Busan District Court-2013-Gu Partnership-575 ( November 22, 2013)

Disposition on which gift tax is imposed under the provisions on deemed donation of title trust;

In light of the fact that it cannot be acknowledged that the title trust of the stock of this case was made by the fraudulent use of name unless there are special circumstances where it is deemed difficult to adopt a judgment of facts in the criminal trial.

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

2013Nu21090 Revocation of Disposition of Imposition of Gift Tax

AA

BB Director of the Tax Office

December 10, 2014

on October 02, 2015

1. Revocation of a judgment of the first instance;

2. The Defendant’s disposition imposing penalty tax of KRW 20,00,000 on the Plaintiff for the gift tax of KRW 20,00,000 for the year 207, KRW 183,301,30 for the gift tax of KRW 2009, and KRW 13,060,00 for the gift tax of KRW 13,060 for the gift tax of KRW 207, July 1, 2013, and penalty tax of KRW 73,68,79 for the gift tax of KRW 209 is revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. A1 is an actual operator of ES Co., Ltd. (hereinafter “ES”), ST Co., Ltd. (hereinafter “STS”), ST Co., Ltd., and ST Co., Ltd., and the Plaintiff worked as an employee of MF’s compensation team from June 13, 2007.

B. On August 14, 2007, the Plaintiff was registered in the respective register of shareholders as a transferee of 21,000 shares of ES newly established on August 14, 2007, and as a transferee of 21,000 shares of B1 on November 24, 2009 (hereinafter collectively referred to as “instant shares”).

C. On June 24, 2011, the Defendant pre-announcementd the imposition of gift tax of KRW 139,884,502 on the ground that the purchase price of MR shares on March 31, 2009 falls under low price acquisition, and decided and notified KRW 58,868,810 on August 1, 201. The Plaintiff paid KRW 35,868,810 on August 30, 201 and applied for postponement of collection and received approval from the Defendant, and paid KRW 23,00,000 on October 25, 201.

D. However, the director of Busan Regional Tax Office conducted a general consolidated investigation of corporate tax from 2006 to 2008 on MR, ST, and ES, and notified the Defendant of taxation data that applied the provision on constructive gift of title trust property under Article 45-2 of the Inheritance Tax and Gift Tax Act, deeming that the shares listed in the Plaintiff’s name were held in title trust to the Plaintiff.

E. Accordingly, the defendant revoked the disposition of gift tax under the above C. (C.) and notified the disposition of imposing 20,00,000 won of gift tax on August 14, 2007 and additional tax on 13,060,000 won, and 183,301,300 won of gift tax on November 24, 2009 and additional tax on 73,68,792 won. The plaintiff raised an objection to the Commissioner of the National Tax Service on March 22, 2012, but dismissed the disposition of imposing 30,000 won for additional tax on 30,00 won, 200 won for additional tax on 20,000 won, 30,000 won for additional tax on 30,000 won for additional tax on 16,000 won for 30,000 won for additional tax on 20,000 won for 306,000 won for additional tax on 1.

Facts that there is no dispute over recognition, Gap evidence 2, 3, 11 (including an additional number, if any; hereinafter the same shall apply), Eul evidence 1 through 6, 14 through 21, 23, 26, 28, 29, and 31.

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

A1 registered the Plaintiff as a shareholder of ES and MR, and is subject to criminal punishment due to forgery and use of a certificate of stock transfer and takeover under the Plaintiff’s name. Thus, it cannot be deemed that there was an agreement on title trust between the Plaintiff and A1, even if the title trust is recognized, it cannot be deemed that there was an objective of tax avoidance. Thus, each disposition of the instant case on different premise is unlawful.

