Whether the purpose of this case’s title trust is tax avoidance

There was no restriction on the number of promoters required for the establishment of the instant company. The tax base of global income tax arising from title trust differs from the amount of tax payable, and in fact, there is tax evasion amount, and there is no tax evasion purpose, such as the tax liability limit varies depending on the shareholding ratio.

2014Guhap70693 Revocation of Disposition of Imposition of Gift Tax

Park AA

Head of Seodaemun Tax Office

June 26, 2015

July 24, 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 imposition of gift tax on August 1, 2013 by ○○○○○ (the portion of gift on April 27, 1999) and ○○○○○ (the portion of gift on December 29, 2001) shall be revoked in entirety.

1. Details of the disposition;

A. The company of this case established on April 27, 199 for the purpose of gold-type manufacturing business (hereinafter referred to as the "company of this case") issued the ○○○○○○○○○○○○○○○○ (capital stock ○○○○○○○○○○○) at the time of its establishment. The register of shareholders states that BB, which participated as promoters at the time of its establishment, ○○○○○○ (80%) CCC (BB), ○○○○ (10%) 5%) and DD in which the Plaintiff participated as underwriters, respectively, shall acquire ○○○○○○ (5%).

B. On December 29, 2001, the instant company issued new shares to ○○○○○○○○○○○○○○○○○○○○○, and the statement of changes in the shares, etc. stated that the DD in which the company participated as the promoters BB○○○○, CCC ○○○○, Plaintiff ○○○○○, and the subscribers, respectively, has been subscribed to ○○○○○○○.

C. The Defendant: (a) on April 27, 1999, ○○○ at the time of the establishment of the instant company by the Plaintiff from BB.

B. The inheritance tax on the ground that the title trust was received respectively at the time of capital increase with consideration on December 29, 2001

Article 45-2(1) of the Inheritance Tax and Gift Tax Act by deeming that the Plaintiff donated each of the above shares from BB in accordance with the legal fiction of donation of title trust property under Article 45-2(1). On August 1, 2013, the Plaintiff imposed on the Plaintiff the gift tax of 1999 and the gift tax of 2001 (hereinafter “instant disposition”).

E. On October 24, 2013, the Plaintiff is dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal for adjudication.

The dismissal decision was made on September 12, 2014.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 4, 7 through 9, Eul evidence 1 through 3 (including paper numbers, hereinafter the same shall apply), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

At the time of incorporation of the company of this case, the title trustee is merely to satisfy the number of promoters and the number of subscribers for the incorporation of the company of this case required under the Commercial Act. At the time of capital increase, the plaintiff, the title trustee, in order to avoid the timely procedure

and due to title trust, BB's secondary tax liability and deemed acquisition by oligopolistic shareholders.

With respect to taxes, there is no tax evaded, and global income tax is a small amount of tax reduction;

Therefore, the tax imposed on the Plaintiff’s nominal consignment of the shares of the instant company

Provisions on deemed donation of title trust for the plaintiff, deeming that there was no tax avoidance purpose;

The instant disposition taken by applying B is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Relevant legal principles

The legislative purport of Article 45-2(1) of the Inheritance Tax and Gift Tax Act is to recognize an exception 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. Thus, the proviso of the same Article is applicable only where 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. Therefore, the fact that there was no purpose of tax avoidance may be proven 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 extent that there was no purpose of tax avoidance in the title trust, and the fact that there was no tax avoidance at the time of the title trust or there was no tax avoidance at the time of the title trust, to the extent that it does not have any doubt (see Supreme Court Decision 2004Du11220, Sep. 22, 2006).

In addition, whether there was an object of tax avoidance or not shall be determined at the time of title trust of the property.

Then, it is not necessary to determine whether the above tax was evaded or not.

(See Supreme Court Decision 2003Du4300 Decided January 27, 2005).

2) In full view of the following circumstances, the Plaintiff’s assertion that the Plaintiff satisfied the requirements of three or more promoters required under the Commercial Act or that it would avoid the capital increase with capital increase, etc., the evidence submitted by the Plaintiff alone cannot be deemed that the title trust of the instant company’s shares was made for the purpose of meeting the requirements of the number of promoters required under the Commercial Act or for the purpose of evading the procedure solely for the purpose of meeting the requirements of the number of promoters required under the Commercial Act without tax avoidance, and the Plaintiff’s assertion disputing this is without merit.

A) Article 288 of the former Commercial Act (amended by Act No. 6488 of Jul. 24, 2001) provides “stocks”

Since the incorporation of the company requires three or more promoters, this case's incorporation

At the time of incorporation of a company on April 27, 1999, the promoters need to be at least three persons.

The company of this case was not only the promoters but also the public offering procedure required by the subscribers.

It was established in accordance with the law.

The plaintiff is a procedure to establish a company under a recruitment procedure than the incorporation incorporation procedure.

It is alleged that at least four promoters and underwriters are required to establish a company to which the company belongs. However, in light of the fact that the company in this case did not have any change of incorporation and there was little difference in the process of incorporation promotion and subscription incorporation due to the lack of the change of incorporation, the company in this case did not need to be incorporated in accordance with the procedure of subscription

B) As long as there is no evidence to readily conclude that BB borrowed the Plaintiff’s name in consideration of the title trust on the shares issued with capital increase since the incorporation of the instant company, the title trust on the shares issued with capital increase on December 29, 2001, which was made after the lapse of about two years and six months after the establishment of the instant company, is deemed as a separate title trust from the title trust, which was made at the time of the establishment of the instant company.

