Since there is a tax avoided at the time of title trust, the disposition of gift tax is legitimate, but the disposition of additional tax on no tax return is illegal.

In addition, since there is no clear purpose in title trust and there is a tax avoided at the time of actual title trust, the imposition of gift tax is legitimate, but it cannot be deemed that the imposition of gift tax is legitimate, but it does not mean that the imposition and collection of penalty tax is impossible or significantly difficult.

2016Guhap56134 Revocation of Disposition of Imposition of Gift Tax

A○○ and 2

○ Head of tax office et al.

on October 19, 2017

on 07 July 2017

1. The portion exceeding KRW 727,594,434, among the disposition imposing gift tax of KRW 820,358,430, which was imposed on Plaintiff A on December 15, 2014 by the head of the relevant tax office, exceeds KRW 592,708,195, among the disposition imposing gift tax of KRW 668,274,990, which was imposed on Plaintiff BB on December 15, 2014; the portion exceeding KRW 592,708,195, among the disposition imposing gift tax of KRW 704,059,30, which was imposed on Plaintiff CCC on January 8, 2015; and the part exceeding KRW 624,46,134, among the disposition imposing gift tax of KRW 624,134,0

2. The plaintiffs' remaining claims are dismissed.

3. Of the costs of lawsuit, 90% is borne by the Plaintiffs, and the remainder 10% is borne by the Defendants, respectively.

Cheong-gu Office

The head of ○○○ Tax Office’s disposition imposing gift tax of KRW 820,358,430, and KRW 668,274,990, which was filed against Plaintiff AB on December 15, 2014 with Plaintiff BB on December 15, 2014 and the head of △△△△ Tax Office’s disposition imposing gift tax of KRW 704,059,330, which was filed against Plaintiff CCC on January 8, 2015 (the Plaintiff stated in the complaint as the primary purport of the claim, and as the preliminary purport of the claim as stated in Section 1, but the subject matter of the lawsuit seeking the revocation of a tax disposition is objective existence of the tax amount, so it can be deemed that the above statement in the purport of the claim is a preliminary claim in accordance with the nature of the original legal nature, and it is stated that only the primary claim indicated in accordance with the original legal nature).

1. Circumstances and basic facts of the disposition;

A. The plaintiffs are the major shareholders of DDD Co., Ltd. (hereinafter referred to as "DDD") and HH Co., Ltd. as its affiliates (hereinafter referred to as "HH") and the representative director of JJ, who are the representative director.

B. DD and HH concluded a contract on May 3, 2010 to acquire management rights of GGG Co., Ltd. (hereinafter “instant company”), which is an emergency financial investment company, to acquire the instant company’s shares at KRW 20 billion.

C. DD and HH paid KRW 5 billion on May 3, 2010 to acquire one million shares of the instant company owned by the Z (24.88% shares), but in the process, the Financial Services Commission delivered the position that it is unable to obtain approval for the change of the major shareholder because it did not report the change of the major shareholder prior to the acquisition of shares, and there was a dispute with the transferor, such as DD, HH and JJ (25.37% shares of the instant company owned by KK) in the name of the Plaintiff AAA379,930,000 shares (30,000 shares shares) in the name of the Ministry of Trade, Industry and Energy.

D. As of April 26, 2011, the Defendants deemed that HH had a title trust with Plaintiff AB, JJ with Plaintiff BB, and DD with Plaintiff CCC with a total of 1020,000 won of the shares of each of the instant companies (hereinafter “instant title trust”). Defendant ○○○ Head of the tax office, on December 15, 2014, determined and notified Plaintiff AA with a gift tax of KRW 820,358,430, and KRW 668,274,990 to Plaintiff BB, respectively, and Defendant △△△ Head of the tax office determined and notified the gift tax of KRW 704,059,30 to Plaintiff CCC on January 8, 2015 (hereinafter “instant disposition”).

E. The Plaintiffs were dissatisfied with each of the instant dispositions and filed an objection on March 10, 2015, and filed an appeal with the Tax Tribunal on August 13, 2015, but was dismissed on December 7, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, 11 (including branch numbers; hereinafter the same shall apply), Eul evidence Nos. 1 and 4, and the purport of the whole pleadings

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

A. The plaintiffs' assertion

1) DD, HH, and JJ (hereinafter “HH, etc.”) from the Z in large amount, took over one million shares of the instant company from the Z in order to avoid obtaining approval for the change of its major shareholder from the Financial Services Commission. Even without obtaining approval for the change of its major shareholder, the method was found to secure the management right of the instant company’s shares by acquiring less than 10% shares per Plaintiff. The deemed acquisition tax that HH, etc. may avoid due to the title trust of this case is the small amount of KRW 20 billion in light of the company’s shares and management right transfer price of the instant company, and HH, etc. thereafter, in the shares lawsuit filed by the ZH, the Z et al. failed to obtain a request for the change of the Financial Services Commission, and thus, it was unlawful to impose the acquisition tax of the instant company’s shares on the grounds that the agreement was null and void, and thus, it does not constitute an oligopolistic shareholder’s taxation purpose.

