The purport of Article 45-2(3) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter referred to as the “former Inheritance Tax and Gift Tax Act”) newly established on January 1, 2004; and the date of deemed donation under the said provision (i.e., the date of submission of a statement on the status of changes in stocks, etc.); / In cases where a transfer of ownership is determined accordingly, whether gift tax may be levied even if the conclusion of a title trust agreement or the delivery of stocks, etc. is transferred (affirmative)

Article 45-2(3) newly established under the former Inheritance Tax and Gift Tax Act (hereinafter “former Inheritance Tax Act”) which was amended by Act No. 7010 on December 30, 2003 and enforced January 1, 2004, provides that in applying the provisions of Article 45-2(1) of the same Act concerning “the deemed donation of property under title trust,” in cases where a list of stockholders or a list of members has not been prepared, whether a transfer is made based on the documents concerning stockholders, etc. submitted to the head of the tax office having jurisdiction over the place of tax payment and the detailed statement of changes in stocks, etc.

Even if a person intends to evade tax by entering the name of the owner of stocks, etc. differently from the actual owner in the specification of changes in stocks, etc., if there is no change of ownership due to the lack of the register of shareholders or the register of members, the gift tax is intended to be levied even in such a case by supplementing

In addition, the date of deemed donation under the above provision shall be deemed the date when the actual owner and the nominal owner can be deemed to have clearly indicated the fact of change in stocks, etc. from the outside.

Meanwhile, Article 10 of the Addenda to the former Inheritance and Gift Tax Act provides that “The amended provisions of Article 45-2(3) shall apply from the portion of submission of documents and statements on changes in stocks, etc. related to shareholders pursuant to Articles 109(1) and 119 of the Corporate Tax Act after the enforcement of this Act.”

In light of the legislative purport, structure, and content of these relevant provisions, if a statement of the change of stocks, etc. was submitted after January 1, 2004, and accordingly the change of ownership was determined, the requirement for deemed donation of title trust should be deemed to have been completed on the date of submission. Furthermore, even if a gift tax liability was established after January 1, 2004, even if a contract for title trust was concluded or a delivery of stocks, etc. was transferred, gift tax can be imposed upon the application of Article 45-2(3) and (1) of the former Inheritance Tax Act.

Article 45-2(1) and (3) (see current Article 45-2(4)) of the former Inheritance Tax and Gift Tax Act (Amended by Act No. 7335, Jan. 14, 2005); Article 10 of the Addenda to the Inheritance Tax and Gift Tax Act (Amended by Act No. 7335, Dec. 30, 2003);

Supreme Court Decision 2011Du11099 Decided May 16, 2014 (Gong2014Sang, 1241) Supreme Court Decision 2017Du32395 Decided May 11, 2017 (Gong2017Sang, 1311)

Plaintiff 1 and two others (LLC, Kim & Lee LLC, Attorneys Kim-young et al., Counsel for the plaintiff-appellant)

Head of the Guro Tax Office and two others

Supreme Court Decision 2016Du55049 Decided May 17, 2017

Seoul High Court Decision 2017Nu53233 decided January 23, 2018

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Article 45-2(3) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter “former Inheritance Tax and Gift Tax Act”) newly established on January 1, 2004 provides that in applying Article 45-2(1) of the same Act to “the deemed donation of title trust property,” where a register of stockholders or a register of members has not been prepared, whether a transfer is made according to the documents and a statement of changes in stocks, etc. submitted to the head of the tax office having jurisdiction over the place of tax payment pursuant to Articles 109(1) and 119 of the Corporate Tax Act.

Even if a person intends to evade taxes by entering the name of the owner of stocks, etc. differently from the actual owner in the specification of changes in stocks, etc., if there is no change of ownership due to the lack of the register of shareholders or the register of members, the gift tax is to be imposed even in such a case by supplementing the problems that could not be applied to the provision on deemed donation of title trust (see Supreme Court Decision 2011Du1099, May 16,

In addition, the date of deemed donation under the above provision shall be deemed the date when the actual owner and the nominal owner submit a detailed statement of changes in stocks, etc., which can be deemed to have clearly indicated on the outside of the fact of changes in stocks, etc. (see Supreme Court Decision 2017Du32395, May 11, 2017).

Meanwhile, Article 10 of the Addenda to the former Inheritance and Gift Tax Act provides that “The amended provisions of Article 45-2(3) shall apply from the portion of submission of documents and statements on changes in stocks, etc. related to shareholders pursuant to Articles 109(1) and 119 of the Corporate Tax Act after the enforcement of this Act.”

In light of the legislative purport, structure, and content of these relevant provisions, if a statement of the change of stocks, etc. was submitted after January 1, 2004, and accordingly the change of ownership was determined, the requirement for deemed donation of title trust should be deemed to have been completed on the date of submission. Furthermore, even if a gift tax liability was established after January 1, 2004, even if a contract for title trust was concluded or a delivery of stocks, etc. was transferred, gift tax can be imposed upon the application of Article 45-2(3) and (1) of the former Inheritance Tax Act.

2. Review of the first instance judgment as cited by the lower court and the record reveals the following facts.

A. On December 2003, the Plaintiffs purchased the shares of the non-party company in the name of Non-party 2, non-party 3, and non-party 4, etc., respectively (hereinafter “instant share transaction”). Accordingly, on March 31, 2004, the non-party company reported the corporate tax base for the business year of 2003 to the Gangnam Tax Office, and submitted a detailed statement of changes in the shares, etc., stating the stock transaction, etc. of this case.

B. On June 2014, the director of the Seoul Regional Tax Office confirmed that the Plaintiffs acquired shares under the above another person’s name and deemed them as gift, and notified the Defendants of the results of the tax investigation.

C. Accordingly, on September 14, 2014 and October 1, 2014, the Defendants designated the relevant Plaintiffs as joint and several taxpayers and imposed each gift tax (hereinafter “instant disposition”).

3. Examining these facts in light of the aforementioned provisions and legal principles, it is reasonable to view that the detailed statement of changes in stocks, etc., stating the fact of transfer of stocks against the Plaintiffs, submitted to the tax office having jurisdiction over the pertinent tax office on March 31, 2004, regarding the stock transaction of this case as the date of deemed donation, gift tax under Article 45-2(3) and (1) of the former Inheritance Tax and Gift Tax Act

Nevertheless, the lower court determined otherwise, on the ground that the transfer date of the instant transaction can be seen as 203 years, and the detailed statement of the change of stocks, etc. of this case cannot be deemed as 2004 years, and thus, the grounds for the primary disposition of the instant disposition, which was premised on the application of Article 45-2(3) of the former Inheritance and Gift Tax Act, are unlawful. In so determining, the lower court erred by misapprehending the legal doctrine on the basic date for the determination of change of holders under Article 45-2(3) of the former Inheritance and Gift Tax Act, thereby adversely affecting the conclusion of the judgment

4. Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Jung-hwa (Presiding Justice)