Seoul Administrative Court 2014Guhap63237

The transfer of shares in this case constitutes a direct gift, not a title trust with no tax avoidance purpose.

In light of the circumstances as to the donation of shares of this case, each transfer of shares of this case constitutes a donation, and the Defendant’s imposition of gift tax and penalty tax based on such premise is lawful.

Article 2 of the Inheritance Tax and Gift Tax Act

2015Nu40691 Revocation of Disposition of Imposition of Gift Tax

KimAA and 3

Head of Nowon-gu Tax Office 2

August 19, 2015

September 16, 2015

1. The plaintiffs' appeal is dismissed.

2. The costs of appeal are assessed against the Plaintiffs.

The judgment of the first instance court shall be revoked. On November 1, 201, the imposition of gift tax of 00,000,000 and additional tax of 00,000,000,000 and additional tax of 00,000,000, and additional tax of 00,000,000 and additional tax against the Plaintiff KimB by the head of the relevant tax office on November 1, 2011 by the head of the relevant tax office; the imposition of gift tax of 00,00,000,000 and additional tax of 00,000,000,000 and additional tax of 00,00,000,000, and the gift tax of 00,000,000,000 and additional tax of 0,000,000,000,000, which were imposed on the Plaintiff MD on the Plaintiff.

1. Quotation of judgment of the first instance;

The reasoning for this Court’s explanation concerning this case is as follows: (a) the reasoning for the judgment of the court of first instance is the same as the part of the reasoning for the judgment of the court of first instance, except for the dismissal under the following Paragraph (2) of Article 8 of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

2. Parts in height:

“1) In light of the following circumstances acknowledged by comprehensively considering the aforementioned evidence and the purport of the entire pleadings in the facts of recognition, it is reasonable to deem that each of the instant shares constitutes a gift. Accordingly, the Defendant’s imposition of the gift tax and the additional tax by each of the instant shares based on such premise is lawful. The Defendant’s each of the instant shares is legitimate. The Defendant’s testimony on the evidence No. 10-1, No. 14-1, No. 14-2, 14-1, 2, 14-2, 2, 2-E of witnesses of the first instance trial

① Each written statement delivered by the Plaintiffs to bothE states that the Plaintiffs are fair in participating in the management, the Plaintiffs bear the responsibility arising from their own fault, and that in the event of resignation from directors of the GIST Telecom due to personal reasons, the Plaintiff KimA, KimB, and 0CC will transfer the GG Telecom stocks that were taken over from the twoE to the twoE. However, around March 29, 201, the Plaintiff KimA, KimB, and 0CC were assigned to the intra-company director of the GG Telecom while taking office as a director of the GG Telecom. At the time, the inside director of the GG Telecom was only Plaintiff D except the above Plaintiffs and the twoE, but around November 12, 2012, each of the instant shares transfer to the Plaintiff is likely to have been made in the process of investigating the 'management participation of each of the above directors' and the Seoul regional tax office'.

② The Plaintiffs asserts that, inasmuch as each of the instant shares cannot be transferred to another person, and in a case where the shares are resigned from the directors, the said shares should be transferred at par value again to both EE, it cannot be deemed that they were donated for the effect of management participation, etc. However, the foregoing restriction appears to be due to the fact that the transfer of each of the instant shares was based on the premise that the Plaintiffs were in the position of directors, and the Plaintiffs could have expected to distribute future dividends and residual assets as they hold each of the instant shares. Furthermore, since the aforementioned restriction was imposed, both E and E could have donated each of the instant shares to the Plaintiffs without receiving any payment.

③ Unless there are special circumstances, such as that if a tax authority received a written confirmation from a taxpayer to a certain taxable fact in the course of conducting a tax investigation, it may not readily deny the value of such written confirmation (see, e.g., Supreme Court Decision 2006Du8068, Sept. 25, 2008). However, the E and the Plaintiffs prepared a written confirmation that recognizes the gift of each of the instant shares in the course of investigation by the Seoul Regional Tax Office. The testimony of Gap evidence 14-1, 2, witness E-E in the first instance trial, and F alone is difficult to find that there was an investigator’s reply or coercion in the course of preparing the written confirmation, and otherwise, it does not appear that the Plaintiffs received a gift even if each of the instant shares was held in title trust (see, e.g., Supreme Court Decision 2006Du8068, Sept. 25, 2008).

④ The Plaintiffs were registered as directors of the GIST Telecom, and were deemed to exercise voting rights as directors, such as sealing the minutes of the board of directors’ meeting. Moreover, the Plaintiffs were paid considerable benefits from the GG Telecom, and the Plaintiffs were to prepare a sales contract for shares in the names of the Plaintiffs, and to report and pay the securities transaction tax.

⑤ After the decision of the instant tax appeal, bothE filed a civil lawsuit on the grounds of termination of the title trust, and, at the latest, would be more natural to proceed with the procedure of restoring the name of the title trust if the procedure of objection to the instant disposition of gift tax and additional tax was followed.

3. Conclusion

If so, the judgment of the first instance court is justifiable, and all appeals by the plaintiffs are dismissed due to the lack of grounds.

D. It is so decided as per Disposition.