Examination Donation 2013-0040 (Law No. 16, 2013.07)

It cannot be said that the title trust of the stock at issue did not have the purpose of tax avoidance.

Although the claimant knew not less than three directors of a corporation under title trust, the claimant argued that there was no purpose of tax avoidance, the claimant did not prove by objective and objective evidence that there was no objective of tax avoidance, so it can be seen that there was a purpose of tax avoidance in the title trust of the shares in question.

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

2013Guhap2691 Revocation of Disposition of Imposition of Gift Tax

KoreaA

○ Head of tax office

March 25, 2014

April 22, 2014

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition imposing OOO on the Plaintiff on January 11, 2013 is revoked.

1. Details of the disposition;

(a) The process of changing stocks;

1) BBT Co., Ltd. (hereinafter “instant company”) was established on August 23, 1995. The total number of shares issued at the time of the establishment of the instant company was 10,000 shares, the face value per share was O, the total capital was OO, and the total capital was OO. The purpose of the instant company was garment manufacturing and wholesale sales.

2) At the time of its establishment, this case’s shares held 5,00 shares, 2,50 shares, 2,500 shares, and 2,500 shares in the registry of shareholders. However, this case’s shares were owned by thisCC. However, the shares held by KimD and GaE on the registry of shareholders were held by thisCC under title trust with KimD and GaE.

3) After that, upon receipt of a request from thisCC to lend the name of a shareholder, the Plaintiff was registered as a shareholder in the register of shareholders on February 28, 2005 on the ground that shares 2,500 shares in the name of ParkE (hereinafter “instant shares”) were transferred.

4) On December 16, 2010, the instant company issued 20,000 shares by offering capital increase. The face value per share was 5,000 won, and the capital increase was 0,000 won, and thisCC acquired 20,000 shares by paying the amount of capital increase to OOO. On February 16, 201, the instant company issued 30,000 shares by offering capital increase once again. The face value per share was OOO or the capital increase was OOOO won, and thisCC acquired 30,00 shares by paying the amount of capital increase.

5) On December 31, 2012, thisCC entered into a title trust exchange agreement with the Plaintiff, and entered all the shares of the instant company in its name in the register of shareholders.

6) From August 23, 1995, the time of incorporation of the instant company, the distribution of the instant company’s shares on the shareholder registry until December 31, 2012, all of the instant company’s shares were returned, which thisCC had been trusted in title to KimD, Park E, and the Plaintiff.

*the omission of the Table

(b) Particulars of imposing gift tax;

1) From October 22, 2012 to November 30, 2012, the head of the △△ District Tax Office confirmed the title trust of the instant shares when conducting an investigation to verify the change of shares with respect to the instant company. The head of the △ District Tax Office demanded the Plaintiff to vindicate the purpose of the title trust on November 30, 2012 and December 18, 2012, but the Plaintiff did not submit any supporting materials.

2) On January 2, 2013, 201, the head of △△ District Tax Office deemed the Plaintiff to have received the instant shares under title trust from thisCC, and notified the Defendant, who has jurisdiction over the Plaintiff’s domicile, of the investigation data on confirmation of the change of shares.

3) On the other hand, on November 30, 2012, the Plaintiff filed a tax base return after calculating the value of donated property to the Defendant as KRW 409,322,50, and the amount paid as KRW OOO. On January 11, 2013, the Defendant issued a disposition of imposition of KRW OOOOO(hereinafter referred to as the “instant disposition”) on the Plaintiff pursuant to the provision on deemed donation of Article 452 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter referred to as the “former Inheritance Tax and Gift Tax Act”).

4) On April 19, 2013, the Plaintiff filed a request for examination with the Commissioner of the National Tax Service on the grounds that the request was dismissed on July 16, 2013.

(c) Other relevant circumstances.

1) From January 2004 to June 2006, Park E-E, which had been issued shares by thisCC prior to the Plaintiff, had been engaged in real estate brokerage business in the △△△ Office.

2) On March 8, 2001, thisCC acquired 8,000 shares out of 20,000 shares issued when it was established with KimF, SouthG, and New HH on March 8, 2001, and transferred the said shares to SouthG, a shareholder of △△△△, on April 1, 2005. After the said shares were transferred, the shareholders of △△△△ was only SouthG and New HH.

