Cho-2016-China-859 ( dated 30, 2016)

Change of title truster is possible within the scope of maintaining the identity of the disposition.

Even if the Plaintiff prepared a confirmation letter of KimB at the time of the initial investigation, and then changed the title truster to KimA during the litigation process, the imposition of gift tax on the constructive gift of title trust is legitimate within the scope of maintaining the identity of the disposition.

Donation of title trust property under Article 41-2 of the Inheritance Tax and Gift Tax Act

Seoul Administrative Court-2016-Gu Partnership-85736

○○ et al.

AA Head of tax office et al.

October 20, 2017

December 1, 2017

1. The plaintiffs' claims are dismissed.

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

The imposition of gift tax of KRW 293,821,380 (including additional tax) imposed on Plaintiff ○○ on December 3, 2015 by the head of the competent tax office and the imposition of gift tax of KRW 293,821,380 (including additional tax) imposed on the Plaintiff ○○ on December 3, 2015 shall be revoked.

1. Details of the disposition;

A. On January 17, 2001, the semiconductor Co., Ltd. (hereinafter referred to as “non-party company”) is an unlisted corporation established with KimA, the husband of the Plaintiff Han-○, as the representative director, for the purpose of manufacturing and wholesaleing semiconductor parts.

B. The Plaintiffs participated in the shares issued on November 5, 2013 by Nonparty Company (hereinafter “instant shares issued”) and acquired each of 30,000 shares (hereinafter “the shares acquired”) (hereinafter “the instant shares”).

C. The details of changes in the shares in 2013 of the non-party company are as listed below.

D. From June 9, 2015 to July 6, 2015, the ○○ Regional Tax Office: (a) conducted a written verification of changes in stocks of the non-party company (hereinafter “instant investigation”); and (b) determined that the non-party company’s representative director at the time of issuing new stocks based on the confirmation of facts and financial transaction specifications submitted by the Plaintiffs and KimB, a partner of the non-party company at the time of issuing new stocks, and notified the Defendants of the taxation data.

E. Accordingly, on December 3, 2015, the Defendants applied Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 13557, Dec. 15, 2015; hereinafter “Inheritance Tax and Gift Tax Act”) to determine and notify the Plaintiffs of each of the gift tax amounting to 293,821,384 (including additional tax) according to the deemed donation of stocks of this case (hereinafter “instant disposition”).

F. The plaintiffs appealed against the disposition of this case and filed an appeal with the Tax Tribunal, and the tax trial was conducted.

The Board dismissed the plaintiffs' claims on September 30, 2016.

Facts that there is no dispute over the basis of recognition, Gap evidence 1 through 4, Eul evidence 1 through 4 (including each number), and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

1) Plaintiff leap○○

A) Since the shares that Plaintiff ○○○ acquired through capital increase with consideration was held in title trust by KimB, not by KimB, but by KimB, the instant disposition based on the premise that KimB is the title truster is unlawful.

B) In light of the fact that, around 2003, KimA, the actual owner of the above shares, was imposed a national tax of approximately KRW 300 million and did not pay all, it was trusted to DoD the shares owned by KimA at the time of this case’s capital increase. Since the title trust was made on the shares of the Plaintiff ○○ to avoid tax in arrears at the time of this case’s capital increase, there was no purpose of tax avoidance. However, even though the statute of limitations on the collection right of national tax already imposed on KimA was expired at the time of the investigation, since the seizure disposition on the external form KimA was still in existence, it was merely the time that KimB was the actual owner. Accordingly, the instant disposition based on the premise that there was a purpose of tax avoidance was unlawful.

2) Plaintiff 1-2

A) As the Plaintiff ○○ received a loan from the Nonparty Company, and paid the purchase price to the Plaintiff with the money, and acquired shares, the Plaintiff ○○ is the actual owner of the said shares (deficial assertion).

B) Even if the Plaintiff ○○○○ is deemed a title trustee, the person who held the title trust of the said shares is KimA, and the title trust of the said shares is aimed at avoiding the execution of national taxes imposed on KimA, an actual owner, and thus, there is no purpose of tax avoidance. Therefore, the instant disposition on a different premise is unlawful (preliminary assertion).

B. Relevant statutes

It is as shown in the attached Form.

C. Facts of recognition

1) While operating an individual enterprise, on January 17, 2001, KimA established a non-party company and was appointed as a representative director, and registered the Plaintiff, who was in F and a private school teacher, as a director and KimB as an auditor. After that, KimA resigned on April 7, 2003, the representative director of the company, who was working in the company such as KimA, was appointed as the representative director of the non-party company at the request of KimA, and on April 7, 2006, KimB was still appointed as the representative director, while KimB was still managing the non-party company as the representative director. After that, on June 21, 2016, the non-party company was appointed as the representative director and the representative director and KimB again was appointed as the representative director at the request of the non-party company, and on the same day, the plaintiff was appointed as the inside director on the same day.