Whether there was a tax avoidance purpose in the title trust on shares issued with capital increase

As of the time of title trust of shares issued with capital increase, not at the time of incorporation of the company

However, the Commercial Act (amended by Act No. 6488, Jul. 24, 2001; its enforcement) at the time of title trust held on December 29, 2001 after two or more years of the establishment of the instant company did not impose any limitation on the number of promoters necessary for the establishment of the instant company (Article 288) in contrast to the Commercial Act, which was in force at the time of the establishment of the instant company (Article 288). Thus, there was no need to issue new shares offering under the Plaintiff’s name.

C) In cases where a corporation issues new shares for the purpose of raising funds after its establishment, unless otherwise stipulated in the articles of incorporation, the existing shareholders have the right to receive allocation of new shares based on the number of shares held by them (Article 418 of the Commercial Act). In cases where shareholders voluntarily waive their preemptive rights without exercising such preemptive rights, the so-called forfeited share price occurs. With respect to such forfeited shares, the corporation may re-examine the forfeited share to a third party other than the relevant forfeited shareholders through the prescribed procedure in order to achieve the purpose of capital increase, or may dispose of the forfeited

Therefore, in order to resolve the title trust as of December 29, 2001, BB, the instant company acquired the Plaintiff’s shares prior to the issuance of new shares, adjusted the shares, or allowed the Plaintiff to waive the preemptive rights after the issuance of new shares, and acquired such forfeited shares. As such, insofar as the instant company’s allocation of new shares in the BB’s offering of new shares by issuing new shares does not seem to have been legally impossible, it is difficult to readily conclude that there exists a clear purpose different from that of tax avoidance solely on the ground that the instant company simply allocated new shares in the Plaintiff’s future according to the existing shares ratio.

In addition, BB owned 100% of the shares of the company of this case and operated the company of this case alone, so it is not deemed that considerable time and effort was needed to implement the procedure necessary to acquire the shares or to take the method of acquiring the forfeited shares.

3) Determination as to the assertion that there is no tax actually avoided or is merely a minor reduction

A) Comprehensively taking account of the purport of the entire pleadings in the descriptions of Gap evidence Nos. 2, 5, Eul evidence Nos. 4, 5, and 7

Recognizing the following circumstances:

(1) The instant company made distributions to shareholders.

(2) The earned surplus of the instant company was accumulated as ○○○ in 2003, 2006, and ○○○○○ in 2012, and 2012. At the time of the instant disposition, the Plaintiff’s shares were not transferred to BB in the name of BB even at the time of the instant disposition.

(3) Meanwhile, if the Plaintiff’s instant shares were in the name of BB in the course of the investigation with the Plaintiff, BB was clearly required to pay the income tax equivalent to approximately KRW 00 from 2003 to 2010 on the ground of the dividend income of the instant shares.

B) The following circumstances revealed by the above recognition: (a) the Plaintiff and BB may easily anticipate the difference in the amount of tax due because the tax rate different from the tax base of global income tax varies; (b) the actual result of tax avoidance in the title trust with the Plaintiff was generated; (c) the tax liability of oligopolistic shareholders differs depending on the stock holding ratio; (b) the amount calculated by multiplying the amount calculated by dividing the total number of shares issued by the Plaintiff by the total number of shares issued by the company or the total amount of investment by the Plaintiff by the title trust; and (c) the tax liability limit for oligopolistic shareholders differs; and (b) it is difficult to readily conclude that BB had no intention of tax avoidance in the title trust of the instant shares solely on the ground that the former is an oligopolistic shareholder, and thus, it is difficult to conclude that the second taxpayer had no intention of tax avoidance.

3. Conclusion

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

Relevant statutes

m. Inheritance Tax and Gift Tax Act

Article 45-2 (Legal Fiction as Donation of Title Trust Property)

(1) Property (excluding land and buildings; hereafter the same shall apply in this Article) which requires registration, etc. for the transfer or exercise of rights.

(u) Where the actual owner or the nominal owner is different, Article 14 of the Framework Act on National Taxes, such different owner or nominal owner shall apply thereto.

Acquisition of ownership by the date when the property is registered as the nominal owner (where the property is subject to a transfer of ownership, acquisition of ownership.

The actual action by the nominal owner on the last day of the year following the year in which the date falls (referring to the day after the last day of the year).

A donation shall be deemed to have been made by a donor: Provided, That in any of the following cases, such donation shall be deemed made:

not to do so.

1. Registration, etc. of property in another person's name or actual ownership of property acquired by another person without any purpose of tax evasion;

Where a change of entry is not made in its name;

director of the Commercial Act (amended by Act No. 6488 of July 24, 2001)

Article 288 (Promoters)

Three or more promoters shall be required for the incorporation of a stock company.

§ 301. Offering of shares in the case of public offering of new shares

Where the promoters do not subscribe for all the shares issued at the time of incorporation, they shall offer shares for subscription.

of this section.

director of the Commercial Act (amended by Act No. 6488 of July 24, 2001)

§ 288. Promoters

In establishing a stock company, promoters shall prepare the articles of incorporation.