Cho-2017-China-3459 ( November 20, 2017)

Whether stock title trust is recognized and whether tax avoidance purpose exists

In light of the personal relations and overall circumstances of the parties, it is difficult to recognize that the shares of this case were reported in the name of another individual regardless of the intent of other plaintiffs by the plaintiff's unilateral act. Since the plaintiff could make a distribution at any time, it cannot be said that there is no purpose of tax avoidance to reduce the global income tax burden, which

Article 45-2 of the Inheritance Tax and Gift Tax Act

2018Guhap10403 Revocation of Disposition of Imposition of Gift Tax

Lee Dong-A 3 others

a) the Director of the Tax Office

on January 30, 2018

on January 20, 2018

1. All of the plaintiffs' claims are dismissed.

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

Cheong-gu Office

The Defendant’s imposition of gift tax of KRW 62,895,300 (including additional tax), KRW 117,412,650 (including additional tax), and KRW 58,078,460 (including additional tax) on Plaintiff KimCC on November 7, 2016, and the total amount of gift tax of KRW 58,078,460 (including additional tax) and the disposition of designating a joint and several taxpayer of KRW 238,386,410 (including additional tax) as gift tax against Plaintiff ED on each of the above dates is revoked.

1. Details of the disposition;

A. BB (hereinafter “instant company”) was established on July 10, 2003 for the purpose of engaging in the business of collecting and transporting commercial wastes, etc., and Plaintiff A was employed as the representative director of the instant company from the date of establishment to April 28, 2018 (except from July 10, 2012 to November 5, 2012) and Plaintiff SB from December 10, 2010 to November 5, 2012, Plaintiff CB was employed as the representative director of each of the instant companies. Meanwhile, Plaintiff KimCC was an internal director of each of the instant companies from December 10, 2010 to May 14, 2015.

B. Among the shareholders stated in the statement on the state of fluctuation of Stocks, etc. submitted by the instant company to the Defendant in 2008, the shares of the remaining plaintiffs other than the Plaintiff E.A (hereinafter “Plaintiff E.D”) (hereinafter “Plaintiff E.”).

Each of the shares of this case) and the cause of acquisition are as listed below (the table 1). The actual owners of each of the shares of this case are plaintiffs A.

C. The Defendant: (a) deemed that Plaintiff A made a title trust of each of the instant shares to Plaintiff AD, etc.; and (b) determined and notified gift tax to Plaintiff BD, etc. as indicated below pursuant to the provision on constructive gift of title trust property under Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201; hereinafter “former Inheritance Tax and Gift Tax Act”); and (c) notified Plaintiff A of the designation of a joint obligor for gift tax as indicated below (hereinafter “each of the instant dispositions”).

D. The Plaintiffs were dissatisfied with each of the dispositions in this case and filed an objection (excluding Plaintiff SB), thereby making a request with the Tax Tribunal on June 14, 2017, Plaintiff KimCC, and SeoB on June 16, 2017, but all of them were dismissed on November 20, 2017.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 2 and 3 (including branch numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiffs' assertion

1) Upon receiving a request from Plaintiff A to register the instant shares as a director or auditor of the instant company or to request the necessity for a incineration business, Plaintiff A et al., and only delivered a seal imprint, etc. to Plaintiff A et al., without any permission for the title trust of each of the instant shares, and Plaintiff A et al. received or purchased each of the instant shares by using the name of Plaintiff A et al. for illegal use by Plaintiff A et al. Accordingly, each of the instant dispositions based on the premise that Plaintiff A et al. held the title trust of each of the instant shares to Plaintiff A et al. is unlawful.

2) Even if the Plaintiff’s title trust of each of the instant shares was made by the Plaintiff AD, etc., the respective dispositions of this case were unlawful, since there was no purpose of evading taxes through the title trust of each of the instant shares.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether the title trust agreement exists

The provision on constructive gift under Article 45-2(1) of the former Inheritance Tax and Gift Tax Act applies in cases where the actual owner and the nominal owner enter into an agreement or communication with respect to property that requires the transfer or exercise of the right, and the registration, etc. is made in the name of the nominal owner in the future, regardless of the intent of the nominal owner. In this case, the tax authority can only prove that the actual owner is different from the nominal owner, and the verification that the registration, etc. of the nominal owner was made in the unilateral act of the actual owner regardless of the intent of the nominal owner should be made by the nominal owner (see, e.g., Supreme Court Decision 2007Du15780, Feb. 14, 2008). The actual owner of each of the shares of this case is the Plaintiff Da, and the nominal owner is the Plaintiff Da, etc. Accordingly, the Plaintiffs’ assertion that each of the shares of this case, such as Plaintiff Da, etc. were made by unilateral act of the Plaintiff Do, regardless of the intent of the Plaintiff Do, etc.

