Seoul High Court Decision 92, 93, 94, 96 of 2014 (No. 03, 2014)

Although there is no reason to transfer the father directly to the children of the father of the spouse's father, the father is sufficient to attract him/her to give a donation in advance because he/she falls under the legal inheritor.

The shares in the name of Plaintiff AA, B, and CC are likely to have been registered as shareholders because it is sufficient that at least four promoters have been required by law to establish the company, and that the shares in the name of Plaintiff AA, B, and CC are registered as shareholders. Since Plaintiff AD constitutes a legal inheritor as a parent of Plaintiff ACC, and works for the company, there is sufficient incentive to give a donation in advance to reduce inheritance tax when the succession or inheritance

Donation of title trust property under Article 45-2 of the Inheritance Tax and Gift Tax Act

Article 81-4 (Prohibition of Abuse of Right of Tax Investigation)

2014Guhap62395 Revocation of Disposition of Imposition of Gift Tax

GuA, IsB, IsCC, Isd

EE Head of the EE Tax Office, FF Director, GG Head of the Tax Office

2015.04.30

2015.06.04

1. (a) Defendant FF Head of the tax office: (a) on February 5, 2013, the gift tax of KRW 0,000,000 on February 5, 201 for the gift tax of KRW 202 owed to Plaintiff GuA;

B. On February 1, 2013, the head of the Defendant EEE Tax Office revoked each disposition of KRW 000,000,000 as gift tax for the year 2010, imposed on Plaintiff EEB on Plaintiff B, and KRW 0,000,000 as gift tax for the year 204 imposed on PlaintiffCC.

2. The plaintiff's claims are dismissed.

3. Of the costs of lawsuit, the part arising between Plaintiff A, BB, thisCC and Defendant FF Tax Office, and the Head of EE Tax Office shall be borne by the Defendants, and the part arising between Plaintiff A and Defendant GG Tax Office shall be borne by Plaintiff BD.

Cheong-gu Office

The disposition of imposition of KRW 0,00,000 on February 1, 2013 by the head of the headquarters and the head of the Defendant GG Tax Office shall be revoked on February 1, 2013.

1. Details of the disposition;

A. From July 23, 2012 to September 5, 2012, HB 200, the Director of the Regional Tax Office: (a) conducted an investigation of changes in the shares of IB Co., Ltd. (hereinafter referred to as "III"); and (b) third I Shares acquired by the Plaintiff, as of January 2, 2002, [Attachment] ① Shares ; hereinafter referred to as "the issues of this case") 1 Shares ; and 2,00 shares ; (c) Shares 1 Shares ; and 20 shares ; and (d) shares 1,00 shares ; (c) shares ; (d) shares 1,00 shares ; and (e) shares ; and (e) shares ; and (e) shares ; (e) the shares ; (e) the shares ; and (e) the shares ; (f) the shares ; (f) the shares ; (f) the shares ; and (f) the shares ; and (f) the shares 2) the shares ; and (f) the shares 3) shares ; and (f) the shares ; (f) the Plaintiff 2.

[Attachment]

Name

Relationship with the largest shareholder

January 2, 2002

Transfer and Acquisition

December 31, 2010

Number of Stocks

(State)

Equity Holdings

(1)

204.

2.2.

2010.

2.7.

2010.

12.28.

Number of Stocks

The Bank of Korea

Equity Holdings

(1)

CC

Principal

4,000

40

4,000

40

EK

wife

3,000

30

3,000

30

GuAA

Eastern

(1) 2,000

20

△△,000

△△,000

JJ

Husband of the father of the wife;

(2) 1,000

10

△△,000

D. D

Marri, 200

(3) 1,000

1,000

10

L

Easterns

△△,000

1,000

10

BB

HaJJ's ASEAN

(4) 1,000

1,000

10

Total

10,000

100

-

-

-

10,000

100

B. On September 28, 2012, Plaintiff GuA, Plaintiff BB, and Plaintiff DD filed a request for pre-assessment review against the Director of the Regional Tax Office. On November 2, 2012, the Director of the Regional Tax Office rendered a decision of re-assessment as follows (hereinafter “instant decision of re-audit”).

