Cho Jae-2017-west-3387 (Law No. 16, 2018)

The imposition of gift tax under the deemed donation of title trust is legitimate by the act of title trust with stocks for the purpose of tax avoidance.

No purpose of tax avoidance may be deemed to exist, such as where the title trust goes beyond the oligopolistic shareholder and goes out of the status of the secondary taxpayer.

Article 45-2 of the Inheritance Tax and Gift Tax Act

2018Guhap7098 Revocation of Disposition of Imposition of Gift Tax

○ Kim

○ ○

○ Kim

○ Head of tax office

○ Head of tax office

○○ Head of tax office

August 23, 2019

September 27, 2019

1. All of the plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

Cheong-gu Office

Each disposition taken by the Defendants against the Plaintiffs listed in the separate sheet No. 1 shall be revoked.

1. Details of the disposition;

A. Chang ○○○○ Co., Ltd. (hereinafter referred to as “ Chang ○○○”) was a corporation established on December 8, 2004 for the purpose of the trade business of agricultural and fishery products and the establishment business of fish farms, etc., and on April 14, 2010, the Plaintiff KimA was an auditor on April 14, 2010, and on June 8, 2010, the Plaintiff LA was the representative director, and on April 4, 201, the Plaintiff Kim Ga was registered on each corporate register as an internal director. Meanwhile, the United StatesA was operating the said company as a substantial representative since the establishment of Chang ○○○○.

B. The details of the change of the ○○○○○ from December 8, 2004 to December 31, 201, which was at the time of establishment of the ○○○○○○○○○○○, are as follows. The initial ○○○○○ was 10,000 shares issued in total. A total of 60,000 shares were 10 shares issued in December 27, 201 (50,000 shares).

C. From November 16, 2015 to January 3, 2017, the head of the ○○ Tax Office conducted an investigation into changes in the shares to Chang○○○○○ upon the basis of the investigation period from November 16, 2011 (hereinafter “instant tax investigation”); ① on September 9, 201 and December 26, 2011, Plaintiff KimA acquired from Plaintiff LA (500 shares) and HA (2,100 shares (hereinafter “instant shares transferred”); ② on the aggregate of 2,60 shares issued by ○○○○○ (hereinafter “the instant shares transferred”); and ② on the aggregate of 50,00 shares issued by the Plaintiffs issued by Chang○○○○○○○ through capital increase as of December 27, 201, Plaintiff 230,000 shares issued by the former Inheritance Tax and Gift Tax Act + KRW 100,70,000 shares issued by the Plaintiff’s shares transferred to Plaintiff 1 and the instant shares transferred to Nonparty 201.

D. Accordingly, based on the above taxation data, the Defendants respectively decided and notified the Plaintiffs of the gift tax (including additional tax) as shown in attached Table 1 (hereinafter “instant disposition”).

E. The Plaintiffs filed an appeal with the Tax Tribunal on the instant disposition, but the Tax Tribunal dismissed the appeal on April 16, 2018.

[Reasons for Recognition] Facts without dispute, Gap evidence 1 through 6, Eul evidence 1 through 5, 14, and 15 (including branch numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Relevant statutes;

Attached Form 2 shall be as shown in attached Table 2.

3. Whether the instant disposition is lawful

A. Summary of the plaintiffs' assertion

1) As to procedural defects

From September 17, 2012 to January 22, 2013, ○○ Director of the Regional Tax Office conducted an integrated investigation of corporate tax for the business year 2007 to 2011, and during that process, the investigation was also conducted as to whether title trust of the instant shares was made.

Nevertheless, the head of ○○ Tax Office conducted the instant tax investigation on the same taxable period and the same tax item (Gift). Thus, this constitutes a duplicate tax investigation prohibited pursuant to Article 81-4(2) of the former Framework Act on National Taxes (amended by Act No. 1520, Dec. 19, 2017; hereinafter the same) and the disposition of this case based thereon is unlawful.

(ii) relation to substantive defects

The instant shares are merely transferred to or issued with capital increase for the following reasons without the purpose of tax avoidance. Therefore, the instant disposition based on the premise that the United StatesA had the intent of tax avoidance in title trust with the Plaintiffs is unlawful.

