Cho High Court Decision 2013 Deputy 4215 ( October 15, 2014)

There is no error in imposing gift tax on bypass donation using title trust.

Since it is judged that the sale is the most nominal trust, the disposition authority did not err in imposing gift tax on the time when the claimant acquired the stocks with respect to the bypass donation using the title trust, considering the time of donation as the time of donation, and imposing penalty tax on unjust and minor tax

Article 2 of the Inheritance Tax and Gift Tax Act

2014Guhap21012 Revocation of Disposition of Imposition of Gift Tax

AA

○○ Head of tax office

September 4, 2014

November 13, 2014

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked. The defendant's disposition of imposition of capital gains tax, OO, OO,OO, or OOO for the plaintiff on January 10, 2012 shall be revoked.

1. Details of the disposition;

A. On November 30, 2006, CCC, a father and a major shareholder of BB (hereinafter “BB”) of the Plaintiff, transferred the name in the form of BB stocks to DD 850 shares, BB shares to EE, BB shares 860 shares, and BB shares to FF 10,000 won per face value (hereinafter “DD, etc.”).

B. On May 19, 2010, DD et al. transferred 0,000 shares of each of the above shares transferred from CCC (hereinafter “instant shares”) to the Plaintiff in the form of sale at KRW 10,000 per share, the face value of which was KRW 10,000. Accordingly, on August 31, 2010, DD et al. made a preliminary return on the tax base of capital gains tax by taking the amount of tax base of capital gains tax as “0 won.”

C. Meanwhile, around September 15, 201, an cross-audit was conducted against the Defendant by the ○○○○ National Tax Service. In the process, the Plaintiff reported and paid KRW 00,000,000, and KRW 00,000,000, and KRW 00,000,00, and KRW 00,00,00,00,000, as to the portion acquired from the EEE (00,000) as gift tax on the portion (00,000, as gift tax on the portion (00 shares) acquired from the FF, on the part (00 shares) acquired from DD, etc., by deeming that the instant shares transferred from DD, etc. fall under the gift tax and gift tax on the portion (00,000,000,000,000,000,000,000,000.

D. Since then, the Defendant notified ○○○ National Tax Service of the Plaintiff’s suspected information on the Plaintiff’s title trust, and investigated BB’s corporate integration in the year 2008 to 2012. During that process, the Defendant conducted an investigation on the change of shares against the Plaintiff.

E. According to the result of the investigation, on July 3, 2013, the Defendant: (a) held the shares of this case under title trust with DD, etc.; (b) determined on May 19, 2010, the date on which the Plaintiff finally acquired the shares under Article 23 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act, as of May 19, 2010, the date on which the Plaintiff acquired the shares of this case, shall be deemed to be the time of acquisition of donated property; (c) from the Plaintiff’s account at the time of acquisition of the shares assessed according to the supplementary assessment method, the amount of KRW 0,000,000 (i.e., market price of KRW 00,000 per share x 0,000 x 000,000 won (i.e., the face value of KRW 1,000 per share) after subtracting the gift tax of this case from the Plaintiff’s account at KRW 00,000 (i. 000).

F. The Plaintiff appealed and filed an appeal with the Tax Tribunal on December 26, 2013, but the Tax Tribunal dismissed the Plaintiff’s appeal.

G. Meanwhile, the value per share of the instant shares assessed by the supplementary assessment method under the former Inheritance Tax and Gift Tax Act is KRW 00,000 as of November 30, 2006, and KRW 00,000 as of May 19, 2010.

Facts that there is no dispute over recognition, Gap evidence 1 through 3 (including household numbers; hereinafter the same shall apply), Gap evidence 5, Eul evidence 1 and 2, and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Calculation of the value of donated property of this case

The transfer of the shares of this case to the Plaintiff by DDR et al. is recognized as the so-called "the so-called "the so-called "the so-called "the so-called" donation that CCC donated to the Plaintiff after the title trust to DDR

However, even if the value of the gift is calculated by deeming it as the “pro rata gift”, it shall be subject to the detailed provisions on the value of the gift under the former Inheritance Tax and Gift Tax Act. In this case, ① The time of acquisition of the shares of this case is not on May 19, 2010, but on November 30, 2006, when the transferor of the shares pursuant to Article 44(1) of the former Inheritance Tax and Gift Tax Act transfers the shares of this case to DD, i.e., when the CCC transfers the shares of this case. ② The calculation of the specific value of the gift shall not be made by simply deducting the price paid from the market price of the shares of this case. ② The calculation of the specific value of the gift shall not be made by the method of simply deducting the price paid from the market price of the shares of this case. The difference between the “value of profit from transfer at low price and the market price” under Article 35(1) of the former Inheritance Tax and Gift Tax Act, which is substantially similar to the method of the said gift tax.