3) In addition, the details of global income tax, special tax for rural development, and resident tax final return on the final return of global income tax, special tax for rural development, and resident tax submitted by thisCC from 2005 to 201 are as follows. The global income tax rate applied to thisCC during that period was 35%

[Reasons for Recognition] Unsatisfy, Gap evidence 1 through 5 (including each number, if the number is included; hereinafter the same shall apply), Gap evidence 7 through 18, Gap evidence 20, 22, 23, 1 through 4, Eul evidence 6, 7, and 8, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Article 288 of the former Commercial Act (amended by Act No. 6488, Jul. 24, 2001; hereinafter the same) required three or more promoters to establish a stock company. To establish the instant company, the instantCC borrowed the name of KimD, Park E, and entered them as joint promoters, and registered 2,500 shares in title trust to KimD and Park E, respectively, and entered them in the register of shareholders. The following defects in the request of Park E-E to make a deduction from the register of shareholders of the instant company due to personal circumstances to thisCC, and the instant disposition was made in title trust with the fact that this three-party shareholders’ status should continue at the time of the establishment of the corporation, knowing that this would have been transferred to the Plaintiff on February 28, 2005. Accordingly, the instant shares were merely made to meet the requirements for establishment, and thus, the instant disposition was unlawful for the purpose of tax evasion.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) The legislative purport of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act is to recognize an exception to the principle of substantial taxation to the purport that the act of tax avoidance using the title trust system is effectively prevented, thereby realizing the tax justice. Thus, if the title trust was recognized as having been conducted for any reason other than the purpose of tax avoidance, and it is merely a minor tax reduction incidental to the said title trust, it cannot be readily concluded that there had been the purpose of tax avoidance. However, in light of the legislative purport as above, inasmuch as the purpose of the title trust is not included in the purpose of the title trust, it cannot be determined that there was the purpose of tax avoidance by applying the proviso of the said provision only when the purpose of the title trust is not included in the purpose of tax avoidance, and it cannot be said that there was an intention of tax avoidance. In this case, the burden of proving that there was no purpose of tax avoidance exists a nominal person who asserts it (see, e.g., Supreme Court Decision 201

2) We examine the instant case in accordance with such legal doctrine.

The fact that thisCC held the title trust of the shares of this case on February 28, 2005 is as seen earlier. Article 45-2(1) of the former Inheritance Tax and Gift Tax Act provides that, in case where the actual owner and the nominal owner are different from the property (excluding land and buildings), the value of the property shall be deemed to have been donated to the actual owner on the date when the ownership is registered, etc. as the nominal owner (in case of the property requiring a title transfer, referring to the day following the end of the year following the year in which the date on which the ownership is the date on which the ownership is acquired). Therefore, the act of thisCC holding the title trust of the shares of this case in accordance with such legal provisions is deemed to have been deemed to have been donated to

3) In light of the following circumstances revealed based on the above facts, each statement in Gap evidence Nos. 6, 19, and 21 cannot be readily concluded that thisCC did not have any purpose of tax avoidance in title trust with the instant stocks, and there is no other evidence to acknowledge this otherwise. Accordingly, the Plaintiff’s above assertion is rejected.

① In establishing a stock company on July 24, 2001, Article 288 of the former Commercial Act amended that the promoters should prepare its articles of incorporation, and thus, the requirements for establishing a stock company were no longer required to have three promoters. Nevertheless, thisCC held the title trust of the instant shares to the Plaintiff on February 28, 2005, which was approximately three years and seven months thereafter.

② Around April 1, 2005, which was involved in the company as a shareholder, transferred 8,000 shares of △△△△△△△, which was that, there were only two shareholders of △△△△△△. Considering such circumstances and the fact that title trust was held after a considerable period of time after the amendment of the Commercial Act, it is difficult to deem that thisCC, which operated the company for a long time, was unaware of the amendment of the Commercial Act. Therefore, it cannot be concluded that the title trust of the shares of this case was for the purpose of meeting the requirements for

③ On November 30, 2012, the Plaintiff appears to have filed a tax base return after calculating the donated value as KRW 409,322,50, and the paid amount as KRW 145,029,747 on the premise that the title trust of the instant shares is deemed as a gift in the process of undergoing an investigation to confirm the change of shares from the head of △△ Tax Office.

④ From the time of the incorporation of the instant company to December 31, 2012, the instant company, for about 17 years, had been placed in title trust with E and the Plaintiff. When the issue was whether the purpose of the title trust was determined by the tax office, the instant company’s stocks were returned to its own name on December 31, 2012.

⑤ Meanwhile, Article 45-2(1)2 of the former Inheritance Tax and Gift Tax Act provides that the provision on deemed donation shall not apply to a case where the stocks held in title are converted into the actual owner’s name during the period from January 1, 1997 to December 31, 1998. However, thisCC did not return the stocks to its own name during that period.

(6) While the circumstances leading up to the transfer of the instant shares in title trust to Park E were due to the personal circumstances of Park E-E, the Plaintiff did not submit evidence to acknowledge the transfer. Rather, from January 2004 to June 2006, Park E-E operated a real estate brokerage business in the office of licensed real estate agents in △△△△, around that time, from January 2004 to June 2006, it does not seem that there was a special circumstance to cancel the title trust.

7) The instantCC continued to apply the global income tax rate of 35%, which is the highest tax rate, at the time from around 2005 to around 2011. However, in the event that the instant company receives dividends from the instant company, the instantCC is bound to bear a larger tax amount according to 35%, which is the highest tax rate, so the possibility that the instant shares were trusted in trust for the purpose of tax avoidance is excluded.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.