or sold during the period of three months before or after the base date of appraisal, and no other circumstance exists to deem that the issue value of the instant shares was appropriately reflected in the objective exchange value of the instant shares as of the base date of appraisal. Thus, the issue value of the instant shares cannot be deemed as the market value. Therefore, since it is difficult to calculate the market value of the instant shares as of the base date of appraisal, it is reasonable to evaluate the value of the instant shares by the supplementary method of assessment under Articles 60(3) and 63(1)1 (c) of the former Inheritance Tax and Gift Tax Act.

Next, this paper examines whether the value of the instant shares should be assessed based on the net asset value under Article 54(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.

It is difficult to view that the method of appraisal under Article 54(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 2002, Feb. 1, 2004) should apply mutatis mutandis to the case where the method of appraisal under Article 54(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 2004, Feb. 1, 2004) is unreasonable solely on the ground that there is a significant change in the operating profit of the company of this case from 2002 to 2004. Thus, there is no ground to evaluate the value of the shares of this case by only the net asset value under Article 54(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act.

Supreme Court Decision 2011Du31253 Decided November 14, 2013 (201Du31253) rendered by the Plaintiff is unreasonable to seek the net profit and loss value by "an weighted average of the net profit and loss value for the last three years per share" under Article 54(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, where there is a reason under the latter part of Article 56(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, and Article 17-3(1) of the former Enforcement Rule of the Inheritance Tax and Gift Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 20, Apr. 30, 2008), the method of supplementary evaluation prepared by the Inheritance Tax and Gift Tax Act, such as the method under Article 54(4) of the former Enforcement Decree of the Inheritance Tax and Gift Tax

Therefore, the method of evaluating the value per share of the instant shares based on net value and net asset value under Article 54(1) of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act is lawful. Therefore, the Plaintiff’s assertion on this part is without merit.

4. Conclusion

If so, the plaintiff's claim shall be dismissed due to the lack of reason, and the judgment of the court of first instance which has different conclusions.

Since the judgment is unfair, the defendant's appeal is accepted, the judgment of the first instance is revoked, and the plaintiff's appeal is

Each decision shall be made as per Disposition.