"The value of donated property received from the same person" includes the value of property considered to be a gift under a title trust;

If the total amount of the donated property received from the same person within ten years before the date of the relevant donation exceeds 10 million won, such value shall be added to the taxable value of donated property, and the value of the donated property deemed the donation shall also be included in the value of the donated property to be added.

Article 47-2 of the Inheritance Tax and Gift Tax Act

2015Guhap61796 Revocation of Disposition of Imposition of Gift Tax

UO

O Head of tax office

August 12, 2015

October 7, 2015

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposing gift tax of KRW 000,000,000 in aggregate on the Plaintiff on June 12, 2014, which exceeds the aggregate amount of KRW 000,000,000 in the separate sheet of imposition of gift tax, shall be revoked.

1. Details of the disposition;

A. From August 2002 to November 2005, O traded shares of 'O base station' and 'OOO community' as securities accounts opened under the Plaintiff's name.

B. The director of the Central Regional Tax Office of China may conduct a tax investigation on stock fluctuation against the plaintiff on around 2003.

The head of the OO confirmed that each of the above shares was held in title trust from OO, and accordingly, the head of the OO levied gift tax on the plaintiff by applying the provision on constructive gift for title trust.

C. The director of the Seoul Regional Tax Office, from March 27, 2014 to May 30, 2014, conducted a tax investigation with respect to the Plaintiff, etc., and confirmed that the Plaintiff received a donation of KRW 000,000,000 from the head of the competent tax office to May 20, 2012, and notified the Defendant, who is the head of the competent tax office, of the fact.

D. On June 12, 2014, the Defendant calculated the amount of gift tax by applying a progressive tax rate after adding up each amount of money (the amount indicated as the "taxable value of gift tax" in the following table) revealed to the Plaintiff’s donation and the value of the portion on which the gift tax was imposed, in accordance with the regulations on deemed donation by title trust, to the amount indicated as the item on the column of re-donation of gift tax under the following table. The Defendant determined the amount of gift tax paid by the Plaintiff or imposed the amount of gift tax after deducting the amount of gift tax already imposed on the Plaintiff (hereinafter “instant disposition”).

Facts without any dispute, Gap's 1 through 3, 5, Eul's 1 through 17 (including each number), the purport of the whole pleadings, and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Article 47 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 11609, Jan. 1, 2013; hereinafter the same) provides that the taxable value of donated property shall be calculated by adding up the value of donated property with respect to the donated property received within ten years from the same donee. Thus, even though the legal fiction of the Plaintiff’s title trust is not a donation under its intrinsic nature, the nominal trust property deemed a donation shall not be added up pursuant to the above provision. However, the Defendant calculated the taxable value of donated property by adding up the value of the property received from the existing OO and deemed as a gift under a title trust, and then the disposition of this case was made, it is alleged to be unlawful. Accordingly, the Defendant sought revocation of the portion exceeding the amount indicated in the column for the amount of tax on recognition of the attached list of gift taxes

(b) Related statutes;

Attached Form is as shown in the attached Form.

C. Determination

1) The legislative purpose of Article 45-2 of the former Inheritance Tax and Gift Tax Act is to recognize exceptions to the principle of substantial taxation in order to effectively prevent tax avoidance by using the title trust system, thereby realizing the tax justice (see, e.g., Supreme Court Decision 2002Du12137, Sept. 24, 2004). It is reasonable to deem that such a provision is a gift under the former Inheritance Tax and Gift Tax Act, regardless of the substance of title trust, and thus, the gift tax should be imposed by deeming it as a gift

2) Meanwhile, in calculating the amount of gift tax, Article 47(1) and (2) of the former Inheritance Tax and Gift Tax Act provides that "the taxable value of gift tax shall be the total amount of the donated property under this Act as of the date of donation excluding a certain sum of the donated property, and where the total amount of the donated property received from the same person within 10 million won or more within 10 years prior to the date of donation exceeds 10,000 won, such value shall be added to the taxable value of the gift, but this shall not apply to the case of the donated property excluded from the aggregate," and the "value of donated property received from the same person" shall be interpreted as including the value of property considered