A) Around December 2004, the U.S.A. had been in a bad credit position due to the bankruptcy of ○○ Trade Co., Ltd., which it had been in the past, and the business could not continue under its own name, established ○○○○○ by acquiring equity shares in the name of a third party, and specifically acquired shares in the name of three in order to meet the number of promoters under the Commercial Act. After that, the shares issued by ○○○ was trusted in trust to its executives and employees. In the instant case, the shares transferred to ○○○○ was merely a transfer to ○○ on the ground of retirement of employees under title trust.

B) On June 21, 2010, the Chang○○○ continued to import snick historical feed from China through L/C transaction (L/C) and intended to supply it in Korea. However, in the process, the financial institution demanded the Chang○○○○○ to provide additional collateral or capital increase in order to meet the loan requirements. Accordingly, the Chang○○○ offered capital increase on December 27, 201 to meet the loan requirements, and accordingly, the new shares were allocated in the name of the Plaintiffs.

Therefore, in the case of the shares issued with new shares, the new shares issued with new shares offered according to the management needs of ○○○○○, thereby constituting title trust based on the current status of shareholders at that time.

B. Determination

1) Facts of recognition

The following facts are acknowledged by the parties or by the purport of Gap evidence of 20 to 22, 27, Eul evidence of 6 to 8, and 10 to 15, as a whole.

A) Details of prior tax investigations and subsequent dispositions

(1) The head of ○○○ Regional Tax Office initially conducted an integrated investigation of corporate tax for the business year from September 17, 2012 to October 6, 2012 (hereinafter “prior tax investigation”) with respect to the Chang○○○○○ from September 17, 2012 to October 6, 2012. The investigation period has been extended several times due to the absence of representative, etc., and the investigation was terminated on January 22, 2013. In the process, the investigation scope was extended to the corporate tax for the business year of 2011 pursuant to Article 81-9(1) of the former Framework Act on National Taxes and Article 63-1(1)3 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 24366, Feb. 15, 2013).

(2) At the time of a prior tax investigation, the director of the regional tax office having jurisdiction over the accounting books, documents, etc. of ○○○○ by means of a provisional custody examination pursuant to the proviso to Article 81-10(1) of the former Framework Act on National Taxes (amended by Act No. 12162, Jan. 1, 2014). The list of custody includes the following:

(3) On January 31, 2013, the director of the regional tax office of ○○○○ issued a notice of the result of the prior tax investigation, and accordingly, the head of the regional tax office issued a notice of the disposition of imposition of corporate tax and the notice of change in the amount of income for each business year from 2007 to 2011 against Chang○○○○○, etc., to United StatesA (2007 to 2011). Accordingly, the head of the regional tax office of ○○○ or United StatesA did not object to the appeal, etc.

(4) Meanwhile, the director of the regional tax office of ○○○○○○○○ (hereinafter referred to as the “title trust in 2004”) at the time of establishment of ○○○○○○○○, and the portion of the shares issued by Chang○○○○○ (hereinafter referred to as the “title trust in 2010”) owned by the officers and employees of ○○○○○○○ at the time of establishment of ○○○○○○○○○○○○, determined that all of the shares issued by ○○○○○○○○○ was a title trust by the United StatesA during the process of prior tax investigation. Accordingly, the gift tax (including additional tax) was separately determined and notified to the trustee pursuant to Article 45-2(1) of the former Inheritance Tax and Gift Tax Act

B) Circumstances of the instant tax investigation

(1) On November 10, 2015, the head of the ○○ Tax Office sent a prior notice of tax investigation to the effect that “the details of the pre-existing stock change were insufficient and thus was selected as a person subject to actual investigation on stock change.”

(2) The instant tax investigation was conducted from November 16, 2015 to December 30, 2015, but the investigation period was extended several times due to the absence of representative, etc., and the investigation was completed on January 3, 2017.

C) Other circumstances

(1) The amount of un disposed earned surplus of ○○○○ was 203,635,777 won in the business year 201, 294,581,695 won in the business year 2012, 260,856,078 won in the business year 2013, 306,782,342 won in the business year 2014, 396,728,689 won in the business year 2015, or the amount was 396,728,689 won in the business year 2015, or the amount was 396,728,68

(2) From the time of establishment to September 2017, ○○○ was in arrears with national taxes, such as corporate tax, wage and salary income tax, and value-added tax, several times, but was paid in full thereafter. Specifically, the amount in arrears after 2013 was confirmed to be above KRW 630,915,480. However, since the time of the transfer of the instant shares and the offering of new shares, ○○○ did not have any national taxes in arrears.

