Seoul Administrative Court 2009Guhap10420 ( December 17, 2009)

Cho High Court Decision 2008Do1824 ( December 18, 2008)

It does not go against the principle of no taxation without the law of no taxation without the substance over form principle.

Since a stock title trust contributes to preventing use as a means of concealing a gift or as a means of avoiding a contribution to gift tax, it does not go against the principle of the principle of no taxation without the law of no taxation without the law of no taxation.

The contents of the decision shall be the same as attached.

1. All appeals by the plaintiffs shall be filed.

2. The costs of appeal are assessed against the plaintiffs.

제1심 판결을 취소한다. 피고 □□세무서장이 원고 정AA에 대하여, 피고 △△세무서장이 원고 박BB에 대하여, 피고 ○○세무서장이 원고 조CC에 대하여, 피고 ♤♤세무서장이 원고 김DD에 대하여 한 별지 증여세 부과처분 내역 기재 각 위 원고별 해당 증여세 부과처분을 모두 취소한다.

1. Any part citing a judgment of the first instance;

The reasoning for the court's explanation on this case is as follows: "If the market price of each issue of this case is assessed by supplementary evaluation methods of the market price of each issue of this case, it is difficult to calculate the market price in accordance with Article 63 (3) of the Inheritance Tax and Gift Tax Act," "in accordance with Article 63 (3) of the Inheritance Tax and Gift Tax Act," and "40,000 won in accordance with Article 63 (3) of the Inheritance Tax and Gift Tax Act," and "40,000 won in accordance with Article 63 (3) of the Inheritance Tax and Gift Tax Act," and the reasoning for the judgment of the court of first instance is as stated in the reasoning for the judgment, except for the addition of the judgment on the plaintiffs' assertion as follows, it shall be cited as it is in accordance with Article 8 (2)

2. Additional parts

A. The plaintiffs' assertion

(1) Article 41-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010 of Dec. 30, 2003) and Article 45-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7580 of Jul. 13, 2005) (hereinafter referred to as the “legal provision of this case”) which are the provision on deemed donation of a trust under the name of this case shall be contrary to the principle of no taxation without law and the principle of substantial taxation, since the State’s taxation authority infringes on the property rights of the people beyond the actual ability of the taxpayer.

(2) The instant legal provision imposes high-rate gift tax by equally treating the title trustee and the person who actually received the tax-bearing capacity by acquiring only the title trustee and the person who had the tax-bearing capacity by acquiring the title trustee’s property without acquiring substantial rights or interests to the title trust property, thereby violating the principle of equality under Article 11(1) of the Constitution.

(3) If the gift tax due to the deemed donation of title trust has the nature of an administrative sanction, the principle of proportionality or the principle of excessive prohibition as stipulated in Article 37(2) of the Constitution shall be applied in relation to the purpose and means to be achieved by the sanction.

B. Determination

(1) Whether the substantial taxation violates the principle of no taxation without law, the principle of substantial taxation, and the principle of equality

The imposition of gift tax on a person who does not receive a gift may be contrary to the principle of substantial taxation. However, in a case where a title trust is used as a means of concealing a gift, the imposition of gift tax may be allowed as an exception to the principle of substantial taxation because it is recognized that it is reasonable in an appropriate way to realize the equity of tax justice and tax, and thus, it is recognized as an exception to the principle of substantial taxation. In addition, a provision of deemed donation is not applicable to the case where the purpose of evading a gift tax is not recognized (the reversal of presumption), but a provision of deemed donation does not apply to the case where the purpose of evading a gift tax

In addition, when considering the responsibilities of the title truster who made it possible for the title truster to evade gift tax by acting in the title trust, the question of who is to impose the primary tax liability among the title truster and the two title trustees, whether to take into account the background and type leading to the title trust, the degree of reflectivity inherent therein, etc., and the method and degree of such consideration also belong to the legislative discretion and the principle of equality are not in violation of the Constitution (see Constitutional Court Decision 2004HunBa40, Jun. 30, 2005; Decision 2005HunBa24, Feb. 4, 2005).