Therefore, in the process of calculating the value of donated property of this case, the Defendant erred by misapprehending the relevant provisions of the former Inheritance Tax and Gift Tax Act.

2) Violation of the principle of good faith

On September 15, 2011, the Plaintiff reported and paid the gift tax on September 15, 201, after consultation with the Defendant on the audit and cadastral records of the ○○○ National Tax Service and the Defendant’s solicitation. The Defendant deemed the transfer of shares in this case as “pro rata gift” in violation of such public opinion expression, and additionally imposed the gift tax on around the around 2013. Thus, the instant disposition violates the principle of good faith as stipulated in Article 15 of the Framework Act on National Taxes.

3) Illegal application of penalty tax

A) The Defendant: (a) deemed that the instant share transfer constitutes a “unlawful act” and imposed an additional tax on non-declaration under Article 47-2 of the Framework Act on National Taxes; (b) however, the Plaintiff reported all the overall facts related to the instant share transaction to the Defendant through a report on the transfer income tax, securities transaction tax, and stock change situation, etc. on the share transfer over 2006 and 2010; (c) thus, there was no concealment or fraud or other unlawful act that prevents the Defendant from determining whether the instant share transfer is a “reliable donation.” Therefore, deeming that the Plaintiff failed to file a tax base report by unlawful means with respect to the transfer of the instant shares, imposing an additional tax of

B) From September 15, 201 to September 15, 201, for the principal gift tax of KRW 000,000,000 paid through a report after the deadline, there was an error of imposition of additional tax in duplicate even though additional tax should not be imposed from September 15, 201 to the date of the instant disposition.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Whether the calculation of the value of donated property of this case is unlawful

(A) the comprehensive taxation method of the taxation of the

Article 2(3) of the former Inheritance Tax and Gift Tax Act provides that "The term "donation" means the transfer (including the transfer of tangible or intangible property at a remarkably low price) of the tangible or intangible property, regardless of its title, form, purpose, etc. to another person without compensation, or the increase of the value of another person's income by means of contribution," and comprehensively defines the concept of donation. However, although the concept of donation is implemented in a multilateral and secret manner, it is practically taking taxation as a taxable object for acts that cause legal and economic effects such as donation. In addition, Article 2(4) of the former Inheritance Tax and Gift Tax Act provides that where it is deemed that the inheritance tax or gift tax has been reduced unfairly by indirect or two or more acts or transactions through a third party, it shall be deemed that the party directly trades in accordance with the economic substance, or by deeming the same as a continuous one act or transaction, and thus, it shall be confirmed that the method of taxation on comprehensive taxation under the current tax law is re-written based on the premise that the transfer of shares in this case is based on the evidence."

B) The transfer of the instant shares, namely, the time of acquiring donated property

(1) Article 31(1) of the former Inheritance Tax and Gift Tax Act provides that the scope of donated property, which is a basis for the assessment of donated property, includes all the property belonging to the donee and having economic value that can be converted into money and all the legal or all the rights having property value. Article 23 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act provides that the time of acquisition of donated property is subject to the application of Articles 33 through 45-2 of the Act (referring to the donation example provision specified by specific types), 1. For the property that needs to be registered or recorded in the transfer or exercise of the right, the date of registration, 2. (Omission), 3. 1 and 2, the date of delivery or de facto use of the property other than those under subparagraphs 1 and 2. In other words, if the donated property is a stock, the date objectively confirmed that the delivery of the relevant stocks, etc. was made at the time of its acquisition.

(2) In light of the above legal principles, CC, a major shareholder of BB, appears to have actually exercised its rights while managing the shares of this case in its internal circumstances around 2006. It appears to have lent the shares of this case to the Plaintiff, one of its own children, who started to work in BB until around 2010. ② It is difficult to readily view that CCC transferred the shares of this case to DD 1 when it transferred the shares of this case to D 206 at the time of transfer on or around 2006, and it is difficult to view that CCC transferred the shares of this case to the Plaintiff at the time of transfer of the shares of this case to D 1, a 2006. The Plaintiff’s transfer of the shares of this case to D 2, the Plaintiff’s transfer of the shares of this case to D 1, a 2006. The Plaintiff’s transfer of the shares of this case to D 2, a transfer date of the shares of this case to D 1, the Plaintiff’s transfer date of the shares of this case.