(3) On December 27, 2011, a title trustee’s share ratio, including the Plaintiffs, was modified through capital increase with capital increase issued on December 27, 201 as follows.

2) Determination on the assertion of procedural defects

A) Article 81-4(2) of the former Framework Act on National Taxes provides that a tax official shall not conduct a reinvestigation on the same tax item and the same taxable period unless there is any obvious evidence to acknowledge a suspicion of tax evasion.

B) However, in light of the following circumstances acknowledged earlier, it is reasonable to view that the instant tax investigation constitutes a case of conducting an investigation on the items and taxable periods separate from the prior tax investigation, and it does not constitute a duplicate tax investigation prohibited under Article 81-4(2) of the former Framework Act on National Taxes. Accordingly, the Plaintiffs’ assertion on this part is without merit.

(1) The instant tax investigation is deemed to have conducted a stock change investigation in 201 with respect to Chang ○○ as gift tax, and, in itself, the subject tax items subject to investigation and the taxable period are not the same. However, even if there is room to view that the taxable period is partly identical as a result of the investigation conducted on the portion of corporate tax for the business year 201 in the process of the prior tax investigation, in light of the fact that the subject of investigation is separate, as well as that of corporate tax for the business year 2011, which was not included in the scope of the previous tax investigation, was partially expanded in the course of the investigation, it cannot be deemed that the

(2) The Plaintiffs asserted to the effect that an investigation was conducted on the share change portion in the previous tax investigation process in 2011 on the grounds that gift tax was imposed on title trust in 2004 and 2010. However, even in light of the written statements, etc. of the United StatesA, Plaintiff LA, and Chang ○○ employee ○○○○ employeeB prepared at that time, the investigators belonging to the ○○ Regional Tax Office confirm the aforementioned share change, exercise the right to inquire and question, or make a statement thereof by the United StatesA, etc. cannot be confirmed.

(3) The Plaintiffs asserted to the effect that, in light of the fact that ○○○-related files, custody documents files, ○○-related files, 2011, etc. were written in the list of custody prepared in the process of provisional holding and inspection, the director of the regional tax office of ○○○ was aware of the title trust of the instant shares by securing ○○-○○○○-related shares allotment table, ○○○○○○○○○-related shares allotment table, and ○○○○○○ Bank passbook, etc. (Evidence A23 and 24)’s passbook, at that time.

However, it is difficult to see that the content of the record on the storage list alone secured the data of the plaintiffs' assertion by the director of ○○○ Regional Tax Office, and even if so, the relevant tax investigation was conducted on the part that does not fall under the scope of investigation by securing such data.

(4) Of course, the director of ○○ Regional Tax Office confirmed the fact of title trust in 2004 and 2010, and accordingly, the imposition of gift tax was carried out, there may be room to deem that it was possible to conduct an investigation on the portion of share fluctuation in 201 at the time of the preceding tax investigation. However, such circumstance alone cannot be deemed as having failed to impose the tax even though the director of ○○ Regional Tax Office carried out the relevant tax investigation.

3) Determination as to the assertion of substantive defects

A) The main text of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act provides that in case where the actual owner and the nominal owner are different from the property that requires a registration, etc. for the transfer or exercise of the right, the value of the property shall be deemed to have been donated to the actual owner on the date when the registration, etc. is made to the actual owner notwithstanding the provisions of Article 14 of the Framework Act on National Taxes, and that in case where the property has been registered, etc. in the name of another person without any purpose of evading taxes under subparagraph 1 of the same Article, the main text of Article 45-2(2) provides that “

However, the legislative purport of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act is to recognize an exception to the substance over form principle with the purport of effectively preventing the act of tax avoidance by using the title trust system and realizing the tax justice. Thus, the application of the proviso of the same Article is possible only if the purpose of tax avoidance is not included in the purpose of the title trust, and in such a case, the burden of proving that there was no purpose of tax avoidance can be proved by means of proving that there was a purpose other than the purpose of tax avoidance. Therefore, the nominal owner who bears the burden of proving that there was no purpose of tax avoidance can be proved by means of proving that there was a purpose other than the purpose of tax avoidance. However, the nominal owner who bears the burden of proof has a clear purpose irrelevant to the tax avoidance to the degree that there was no purpose of tax avoidance in the title trust, and must prove that there was no tax avoidance at the time of the title trust or in the future. In addition, the application of the provision on donation presumption cannot be avoided solely on the ground that the nominal owner had no purpose (see, Mar. 28, 2019, 20197.

