Whether a disposition imposing gift tax or capital gains tax on the transfer of shares at a low price is legitimate

The gift tax and transfer income tax are based on the premise that the transfer of the property was actually carried out, and if the property is title trust but only the property is returned to the title holder upon the termination of the title trust contract, it should be viewed that there was no transfer subject to taxation.

Article 35 (Donation, etc. of Profits Following Transfer at Low or High Price)

Article 88 (Definition of Transfer)

1. On November 13, 2006, the head of Gangnam District Tax Office imposed a gift tax of KRW 2,268,422,170 for the Plaintiff Lee Jong-chul on November 16, 2006; imposed a gift tax of KRW 164,584,620 for the transfer income tax and securities transaction tax of KRW 8,57,050 for the Plaintiff Lee Jong-young on November 16, 2006; imposed a disposition of KRW 411,497,570 for the transfer income tax and KRW 21,442,640 for the securities transaction tax against the Plaintiff Kim Jong-young on the same day by the head of the same tax office.

2. The costs of lawsuit are assessed against the Defendants.

same as the entry.

1. Details of the disposition;

A. On December 5, 2005, the Plaintiff Lee ○○ entered into a contract of transfer of the shares of 16,500 shares of ○○○○ Co., Ltd. (hereinafter “instant company”) from Lee○○○, Kim○ and Kim○○, and Han○○○ (hereinafter “instant shares”) (the Plaintiff Lee○○○, Kim○, Kim○, 7,500 shares, 300 shares, 1,500 shares, 1,500 shares, 300 shares, 25,00 won per share, respectively, and hereinafter “the instant shares”). Pursuant to the said contract of transfer, the Plaintiff Lee ○○, and Kim○○, reported and paid the transfer value of the instant shares at KRW 25,00 per share, and the acquisition value at KRW 50,00 per share, 300 (the value of the instant shares).

B. The director of the Seoul Regional Tax Office, from August 16, 2006 to September 26, 2006, as a result of the consolidated investigation into corporate tax and the stock transfer investigation into the Plaintiff Lee ○○○○○○○, the value of KRW 25,00 per share of the instant shares that the Plaintiff Lee ○○ acquired by the Plaintiff Lee ○○ was at a lower price compared to the appraised value of the instant shares under the supplementary assessment method stipulated in the Inheritance Tax and Gift Tax Act (hereinafter “Inheritance Tax and Gift Tax Act”), which is the value arbitrarily assessed in the absence of an example of sale and purchase, and the gift tax shall be imposed on the value of donated shares calculated based on the difference between the value voluntarily assessed and the value of the stock in accordance with the supplementary assessment method with respect to the Plaintiff Lee○○○, who transferred the instant shares at low price, and the taxation data that the transfer income tax

C. Based on the above taxation data, the Defendants imposed each of the instant dispositions imposing gift tax, transfer income tax, and securities transaction tax on the Plaintiff Lee ○○○, as indicated in the Disposition.

D. The Plaintiffs were dissatisfied with each of the instant dispositions and requested to the National Tax Tribunal for adjudication, but they were dismissed on November 12, 2007.

[Reasons for Recognition] Each entry of Gap 1, 3, 4, Eul 1 through 5 (including the number of branches), and the purport of the whole pleadings

2. Whether the disposition of imposition is lawful.

A. The plaintiffs' assertion

The actual owner of the instant shares is the Plaintiff ○○, and the Plaintiff ○○○ had title trust with the instant shares transferred in the form of transfer, and only restored the ownership title of the instant shares. As such, the transfer of the instant shares cannot be subject to gift tax or capital gains tax (including securities transaction; hereinafter the same shall apply) under the substance over form principle on the ground that there is no transaction subject to taxation, and thus, the transfer of the instant shares cannot be subject to the imposition of gift tax or capital gains tax (including securities transaction; hereinafter the same shall apply) under the substance over form principle. Accordingly

(b) Related statutes;

Article 35 (Donation, etc. of Profits Following Transfer at Low or High Price)

Article 88 (Definition of Transfer)

Article 101 (Calculation of Capital Gains by Wrongful Acts)

Article 1 (Objects of Taxation)

(c) Fact of recognition;

1) On September 8, 1989, the Plaintiff Lee Jong-chul established the instant company for the purpose of selling sports supplies, etc. on which it was decided to convert the company into a corporation while it was actually acquired and operated from April 1986 the ○○○ Company, which operated the golf products import business in the course of operating the Plaintiff Kim Jong-chul, which is a type of sales business.

