Whether there exists the purpose of tax avoidance of stock title trust

Recognizing that the reason for the title trust is to inform that an external investor, who is not the purpose of tax avoidance, has entered the company, and there is no evidence to avoid high-amount tax due to the title trust, the provision on the legal fiction of title trust donation cannot be applied.

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

1. The Defendant’s disposition of imposition of KRW 781,06,730, which was made against the Plaintiff on July 15, 2004, is revoked.

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

The same shall apply to the order.

We examine the grounds of appeal.

1. Imposition of gift tax;

A. On November 4, 2002, the director of the regional tax office of ○○○○○○○○○○○○○○○○○○○○○○○, Inc., Ltd., located in ○○○○○○○○○○○○○○○○○○, Inc., Ltd., (hereinafter “○○○○○○○○○○○○”). On November 4, 2002, 205, the Plaintiff conducted an investigation into the contents and source of funds, including the purchase amount of KRW 1,105,041,60 (the purchase amount of KRW 1,105,041,60) and the sum of KRW 5,110,734 (the purchase amount of KRW 775,138,00), etc. of KRW 1,880,179,60 (hereinafter “instant shares”). As a result, the Plaintiff’s funds for acquiring the instant shares were deposited into the Plaintiff’s account of ○○○-00-0000 (the Plaintiff’s account”).

B. Accordingly, by applying the legal fiction of title trust donation under the Inheritance Tax and Gift Tax Act, on November 5, 2002, the Defendant: (a) deemed that the Plaintiff received a donation of stock acquisition fund from Kim○○ on November 5, 2002; and (b) rendered the instant disposition imposing gift tax of KRW 781,065,730 on the Plaintiff on July 9, 2004 by deeming the acquisition value of stocks as the taxable value of donated property; (c) pursuant to the instant disposition imposing the gift tax of KRW 781,065,730 on the Plaintiff on July 9, 2004. [Grounds for recognition] of absence of dispute; (d) entry from

2. Whether the instant disposition is lawful

A. The parties' assertion

The defendant asserts that the disposition of this case is lawful as it is in accordance with the relevant Acts and subordinate statutes, and the plaintiff asserts that the disposition of this case is unlawful for the following reasons.

(1) The Plaintiff, rather than being entrusted with the instant shares by Kim○○’s name, was an actual owner who borrowed shares from ○○ Media to acquire the instant shares under his own name, and exercised the authority of a director and a shareholder at ○○○○○’s general meeting or the board of directors.

(2) Even if the instant shares are title trusted to the Plaintiff from ○○○○, the instant shares were subject to tax avoidance, such as: (a) in the process of capital increase, etc. in order to newly run the ○○○○○○ business, by an external investor with considerable influence and flame, made an investment with the major shareholder, ○○○, Kim○, etc.; and (b) obtained his trust; and (c) as alleged by the Defendant, Kim○ was trying to avoid taxation under Article 52 of the Corporate Tax Act by concealing the fact that the instant shares were traded with the person having a special relationship while transferring the shares of ○○○○○○○, a corporation with its representative director, and ○○○○○○, a corporation with a special relationship. This is clear that, in selling the shares of each of the instant shares to ○○○○○○○○, this case’s shares were acquired under the name of Kim○○○, and thus, there is no difference between the parties having a special relationship provided for in the Corporate Tax Act.

(b) Related statutes;

○ Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002)

Article 41-2 (Presumption of Donation of Title Trust Property)

(1) Where the actual owner and the nominal owner are different in property (excluding land and buildings; hereafter the same shall apply in this Article), which requires a registration, etc. for the transfer or exercise of rights, the value of the relevant property shall be deemed to have been donated by the actual owner on the date when it is registered, etc. as the nominal owner, notwithstanding Article 14 of the Framework Act on National Taxes: Provided, That the same shall not apply