2) Preliminaryly, even if the title trust of this case had the purpose of tax avoidance, the act of title trust alone cannot be deemed as having committed “Fraud or other unlawful act,” which is the requirement for an unfair non-reported additional tax, and thus, the general non-reported additional tax (20% of the additional tax rate) should be applied, not the additional tax (40% of the additional tax). Accordingly, the tax amount arising from the difference in the above additional tax rate among the dispositions of this case is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Whether the purpose of tax avoidance exists

A) The main text of 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”) provides that “Where the actual owner and the nominal owner of the property (excluding land and buildings) are different, the value of the property shall be deemed to have been donated to the actual owner on the date when the property is registered, etc. as the nominal owner (where the property is subject to a transfer of ownership, referring to the date following the end of the year following the year in which the date of acquisition of ownership falls) in the name of the actual owner, notwithstanding Article 14 of the Framework Act on National Taxes.” The proviso provides that “Where the property is registered, etc. in another person’s name or the ownership of which is acquired is not transferred in the name of the actual owner without any purpose of tax evasion, it

The legislative purport of the above provision is to recognize an exception to the principle of substantial taxation by effectively preventing the act of tax avoidance using the title trust system. Thus, if it is recognized that the title trust was made for any reason other than the tax avoidance purpose, and only a minor reduction takes place as incidental to the said title trust, it cannot be readily concluded that there was a "purpose of tax avoidance" (see, e.g., Supreme Court Decision 2014Du786, May 16, 2014). However, in light of the legislative purport as seen above, it cannot be deemed that there was no objective and objective purpose of tax avoidance unless the purpose of the title trust is not included in the purpose of tax avoidance (see, e.g., Supreme Court Decisions 97Nu1532, Jun. 26, 1998; 2003Du1364, Dec. 23, 2004; 2004; 300Du1654, supra, there was no other objective and objective purpose of tax avoidance (see, etc.).

The principle of taxation on the beneficial owner under Article 17(1) of the Framework Act on Local Taxes, in cases where there is a person to whom such income, profit, property, act, or transaction belongs, unlike the nominal owner, is to be the person to whom such income, profit, or appearance belongs, rather than the nominal owner to whom such income, etc. belongs, and such principle applies to legal relations with respect to local taxes pursuant to Article 3 of the Framework Act on Local Taxes. Furthermore, in cases where Article 7(5) of the former Local Tax Act (amended by Act No. 12153, Jan. 1, 2014; hereinafter the same shall apply), deeming that the acquisition tax is acquired from an oligopolistic shareholder of the corporation, thereby imposing acquisition tax on the oligopolistic shareholder, should be determined based on the fact that the oligopolistic shareholder actually owns or is in a position to directly dispose of the corporation’s property, and that there is no substantial difference between it and the person to whom such property belongs (see, e.g., Supreme Court Decision 2014Du36266, Sept. 4, 2014).

B) According to the overall purport of Gap evidence Nos. 2, 3, 5 through 10, 13, 15, 16, 18, and Eul evidence Nos. 2 and 6, the following facts are acknowledged.

① On May 3, 2010, HH et al. paid KRW 5 billion to acquire one million shares of the instant company owned by the Z (24.88%) first, and on June 25, 2010, HH et al. filed an application with the Financial Services Commission for approval of the change of a major shareholder of the instant company. However, HH et al. received the notice from the Financial Services Commission that it is impossible to obtain approval of the change because it did not report the change of a major shareholder prior to the acquisition of shares. On July 26, 2011, H et al. received a prior notice from the Financial Services Commission of the order to dispose of the said one million shares, and “The Financial Services Commission” issued an order to dispose of the said one million shares within six months from the date on which the order to prohibit the disposal of shares becomes invalid.

② Meanwhile, on the other hand, on March 30, 201, the Z claimed that “H” et al. did not obtain approval for the change of the major shareholder, and that the acquisition of the shares that was concluded with it was null and void as agreed upon in the agreement on the transfer of the shares and the management rights of the instant company, and filed a civil lawsuit seeking the return of the said one million week (△△ District Court 201 Gohap******) and the judgment for the claimant on August 31, 2012 was issued, and the said judgment was dismissed on July 10, 2013, and the said judgment became final and conclusive on August 2, 2013.