B. Relevant statutes

m. Inheritance Tax and Gift Tax Act

Article 45-2 (Legal Fiction as Donation of Title Trust Property)

(1) Where the actual owner or the nominal owner of any property (excluding land and buildings; hereafter the same shall apply in this Article) required to be registered, etc. for the transfer or exercise of rights is different, the value of such property shall be deemed donated to the actual owner by the nominal owner on the date when it is registered, etc. to the nominal owner (where such property is subject to the 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), notwithstanding Article 14 of the Framework Act on National Taxes:

1. Where any property is registered in another person's name without any purpose of tax evasion, or transfer is not made in the name of the actual owner who has acquired the ownership;

(2) Where property is registered, etc. under the name of another person, or a change of ownership is not made under the name of the actual owner, or where the title of stocks, etc. is not converted under the name of the actual owner during the grace period, it shall be presumed that there exists a purpose of tax evasion: Provided, That this shall not apply where the transferor files a report on the change of ownership along with a tax base return on capital gains under Articles 105 and 110

C. Facts of recognition

1) The main office of MR, ES, and TPP is the same as 00:000-1,000,000 for the main office of which is 00:00:00,000, and the representative director of MR is registered as ms, ES, A1, and ST are registered as ms, but A1 actually operated all the above companies.

2) From June 13, 2007, the Plaintiff served as the employee of the compensation team of MR, respectively, was registered as the director of ES from August 14, 2007, the outside director of ES from March 31, 2009, and the auditor from March 31, 2009 to March 31, 2012.

3) The Plaintiff worked in GI for a company from January 1, 1996 to October 200, 1996, which had been registered as holding 1,800 shares in the list of changes in stocks, etc. of the company from around 1998 to April 30, 2012.

4) A1, around January 2009, ordered the SJ to change the name of shares on the ground of B1’s retirement of directors, which is in charge of the management general affairs in MR. The SJ made employees to prepare a certificate of transfer and receipt of shares on March 31, 2009, which became the transferor B1 and the Plaintiff, and submitted the said documents to the KJ on May 31, 2010.

5) Investigation of Busan Regional Tax Office

A) On September 28, 201, in the course of the investigation by the Busan Regional Tax Office on whether to hold a title trust of shares, A1 stated to the effect that “MR, ES and ST’s all shares were trusted in title to A2, who is an employee of the company, and B1, B2, B3, B4, B5, etc., who is an employee of the company, and the share capital of 45,000 shares out of the shares issued at the time of the establishment of ES was paid in each 15,00 shares in the name of the Plaintiff, BS, and S, and the share capital was transferred again in the statement of share transfer in 209 under the name of the Plaintiff. However, in the statement of share transfer in 209 of MR, the company employees were aware of such content, and the employees considered to be the date of the house and the company, and were in cooperation without any problem.”

B) On October 4, 2011, MR, ES, A2, A2, mms, B4 (this refers to A2, ms. from among these), etc. registered as executive officers of STR, ES, and ST, prepared and submitted to the Busan Regional Tax Office a written confirmation stating that “Is are not real shareholders, but only lend their names at the A1’s request from the company’s employees to acquire and hold shares as above.” However, the Plaintiff and B1 did not prepare the above written confirmation.

6) Complaints against A1 and finality of criminal judgment

A) On October 10, 201, the Plaintiff, B1, B2, A2, msms, and B4 et al. filed a complaint with the competent police station on October 10, 201 under the suspicion that “A1 arbitrarily forged documents concerning quantity and water supply by using seals, certificates of personal seal impression, etc. kept without his/her consent,” and the Plaintiff stated on behalf of the said complainant at the police station.

B) On November 15, 2011, A1, December 17, 201, and January 11, 2012, A1 of the same year, through an investigation conducted by the Tong Young Police Station, “In establishing ST, at around 2003, only requested the complainants to deliver a certificate of personal seal impression, seal, etc., to meet the requirements for the establishment of the corporation, and forged a share acquisition agreement without obtaining consent from the complainants for the registration as shareholders of the company in question.”