HH Director of the Regional Tax Office of Korea on January 2, 2002, 200 won of gift tax of 0,000,000,000 won of gift tax of Claimant to Claimant on September 7, 2012, and on February 2, 2004, the gift tax of Claimant to Claimant on February 2, 2004, 0,000,000,000 won of gift tax of Claimant to Claimant on February 27, 2010, and the tax investigation of Claimant to Claimant on December 28, 2012, the notice to impose KRW 00,00,000,00 of gift tax of Claimant to Claimant on December 28, 2012.

In addition, the issue of whether the nominal holders at the time of establishment of IIII are actual owners of shares, whether the change of ownership after incorporation is a gift or a title trust, and whether there is a purpose of tax avoidance in the case of a title trust, I will re-determine the tax base and tax amount of gift tax by claimant according to the results.

C. After the decision of re-audit of this case, HH regional tax office, according to the purport of the decision of re-audit of this case, found that: (a) at the time of establishment of III as to whether the title holder is the actual owner of shares; (b) whether the change of ownership after establishment is a gift or title trust; and (c) whether there was a purpose of tax avoidance in the case of title trust (hereinafter “the second tax investigation”); and (d) as to the result of the first tax investigation, the HH regional tax office again conducted a tax investigation to verify whether the title trust was made; (b) as to the first tax investigation, the Plaintiff’s first portion of the instant case was deemed to have been trusted by CC; and (c) the JJ deemed to have received the instant 2 shares from CC; and (d) Plaintiff HD deemed to have donated the instant 3 shares from CC. However, unlike the result of the first tax investigation with respect to Plaintiff B’s instant 4 shares donated by SH, the director of HHB office reported that the Plaintiff 2B shares received the Plaintiff 2B notice.

D. According to the notice of scheduled taxation based on the second tax investigation, on February 5, 2013, Defendant FF head of the tax office imposed the Plaintiff’s tax office KRW 0,000,000 for the gift tax of KRW 0,000 for the year 2002, Defendant EEE head of the tax office as joint and several tax obligor on February 1, 2013, the Plaintiff EEE head of the tax office imposed the Plaintiff’s tax office imposition of KRW 0,000,000 for the gift tax of KRW 200,000 for the year 200, and Defendant GG head of the tax office imposed the Plaintiff EF head of the tax office on the Plaintiff EF head of the tax office on February 1, 2013 (hereinafter referred to as “each disposition of this case”), respectively, on February 1, 2013 (hereinafter referred to as “instant disposition”).

E. On April 16, 2013, the Plaintiffs filed a request for review with the Board of Audit and Inspection for revocation of each of the dispositions in this case. However, the Board of Audit and Inspection dismissed the request for review on April 3, 2013, which was served on the 11st of the same month.

F. The Plaintiffs were dissatisfied with this and filed the instant lawsuit on July 8, 2014.

[In the absence of any dispute, each entry of Gap evidence Nos. 1 through 9, the purport of the whole pleadings]

2. The assertion and judgment

A. The plaintiffs' assertion

1) Procedural illegality assertion

The disposition of this case is unlawful since it violates the principle of prohibition of duplicate investigation as provided by Article 81-4(2) of the Framework Act on National Taxes or is based on the second tax investigation without any legal basis.

2) The assertion of substantive illegality

The part on each of the instant dispositions 1 and 4 shares is illegal because the title trust of each of the instant shares (hereinafter referred to as “each of the instant shares”) is a title trust with no tax avoidance purpose, and thus is not subject to gift tax, notwithstanding that it is not a title trust with no tax avoidance purpose, Defendant FF Head of the tax office and EE head of the tax office have imposed the tax by deeming it as a title trust with tax avoidance

In addition, among the dispositions of this case, the part on Plaintiff AD’s 3 shares of this case among the dispositions of this case is unlawful because the Plaintiff AD received a title trust without a tax avoidance purpose, Defendant GG head of the tax office, considering it as a gift and imposed it.

(b) Related statutes;

Attached Form is as shown in the attached Form.

C. Determination

1) Whether the prohibition of overlapping investigation is violated

Article 81-5 (4) of the former Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 2013; hereinafter referred to as the "Framework Act on National Taxes") provides that three decision-making shall not be made on a pre-assessment review request, i.e., where a request is deemed groundless: (i) decision-making not to adopt a request; (ii) decision-making shall be made where a request is deemed reasonable; (iii) decision-making shall be made partially where a request is deemed reasonable; and (iv) decision-making shall not be made where a request is not made; and (iii) decision-making shall be made where a request period expires or an amendment is not made; and (iv) contrary to Article 65 (1) of the Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 2013; hereinafter referred to as the "Framework Act on National Taxes"), and therefore, the commissioner of HH has re-audited all of the above dispositions to the purport that it is unlawful.