(ii)whether it violates the principle of proportionality or the principle of proportionality;

(a)whether the means are adequate

With respect to the systematic and justifiable violation of the law, if there is a public interest reason to allow such a violation, the violation can be justified, and it cannot be viewed as a violation of the principle of prohibition of persons in legislation, and it does not lead to the problem of unconstitutionality unless the legislative discretion significantly deviates from the limit, because it belongs to the original legislative discretion.

However, the title trust is a system formed and developed by a judicial precedent without any legal basis, and externally transfers the ownership of the property to another person, but the actual right holder agrees to hold ownership inside the same way. If the property such as shares is donated and concealed by using the title trust, it is difficult to find it as limited number of persons and ability in the tax authority to impose gift tax by finding it difficult to impose gift tax if the ownership of shares is distributed by using the title trust. In addition, if the ownership of shares is distributed by using the title trust, the burden of income tax can be reduced because it can avoid the progressive burden of income tax if it is left alone, it would be easy for good taxpayers to evade gift tax, etc. through the title trust.

The legal provision of this case, as such, prevents the avoidance of taxes, such as gift tax by using title trust, thereby achieving tax justice and tax equality, and ensuring that real substance over form is realized, the legitimacy of its purpose can be recognized. Furthermore, the legislative method that selects the legislative method to estimate the title trust as a gift is appropriate to achieve the legislative purpose of preventing the act of tax evasion, and it cannot be readily concluded that this method causes considerable damage to taxpayers compared to other alternative means such as avoiding punishment or penalty.

(b)the minimum extent of damage;

In order to prevent tax avoidance using title trust, the Act on the Registration of Real Estate under Actual Titleholder’s Name prohibits a title trust agreement with respect to real estate (Article 3), the title trust agreement is null and void (Article 4(1)), and any change in real rights made under a title trust agreement is null and void (Article 4(2)), and any person who violates a title trust agreement imposes a penalty within the limit of 30/100 of the real estate price (Article 5(1)). If a title truster upon whom a penalty surcharge is imposed fails to make a registration under his/her name without delay, the enforcement fine (Articles 10/100 to 20/100) is imposed, and the title truster and the trustee who violates the provisions on the prohibition of title trust are punished by imprisonment with prison labor for not more than five years or a fine not exceeding 200 million won; a trustee shall be punished by imprisonment with prison labor for not more than three years or a fine not exceeding one hundred million won pursuant to Article 7(2), 3 years or a fine not exceeding one hundred million won).

This method is to invalidate a title trust agreement under the substantive law, regardless of whether it is intended to avoid gift tax, and this problem is originally belonging to the jurisdiction of the law and does not include the original regulatory scope of the tax law, and thus is not systematicly appropriate. As such, the criminal punishment of imprisonment or fine may be imposed on both the title truster and the trustee, so such punishment may not be said to be a more minor burden on the taxpayer than the imposition of gift tax. Therefore, it cannot be said that imposing gift tax by the method of imposing the penalty of title trust does not go against the principle of minimum infringement, since it does not go against the principle of minimum infringement.

(c)The proportionality of legal interest;

The imposition of high-rate gift tax on the act of evading gift tax using the title trust is limited to cases where the title trustee is deemed to have a substantial monetary burden, but it is limited to cases where the purpose of evading gift tax is recognized. Since the title trustee has made it possible to avoid gift tax by lending his/her own name, it cannot be held liable to a certain extent. Moreover, it is merely a presumption that there is no such purpose. If it is proven that there is no such purpose, it would be no presumption of gift nor would the disadvantage that the title trustee bears gift tax. Considering this, the imposition of gift tax on the title trust cannot be deemed to be grossly unfair. On the contrary, the imposition of gift tax on the title trust cannot be deemed to have been made by the title trustee through the imposition of gift tax. On the contrary, the imposition of gift tax on the title trust plays an important role in preventing the use of the title trust as a means of concealment of gift or using it as a means of avoiding the progressive burden of gift tax, and therefore, the legal provision of this case also aims to pursue significantly higher public interest than private interest and thus, it does not violate the principle of non-legal interests (see Constitutional Court Decision 2004.

3.In conclusion

Therefore, the disposition of this case is legitimate, and the judgment of the court of first instance is just, and all appeals by the plaintiffs are dismissed. It is so decided as per Disposition.