③ 그런데 ZZZ은 2011. 5. 17. HHH 등을 상대로 위 100만 주의 처분금지를 구하는 가처분신청도 하여(△△지방법원 2011카합****), 2011. 6. 17.자로 가처분결정을 받았으나, HHH 등이 제기한 가처분 이의신청에서 '2010. 5. 3.자 주식양수도 계약이 무효라고 보기 어렵다.'는 이유로 2012. 1. 20. 가처분결정이 취소되었고, ZZZ의 항고, 재항고는 기각되었다. 또한 원고 AAA가 이 사건 회사의 대표이사와 이사(ZZZ, KKK 측 이사이다)를 상대로 제기한 이사직무집행정지 및 직무대행자선임가처분(□□법원 2012카합***) 사건의 2013. 1. 21.자 인용결정에서는 위 100만 주의 주주로서 의결권을 행사할 수 있는 자를 HHH 등이거나 그로부터 주식을 양수한 김○○, 김◘◘원, 문▲▲(HHH 등은 금융위원회로부터 주식처분명령을 받고 위 100만 주를 김○○, 김◘◘, 문▲▲에게 명의신탁하였다)로 보았다.

④ As of March 31, 2011, the total asset value of the instant company on the balance sheet is KRW 17.5 billion, and the total asset value of the vehicle, real estate, and other invested assets (member rights) on which acquisition tax is imposed is KRW 6,796,13,133. Where HH acquires Z or KK’s stocks in its own name, the total equity ratio is 50.24%, and in this case, the deemed acquisition tax to be borne by HH, etc. is KRW 68,287,546.

C) We examine the above facts in accordance with the legal principles as seen earlier. According to the above facts, HH et al., despite the dispute with HH et al. with the Z and KK, it appears that the title trust of this case was damaged by the Financial Services Commission to secure management rights of the company. However, the title trust of this case was planned over a long period of time through the dispute with Z and KK. In light of the scale of contract, etc., HH et al., it appears that the acquisition of the management right of this case appears that the type and amount of the tax to be borne by the acquisition right of this case were estimated. ② In particular, the company of this case is larger than the value of the assets subject to acquisition tax compared to the total assets, and the deemed acquisition tax to be borne by H et al. was relatively large to 68,287,546 won, and it is difficult to view that the purpose of this case’s title trust of this case was the acquisition of the above Z’s voting rights to the extent that it did not have been verified by the acquisition right of this case.

Therefore, this part of the plaintiffs' assertion is without merit.

2) Whether an illegal additional tax on non-declaration is lawful

A) Article 47-2(2)1 of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 2011; hereinafter the same) provides that where a tax base without reporting by improper means (referring to any method prescribed by Presidential Decree as violating the duty to report the tax base or the amount of national taxes on the basis of the concealment or pretending all or part of the fact that serves as the basis for calculating the tax base or the amount of national taxes) exists, an amount equivalent to 40/100 of the amount calculated by multiplying the calculated tax amount by the ratio of the amount of the tax base without reporting by improper means to the tax base to the tax base shall be added to the amount payable or deducted from the amount to be refunded (hereinafter referred to as "additional duty without filing an unfair return"), Article 27(2) of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 23592, Feb. 22, 2012; hereinafter the same shall apply) provides that the aforementioned method of recording of the account book, such as "an act of concealment or concealment" (Article 1, 3).

The legislative purport of the above provision is to impose heavy sanctions on taxpayers who violate the duty to report the tax base or the amount of tax in an unlawful manner, in cases where it is difficult for the tax authorities to detect any fact that serves as the basis for calculating the tax base or the amount of tax, or there is any fraudulent act such as forging false facts, etc. (the rate of penalty taxes for non-declaration of taxes shall be 20% and the rate of penalty taxes for non-declaration of taxes shall be 40%). Therefore, “Fraud and other unlawful acts cited as one of the unfair methods under Article 27(2)6 of the former Enforcement Decree of the Framework Act on National Taxes” refers to fraudulent and other active acts that make it impossible or considerably difficult to impose and collect taxes, and it does not constitute merely failure to file a tax return under the tax law or filing a false tax return without attaching any circumstances showing active intent (see, e.g., Supreme Court Decision 2015Du4158, Apr. 13, 2017).