A) Article 45-2 of the former Inheritance Tax and Gift Tax Act only stipulates that in the event of a title trust, the title holder shall be deemed to have donated the value of the property from the actual owner, and does not separately stipulate the grounds, rate, etc. for imposing taxes on the deemed donation, and also applies the different provisions of the same Act concerning the gift tax. Therefore, the gift tax based on the deemed donation of title trust differs from the other gift tax in general, but it shall be interpreted to mean that other provisions concerning the gift tax are applied as it is, unless special provisions dealing with it are prescribed otherwise.

B) Article 55 of the former Inheritance Tax and Gift Tax Act provides, “(i) The tax base of gift tax shall be the amount calculated by subtracting the appraisal commission for donated property prescribed by Presidential Decree from the amount falling under any of the following subparagraphs. 1. The legal fiction of title trust property donation pursuant to Article 45-2: The amount of the title trust property is the amount of the title trust property.” This is understood as having a special rule on the premise that if the title trust is deemed a donation, it constitutes a donation under the former Inheritance

C) Article 47(2) of the former Inheritance Tax and Gift Tax Act provides that “where the total amount of the donated property received from the same person within 10 years prior to the relevant donation exceeds 10,000 won, such value shall be added to the taxable value of donated property: Provided, That this shall not apply to donated property excluding any summing-up.” Article 47(1) of the Inheritance Tax and Gift Tax Act provides that “The foregoing shall not apply to donated property excluding summing-up.” Article 47(1) of the Inheritance Tax and Gift Tax Act provides that “The donation of profits derived from the conversion, etc. of convertible bonds, etc. into stocks or the transfer of convertible bonds, etc. from among the donation of profits arising from the conversion, etc. of stocks or equity shares (Article 40(1)2), ② the donation of profits arising from the listing, etc. of stocks or equity shares (Article 41-3), and ④ The donation of profits arising from the increase of the value of property by another person (Article 42(4) of the Inheritance Tax and Gift Tax Act).”

D) The legislative purport of imposing gift tax by deeming the title trust as a donation is to effectively prevent tax avoidance and to recognize exceptions to the principle of substantial taxation in order to realize tax justice. If interpreting that the title trust property is not added to the taxable value, opening a way to avoid the progressive tax rate applied to the gift tax through the title trust, thereby going against the legislative purpose.

3) Therefore, in calculating the taxable value of gift tax on the Plaintiff’s donation of KRW 791,886,893 from 200 to 2012, the sum of the value of donated property received from the same person within 10,000 won shall be added to the taxable value of donated property, if the aggregate of the value of donated property received from the same person within 10,000 won within 10 years prior to the date of the relevant donation, as stipulated in Article 47(2) of the former Inheritance Tax and Gift Tax Act. Since the value of donated property to be added includes the value of the donated property deemed the gift, the disposition of this case is justifiable in calculating the taxable value of the above donated property, which is the sum of the value of the shares deemed the donation received from OO and deemed the donation. The Plaintiff’s above assertion is not acceptable.

4) In addition, the Plaintiff asserts that the aggregate amount of KRW 00,000,000 remaining after disposing of all the shares previously held in title trust from OO and then returning all the shares remaining after being used for the payment of the gift tax to O does not actually belong to the Plaintiff. Therefore, the above amount of cumulative taxation on the above amount is unreasonable.

However, even if the plaintiff returned the value of the property held in title by the OO to the O, it shall be interpreted as including the value of the nominal trust property deemed as a donation in the application of the aggregate taxation provided by Article 47(2) of the former Inheritance Tax and Gift Tax Act, and it shall be interpreted as including the value of the nominal trust property deemed as a donation in the application of the aggregate taxation provided by Article 47(2) of the former Inheritance Tax and Gift Tax Act.

3. Conclusion

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