Examination Donation 2014-0063 (Law No. 29, 2014)

The gift tax imposed on the constructive gift of stock nominal trust is presumed to be the purpose of tax avoidance.

The Plaintiff’s assertion alone is difficult to view that there was an obvious different purpose from the tax avoidance, and it is difficult to view that there was no tax avoidance at the time of the title trust or in the future, based on objective and conclusive evidence, that there was no tax avoidance in the future, and it cannot be said that there was a proof to the extent that it would not have any doubt.

Donation of title trust property under Article 41-2 of the Inheritance Tax and Gift Tax Act

2014Guhap22435 Revocation of Disposition of Imposition of Gift Tax, etc.

OO

O Head of tax office

March 5, 2015

March 26, 2015

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

On March 11, 2014, the Defendant’s disposition of imposition of KRW 000 (including additional tax of KRW 000), the gift tax of KRW 000 (including additional tax of KRW 000), the gift tax of KRW 000 (including additional tax of KRW 000), and the gift tax of KRW 000 (including additional tax of KRW 000), the gift tax of KRW 2004, the gift tax of KRW 2004 (including additional tax of KRW 000) that was paid to the Plaintiff, not the date of disposition, but the Plaintiff, who received a tax payment notice on March 11, 201.

1. Details of the disposition;

A. The relationship between the Plaintiff and AA

1) BB (the trade name of October 25, 2010 was changed to 'CCC stock company'; hereinafter 'CCC') is a company established on November 3, 1994 for the purpose of construction business, etc.

2) AA is an actual owner who acquired CCC by acquiring a major shareholder’s share of CCC around 1996, and the Plaintiff was an employee employed by AA and worked in CCC.

B. The process of acquisition and transfer of the CCC shares under title trust

1) On October 5, 1996, AA lent the Plaintiff’s name to acquire 12,600 shares of CCC. Thereafter, from October 2010, CCC’s shares held in the name of the Plaintiff were total 80,220 shares (12,60 shares + 37,800 shares + 2,100 shares + 10,920 shares + 16,80 shares; hereinafter “instant shares”).

- Acquisition of 37,800 shares with capital increase with September 22, 1997

- Acquisition of 2,100 shares with capital increase with September 29, 199

- Acquisition of 10,920 shares with capital increase on August 22, 2002

- Acquisition of 16,800 shares with capital increase with December 10, 204

2) In light of the above circumstances, although the transfer of shares was made in the name of the Plaintiff, the purchase price of shares or the subscription price for new shares was fully borne by AA, not the Plaintiff, in the process of purchase of shares and subscription for new shares.

3) Since then, around October 5, 2010, the instant shares were transferred to DD, a Dongbook of AA, according to the purport of AA.

C. Imposition of gift tax (including additional tax) on the plaintiff by the defendant

1) As a result of the CCC investigation by the director of the OCO, the instant shares were confirmed to have been held in title by AA, the actual owner of CCC, and the director of the OO office notified the Defendant of the gift tax assessment data on the Plaintiff, the title trustee.

2) Based on the above investigation, on March 11, 2014, the Defendant decided and notified the Plaintiff on March 11, 201, that the gift tax and additional tax 000 won [including additional tax 000 won) for the gift on September 29, 1999 + KRW 000 for the gift on August 22, 2002 (including additional tax 000 won) + KRW 000 for the gift on December 10, 2004 (including additional tax 000 won): Provided, That with respect to the title trust shares on October 5, 1996 and September 22, 1997, the imposition disposition of gift tax was imposed (hereinafter “instant disposition”).

D. Plaintiff’s objection to the disposition of this case

1) On March 26, 2014, the Plaintiff, who was dissatisfied with the instant disposition, filed an objection with the director of the regional tax office having rendered a decision of dismissal, and again filed a request for examination with the Commissioner of the National Tax Service on May 16, 2014, but dismissed the request on July 29, 2014.

2) After October 1, 2014, the Plaintiff filed the instant lawsuit.

[Ground of Recognition] Facts without dispute, Gap's 1, 2, Eul's 1 to 10 evidence (including each number; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

AA’s acquisition of the instant shares in the Plaintiff’s name is not based on the purpose of tax avoidance. The recent transfer of the instant shares from the Plaintiff’s name was made voluntarily by AA. This is attributable to the purpose of cancelling the previous title trust and avoiding the smooth procedure following the recovery of the name in the name of the title truster, the title truster, and there is no only one percentage of tax avoided by AA as incidental to the above title trust. The Plaintiff was merely a document that acquired and returned the instant shares only in the inevitable circumstances where it is inevitable to comply with the direction of AA, an employer, and thus, it was unlawful to impose gift tax pursuant to the provisions on the constructive gift of a title trust property under the Inheritance Tax and Gift Tax Act against the substance over form principle.

B. Relevant statutes

Attached Form is as shown in the attached Form.

C. Determination

1) Presumption of deemed donation of title trust property and presumption of tax avoidance purpose

The legislative intent of Article 41-2(1) and Article 45-2(1) of the Inheritance Tax and Gift Tax Act prior to the amendment on December 18, 2002, prior to the amendment on December 31, 2007, prior to the purport of effectively preventing the act of tax avoidance using the title trust system and realizing the tax justice. Thus, the proviso of the same Article shall apply only where the purpose of title trust is not included in the purpose of tax avoidance, and the burden of proving that there was no purpose of tax avoidance in the title trust (see, e.g., Supreme Court Decision 2003Du13649, Dec. 23, 2004). The burden of proving that there was no purpose of tax avoidance can be proved by the method of proving that there was another purpose of tax avoidance, not by the purpose of tax avoidance, but by the nominal owner who bears the burden of proving that there was no objective of tax avoidance in the title trust and that there was no obvious purpose of tax avoidance in the future (see, e.g., Supreme Court Decision 2001Du204.

However, as recognized by the Plaintiff, the instant shares were trusted to the Plaintiff by the Plaintiff, and thus, the instant shares are deemed to have been donated to the Plaintiff under Article 41-2(1) and (2) of the Inheritance Tax and Gift Tax Act prior to the amendment on December 18, 2002, and Article 45-2(1) and (2) of the Inheritance Tax and Gift Tax Act prior to the amendment on December 31, 2007.

2) Whether there was no purpose of tax avoidance

According to the evidence No. 2, No. 2, No. 8, No. 10, 11, and 12, the plaintiff was employed by AA and worked in CCC. The plaintiff did not participate in CCC management at all. From October 1996 to October 2010, CCC paid national taxes, such as corporate tax and value-added tax equivalent to approximately KRW 000 billion, which the plaintiff held the shares under a title trust, from around October 1996 to around October 201, 300, and AAA paid comprehensive income tax equivalent to KRW 00 million during the same period.

However, even if all of the evidence presented by the Plaintiff appears to be such circumstances, it is insufficient to view that the title trust with respect to the instant shares was made for a clear different purpose from the tax avoidance, and that there was no tax evasion in the future at the time of the said title trust or in the future, to have been sufficiently proven to the extent that there was no doubt, and there is no other evidence to acknowledge this otherwise.

3) Whether it is unlawful against the substance over form principle

In light of the legislative purport of the above provision to recognize an exception to the substance over form principle with the purport of effectively preventing tax avoidance by using the title trust system and realizing the tax justice, the imposition of gift tax on the Plaintiff by deeming the instant shares as having been donated cannot be deemed unlawful against the substance over form 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.