Cho Jae-2015- Middlebuan-001 (Law No. 15, 2016.29)

The provision on deemed donation for title trust shall apply in cases where the actual owner and the nominal owner have made registration, etc. in the name of the nominal owner by agreement or communication.

The provision on deemed donation for title trust shall apply in cases where the actual owner and the nominal owner have made registration, etc. in the name of the nominal owner by agreement or communication.

Legal fiction of donation of title trust property under Article 45-2 of the Inheritance Tax and Gift Tax Act

2015Guhap68902 Revocation of Disposition of Imposition of Gift Tax

AA

Head of △ District Office

April 27, 2016

May 18, 2016

1. The Defendant’s imposition of KRW 0,00,000,000, which was imposed on the Plaintiff on February 18, 2014, shall be revoked.

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

Cheong-gu Office

The same is as the order (the date of the disposition stated in the complaint's purport of the claim seems to be the date of February 17, 2014, "the date of the disposition" seems to be the clerical error of February 18, 2014).

1. Details of the disposition;

A. On July 20, 2012, SS requested the Plaintiff to invest KRW 2.5 billion, an amount equivalent to 1,242,257 shares of KK, among March 2012, 2012, when it was intended to acquire KK as a stock company (DDD, which was a stock company, and its trade name was currently ○○○; hereinafter referred to as “K”).

B. However, the Plaintiff did not have sufficient financial resources to raise KRW 2.5 billion, and SS paid KRW 50 million to the Plaintiff, the remaining KRW 2 billion, by offering YY as security, borrowed funds with KRW 1,242,257, and the Plaintiff shall make an investment by re-loaning from YY from YY. On March 28, 2012, the Plaintiff agreed to take over the shares above 1,242,257 (hereinafter “the shares acquired”) around March 28, 2012, and thereafter, on March 30, 2012, the Plaintiff reported on the status of possession, such as shares that “the Plaintiff had acquired the shares acquired.”

C. Meanwhile, on June 7, 2012, 816,257 shares that were acquired in the instant case were transferred to the Plaintiff’s name.

D. Of the foregoing 816,257 shares, 191,000 shares of the 816,257 shares were offered as collateral to GGG, a bond manager, on March 27, 2012. GG loaned KRW 700,000 of the acquisition fund toY. HH, who was working as a non-registered director of KK, sold the said 191,00 shares on August 27, 2012, and repaid the debt to GG with the purchase price.

E. Of the foregoing 816,257 shares, 600,000 shares out of the 816,257 shares (hereinafter referred to as “instant shares” was provided as collateral to ZZ on May 9, 2012. The ZZ has leased KRW 1.3 billion of the acquisition fund to YY. The said 600,000 shares was sold to foreign investment companies, and Y was sold to YY on August 21, 2012, and YY received KRW 1.377,00,000 out of the purchase price and received KRW 955,500,000 in the remainder.

F. From September 25, 2013 to November 25, 2013, the director of ○○ Regional Tax Office: (a) conducted an investigation into corporate tax integration with respect to KK; and (b) notified the Defendant of the taxation data stating that “SS was a title trust with the Plaintiff on June 7, 2012.”

G. Accordingly, on February 18, 2014, the Defendant deemed that the Plaintiff donated the outstanding shares pursuant to Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 13557, Dec. 15, 2015; hereinafter “former Inheritance Tax and Gift Tax Act”) to the Plaintiff, and imposed and notified the Plaintiff of KRW 0,000,000 as gift tax for the year 2012 (hereinafter “instant disposition”).

H. On October 14, 2014, the Plaintiff appealed to the Tax Tribunal, but the Tax Tribunal dismissed the Plaintiff’s request on June 29, 2015.

[Reasons for Recognition] Uncontentious Facts, Gap evidence 1, 5, 7, 8, Eul evidence 1, 2, Eul evidence 3-1, Eul evidence 8-1, Eul evidence 1, 2, Eul evidence 18-1, Eul evidence 21-1, Eul evidence 21-2, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition is unlawful for the following reasons.

1) In order to establish the legal fiction of title trust property under Article 45-2(1) of the former Inheritance Tax and Gift Tax Act, “title trust agreement” exists. However, only the Plaintiff was aware that he/she actually acquired the outstanding shares, and there was no agreement on title trust with the SS on the outstanding shares.