B) Since there is no dispute between the parties as to the fact that the United StatesA trusted the instant shares to the Plaintiffs, it is presumed that the title trust of the instant shares was the purpose of tax avoidance under the main sentence of Article 45-2(2) of the former Inheritance Tax and Gift Tax Act.

Although the Plaintiffs asserted that there was no purpose of tax avoidance, in light of the legal principles as seen earlier, the evidence submitted by the Plaintiffs alone is insufficient to deem that there was no purpose of tax avoidance in the title trust of the instant shares, and there is no evidence to acknowledge otherwise. Accordingly, the Plaintiffs’ assertion on this part is without merit.

(1) The plaintiffs asserted that, at the time of the establishment of the Chang○○○○○, the United StatesA inevitably took the form of acquiring shares in three names to meet the number of promoters under the Commercial Act, and thus, there was no objective of tax avoidance from the first title trust in 2004, which was the title trust.

However, there is no particular material to support such argument, and instead, the United StatesA appears to have taken over shares in the name of a third party with the intention to avoid the restriction on transactions or the payment of delinquent taxes by financial institutions and customers, etc. that may arise when establishing and operating the Chang○○○ as a single shareholder, and it is deemed that the United StatesA has held the shares of Chang○○ for the same purpose, even thereafter, to the executives and employees belonging to the land owner or Chang○○○○○.

(2) As seen earlier, the gift tax was imposed on the title trustee under Article 45-2(1) of the former Inheritance Tax and Gift Tax Act on the premise that the title trust in 2004 and 2010 was an object of tax avoidance with respect to the shares issued by Chang○○○○ in fact.

However, in the case of the share transferred in this case, the title trustee only falls under the case where the title trustee was changed to the Plaintiff KimA in 2010, and thus, the purpose of tax avoidance is to be deemed to have existed. Furthermore, the Plaintiffs asserted that the employee ○○○○ employee retired and inevitably transferred the share transferred, but only for such reason, it cannot be deemed that there was no purpose of tax avoidance in the title trust of the shares transferred in this case. Of the shares transferred in this case, it is inconsistent with such assertion in the case of the 50 share transferred from the Plaintiff ChoiA among the shares transferred in this case.

(3) The Plaintiffs asserted that the title trust of the instant shares issued with capital increase in December 27, 201 was irrelevant to the purpose of tax avoidance, since the title trust of the instant shares issued with capital increase was conducted by Chang○○○ upon a financial institution’s request for capital increase.

However, it is insufficient to view that there was a need for capital increase to continue L/C transaction only by the evidence (Evidence A to No. 9 and 11) such as a summary for corporate credit assessment or the details of the transaction of the imported L/C offered by the Plaintiffs. Even if so alleged by the Plaintiffs, the new shares allocated through capital increase with consideration were allocated only to the Plaintiffs, who are shareholders at that time and the Plaintiffs, and such new shares seems to have been allocated voluntarily regardless of their equity ratio. This may also be deemed as the circumstance where the relevant AA intended to avoid the oligopolistic shareholder issue that may arise in the course of title trust of the shares issued

(4) Through the title trust of the instant shares, the United StatesA still could be relieved of the status of an oligopolistic shareholder of Chang○○○. Accordingly, it seems that it could have avoided the secondary tax liability even with respect to the failure to pay the national taxes by Chang○○○○ in arrears that occurred after 2013.

(5) Unlike the Plaintiffs’ assertion, it is difficult to view that the fact that the Chang○○○ does not have a problem of deemed acquisition tax for oligopolistic shareholders because it does not acquire assets subject to deemed acquisition tax, and that it is difficult to bring about the possibility of evading dividend income of the United StatesA because it does not have any dividend until now since the establishment of the Chang○○○○○○ was difficult to bring about the possibility of avoiding dividend income of the United StatesA. Thus, it is difficult to view that the fact that there was no tax to be avoided

4) Sub-committee

In title trust with the shares of this case to the plaintiffs, the disposition of this case, which is based on the premise that there was a purpose of tax avoidance, is legitimate.

4. Conclusion

The plaintiffs' respective claims against the defendants are without merit, and all of them are dismissed. It is so decided as per Disposition.