The review of the above argument takes the form of re-examination of the matters pointed out in the relevant decision as to the whole or part of a single taxation unit and making the disposition after correcting the tax base and the amount of tax or maintaining the initial disposition according to the result. Accordingly, the subject and scope of the re-audit decision can be specified in detail in the next stage litigation procedure only after the notification of the subsequent disposition is received. Considering the form and purport of the re-audit decision, and the characteristics of the tax legal relationship with the autonomous administrative control function and complicated and professional and technical nature of the administrative appeals system, the re-audit decision is deemed to be effective as a modified decision where the agency intended to take part of the decision on the subsequent disposition as part of the decision on the objection, etc., by re-examination of the matters pointed out in the relevant decision, and the re-audit decision becomes effective as a result of supplementation of the contents of the subsequent disposition made by the agency (see Supreme Court en banc Decision 2010Du1547, Jun. 25, 2010).

Since the above legal principles are the same in the pre-assessment review, where a request for pre-assessment review is made in the same manner, the submission of data submitted by a taxpayer at the pre-assessment review stage is deemed to be reliable, but where it is difficult to confirm it closely at the pre-assessment stage, instead of making a decision not to adopt a "decision" or "decision not to adopt" under Article 81-15 (4) of the Framework Act on National Taxes, it shall be deemed as a form of a modified decision that is made when the tax authority intends to achieve the purpose of pre-assessment review by setting the specific object and scope, and by making a limited additional investigation that cannot be directly examined by the pre-assessment review, and it shall be deemed as effective as a decision on the request for pre-assessment review only when a subsequent disposition by the tax authority is made after such additional investigation.

Therefore, since a re-audit decision on a request for pre-assessment review is a provisional transformation decision that requires the tax authority to make a supplementary investigation before the final decision is made, it does not necessarily require any explicit basis in the Framework Act on National Taxes. A tax investigation (in this case, the first and the second tax investigation) conducted before and after the pre-assessment review is merely a final investigation that leads to the subsequent disposition of the tax authority, and it cannot be deemed a separate tax investigation or a re-investigation that requires a separate basis in the Framework Act on National Taxes.

Therefore, this part of the plaintiffs' assertion cannot be accepted.

2) Determination on the shares held in the name of the Plaintiff GuA, B, and CC

In the application of the provision on deemed donation of trust property under the name of Article 45-2(1) of the Inheritance Tax and Gift Tax Act (hereinafter “Inheritance Tax and Gift Tax Act”), if it is recognized that the title trust was made for any reason other than the tax avoidance purpose, and only a minor reduction of tax incidental to the said title trust takes place, it cannot be readily concluded that there was an objective of tax avoidance in the title trust (see Supreme Court Decision 2007Du19331, Apr. 9, 2009). If it appears that there was no objective of tax avoidance, it cannot be viewed that there was a possibility that future tax reduction may result in a possibility (see Supreme Court Decision 2004Du7733, May 12, 2006). Whether there was an objective of tax avoidance should be determined as at the time of the title trust of the relevant shares (see, e.g., Supreme Court Decision 2009Du21352, Jul. 14, 201).

In the instant case where there is no dispute between the parties regarding the fact that each of the instant title trusts is a title trust, not a gift, in light of the aforementioned legal principles, the following circumstances are comprehensively taken into account: (a) the details of the instant disposition and the grounds for recognition, as seen earlier, together with the statements as set forth in subparagraphs 14 and 15, and the testimony and the overall purport of pleadings by the witness leM; (b) as such, each of the instant title trusts does not constitute a case of tax avoidance; and (c) therefore, Article 45-2(1) of the Inheritance Tax

① From the time of the establishment of the instant company to the time of title trust of each of the instant shares, the PlaintiffCC owned 40% of the shares of the instant company, and, as its spouse, KR owned 30% of the shares of the instant company, CC was an oligopolistic shareholder of the instant company irrespective of the title trust of each of the instant shares (see Article 39 of the Framework Act on National Taxes). Accordingly, there is no possibility of evading the responsibilities under the tax law applicable to oligopolistic shareholders through each of the instant title trust.