2) Since there was no tax evaded through title trust of the pertinent shares, and the Plaintiff did not have the purpose of tax avoidance, the deemed donation of title trust property is not established pursuant to the proviso of Article 45-2(1)1 of the former Inheritance Tax and Gift Tax Act.

B. Relevant statutes

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

C. Facts of recognition

1) The Plaintiff acquired the instant acquired shares worth KRW 2.5 billion and paid KRW 500 million to SS, and the remainder of KRW 2 billion provided YY as collateral and provided YY’s outstanding shares, thereby re-financing funds from the bond company by way of borrowing from YY.

2) On August 21, 2012, the Plaintiff demanded SS and YY to change the remainder after deducting the costs from the disposal proceeds of 600,000, out of the shares in question, as investment gains, SS and YY proposed that the Plaintiff make an investment in the non-listed shares. However, according to SS and YY’s other proposals, the Plaintiff refused it, but the Plaintiff lent 900 million won to J (KK representative director) and decided to make an investment in the non-listed shares in the name of JJ. Accordingly, SS and YY made a monetary loan agreement with the effect that s and Y lent 90,000 won to J.

3) On June 21, 2013, in collusion with YY, JJ, and SS, the Plaintiff was indicted for violating the Financial Investment Services and Capital Markets Act (○○○ District Court 200○○○○ District Court 200, 60 , 70 , 70 , and 20 ) on the following grounds: “The actual owner of the acquired stocks of this case was in collusion with YY, JJ, and SS, and the actual owner of the acquired stocks of this case was in charge of KK’s disclosure of the Plaintiff even though YY and SS, and the Plaintiff was charged with the violation of the Financial Investment Services and Capital Markets Act (○○○○ District Court 200 , 200 , 200 , 200 , 200 , and 00 , 2014). The Plaintiff appealed on June 20, 2014.

B) On October 6, 2014, the Plaintiff appealed, and the Supreme Court reversed the ○ High Court’s judgment on October 23, 2015 (Supreme Court Decision 2000Do8200 Decided October 6, 2014) stated in the ○ High Court on the ground that, despite being aware of the fact that the Plaintiff was a de facto holder of YY and SS, it is difficult to deem that the Plaintiff made a false statement as if he was a stock holder, without reasonable doubt (Supreme Court Decision 2000Do820 Decided 6, 2014). The ○ High Court acquitted the Plaintiff on January 23, 2015 (hereinafter referred to as “related criminal case of the instant case”).

[Basis] Facts without dispute, Gap evidence 7, 8, Eul evidence 9-1, Eul evidence 2, Eul evidence 3-1, Eul evidence 18-3, the purport of the whole pleadings

D. Determination

1) The provision on deemed donation under Article 45-2(1) of the former Inheritance Tax and Gift Tax Act applies to a case where the actual owner and the nominal owner have made a registration, etc. in the name of the nominal owner by agreement or communication with respect to property which requires registration,

In this case, considering the health account, Gap evidence Nos. 7 and 8, Eul evidence No. 9-1, Eul evidence No. 3-5, Eul evidence No. 8-1, and Eul evidence No. 8-2 and the overall purport of the pleadings, the plaintiff's funds out of the acquisition fund of this case are merely KRW 50 million, and the remaining 2 billion is funds borrowed from the bond company as collateral. However, it is difficult to view the facts acknowledged in the above Da as above that the plaintiff's new shares were purchased as collateral and stated in the Y-2, Eul evidence No. 8-1, Eul evidence No. 13, and Eul evidence No. 13-1, and Eul evidence No. 13-1, and that the plaintiff's new shares were purchased as collateral by the Y-2, and it is difficult to view that the plaintiff's new shares were purchased as collateral for investment in the Y-2, and that the Y-5,000,000,000 won stated in the Y-13.

2) The instant disposition based on the premise that there was an agreement between the Plaintiff and SS on title trust regarding the pertinent shares is unlawful.

3) Meanwhile, Article 45-2(1)1 of the former Inheritance Tax and Gift Tax Act provides that, under the premise that a title trust agreement is constituted, a donation shall not be deemed as an exception to this, if there is no tax avoidance purpose. Thus, insofar as it is difficult to deem that there exists a title trust agreement as above, the existence of the purpose of tax avoidance is not examined.

3. Conclusion

The plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.