In a case where the registration, etc. following the title trust is made, the tax authority imposed a gift tax pursuant to the main sentence of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act on such registration, etc., and such registration, etc. is restored to original state by a judgment revoking a fraudulent act, whether the application of the provision on deemed donation under the said provision is excluded (negative), and whether the reason why the title trust is revoked constitutes a ground for ex post facto request for correction under Article 4

Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (Amended by Act No. 9916, Jan. 1, 2010); Article 45-2(2) of the former Framework Act on National Taxes (Amended by Act No. 9911, Jan. 1, 2010)

[Judgment of the court below]

Head of Mapo Tax Office

Seoul High Court Decision 2011Nu40846 decided March 21, 2012

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

We examine the grounds of appeal.

1. The main text of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010) provides that where the actual owner of the property (excluding land and buildings) subject to transfer or exercise of the right and the title holder is different, 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 title holder, notwithstanding Article 14 of the Framework Act on National Taxes, and subparagraph 1 of the proviso provides that the same shall not apply where the title holder registers the property in another person’s name or fails to transfer the ownership in the actual owner’s name, without any purpose of tax avoidance.

The instant legal provision recognizes an exception to the substance over form principle in order to effectively prevent tax avoidance by using the title trust system, thereby realizing tax justice. In addition to such legislative intent, insofar as the registration, etc. under the title trust was completed for the purpose of tax avoidance, even if the title of the registration, etc. was restored to the actual owner’s future, the judgment revoking the fraudulent act does not have any retroactive effect, and thus, until then, the purpose of tax avoidance is achieved by maintaining the registration, etc. under the title trust. In light of the fact that the registration, etc. under the title trust is achieved by maintaining the registration, etc. under the title trust, the tax authority imposed gift tax pursuant to the main sentence of the instant legal provision, and the registration, etc. was restored to the original state by the judgment revoking the fraudulent

Therefore, the above reasons shall not be deemed grounds for ex post facto request for correction under Article 45-2(2) of the former Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010; hereinafter the same).

2. A. According to the facts duly established by the lower court, the following facts are revealed.

(1) On April 16, 2007, the Plaintiff acquired 18,200 shares of the counter-Ying Business Co., Ltd. (hereinafter “instant shares”) from the Nonparty, who is the representative director of the Handod Co., Ltd. (hereinafter “ Handod”)

(2) The director of the Seoul Regional Tax Office conducted a tax investigation on Apr. 2, 2008 with respect to the Han Madrid and confirmed that the non-party title trust was made to the Plaintiff, and notified the Defendant of taxation data that the gift tax on the title trust property should be imposed.

(3) On June 2, 2008, the Defendant decided and notified KRW 130,969,480 to the Plaintiff by applying the main text of the instant legal provision to the instant shares, pursuant to the said taxation data.

(4) Meanwhile, the Republic of Korea filed a lawsuit against the Plaintiff on March 19, 2009 against the Seoul Central District Court 2009Gahap30972 to reinstate the instant shares to the Nonparty, who is the actual owner and the Nonparty, who is the secondary taxpayer of the Han Doradrid, to appropriate them for a tax claim. In the said case, on May 29, 2009, the Seoul Central District Court revoked the transfer agreement entered into between the Plaintiff and the Nonparty on the instant shares on April 16, 2007, and became final and conclusive on May 29, 2009, the Plaintiff was changed to the Nonparty, who is the actual owner of the instant shares.

(5) On July 27, 2009, on the ground that the transfer contract of the instant shares was revoked by the above judgment, the Plaintiff filed a subsequent claim for correction to revoke the imposition of the said gift tax based on Article 45-2(2) of the former Framework Act on National Taxes, but the Defendant rejected the instant disposition on August 20, 2009.

B. Examining these factual relations in light of the aforementioned provisions and legal principles, even if the title trust was revoked by a fraudulent act revocation judgment after the imposition of gift tax on the title trust of the instant shares was made pursuant to the main sentence of the instant legal provision, and the name of the actual owner was restored, the application of the provision on the constructive gift under the instant legal provision to the title trust maintained up until the time is excluded, or the ground that the title trust was revoked as above does not constitute the ground for ex post facto request for correction under Article 45-2(2) of the former Framework Act

Although the reasoning of the judgment of the court below is somewhat inappropriate in the instant case, which is the subject of dispute, not the imposition of the gift tax originally, but the subsequent request for correction, the conclusion of the court below that the instant disposition rejecting the Plaintiff’s request for correction is legitimate is justifiable. In so doing, it did not err by misapprehending the relevant

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Poe-young (Presiding Justice)