Cho High Court Decision 2010Du0545 ( October 29, 2011)

Even if a fraudulent act was restored to the original state in accordance with a lawsuit seeking revocation, the effect of title trust is not extinguished.

Even if shares were to be restored by a judgment on revocation of a fraudulent act, the effect of title trust is not retroactively extinguished, so it cannot be asserted that the initial title trust agreement was cancelled.

2011Revocation of disposition imposing gift tax, 19970

XX

Head of Mapo Tax Office

September 6, 2011

November 1, 2011

1. The plaintiff's claim is dismissed.

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

"The imposition of gift tax by the defendant on June 2, 2008 by 130,969,480 (the Director's 130,960,480 seems to be a clerical error)" and the reasons therefor are revoked.

1. Details of the disposition;

A. On April 16, 2007, the Plaintiff acquired 18,200 shares of the anti-pawal industry (hereinafter referred to as “instant shares”) from HanO, the representative director of XXD Co., Ltd. (hereinafter referred to as “xxD”).

B. On April 2008, the director of the Seoul Regional Tax Office confirmed that the instant shares transferred to the Plaintiff by HanO was title trust, and notified the Defendant of the taxation data to impose gift tax on title trust property.

C. On June 2, 2008, the Defendant decided and notified the Plaintiff on June 2, 2008 by applying Article 45-2(1) of the Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “Inheritance Tax and Gift Tax Act”) as gift tax on April 16, 2007, KRW 130,969,480 as gift tax on the donation portion (hereinafter “instant disposition”).

D. Meanwhile, on March 19, 2009, in order to terminate the title trust relationship of the instant shares for the collection of national taxes in XXD’s national taxes (the secondary taxpayer), and restore the ownership of the instant shares to the Korea-OO, a real owner, and set up a lawsuit seeking revocation of a fraudulent act with the Seoul Central District Court on March 19, 2009. The above court revoked the share transfer contract concluded on May 29, 2009 and rendered a judgment (2009Gahap30972) that “the Plaintiff shall implement the transfer procedure for the transfer of shares on the ground of revocation of the share transfer contract to the Korea-OO” (the title on the register of shareholders of the instant shares was changed to the Korea-O, a real owner.

E. On July 27, 2009, the Plaintiff filed a claim for correction against the Defendant to revoke the instant disposition on the ground that the transfer contract for the instant shares was revoked in accordance with the above judgment, but the Defendant rejected the said claim on August 20, 2009.

F. The Plaintiff was dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on February 2, 2010, but the said claim was dismissed on March 29, 201.

[Reasons for Recognition] Unsatisfy, Gap's 1.2 evidence, Eul's 1 to 5 evidence, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

As non-listed shares, the instant shares do not constitute the purpose of tax avoidance in relation to the instant title trust, rather than the KoreaO and the Plaintiff. Since the instant share transfer contract, which is the basis of the instant disposition, was revoked in accordance with the judgment of revocation of fraudulent act instituted by the Republic of Korea against the Plaintiff, and the shares were returned to the KoreaO, the instant shares transfer act was retroactively extinguished. Therefore, the instant disposition that imposed gift tax on the Plaintiff is unlawful since it constitutes a case where no gift was made. In addition, even if the share transfer contract was revoked in accordance with the judgment of revocation

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

The legislative purport of Article 45-2(1) of the Inheritance Tax and Gift Tax Act provides for exceptions to the principle of substantial taxation to the purport that the act of tax avoidance using the title trust system is effectively prevented, thereby realizing the tax justice. As such, the proviso of the same Article is applicable only to cases where the purpose of tax avoidance is not included in the purpose of the title trust. In such a case, the burden of proving that there was no purpose of tax avoidance. Therefore, the fact that there was no purpose of tax avoidance may be proven by means of proving that there was another purpose, not the purpose of tax avoidance. However, the person who bears the burden of proof bears the burden of proof that, in the title trust, there was an obvious objective and irrelevant to the tax avoidance to the extent that it is recognized that there was no purpose of tax avoidance in the title trust, and that there was no tax avoidance at the time of the title trust or in the future, it should be proved to the extent that it does not have any doubt (see, e.g., Supreme Court Decision 2004Du1220, Sep. 22, 2006).

In light of the above legal principles, as seen earlier, the Plaintiff received the title trust of the instant shares from HanO as to the instant case. As long as there is no objective and objective evidence to acknowledge that the said title trust was made for any reason other than tax avoidance purpose, the evidence submitted by the Plaintiff alone is insufficient to acknowledge it as a title trust without any tax avoidance purpose, and there is no other evidence to acknowledge it (In other words, at the time of the instant title trust, the imposition of high-value tax on xd, was anticipated at the time of the instant title trust. The Plaintiff appears to have made the title trust of the instant shares to the Plaintiff as a representative director of x xd and the Plaintiff as a means to avoid his secondary tax liability. Even if the instant shares were restored to the original state in accordance with the judgment on revocation of a fraudulent act, the effect of the title trust cannot be retroactively extinguished, and thus, the Plaintiff cannot assert to the Defendant that the original title trust agreement was revoked. Furthermore, as long as the Plaintiff cannot assert that the original title trust agreement was revoked, the Plaintiff cannot be deemed as violating the excessive prohibition principle.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.