C) A1 was prosecuted for committing an offense, such as fabrication of the aforesaid private document, and the final appeal was dismissed (2013Do00000) on December 20, 2012 at the Changwon District Court’s Tong branch branch of the Changwon District Court, which was convicted on December 20, 2012 (200,000,000,000), and the Busan High Court, which was the appellate court, was also convicted on September 6, 2013, and was sentenced to a suspended sentence of five years and a fine of one billion won for three years (2013No00) (200), and the final appeal was finalized on November 8, 2013 by the Supreme Court (2013Do000).

D) Meanwhile, in a criminal trial on the fabrication of the above private document by A1, B2, A2, B4, and B5 submitted a written agreement to the effect that they would not want punishment by A1, but the Plaintiff did not submit such written agreement.

Facts that there is no dispute over recognition, Gap's evidence Nos. 1, 4, 8, 10, 13, 15, Eul's evidence Nos. 7 through 11, 12, 13, 30, 32, witness B1, witness of the first instance court, witness of the SJ, the result of the plaintiff's personal examination of the first instance court, the purport of the whole pleadings.

D. Determination

1) Article 45-2(1) of the Inheritance Tax and Gift Tax Act applies to property, the transfer or exercise of rights of which requires registration, etc. in the name of the actual owner and the nominal owner by agreement or communication, and where a registration, etc. is made in the name of the nominal owner unilaterally by using the name of the nominal owner regardless of the intent of the nominal owner, it may not apply. In this case, the tax authority must prove only the difference between the actual owner and the nominal owner, and the verification that the use of the name was made by the unilateral act of the actual owner should be made by the nominal owner (see Supreme Court Decision 2007Du15780, Feb. 14, 2008). However, the title trust relationship is not necessarily established by an express agreement between the truster and the trustee, but may also be established by implied agreement (see Supreme Court Decision 200Da49091, Jan. 5, 2001).

On the other hand, even if a civil trial is not bound by the finding of facts in a criminal trial, the facts that have been recognized as the crime of criminal judgment which has already become final and conclusive with respect to the same factual basis are insufficient evidence, and thus, it cannot be recognized that there is no special circumstance where it is difficult to adopt a factual judgment in a criminal trial in light of other evidence submitted in the civil trial (see Supreme Court Decision 94Da39215 delivered on January 12, 1995). This legal principle is the same in relation to the administrative litigation (see Supreme Court Decision 98Du10424 delivered on November 26, 199).

In addition, if a tax authority has received a written confirmation from a taxpayer to the effect that the taxpayer is a person responsible for tax evasion in the course of conducting a tax investigation, the evidence of the written confirmation cannot be readily denied. However, if there is evidence that conforms to the written statement or there is no complementary investigation such as confirmation of the fact about the taxpayer, it is merely an unilateral statement of the taxpayer and it cannot be deemed as taxation data for the taxpayer unless there are other special circumstances (see, e.g., Supreme Court Decisions 2001Du2560, Dec. 6, 2002; 2009Du5022, Jul. 9, 2009).

2) In light of the aforementioned legal principles, in full view of the following circumstances, which can be seen by adding up the developments leading up to each disposition of the instant case and the purport of the entire pleadings, prior to the facts of recognition, the Plaintiff cannot be deemed to have given implied consent to the title trust of the instant shares to A1, and it is reasonable to deem that A1 unilaterally used the name of the Plaintiff in a disaster involving the instant shares to be a shareholder, etc. by unilaterally

A) The Plaintiff asserts that A1 issued seals and certificates of seal impression upon the request of the Plaintiff to be used only for the registration of executive officers of the company. However, in light of the fact that the Plaintiff was registered in the name of the Plaintiff on August 14, 2007 as the Plaintiff’s director, and the MR shares were registered as the auditor of ES’s outside director and ST on March 31, 2009, the transfer date of the certificate of share transfer and receipt (No. 30-7) of ES’s shares, the seal issued for the registration as executive officers is likely to have been used for the registration in the register of shareholders.