However, in the case of a constructive gift under a title trust under Article 45-2 (1) of the Inheritance Tax and Gift Tax Act, the taxation requirement itself forms a false appearance that the nominal shareholder and the beneficial shareholder are different for the purpose of tax avoidance. In order to form such appearance, the agreement on stock acquisition with different contents, unnecessary capital transfer, and accounting books related thereto are bound to be accompanied. Therefore, in order to apply the provision of an unfair non-reported additional tax on the gift tax due to a constructive gift under a title trust, it should be deemed that the act of title trust as above and the acts incidental thereto are more actively impossible or considerably difficult to impose and collect the gift tax due to a constructive gift under a title trust, and all the acts incidental thereto are included in the "unfair method" under Article 47-2 (2) 1 of the former Framework Act on National Taxes. This is because if the gift tax pursuant to a constructive gift under a title trust is not reported, most unfair non-reported additional tax should be imposed, and if so, the gift tax itself is a kind of title trust for the purpose of tax avoidance.

나) 을 제4호증의 기재 및 변론 전체의 취지에 의하면, HHH 등은 원고들의 명의로 이 사건 회사 주식 102만 주를 취득하는 과정에서, HHH, DDD의 자금 25억 원을 ▢▢종합건설 주식회사 명의의 계좌를 거쳐 원고들에게, JJJ의 자금 13억 원을 조○○ 명의 계좌를 거쳐 원고 BBB에게 각 지급하여 위 102만 주의 매매대금을 XXX에게 지급한 사실이 인정된다. HHH 등은 위와 같은 자금거래의 내용에 일치하도록 회계장부를 기록하고, 원고들도 명의신탁의 외관에 따라 주식양수도계약서를 작성하였을 것으로 보인다. 그러나 위 자금거래의 입출금일자와 액수에 비추어 보면 원고들이 HHH 등으로부터 자금을 받아 이 사건 회사 주식 102만 주를 취득하였음을 쉽게 알 수 있고, 그 밖에 명의신탁행위에 수반되는 행위를 넘어 HHH 등이나 원고들이 명의신탁 증여의제에 따른 증여세의 부과와 징수를 불가능하게 하거나 현저히 곤란하게 하는 사실의 은폐・가장행위를 하였음을 인정할 자료는 없다. 따라서 피고들은 원고들에게 부당무신고가산세를 부과할 수는 없고 단지 통상의 무신고가산세를 부과할 수 있을 뿐이다. 이 부분 원고들의 주장은 이유 있다.

C) The amount of legitimate tax calculated by applying the ordinary rate of non-declarational penalty (20%) to the Plaintiffs is as listed below. Therefore, the portion of each of the instant dispositions in excess of the amount indicated below as legitimate tax amount is unlawful.

3. Conclusion

The plaintiffs' claims shall be accepted within the scope of the above recognition, and the remaining claims shall be dismissed as without merit, and the costs of lawsuit shall be shared by the plaintiffs and the defendants according to the winning ratio. It is so decided as per Disposition.

Relevant statutes

▣ 구 상속세 및 증여세법(2015. 12. 15. 법률 제13557호로 개정되기 전의 것)

Article 45-2 (Legal Fiction as Donation of Title Trust Property)

(1) Where the actual owner or the nominal owner of any property (excluding land and buildings; hereafter the same shall apply in this Article) required to be registered, etc. for the transfer or exercise of rights is different, the value of such property shall be deemed donated to the actual owner by the nominal owner on the date when it is registered, etc. to the nominal owner (where such property is subject to the change of ownership, referring to the date following the end of the year following the year in which the date of acquisition of ownership falls), notwithstanding Article 14 of the Framework Act on National Taxes:

1. Where he/she registers his/her property in another person's name without any purpose of tax evasion, or fails to change the title in the name of the actual owner who acquired the ownership;

(2) Where property is registered, etc. under another person's name, or a change of ownership is not made under the name of the actual owner, or where the title of stocks, etc. is not converted under the name of the actual owner during the grace period, it shall be presumed that there exists a purpose of tax evasion: Provided, That this shall not apply where the transferor files a report on the change of ownership along with a tax base return on capital gains under Articles 105 and 110

(3) In applying paragraph (1), where a register of stockholders or register of members has not been prepared, the decision of transfer shall be made in accordance with the documents concerning stockholders, etc. submitted to the head of the competent tax office having jurisdiction over the place of tax payment and the detailed statement of the status of changes in stocks, etc.

(6) The term "taxs" in paragraphs (1) 1 and (2) means the national and local taxes provided for in subparagraphs 1 and 7 of Article 2 of the Framework Act on National Taxes and customs duties provided for in the Customs Act.