2) At the time of the incorporation of the non-party company, the shareholders were KimA, KimB, HyF, and ○○○○○, but around 2003, KimA and ○○○ transferred each of its own shares to ED and EE. After that, at the request of KimA, 2,500 shares owned by the non-party company, the non-party company transferred 4,500 shares to EF. The non-party company acquired 30,000 shares issued from the non-party company’s capital increase issued from October 10, 203. The 60,000 shares issued from the capital increase issued from the capital increase in this case were each 30,00 shares by the plaintiffs. around 2015, the status of the non-party company’s stock ownership was as follows.

3) On November 5, 2013, the non-party company received a loan of KRW 300 million from KimB to the financial account of KimB, and immediately transferred the amount of KRW 300 million to the account of the representative director, and the account was recorded as the “in-house against the receipts and disbursements of shares.” On the same day, the plaintiff YoonB received deposit of KRW 15 million (50 million per share acquisition price x 30 million x 30 million) from KimB, and immediately remitted the same amount to the non-party company’s account. The plaintiff Han○○ transferred the same amount to the non-party company’s account on November 5, 2013 and November 6, 2013.

4) The ○○○ Regional Tax Office started the instant investigation with a suspicion of an increase in interest arising from the capital increase such as inequality, and in the course of the investigation, submitted a letter of confirmation that “The Plaintiffs and KimB trusted trusted the instant shares to the Plaintiffs,” and submitted a letter of confirmation that the Central Tax Office, ○○, and EE also received title trust from KimB.

5) Meanwhile, around March 2013, Nonparty Company distributed 450 million won out of the retained earnings not disposed of in cash, and KimB issued a revised global income tax return for the global income tax for the year 2013 including the amount of dividends on its dividend income, following the omission of dividend income return in the instant investigation.

6) On January 11, 2016, the head of the AAA Tax Office imposed 752,500 won of gift tax for the year 2003, based on the deemed donation of the shares of the non-party company to E. On December 31, 2015, prior to the said disposition, the same amount was remitted from the Plaintiff 1’s account to E on December 31, 2015.

7) Meanwhile, from around 2003, KimA had a seizure on wages, insurance claims, etc. due to delinquency in taxation such as value-added tax and income tax.

8) AD, EE, Plaintiff 00 worked for all companies such as KimA in the past.

9) AD has stated in this Court the following:

○○ (DD) was operated by a separate company and lent the name of the non-party company to the representative director at the request of KimA, and the shares held by KimA when appointed as the representative director was held under title trust. The non-party company continued to be operated by KimA from the time of its establishment, and even after the representative director was changed to KimB, the employees were the president and KimB as the president.

○ At the time of the instant investigation, KimB’s submission of the letter of confirmation to the title truster was based on the advice of the tax accountant that the KimB would be favorable for the Nonparty company to promptly conclude the case by making KimB as the title truster, because there is concern about the disadvantage of the Nonparty company due to the fact that KimB’s past tax delinquency was in arrears.

○ After the investigation of the instant case, the gift tax imposed on the shares in the name of the principal was paid directly by KimA.

Facts that there is no dispute over the basis of recognition, Gap evidence 3, 4, 11, 13, 17, Eul evidence 2 through 6 (including each number), witness testimony and pleading of Isd

The purport of the whole

D. Determination

1) The actual owner of the instant shares

A) The Defendant initially rendered the instant disposition by deeming KimB as the title truster, the actual owner of the instant shares.

In the course of the instant investigation, the Plaintiffs and KimB submitted a written confirmation that KimB is the actual owner of the instant shares. The payment of all or part of the purchase price of the instant shares was made from the account of KimB with the money wired from the account of KimB, and KimB made a revised global income tax return on the premise that the actual owner of the dividend paid prior to the instant capital increase increase was himself/herself. This is as seen earlier.

However, even after the resignation of the representative director, the actual payer of the gift tax imposed pursuant to the provision on the donation of title trust, and KimB established the non-party company as the representative director after the completion of the investigation in this case, the owner of the shares owned by the non-party company was changed to KimAA due to the conversion of the real name of the non-party company after the completion of the investigation in this case. In light of the fact that the non-party company’s shares was the title trustee of the non-party company’s shares, ED, Plaintiff 0, and EE was the seat of KimA, all of the former KimB worked in the company such as KimA, the fact that the plaintiffs and KimB prepared a confirmation document that KimB was the title truster; the fact that the purchase price of shares was remitted from the account of KimB; and the fact that the revised report on global income tax of KimB was insufficient to deem that the non-party company is the title truster of the shares in this case; and there is no other evidence to acknowledge otherwise.

B) However, the Defendants: (a) added the grounds for disposal to the title truster of the instant shares as KimA; and (b) the addition of such grounds for disposal was made to the extent that the identity of the disposition is maintained; and (b) in the case of Plaintiff Ma○, the Defendants are the title truster.

C) Meanwhile, the Plaintiff Han-○ asserted that it is the actual owner of the shares acquired through capital increase with consideration. However, in full view of the following facts and circumstances revealed from the aforementioned facts and the evidence revealed earlier, it is reasonable to deem that the actual owner of the shares in the Plaintiff Han-○○○○ was KimA.