② In a case where a dividend is made to shareholders, if a shareholder holds shares in the name of another person subject to the lower tax rate in the process, the tax avoidance may occur due to the difference in the tax rate on the dividend income. However, IIII did not pay dividends once after the date of establishment to the present, and all distributable profits have been reserved in the company (Therefore, it can be inferred that the company of this case did not intend to conduct a long-term distribution at the time of each title trust of this case).

③ In addition, the above plaintiffs did not transfer the shares of the company of this case to a third party, and the capital gains tax rate for the transfer of non-listed shares, such as the company of this case, is the same tax rate depending on the size of the company or the holding period of the shares (see Article 104(1)4 of the Income Tax Act). Thus, it does not seem that the above plaintiffs intended to avoid capital gains tax on the issues 1 and 4 of this case.

④ In addition, it is found that the instant company or the instant company’s representative director, who is a substantial representative, actually did not have any tax in arrears.

Ultimately, it cannot be deemed that the above plaintiffs had an objective of tax avoidance with respect to each of the instant dispositions, and there is sufficient possibility that the above plaintiffs had recorded others as shareholders of the instant company, other than the plaintiffCC, by mistake that at least four promoters are legally required for the establishment of the company, as alleged by the above plaintiffs. Accordingly, the part regarding the plaintiff A, this BB, and thisCC among each of the dispositions in this case is unlawful and should be revoked.

2) Determination on the shares held in the name of Plaintiff DoD

The burden of proving the existence of the tax-related facts is against the tax authority, but if the facts presumed to have been taxed in light of the empirical rule, the other party must prove the circumstances not subject to the application of the empirical rule (see, e.g., Supreme Court Decision 89Nu6006, Apr. 27, 1990). Meanwhile, Article 14(2) of the Framework Act on National Taxes provides that "the provisions on the calculation of the tax base in the tax-related Acts provide that "the provisions on the calculation of the tax base shall apply according to the substance regardless of the name or form of the income, profit, property, act or transaction, regardless of the type or form of the transaction." However, if the transfer of ownership of a certain property takes the form of donation, such transaction should first be presumed to have been presumed to have been a gift, and

On February 2, 2004, Plaintiff AD acquired a transfer of shares from Plaintiff A to transfer the title of the 3 shares of this case, which is the ownership of Plaintiff ACC, in the form of a transfer of shares from Plaintiff AA. However, there is no dispute between the parties. As such, Plaintiff AD’s acquisition of the 3 shares of this case takes the form of an external donation, so it should be deemed as a first donation, and it should be deemed as the fact that this constitutes a title trust without any tax avoidance purpose, and that Plaintiff AD bears the burden of proof as to the fact that this constitutes a title trust without any tax avoidance purpose.

However, it is not sufficient to recognize that the acquisition of the 3 shares in this case constitutes a title trust, not a gift, by the Plaintiff’s assertion on this part, that is, the evidence that seems consistent with the fact that the acquisition of the 3 shares in this case constitutes a title trust, not a gift, and that it is the reason for the testimony of the witness leM. However, in this court, leM testified that “Plaintiff Do was not involved in the acquisition of the 3 shares in this case, and it was made in the name of Plaintiff Do and Do Do d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d.

The issue 1 and 4 shares of this case are title trust by the tax authorities, and they are argued to the purport that only the 3 shares of this case, the title transfer of which was made at the same time, are not a gift, and that this is not consistent with the balance. However, the plaintiff Eul is the Dong-gu husband of this case's spouse. The plaintiff Eul is the child of the plaintiff CC's spouse, and there is no reason that the plaintiff CC directly transfers the father. While the plaintiff CC is the father of this case's father, the plaintiff Da constitutes a legal heir as his father of this case, and the company works in this case, and there is sufficient incentive to give a donation in advance to reduce the inheritance tax when the succession to the company of this case or succession to the company of this case begins, the issue 1, 4 shares of this case and the 3 shares of this case are assessed differently, and it cannot be deemed that the balance is not consistent with the balance.

Therefore, we cannot accept the argument of the plaintiff Lee Do, and the part on the plaintiff Lee Do among the dispositions of this case is legitimate.

3. Conclusion

If so, the claims of the Plaintiff AA, BB, and thisCC are reasonable, each of them shall be accepted;

The claim of DaD is dismissed as it is without merit. It is so decided as per Disposition.