1. Where assets are registered, etc. in the name of another person without the purpose of tax avoidance;

2. Where, among stocks or equity shares (hereafter referred to as "stocks, etc." in this Article), with respect to the stocks, etc. entered in the register of stockholders or the register of members in the name of another person or the transfer of titles is converted to the actual name of the owner during the period until December 31, 1998 (hereafter referred to as "suspension period" in this Article) pursuant to a trust or agreement made before January 1, 1997: Provided, That this shall not apply where the titles are converted to the name of the person in a special relationship with the stockholders (including investors) of the corporation which issued the relevant stocks, etc. or of the person who is a minor as of January

(2) Where assets are registered, etc. in the name of another person and the title of stocks, etc. is not converted into the name of the actual owner during the grace period under the provisions of paragraph (1) 2, it shall be presumed that there exists a purpose of tax avoidance

C. Determination

(1) As to the first argument

If the purport of the entire pleadings is gathered in the statements in subparagraphs 2, 4-1 through 4-2, 5-2, 1, 2, 6-2, and 7 of subparagraph 5, the actual owner of the shares at issue at issue at issue at issue at issue at issue at issue at issue at issue at ○○○, Kim○, exercising the status as a shareholder of the shares at issue at issue at issue at issue at issue at issue at issue at issue at ○○○, and the Plaintiff is merely a title trustee (the ○○ Media is a corporation with ○○○○ representative director at issue at issue at issue at issue at issue at issue at issue at ○○○○○○○, and the amount of 38 million won until June 30, 202 after its commencement of business at issue on February 25, 200, and the loans to the Plaintiff on the settlement of accounts belonging to the above company at issue at issue at issue at issue at issue at issue at issue at issue at issue at issue at issue at ○○○○, and this part of the Plaintiff’s assertion is not accepted).

(2) As to the second claim

(A) The legislative intent of Article 41-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 18, 2002; hereinafter the same) is to recognize an example as to the principle of substantial taxation in the purport that the act of tax avoidance using the title trust system is effectively prevented, thereby realizing the tax justice (see, e.g., Supreme Court Decision 2003Du13649, Dec. 23, 2004). Thus, if the title trust was deemed to have been made for reasons other than the purpose of tax avoidance and the reduction of taxes incidental to the said title trust is merely a minor reduction of taxes, it cannot be deemed that there was a "tax avoidance purpose" under the proviso of the same Article in the said title trust (see, e.g., Supreme Court Decision 2004Du13936, May 25, 2006).

(B) From 198 to 200 million won, ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ KRW 2,00,000, 100 KRW 2,000,00,000, 100,000 KRW 2,000,000,000,000 KRW 2,000,00,000,000 KRW 1,000,000,000,000 KRW 2,000,000,00,00 KRW 2,000,00,00,000, KRW 1,5,000,00,00,00,00,00,00,00 won, and 3,000,000,00,00.

(C) It is acknowledged that ○○○○○○○○○○○○’s title trust with the Plaintiff, based on the above facts of recognition, was an investment by an external investor with considerable history and maturity in the process of capital increase in order to newly operate ○○○○○○○○○○○○ business. Furthermore, according to Article 52(1) of the Corporate Tax Act and Article 87(1) of the Enforcement Decree of the same Act, the shareholder and his/her relatives are specially related persons, and thus, it can not be concealed that ○○○○○○○○○○○○○○ was a shareholder of the instant case by owning the instant shares under the name of the Plaintiff, and thus, it cannot be deemed that ○○○○○○○○○○○○○○○○○○○○’s relatives who did not have an interest in the instant shares, and thus, it could not be deemed that ○○○○○○○○○○○○’s acquisition of shares in accordance with the above laws and regulations. Furthermore, whether ○○○○○○○○○○’s own shares could intervene.

(D) Therefore, the instant disposition, which applied the provision on deemed donation of title trust, based on the premise that the title trust of the instant shares to the Plaintiff by Kim○○○, had an objective of tax avoidance, is unlawful.

3. Conclusion

Thus, the plaintiff's claim of this case seeking the revocation of the disposition of this case is justified and accepted.