Cho Jae-2018-Mining-2244 (2018.04)

Whether the Plaintiff’s parents donated the instant money to the Plaintiff

It is recognized that the Plaintiff’s parents paid the instant money to the Plaintiff and each of the instant companies constituted the concept of donation under Articles 2(3) and 4-2 of the Inheritance Tax and Gift Tax Act. Unlike the above, there is no evidence to support that the said money was included in the transaction or act excluded from the taxable subject of gift tax or the scope of taxation.

Articles 2(3) and 4-2 of the Inheritance Tax and Gift Tax Act

Revocation of Disposition Imposing Gift Tax

AA

BB Director of the Tax Office

2019.06.13

2019.07.18

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of gift tax of KRW 000,000,000 against the Plaintiff on October 0, 000 shall be revoked.

1. Details of the disposition;

A. On April 28, 2010, the Plaintiff established ○○○○○○ and a limited liability company (hereinafter referred to as “○○○○○○○○○○○○ club” and “○○○○○○○○○○ club,” respectively, and held office as a representative director around that time. B. The Plaintiff purchased ○○○○○○○○ Dong 000-0 on June 20, 2007 and completed the registration of ownership transfer on March 13, 2013 from the 29th day of the same month to the 000, the same 000-0, and 000-00-00, and each of the above lands constructed a private teaching institute on each of the above lands, and completed the registration of ownership preservation on March 24, 2009.

C. On October 30, 2012, the Plaintiff purchased ○○○○○○-dong 000-00 (hereinafter referred to as “each of the instant lands”) from October 30, 2012, and completed the registration of ownership transfer on the same day. On the said land, the Plaintiff newly constructed three-story buildings of reinforced concrete structure (refinite concrete roof), and completed the registration of ownership preservation on February 27, 2013.

D. From August 28, 2017 to October 16, 2017, the director of the regional tax office of ○○○○○○○○, the parents of the Plaintiff, and the head of the Plaintiff’s father, after conducting an investigation into the source of funds, the head of the regional tax office of ○○○○○○○○○, the father of the Plaintiff deposited 79 million won to the Plaintiff on October 24, 2013, and 770 million won deposited to ○○○○○○○○ on May 14, 2014, the mother of ○○○○○○○○○○○, the mother of which deposited to ○○○○○○○○○○○○○○○○○○○○○○ on June 2, 2014, deemed the Plaintiff’s donation of 00,000 won in total and 00,000 won in total, and the Defendant notified the Defendant of each of the said disposition of 00,000.

E. The Plaintiff appealed and filed a tax appeal with the Tax Tribunal, but was dismissed on December 4, 2018.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 5, Eul evidence 1 (including each number; hereinafter the same shall apply), the purport of the whole pleadings

2. The plaintiff's assertion

A. The instant disposition was unlawful since it applied the current Inheritance Tax and Gift Tax Act, not at the time when the Plaintiff’s liability to pay gift tax was established.

B. The Plaintiff’s parents lent the instant money to each of the instant companies, and since the deposit of the said money is included in Article 41(1) of the Inheritance Tax and Gift Tax Act, the instant disposition that imposed gift tax by deeming it as a donation to the Plaintiff is unlawful.

3. Relevant statutes;

It is as shown in the attached Form.

4. Determination

A. Applicable statutes of the instant disposition

Comprehensively taking account of the aforementioned evidence evidence evidence evidence No. 7 and the purport of the entire argument, the Defendant may recognize the fact that Article 2(3), Article 31(1), and Article 32 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 13557, Dec. 15, 2015; hereinafter the same) was applied to each gift, which was enforced on October 24, 2013; May 14, 2014; and June 2, 2014; and thus, the Plaintiff’s allegation in this part is without merit.

B. Whether to give gift to the plaintiff

1) Article 2(1) of the former Inheritance Tax and Gift Tax Act provides that “The gift tax shall be subject to taxation of donated property from another person’s donation.” Article 2(3) of the former Inheritance Tax and Gift Tax Act provides that “Where it is deemed that the inheritance tax or gift tax has been unjustly reduced by indirect method through a third party or by going through two or more acts or transactions, regardless of the name or form of such acts or transactions, it shall be deemed that a party directly trades according to the economic substance and thus, the inheritance tax or gift tax shall be levied as prescribed by this Act” (Article 14(3) of the Framework Act on National Taxes also provides that “in cases where it is deemed that the party concerned has directly reduced the inheritance tax or gift tax by taking the indirect or indirect method through a third party, or by taking the indirect or at least two acts through a third party or by taking the benefits of the tax-related Acts or by taking the benefits of the tax-related Acts or by taking the title, form, purpose, etc. of the actual taxation, it shall be deemed that the party concerned directly or indirectly receives the benefits of the tax-related act or transaction.”

