Whether the Plaintiff acquired the instant shares through a title trust

It is difficult to see that there was no purpose of tax avoidance in title trust, and that there was no purpose of tax avoidance in relation to the shares of this case.

2018Guhap60169 Revocation of Disposition of Imposition of Gift Tax

Section AA

BB Director of the Tax Office

December 20, 2018

201.01.31

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposing gift tax on the Plaintiff on January 19, 2017 is revoked in entirety.

1. Details of the disposition;

A. On March 3, 2014 and December 30, 2014, the Plaintiff drafted a sales and sales contract stating that the Plaintiff will acquire a total of 93,000 shares of DDR (hereinafter referred to as “DDR”) between thisB and CCC et al. (hereinafter referred to as “CCC”), and the details are as listed below.

B. Since then, this B andCC reported the securities transaction tax following the transfer of the instant shares, as seen above, and DV reported that the shareholder was changed from BB and CCC to the Plaintiff at the time of filing a corporate tax return in 2014.

C. The Defendant deemed that the Plaintiff acquired the shares of this case from this B andCC at a price lower than the market price, and conducted a tax investigation with respect to the Plaintiff from September 19, 2016 to November 18, 2016.

D. Based on the results of the above tax investigation on January 19, 2017, the Defendant: (a) drafted a sales contract under which the Plaintiff acquired the instant shares with B and CCC; (b) did not actually pay the purchase price; (c) did not have any financial resources to pay the purchase price; and (d) deemed that the instant shares owned by B and CCC were held in a title trust in a close relationship with B and CCC; and (b) determined and notified that the instant shares owned by B and CCC were held in a title trust (hereinafter “instant disposition”), as indicated in the attached disposition No. 1, KRW 974,858,150 in total, three donated shares in the year 2014 (hereinafter “instant disposition”).

E. The Plaintiff dissatisfied with the instant disposition and filed an objection against the Defendant on April 7, 2017. However, the Defendant rendered a decision to dismiss the Plaintiff’s objection on May 23, 2017, and the Plaintiff filed a request for examination with the National Tax Service on August 23, 2017, but the National Tax Service rendered a decision to dismiss the Plaintiff’s request for examination on October 31, 2017.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case should be revoked illegally for the following reasons.

1) Non-existence of tax evasion purpose

A) Although the Plaintiff acquired the instant shares through title trust from BB and CCC, this was aimed at preventing the bankruptcy of Dtetec by accepting the conditions (company separation request) extending the maturity of the loans of EEE Bank (hereinafter “EEEE Bank”), the principal creditor bank, and the relevant criminal cases against BB were revealed that the said title trust was inevitable in accordance with the management judgment.

B) In addition, in the case of a title trust for the purpose of tax evasion, the gift tax jointly and severally paid by this BB and CCC pursuant to Article 4-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 16102, Dec. 31, 2018; hereinafter “former Inheritance Tax and Gift Tax Act”) exceeds the amount of tax avoided due to the title trust. As such, there is no reason for BB and CCC to assume these risks and conduct a title trust for the purpose of tax evasion.

C) Furthermore, with respect to the partial default of national tax (the first payment period from September 30, 2014 to March 15, 2015) on the DCC’s secondary tax liability, this B and CCC had already been imposed a tax assessment as the original taxpayer. Therefore, tax avoidance was impossible. The amount of national tax in arrears as the original taxpayer of DCC, which may be at issue of tax avoidance by BB and CCC, was not at the time of the title trust, and the amount was at least KRW 22,769,470,00.

2) Illegality in establishing the tax base

The tax base on which the instant disposition was based is larger than that on the title trust in the same year, and even the difference between the shares held in title on the same date is considerably larger than that on the transfer scale recognized in the relevant criminal cases on the BB. In other words, in the relevant criminal case, the transfer price for the total of 38,200 shares in the name of the CCC was 764,00,000 won, but the tax base on the title trust of the same shares was 1,50,177,40 won. In addition, the difference between the title trust of 20,000 shares on March 3, 2014 and the title trust of 20,000 shares on the title trust of 30,000 shares and the trust of 30,000,000,000,000 won on the 30,000,004, 104, 204, 2014, 200.

B. Relevant statutes

Attached Form 2 shall be as listed in attached Table 2.

C. Determination

1) Whether there is no purpose of tax evasion

A) Notwithstanding Article 14 of the Framework Act on National Taxes, where the actual owner or the nominal owner of a property (excluding land and buildings; hereafter the same shall apply in this Article) that requires a registration, etc. for the transfer or exercise of the right is different, the value of the property (where the property is subject to a transfer of the right, referring to the value assessed on the basis of the date of acquisition of ownership where the property is subject to a transfer of the right, referring to the date following the end of the year following the year in which the date of acquisition of ownership falls) shall be deemed donated to the actual owner by the nominal owner: Provided, That this shall not apply to cases falling under any of the following subparagraphs, and subparagraph 1 of Article 45-2 of the former Inheritance Tax and Gift Tax Act provides, “Where the property is registered in another person’s name or the ownership is not transferred in the actual owner’s name without any purpose of tax evasion

The purpose of the foregoing provision is to effectively prevent title trust acts conducted by the actual owner of property in the name of another person for the purpose of tax evasion and realize tax justice. Thus, if it is recognized that title trust acts were conducted for another purpose, not for tax avoidance, and only for the reduction of minor taxes incidental thereto, such title trust act cannot be deemed as a donation, deeming that there was a purpose of tax evasion. However, in light of the legislative intent as seen above, only if the purpose of tax evasion is not included in the purpose of tax evasion, it shall not be deemed as a donation. Therefore, if it is deemed that there was a purpose of tax evasion, it shall be deemed as a donation still deemed as a donation. In such a case, the burden of proving that there was no purpose of tax evasion (see, e.g., Supreme Court Decision 2011Du10232, Feb. 21, 2017). With respect to the absence of the purpose of tax evasion, it may be proven that there was no other purpose of tax evasion in the future by means of proving that there was no objective or objective evidence that there was no such purpose of tax evasion.