C) Calculation of specific donated value

(1) Article 60(1) of the former Inheritance Tax and Gift Tax Act stipulates that the value of the property on which the gift tax is levied is based on the market price as of the date of donation. With regard to the calculation of the specific value of the property, Articles 33 through 42 of the same Act stipulates that the method of calculating the value of the donated property by individual type of donation is an example of the method of calculating the value of the donated property. Therefore, in the case of the gift tax under Article 2(3) of the same Act, the value of the donated property shall be calculated in principle by applying mutatis mutandis only when the taxation requirements, type of transaction, economic substance, etc. are identical or similar to those under Articles 33 through 42 of the same Act (Article 32 of the Inheritance Tax and Gift Tax Act amended by Act No. 11609 of Jan. 1, 2013). In this regard, the amount equivalent to the market price of the donated property shall be deemed the value of the donated property without compensation, notwithstanding Articles 39 through 31-4, 39-4, and 41 of the same Act.

(2) In light of the following: (a) there is no dispute between the parties that the instant shares were donated to the Plaintiff in the form of sale and purchase; and (b) it is difficult to view that the said “pro rata donation” is a provision on the transfer of profits following low-price transfer or an example provision on the calculation of other detailed donated values and its substance are similar, so the value of the property subject to the gift tax in this case ought to be calculated according to the current market price as of the date of donation, i.e., the current market price as of May 19, 2010.

Accordingly, when calculating the value of donated property, the amount of KRW 0,00,000,00, which is the market value of the shares of this case assessed according to the supplementary evaluation method as of May 19, 2010 (i.e., the market value of KRW 000,000 per share x 0,000) is the value of donated property. Considering the Plaintiff’s circumstances, the Defendant accepted the Plaintiff’s assertion that the Defendant spent KRW 00,00,000 per share in the process of acquiring the shares of this case, and it is deemed that the Plaintiff was spent in the process of 'contribute donation' (i.e., the Plaintiff failed to clearly explain the source and specific payment method of KRW 0,00,00 in the course of the investigation, and in fact, it is difficult to regard the acquisition price of shares of this case as the price for acquiring the shares of this case) and so deducted the above amount as the actual value of the Plaintiff’s property value of the Plaintiff’s property in this case. Rather, it appears to be unlawful.

On the other hand, the plaintiff argues that since the substance of the "pro rata donation" through the transfer of shares in this case is similar to the "donation of profit from transfer at low price" under Article 35 of the former Inheritance Tax and Gift Tax Act, the plaintiff should make the final amount calculated by deducting the smaller amount of 30/100 or 300 million won at the market price from the difference between the price and the market price as the value of the gift. However, the above donation provision is premised on the transfer and acquisition transaction, and it cannot be deemed that the CCC and the plaintiff have a direct transfer and acquisition transaction between the donor and the donee, as in this case, as it is based on the premise of the transfer and acquisition transaction, and thus

D) Ultimately, the Defendant calculated the value of donated property lawfully under the former Inheritance Tax and Gift Tax Act, and the Plaintiff’s aforementioned assertion on a different premise is without merit.

2) Whether the principle of good faith is violated

A) In general, in order to apply the principle of trust and good faith to the tax act of the tax authority in tax legal relations, the tax authority should express the public opinion that is the subject of trust to the taxpayer, and the taxpayer should not be responsible to the taxpayer for the trust that the tax authority’s statement of opinion is justifiable, and the taxpayer must act in trust and what is the subject of the tax authority’s statement of opinion. Third, the taxpayer should act in trust and what is against the above statement of opinion. Fourth, the tax authority’s disposition against the above statement of opinion should result in the violation of the taxpayer’s interest (see Supreme Court Decision 2001Du9103, Nov. 26, 2002). Such principle of trust protection or the principle of respect for tax practices stipulated in Article 18(3) of the Framework Act on National Taxes applies only in special circumstances where it is deemed that the taxpayer’s trust is consistent with the concept of justice even if it sacrifices the principle of legality (see Supreme Court Decision 201Du1253, Oct. 25, 2002).

B) According to the witness FF’s testimony and the statement in Gap evidence No. 4, in 201, ○○○○○ National Tax Service’s cross-audit and inspection on the defendant’s cross-audit, and the auditor conducted an audit on the change of shares in BB. On September 15, 201, the plaintiff received shares at low price from DD, etc., and paid gift tax thereon. At that time, the fact that the defendant requested the plaintiff to submit explanatory data, etc. on the acquisition of the shares of DD in this case at a low price of KRW 00,000 at face value.