▣ 구 자본시장과 금융투자업에 관한 법률(2015. 7. 24. 법률 제13448호로 개정되기 전의 것)

Article 9 (Other Definitions)

(1) The term "major shareholder" in this Act means a shareholder who falls under any of the following subparagraphs:

1. A principal who holds the greatest number of stocks (including securities depository receipts that are related to the stocks) owned by the principal and a person in a special relationship prescribed by Presidential Decree with the principal (hereinafter referred to as a "specially related person") on his/her own account, regardless of in whose name the stocks are held, as a result of the total number of outstanding voting stocks of a

2. A person who falls under any of the following items (hereinafter referred to as a "major shareholder"):

(a) A person who holds 10/100 or more of the total number of outstanding voting stocks (including securities depository receipts related to the stocks) of a corporation, no matter whose name the account stand in;

Article 23 (Approval for Change of Major Shareholders, etc.)

(1) A financial investment business entity (excluding an investment advisory business entity and a discretionary investment business entity) who intends to become a major shareholder (referring to a major shareholder under Article 12 (2) 6 (a), but excluding persons prescribed by Presidential Decree; hereafter the same shall apply in this Article) by acquiring stocks issued by it shall meet the requirements prescribed by Presidential Decree for sound management among the requirements for major shareholders under Article 12 (2)

(2) The Financial Services Commission may order disposal of stocks acquired without approval pursuant to paragraph (1) within a prescribed period not exceeding six months.

▣ 구 지방세법(2014. 1. 1. 법률 제12153호로 개정되기 전의 것)

Article 7 (Taxpayer, etc.)

(5) Where a person becomes an oligopolistic stockholder (hereinafter referred to as " oligopolistic stockholder") pursuant to subparagraph 2 of Article 47 of the Framework Act on Local Taxes by acquiring the stocks or shares of a corporation, the oligopolistic stockholder shall be deemed to have acquired the real estate, etc. of the corporation: Provided, That where a person becomes an oligopolistic stockholder by acquiring the stocks or shares issued at the

▣ 구 국세기본법(2011. 12. 31. 법률 제11124호로 개정되기 전의 것)

Article 47-2 (Additional Tax on Non-Filing)

(1) Where a taxpayer (general title omitted) fails to file a tax base return under the tax-related Acts by the statutory deadline for return, an amount equivalent to 20/100 of the amount of tax calculated under the tax-related Acts (including corporate tax on capital gains accruing from land, etc. under Article 55-2 of the Corporate Tax Act in cases of corporate tax; including the amount added under Article 27 or 57 of the Inheritance Tax and Gift Tax Act in cases of inheritance tax and gift tax; and referring to the amount of tax payable under Articles 17 and 26 (2) of the Value-Added Tax Act in cases of value-added tax; hereinafter referred to as "amount of tax

(2) Notwithstanding paragraph (1), if a taxpayer has filed a tax base without filing a return (referring to the amount of tax payable under Articles 17 and 26 (2) of the Value-Added Tax Act in cases of value-added tax; hereafter the same shall apply in this Section) by improper means (referring to any method prescribed by Presidential Decree, which is a violation of his/her duty to report the tax base or amount of national tax on the basis of the concealment or disguise of all or part of the fact that serves as the basis for calculating the tax base or amount of national tax; hereafter the same shall apply in this Section), the aggregate

1. The amount of additional tax on a non-declaration of tax base by improper means: An amount equivalent to 40/100 of an amount calculated by multiplying the calculated tax by the ratio of an amount equivalent to the non-declaration of tax base by improper means (hereafter referred to as "non-declaration of tax base" in this paragraph) in the tax base (hereafter referred to as "additional tax on non-declaration of tax base" in this paragraph);

2. The amount of additional tax on the part other than that referred to in subparagraph 1: An amount equivalent to 20/100 of an amount calculated by multiplying the calculated tax by the ratio of an amount equivalent to the tax base less the unjustly non-reported tax base among the tax base to the tax base.

(9) Matters necessary for the scope of the amount of income, calculation of the amount of income without filing any report, and imposition of additional tax on no return shall be prescribed by Presidential Decree.

▣ 구 국세기본법 시행령(2012. 2. 2. 대통령령 제23592호로 개정되기 전의 것)

Article 27 (Additional Tax on Non-Filing)

(2) "Manner prescribed by Presidential Decree" in the main sentence of Article 47-2 (2) of the Act means any of the following manners:

1. Making a false entry in books, such as double entry;

2. Preparation of false certification or false documents (hereafter referred to as " false certification, etc." in this Article);

3. Receipt of false certification, etc. (limited to receipt knowing that it is false).

4. Destruction of books and records;

5. Concealment of property, or fabrication or concealment of income, profits, acts or transactions;

6. Other fraudulent and illegal acts to evade national taxes or receive a refund or deduction. Finally.