As above, the former Inheritance Tax and Gift Tax Act and the Framework Act on National Taxes requires the imposition of gift tax according to the economic substance regarding the act of unfairly reducing gift tax by interfering with a third party or multiple stages of transactions. The purpose of imposing gift tax is to deny such various stages of transactions in order to cope with the act of unfairly reducing gift tax while bypassing or transforminging the transaction subject to gift tax, and to ensure that gift tax can be imposed by deeming the same as a single act or transaction subject to gift tax depending on substance. However, a taxpayer may arbitrarily choose to take any legal form in order to achieve a specific economic purpose, and the tax authority shall also respect the legal relationship in accordance with the legal form chosen by the parties, barring any special circumstance. Moreover, the outcome of transactions after multiple stages of transactions can be reflected not only in compensating for losses, etc., but also in the relevant party’s act or external factor, etc., which are not directly related to the relevant transaction, and thus, to readily conclude that the relevant party’s transaction constitutes an identical transaction subject to gift tax under Article 24(1) of the former Inheritance Tax Act by taking account of its economic effect or substance.

Meanwhile, in light of the fact that the complete comprehensive taxation system of gift tax was introduced under the former Inheritance Tax and Gift Tax Act in order to cope with an irregular inheritance and gift in advance, and Article 2(3) was introduced with the concept of comprehensive gift under the tax-related law and uniformly converted the former provision (Articles 32 through 42) into the provision on the calculation of donated property (hereinafter “value calculation provision”), in principle, if a transaction or act constitutes the concept of gift under Article 2(3), taxation of gift tax shall be possible pursuant to Article 2(1) of the same Act: Provided, That in cases where an individual value calculation provision limits only a specific transaction or act while regulating a specific type of transaction or act to be subject to gift tax in order to ensure the predictability of taxpayers and promote the stability of tax law relations, and the scope of taxation can be deemed to have set a limit on the scope and limit of gift tax by prescribing the scope of taxation of gift tax. In such cases, even if a transaction or act excluded from the subject or scope of taxation of gift tax among transactions or act under the individual value calculation provision, it cannot be seen as taxation of gift tax on gift tax (see Supreme Court Decision 20128Du214.

2) The following facts can be acknowledged in full view of the evidence evidence Nos. 8 through 12, evidence Nos. 2 and 3 as well as the purport of the entire pleadings.

A) ○○○○○○ borrowed KRW 0,000,000,000 from ○○ Bank, and paid it to the Plaintiff, and then included it in the account book as a short-term bond (short-term bond) against the Plaintiff. The Plaintiff purchased each of the instant lands at KRW 0,000,000,000, including the above KRW 0,000,000,000.

B) On October 24, 2013, both ○○○○○○○○○○○ Account deposited KRW 00,000,000 into the Plaintiff’s account, and the Plaintiff deposited the same amount on the same day into the Plaintiff’s account. In addition, on May 14, 2014, both ○○○○○○○ deposited KRW 00,000,000 into the ○○○○○○ Account. On June 2, 2014, ○○○○○○○○○○○○○○ Account deposited KRW 0,000,000 in money deposited as above. ○○○○○ and ○○○○○○○○ club repaid KRW 0,00,000 to the ○○○○○ Account.

C) With respect to the instant money, ○○○○○○○○○ was responsible for accounting as the collection of claims (provisional payment) against the Plaintiff, and as the short-term debt (provisional payment) of shareholders’ officers against the Plaintiff increased to the amount that he/she received, the amount that he/she received was transferred.

3) The purport of the relevant Acts and subordinate statutes as seen earlier and the above facts are as follows: (a) ○○○○ borrowed the purchase cost of each of the instant land from ○○○ Bank and then sublet it to the Plaintiff; (b) the Plaintiff could purchase each of the instant land; (c) ○○○○○○○○○○ Bank paid the loan to ○○○○ Bank with the instant money deposited by ○○○○○○○ and ○○○○○○○○; (c) the Plaintiff acquired each of the instant land without any cost; and (d) it appears that there is no reason to undergo the process of borrowing, lending, purchasing, and repaying the instant real estate with the intention to impose gift tax on the Plaintiff; (c) the Plaintiff alleged that the instant money was lent to each of the instant companies by ○○○○○○○○ Bank; (d) in light of the following circumstances, the concept of the purchase of each of the instant real estate and the preparation of funds, the details of accounting settlement of each of the instant money and the deposit amount of each of the gift tax pursuant to Article 2 of the former Inheritance Tax Act and Gift Tax Act.

5. Conclusion

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