2) At the time of the establishment of the Plaintiff Lee ○, Inc., 50,000 won for 10,000 shares of the instant company (one share price of KRW 5,000) issued at the time of the establishment. However, according to the Commercial Act (amended by Act No. 4372 of May 31, 1991), at the time of its incorporation, at least seven promoters at the time of incorporation of the instant company have to take over shares in writing. The Plaintiff Lee ○, Inc., was to take over only 2,00 shares out of 10,00 shares of the said 10,000 shares, and the remaining 8,00 shares were to take over only 2,00 shares out of 10,00 shares of the said 10,000 shares, ○○, Lee Dong-ho, Lee Dong-ho, Lee Dong-ho, and Lee Dong-ho, Kim Jong-ho, Dong-ho, and Do resident’s office affairs (the Plaintiff Kim 2, Kim 2,50000,000,0000 shares

3) After this, the Plaintiff Company returned 500 shares of the instant company, which were in the name of the largest citizen, in the form of transfer. Meanwhile, when the instant company newly issued 20,000 shares through capital increase, it allocated 20,00 shares to the existing shareholders of the instant company according to the shareholding ratio. Accordingly, the Plaintiff Company’s shareholder registry of the instant company held 3,00 shares each of 7,500 shares, 6,000 shares, 00 shares, 6,000 shares, 3,000 shares, 1,50 shares, 3,000 shares, 1,50 shares, and 1,500 shares, respectively. However, the said 20,000 shares increase payment was made by the Plaintiff Company’s shareholder registry of the instant company. The remaining shareholders, other than the Plaintiff Company’s ○, did not pay the capital increase or participate in the said capital increase.

4) On December 5, 2005, as seen earlier, the Plaintiff Company entered into a transfer contract with the contents that the instant shares were transferred to KRW 25,000 per share by calculating the dividend amount of KRW 25,000 per share from the transferor, and deposited the transfer price of the shares to the Plaintiff Kim Il, and Lee Il-young in the passbook in their names (the Plaintiff Kim Il-sung: the Plaintiff Kim Il-sung, the Plaintiff Lee Jong-sung: the same bank; the same bank B; hereinafter referred to as the “each passbook in this case”). Further, around December 2004, the Plaintiff Company decided to distribute the retained earnings of KRW 3 billion to the shareholders, and deposited the amount of dividends of KRW 750,00,000 and KRW 600,000,000 in the dividend amount of the Plaintiff Lee Il-young, excluding the comprehensive income tax on the dividend amount of KRW 25,000 per share in each passbook in this case. However, each of the passbook in this case did not have been deposited or deposited in each of the Plaintiff Company’s in this case’s account.

5) After the establishment of the instant company, the Plaintiff Kim ○ and Lee ○○ were registered as a director in the corporate register. However, after its establishment, the instant company did not work for the instant company or attend the board of directors, and the instant heading was operated as one of the instant heading companies.

[Reasons for Recognition] The entry of Gap's evidence 1 to 10, the entry of Eul's evidence 6 to 16, the witness's testimony of the last ○○, and the purport of the whole pleadings

D. Determination

1) According to Article 35(1) and (2) of the Inheritance Tax and Gift Tax Act, where the property is acquired by transfer from another person at a price lower than the market price, the transferee of the property shall be deemed to be the value of donated property equivalent to the difference between the price and the market price thereof. Article 101(1) of the Income Tax Act provides that the resident’s act or property in the transfer income is deemed to unreasonably reduce the tax burden on the relevant income by means of transaction with the resident and the related party, the transfer income tax may be levied by calculating the amount of income in the relevant year regardless of the resident’s act or transaction with the related party. However, the imposition of gift tax or transfer income tax on the transfer of property at a low price is entirely premised on the actual existence of the transfer of the property. If the title of the property is merely the transfer of the property upon the termination of the title trust contract, it cannot be deemed that the transfer of the property subject to the transfer income tax or the transfer income tax

2) However, according to the facts acknowledged above, it is reasonable to view that the actual owner of the shares of this case was transferred the shares of this case to the transferor of this case, regardless of the title of ownership, by means of the title transfer by the plaintiff Lee ○○, who was nominal in the title of the transferor of this case, and by the restoration of his name, the transfer income tax was reported and paid upon the transfer of the shares of this case, and even if the plaintiff Kim Kim ○ and Lee ○○, paid the shareholders' dividends on the transfer of the shares of this case in his name, the actual owner of each land of this case was the plaintiff Lee ○, and the plaintiff was formally the actual owner of each land of this case, and dealt with all related tax affairs in light of the fact that all related tax affairs were handled, the above facts alone cannot be deemed to have been the actual owner of the shares of this case.

3) Therefore, each disposition of this case imposing gift tax and transfer income tax on the premise that the transfer of the instant shares was actually made between the transferor and the Plaintiff Lee ○○, is unlawful without any need to further examine. The Plaintiffs’ assertion pointing this out is with merit.

4. Conclusion

Therefore, the plaintiffs' claim of this case is justified and it is so decided as per Disposition with the assent of all participating Justices.