(1) During the instant investigation, the Plaintiff Han-○ voluntarily asserted that he is the title trustee who is not the actual owner of his nominal shares, and submitted a confirmation statement on such facts. Unlike KimA, the Plaintiff Han-○ does not have any risk of being subject to a disposition on default on the shares owned by the Plaintiff. As such, the Plaintiff anticipated to be subject to a gift tax pursuant to the deemed gift from title trust donation (the Plaintiff submitted a certified tax accountant’s assistance in the process of the instant investigation and submitted a confirmation that he is the title trustee), and does not explain any reasonable reason to either conceal the ownership of his shares

(2) The non-party company remitted KRW 300 million to KimB, which was equivalent to the acquisition price of the shares of this case, to the non-party company's account of the representative director, and deposited KRW 15 million in the account of the plaintiff's ○○○○. Since the actual representative director of the non-party company is KimA, the source of the acquisition price of shares acquired by the plaintiff ○○○ is KimA. In this regard, the plaintiff ○○ alleged that the above 15 million won was repaid from the non-party company, and the date of preparation was 2010 and 2013, it was difficult to recognize the amount equivalent to the transfer price of shares of the non-party company to the non-party company's 13 and 16 (including the number of the non-party 10 shares) as the transfer price of shares issued by the non-party 2 to the non-party ○○ bank account, which was 50 million won deposited in the non-party 1's account, as the transfer price of shares.

(3) The Plaintiff ○○○ alleged that the Plaintiff continued to own the shares of the non-party company since the time of the incorporation of the non-party company, the Plaintiff ○○○, and the non-party company’s wife. However, in light of the fact that the 2,500 shares of the non-party company’s 4,500 shares of the non-party company owned by the KimA (25% shares), at the time of title trust to the non-party company’s title trust with the non-party company, the shares of the ○○○ was also owned by the non-party company in the past of the KimA (in response, there was no change in the shares of the KimB) in light of the fact that the 2,500 shares of the

D) Therefore, the plaintiffs can fully recognize the fact that the shares of this case were held in title trust by KimA, the actual owner of the shares of this case, and the defendants were legally added to the grounds for disposition of this case. Thus, the plaintiffs' assertion that the title trust was not held in title trust or the specific nature of the title truster was erroneous

2) Whether the purpose of tax avoidance exists

A) The legislative purport of Article 45-2(1) of the Inheritance Tax and Gift Tax Act is to recognize an exception to the principle of substantial taxation with the purport of effectively preventing the act of tax avoidance using the title trust system and realizing the tax justice. Thus, in light of the legislative purport of the above above, if the title trust was recognized to have been conducted for any reason other than the purpose of tax avoidance, and only a minor tax reduction incidental to the said title trust was generated, it cannot be readily concluded that there was a "tax avoidance purpose" in the said title trust. However, it cannot be concluded that there was a "purpose of tax avoidance" in the said provision only when the purpose of the title trust is not included in the purpose of tax avoidance. However, it cannot be said that there was an intention of tax avoidance if there was no intention of tax avoidance. In addition, the burden of proving that there was no intention of tax avoidance is a nominal person who asserts it (see Supreme Court Decision 2007Du17175, Sept. 8, 2011).

B) However, in light of the legislative intent of Article 45-2(1) of the Inheritance Tax and Gift Tax Act, the Plaintiffs asserted that a title trust was made in order to avoid the disposition on default on the shares held by KimA, and it is reasonable to view that not only intends to avoid the burden of future tax liability, but also evading the payment of taxes by creating a false state in which no property exists through title trust is available through a fraudulent title trust as included in the “tax evasion” under Article 45-2(1)1 of the Inheritance Tax and Gift Tax Act. The Plaintiffs asserted that the statute of limitations of the collection right has expired in relation to the national tax imposed on KimA at the time of the instant capital increase increase

In addition, comprehensively taking account of the overall purport of Gap evidence Nos. 2 and Eul evidence Nos. 6 and evidence Nos. 854,148,237 won in earned surplus of the non-party company immediately after the payment was made on or around March 2013, the non-party company's unpaid earned income is KRW 8.7 million in 2013, approximately KRW 5.4 million in 2014, and approximately KRW 8 million in 2014 in earned income of the non-party company, and approximately KRW 1 million in 2014 in 2014 can be acknowledged. Accordingly, it is probable that KimA may avoid the application of progressive tax rate in global income tax based on global income by distributing the shares of this case to the plaintiffs who are not subject to the highest tax rate of global income tax from the capital increase in Korea.

Therefore, this part of the plaintiffs' assertion cannot be accepted, since it cannot be deemed that there was no purpose of tax avoidance in relation to the title trust of the shares of this case.

3. Conclusion

Therefore, the plaintiffs' claims are dismissed in entirety as it is without merit. It is so ordered as per Disposition.

shall be ruled.