B) In a criminal trial, A1 was convicted of the facts constituting a crime that arbitrarily prepared the Plaintiff’s certificate of transfer and receipt of shares by stealing the Plaintiff’s name, and recorded the Plaintiff as a MR’s shareholder. The said criminal judgment was conducted after the examination of evidence was conducted as to the results of the investigation on A1

C) A1 stated that the Plaintiff was registered as a shareholder of the instant shares with the Plaintiff’s consent in the course of the tax investigation, but the tax authority did not have obtained a confirmation from the Plaintiff, the taxpayer, that there was a timely consent to the title trust of the instant shares in the course of the tax investigation. Thus, the unilateral statement made by A1, other than the Plaintiff, cannot be deemed as the taxation data for the Plaintiff, without any special circumstances.

D) In particular, A1 is merely a comprehensive reply to the fact-finding of the shares of the ST, MR and ES in a tax investigation with the consent of their employees and the relationship with the company employees. It is difficult to reverse the fact-finding of the criminal judgment solely based on the statements of A1.

E) From July 201, the Plaintiff received a prior notice from the Defendant on March 31, 2009 that gift tax shall be imposed pursuant to Article 35 of the Inheritance Tax and Gift Tax Act on the acquisition of shares on March 31, 2009, and received a transfer of money equivalent to the amount of tax imposed pursuant to the said notice from the Defendant, and paid 58,868,810 won to the Defendant twice through the deferment of collection. ① The Plaintiff was unaware of the additional disposition by the time of filing an application for the imposition and postponement of payment of gift tax, and the Plaintiff was not aware of the additional disposition by the time of filing an application for the suspension of payment, and thus there was no reason to consider the issue at the time. ② As a result of the Defendant’s tax investigation into A1, the issuance of each disposition by the instant case was made after the Defendant’s second day. In this case, it is difficult to view that the Plaintiff first made a mutual agreement on the acquisition of shares under title trust (A1) with other employees.

F) Although the Plaintiff made a statement different from the facts at an investigative agency on the previous gift tax imposition disposition, in light of the fact that the date of acquisition of shares (the date of November 24, 2009) and the relevant legal provisions (Article 45-2 of the Inheritance Tax and Gift Tax Act) differ from that of the previous gift tax imposition disposition (the acquisition of shares on March 31, 2009 and Article 35 of the same Act), the Defendant also cancelled the previous gift tax imposition disposition after the investigation and investigation into A1 were conducted, there was room for misunderstanding that each of the instant dispositions and the previous gift imposition disposition are not identical to the previous shares when the Plaintiff is investigated by the investigative agency.

G) Unlike other shareholders, the Plaintiff was not in a relationship with A1, and was employed for ten years in another company even before the Plaintiff worked for MR, and was employed by the head of the Compensation Team after being employed for MR around 2007, and was in charge of compensation duties, etc., and was not in a position to exercise the influence over the company’s management, such as MR’s managers, etc., and there is no special reason to allow title trust of the instant shares even at risk of risk of gift tax imposition.

H) The Plaintiff consistently asserts that he did not know about the shares of GI. The Defendant did not know about the pertinent shares, and there is no fact that the Defendant rendered a disposition of gift tax premised on the title trust as in the instant case, and thus, the Plaintiff could have known that he was registered as a shareholder. It is difficult to view that the Plaintiff neglected the registration until the closure of business after the lapse of 10 years from the withdrawal of GI with the knowledge of the title trust. Accordingly, it is difficult to view that the Plaintiff was aware of the fact that he was a shareholder

3) Therefore, without examining whether the Plaintiff’s assertion is reasonable and whether the transfer of shares was subject to tax avoidance, each of the dispositions of this case conducted on the premise that the title trust was established between the Plaintiff and A1 is unlawful.

3. Conclusion

If so, the plaintiff's claim is reasonable, and the judgment of the court of first instance is justified.

Since it is unfair, the judgment of the first instance is revoked, and the defendant's disposition of this case is revoked.