B) According to the following circumstances, the evidence mentioned above, Gap evidence Nos. 7, Eul evidence Nos. 3 and 4 as well as the overall purport of the arguments and arguments, the evidence submitted by the plaintiff alone is insufficient to deem that there was no purpose of tax evasion in relation to the title trust of the shares of this case, and there is no evidence to support this. Thus, the plaintiff's assertion that there was no purpose of tax evasion is rejected.

① Prior to the Plaintiff’s acquisition of the instant shares by title trust, the largest shareholder of the DV was 5% CCC (the holding ratio of 55%). CCC constitutes a corporation that owns and controls BB shares 61.89%, and the total share ownership ratio of CCC and BB DDD 1 constitutes 82.4% (=5% + 27.4%). Thus, CCC and BB were liable for secondary tax liability of oligopolistic shareholders pursuant to Article 39 subparag. 2 of the Framework Act on National Taxes with respect to default on DD 3. However, since CCC and CB were not subject to the Plaintiff’s tax evasion obligation on March 3, 2014 and CB 14, each of the instant shares owned by 30% shares of DB 20 and CCC 2014 were not subject to the Plaintiff’s tax evasion obligation on each of the instant shares, and thus, CCC and CB 1 were not subject to any other tax evasion obligation on the instant shares.

② According to the evidence evidence No. 3 of the Dtech’s 2014, unclaimed surplus earnings for the business year 3,330,764,856, and the aggregate amount of unpaid income from April 30, 2015 to September 30, 2015 was 22,769,740 + 542,680 + 54,422,640 + 7,414,100 + 60,328,360 + 53,360 + 10,413,80 + 108,610 + 200 + 208,618,000 + 232,770 + 172,770,270 + 270,7270,770, and 2704, the Plaintiff’s remaining shares were likely to have been appropriated as the amount of dividend income during the period of Da’s 2727.

③ This Court testified to the effect that “EEB, the principal creditor bank of DB, sold its shares of DB and demanded to separate them from CCC.” However, it is insufficient to recognize that each of the descriptions of DB evidence No. 14 and 15 stated “A” had a clear purpose of tax avoidance and irrelevant to the Plaintiff to the extent that it can be deemed that there was no purpose of tax avoidance and tax evasion. Rather, according to the overall purport of the statement and pleading of evidence No. 7, it is difficult to acknowledge that the aforementioned EEB had a separate title trust of 30% share shares for the purpose of this case’s new loan of DBC (the extension of the maturity of loans and new loans) and DCC. Accordingly, it is difficult to deem that DB had a separate title trust of 30% share shares from DB shares for the purpose of this case’s new title trust of 30% prior to the expiration date of 20% D& 140% prior to the expiration date of 30% D& 2014.

④ Further cited by the Plaintiff on the ground that there was no tax evasion purpose, solely on the premise that the fact of title trust for the purpose of tax evasion was discovered, the circumstances, such as the fact that the gift tax to be jointly and severally paid by the BB and CCC exceeds the amount of tax avoided through the title trust, or that there was a non-prosecution disposition in the relevant criminal case against BB, are not subject to a non-prosecution disposition, cannot be deemed as having been presented objective and acceptable evidence as to the fact that there was no tax evasion or tax evasion in the future at the time of the title trust.

2) Whether the establishment of the tax base is illegal

According to the following circumstances revealed by taking full account of the aforementioned evidence and the purport of the entire pleadings, the Defendant’s tax base established at the time of the instant disposition is not unlawful, and thus, the Defendant’s assertion on this part is rejected on a different premise.

A) According to Article 47(2) of the former Inheritance Tax and Gift Tax Act, where the total amount of the value of donated property received from the same person within ten years prior to the pertinent donation date is at least 10,000 won, such value shall be added to the taxable value of donated property. Of the shares in this case, the tax base on title trust as of December 30, 2014 of the shares in the name of CCC is calculated as KRW 1,004,497,400, based on Article 47(2) of the former Inheritance Tax and Gift Tax Act, Article 47(2) of the same Act applies to the calculation of the taxable value of donated property related to title trust as of December 30, 2014, KRW 508,817,400 was added to the value of donated property related to title trust as of March 3, 2014 (the gift tax resolution (in addition, the calculation method stipulated in subparagraph 1)).

B) Since the sum of the sales price under the sales contract prepared at the time of title trust of the pertinent shares, and the said price has not been actually paid, the amount of KRW 764,00,000, out of the instant shares, as indicated in the grounds for non-prosecution in the relevant criminal case against B, cannot be considered as the basis for calculating the value of donated property.

C) In consideration of the added value of the donated property under the foregoing A (excluding the foregoing), the tax base per share of the instant shares calculated by the Defendant for each title trust does not vary on the same transaction date as indicated in the following table, and there is no big difference between the title trust as of March 3, 2014 and the title trust as of December 30, 2014, as alleged by the Plaintiff.

3. Conclusion

Thus, the plaintiff's claim is dismissed as it is without merit.