Whether gift tax may be imposed on a titleholder by applying Article 45-2(3) of the former Inheritance Tax and Gift Tax Act where a title holder on the register of shareholders fails to transfer ownership in the future, although the title holder is different from the actual owner, such as the legislative purport of Article 45-2(3) of the former Inheritance Tax and Gift Tax Act, and the statement of changes in stocks, etc., are

Article 45-2(3) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “former Inheritance Tax Act”) intends to evade taxes by stating the name of the owner of stocks differently from the actual owner in the specification of changes in stocks, etc., the legislative intent of Article 45-2(3) of the former Inheritance Tax and Gift Tax Act is to supplement the problems in which Article 45-2(1) of the former Inheritance Tax and Gift Tax Act could not be applied if the change of ownership is not made due to the lack of the register of shareholders or the register of members. In full view of the legislative intent and the fact that Article 45-2(3) of the former Inheritance Tax and Gift Tax Act clearly limits the application of Article 45-2(3) of the former Inheritance Tax and Gift Tax Act to “where the list of shareholders is prepared, even if the name of the owner is entered in the specification of changes in stocks, etc., even if the name of the nominal owner is entered differently from the actual owner.

Article 45-2(1) and (3) of the former Inheritance Tax and Gift Tax Act (Amended by Act No. 9916, Jan. 1, 2010)

Plaintiff 1 and one other (Law Firm LLC, Attorneys So-young et al., Counsel for the plaintiff-appellant)

Director of the National Tax Service and one other

Seoul High Court Decision 2010Nu32794 decided April 26, 2011

All appeals are dismissed. The costs of appeal are assessed against the Defendants.

The grounds of appeal are examined.

1. As to the grounds of appeal Nos. 1 and 2

A. Article 45-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “the Inheritance Tax Act”) provides that “where the actual owner and the nominal owner are different from each other, the value of the property shall be deemed to have been donated to the actual owner on the date when the actual owner and the nominal owner are registered as the nominal owner, notwithstanding Article 14 of the Framework Act on National Taxes.” Article 45-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter “the former Inheritance Tax and Gift Tax Act”) provides that “In the application of the provisions of paragraph (1), where the list of shareholders or the register of members has not been prepared, whether the change of ownership is made in accordance with the documents concerning shareholders, etc. submitted to the head of the tax office having jurisdiction over the place of tax payment and the detailed statement on changes in stocks, etc.”

Article 45-2(1) of the Inheritance and Gift Tax Act provides that even if a person intends to evade taxes by entering his/her name differently from the actual owner in the specification, etc. on the change of stocks, etc., the legislative intent of the instant legal provision is to supplement the problems in which the main text of Article 45-2(1) of the Inheritance and Gift Tax Act was not applicable in cases where the change of ownership is not made due to the lack of the shareholder registry or employee registry itself. In full view of the legislative intent and the instant legal provision clearly limits the scope of the application to “where the shareholder registry or employee registry has not been prepared” as “where the shareholder registry or employee registry has not been prepared,” even if the name of the owner was entered differently from the actual owner in the specification, etc. on the change of stocks, etc., the gift tax cannot be imposed

B. In full view of the adopted evidence, the lower court acknowledged the facts as indicated in its reasoning, and determined that gift tax may not be imposed on the Plaintiffs by applying the main text of Article 45-2(1) of the Inheritance and Gift Tax Act as well as the legal provision of this case, even if the Plaintiffs were to be indicated in the statement of changes in stocks, etc. submitted by the YNN Co., Ltd. to the director of the tax office on March 31, 2007, as long as there was no transfer of ownership on the instant stocks in the future of the Plaintiffs in the register of shareholders, which was prepared by the YNNN, on the part of the Plaintiffs

C. In light of the above legal principles, regulations, and records, the judgment of the court below is just, and there is no error in the misapprehension of legal principles as to the interpretation of the legal provision of this case or the application of the main sentence of Article 45-2 (1) of the Inheritance and Gift Tax Act as

2. As to the third ground for appeal

In order to apply the principle of trust and good faith to taxpayers, there is an objectively contradictory behavior, the behavior was caused by the taxpayer's severe act of worship, and the trust of the tax authorities resulting therefrom should be worth protecting (see Supreme Court Decisions 98Du17968 delivered on November 26, 199; 2005Du6300 delivered on January 26, 2006, etc.).

However, even according to the defendants' assertion, the statement of the situation of the change of stocks in this case was submitted to the head of the Pacific Tax Office, and it was not submitted by the plaintiffs. Thus, the plaintiffs' assertion different from the statement of the situation of the change of stocks in this case cannot be deemed to violate the principle of trust and good faith.

The judgment below to the same purport is just, and there is no error in the misapprehension of legal principles as to the principle of good faith.

3. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Jo Hee-de (Presiding Justice)