① While undergoing an investigation into each of the instant shares in the Central Regional Tax Office, Plaintiff RD et al., in 2008, Plaintiff RD et al. issued a request from Plaintiff LA to register the instant shares as the auditor of the instant company, Plaintiff RB, upon receipt of a request from each of the instant companies to register the Plaintiff as the director of the instant company, stated that Plaintiff RD et al. issued its seal impression design, etc. to Plaintiff LA et al. using the request to register the instant shares as the director of the instant company. Plaintiff RB and KimCC came to know that each of the instant shares was in their own name when Plaintiff RB were intended to sell each of the instant shares on January 2016. In the instant lawsuit, Plaintiff RD was subject to the instant investigation on the said date, and Plaintiff RB and KimCC came to know that each of the instant shares was in their own name.

However, there is no fact that the Plaintiff was listed as the auditor of the instant company, and the Plaintiff SB was listed as the director of the instant company on December 10, 2010, and there is no material to view that the Plaintiff’s seal impression of the Plaintiff KimCC was used for the establishment and operation of the Plaintiff’s incineration site of the instant company. However, the Plaintiff did not confirm whether the Plaintiff’s seal imprint, etc. was used for any actual purpose until several years pass from the time when the Plaintiff issued the Plaintiff’s seal imprint, etc. to the Plaintiff EA in 2008, and it seems to be very exceptional that the Plaintiff believed the horses of the instant company, and therefore, it is difficult to readily accept the said statements and arguments such as Plaintiff RD, etc.

② Moreover, the Plaintiff asserted that the name was stolen from the Plaintiff A, but did not take such active measures as filing a complaint with the Plaintiff, claiming damages, such as forging a private document, uttering of a falsified investigation document, etc.

③ Plaintiff A submitted as evidence a factual confirmation, etc. of Park E-E, alleging that it is favorable for Plaintiff A to make the image of the instant company by pretending the employees, etc. of the instant company as shareholders in various ways, using the name of Plaintiff AD, etc. without permission, following the Park E-E’s advice that it would be favorable for Plaintiff A to participate in increase or purchase of each of the instant shares. However, it is unclear whether it is favorable for Plaintiff A to constitute various shareholders as above. Even if it was intended to constitute various types of shareholders, in light of the fact that Plaintiff A was in a matrimonial relationship with Plaintiff BD, etc. or a director of the instant company, even if it was intended to constitute a group of shareholders, the Plaintiff A-A was not in a relationship with Plaintiff BD, etc. by marriage with Plaintiff AD, etc., or was in a relationship to the degree that Plaintiff A would have been responsible for taking advantage of the name of the company without permission upon receiving the risk of criminal punishment (the Plaintiff’s wife, i.e., F., the Plaintiff’s wife did not have any objection to this part of the gift gift.

2) Whether the purpose of tax avoidance exists

The legislative purport of Article 45-2(1) of the former 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, if the title trust was recognized as having been conducted for any reason other than the purpose of tax avoidance, and only a minor tax reduction incidental to the said title trust arises, it cannot be readily concluded that there was such a purpose of tax avoidance. However, in light of the legislative purport as seen above, only if the purpose of the title trust is not included in the purpose of tax avoidance, it cannot be deemed as having been deemed that there was an intention of tax avoidance by applying the proviso of the said provision. In addition, the burden of proving that there was no purpose of tax avoidance is against the person asserting it (see, e.g., Supreme Court Decision 2007Du1931, Apr. 9, 2009). Moreover, if the title holder bearing the burden of proof as above, the title trust did not have any objective or objective purpose of tax avoidance, and it should not be determined as 16.

As to the instant case, it is difficult to conclude that Plaintiff A had no objective purpose of tax avoidance or for other purpose to reduce the global income tax burden at the time of the title trust, as follows: (i) the remaining unclaimed surplus funds carried over by the instant company are KRW 193,584,690 in the business year 2006, KRW 233,316,950 in the business year 2007, KRW 279,536,120 in the business year 2008, and KRW 354,417,608 in the business year 209; (ii) even if the instant company did not actually pay dividends, it is difficult to conclude that Plaintiff A did not have any objective and objective purpose of tax avoidance or otherwise have any objective and objective reason to believe that each of the instant shares was purchased under the name of each of the instant companies by using the most favorable shareholders of the instant company.

3. Conclusion

Therefore, all of the plaintiffs' claims are dismissed as it is without merit. It is so decided as per Disposition.