However, the following circumstances, which can be acknowledged by comprehensively considering the evidence and the purport of the entire pleadings, i.e., ① the tax authority made a correction disposition within the exclusion period to correct the errors of its taxation disposition or taxpayer's return, and real equity in taxation can be realized. In this case, the defendant seems to have clearly identified the "compact donation" between the plaintiff and CCC through an additional investigation conducted at around 2011 by the ○○○ National Tax Service, and ② even if the plaintiff was found at the time of cross-inspection on around 2011, it was difficult to find that there was no further taxation, and it was hard to find that the plaintiff did not present the plaintiff's opinion that it was difficult to view that there was no other reason for the plaintiff's return or notification to pay only the gift tax on the low price of shares between D, etc., rather than the "compact donation", ③ even if the defendant did not have any public opinion on the reasons for the acquisition of the gift tax on D and D, it is difficult to view that there was no other reason for the plaintiff's declaration or notification.

C) Ultimately, the instant disposition is difficult to be deemed to have violated the principle of good faith, and therefore, the Plaintiff’s above assertion is without merit.

3) Whether the imposition of additional tax is illegal

A) The portion of penalty tax to be reported in an unlawful manner

(1) Article 47-2(1) of the former Framework Act on National Taxes (amended by Act No. 9968, Jan. 25, 2010; hereinafter “former Framework Act on National Taxes”) provides that where a taxpayer fails to file a tax base return by the statutory deadline for filing a tax return, an amount equivalent to 20/100 of the calculated tax amount under the tax-related Acts shall be added to the payable tax amount or deducted from the refundable tax amount. Paragraph (2) of the same Article provides that where a taxpayer violates the duty to report national tax base or tax amount by improper means (referring to a method prescribed by Presidential Decree as violating the duty to report because the taxpayer conceals or disguises all or part of the fact that serves as the basis for calculating the tax base or the amount of national tax by improper means, the amount equivalent to 40/100 of the reported tax base shall be added to the amount calculated by multiplying the calculated tax amount by the ratio occupied by the amount of tax base. Article 27(2) of the Enforcement Decree of the Framework Act on National Taxes provides that the taxpayer shall obtain false recording, fraudulent or other recording, fraudulent or document, fraudulent, fraudulent or document.

Therefore, in order to fall under the above "unfair method", it means that there is a deceptive scheme or other active act that makes it impossible or considerably difficult to impose and collect taxes as a means of tax evasion, and without accompanying such an act, the fact that a taxpayer does not simply submit a tax return under the tax law or underreporting the tax base and does not constitute the fact that a taxpayer does not pay taxes (see, e.g., Supreme Court Decision 2005Do370, Mar. 25, 2005).

(2) In light of the aforementioned relevant statutes and legal principles, whether the Plaintiff could be deemed to have failed to report gift tax by the statutory due date of return after acquiring the instant shares from CCC on May 19, 2010, taking into account the health care of the following circumstances, namely, (i) the instant shares were actually owned by CCC and were transferred to DDR, and thus, the agreement on the acquisition of shares made between CCC and DDD were deemed to have been falsely prepared to transfer their names only in appearance, and (ii) such DD et al., even if they were not at the right or location to sell the instant shares to the Plaintiff, it was difficult to determine that the Plaintiff would have entered into a false stock acquisition agreement with the Plaintiff in order to decrease the “donation”, and (iii) the Plaintiff could not be found to have been able to accurately acquire the gift tax by means of a fraudulent scheme, such as making it difficult for CCC and DD to accurately collect the gift tax base (i.e.,, making it difficult for the tax authority to ascertain that it could not be subject to any tax investigation.

Therefore, the plaintiff's above assertion is without merit.

B) As to the duplicate taxation of additional tax for unfaithful payment

According to the above evidence and the purport of the whole argument, the defendant can be recognized as having deducted not only the principal tax of the gift tax paid after the deadline from the total amount of the gift tax, but also the penalty tax paid in good faith through the return. Thus, the plaintiff's assertion that the penalty tax paid in duplicate was imposed on the principal tax of the gift tax already paid in 00,000,000 shall be without any need to further examine."

Therefore, the disposition of this case is lawful where the remaining portion of the share of this case calculated by subtracting the amount deemed to have been disbursed by the plaintiff from the market price as of May 19, 2010 is deemed to be the value of the property of this case, and the gift tax (principal tax), non-reported additional tax, and additional additional tax for unfaithful payment is imposed.

3. Conclusion

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