early 207west2427 (208.02.04)

Requirements for taxation on title trust

When the tax authority imposes gift tax on the grounds of title trust, it should identify who is the title truster.

1. Each disposition of imposition of gift tax of KRW 54,186,020 against the Plaintiffs on February 9, 2007 shall be revoked, respectively.

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

The same shall apply to the order.

1. Circumstances of the disposition;

The following facts are not disputed between the parties, or can be acknowledged in full view of the purport of the whole pleadings in each of the evidence Nos. 1-2, 2, 7, 8, 9, and evidence Nos. 1-1, 1-2.

A. The plaintiff Han-A, the non-party strongB, KimCC, KimD, KimE, SE, SF, UG, UH, MH, and the lowest KK (hereinafter referred to as "eight persons, etc.") acquired the total of 4,389,616 shares of the company MM (hereinafter referred to as "MM") owned by the LLGtech from April 18, 2005 to September 26 of the same year as indicated in the following table, and acquired the total of 5,864,528,142 won. The acquisition value is the total of 5,864,528,142 won.

B. Of the 4,214,614 shares of the said MM acquired in the name of GangwonB or in the name of eight (8) (hereinafter “instant shares”), 4,214 shares from April 18, 2005 to October 28, 2005 were sold to the head of the Korea Stock Exchange, and the price is KRW 20,92,07,630 in total.

C. On April 18, 2005, under the name of the Plaintiff Han-A (the date of actual acquisition of stocks, and the date of purchase on April 1, 2005) 45,000 shares (hereinafter “instant shares”) were acquired. As of August 1, 2005, according to the capital reduction of MM, Plaintiff Han-A whose shares were transferred to 39,951 shares under the name of the Plaintiff Han-A as of August 1, 2005.

D. The Defendant: (a) on the premise that the instant shares were owned by the Plaintiff N and the Plaintiff N are substantially nominal trust with the Plaintiff NN; and (b) on the same day, deemed donation pursuant to Article 45-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter referred to as the “Act”); (c) on February 9, 2007, the Defendant imposed KRW 54,186,020 on the Plaintiff Han-A for the gift tax of 205 (the amount of the gift tax was calculated on August 1, 2005; and (d) on the ground that the MM shares in the Plaintiff Han-A’s name were 39,951 shares or 33,472 shares due to a public official’s mistake; and (d) on the same day, the said gift tax was imposed on the Plaintiff N. on the same day (hereinafter referred to as the “instant disposition”).

E. However, under the premise that the actual owner of the instant shares is the Plaintiff NN’s model, the head of the Seoul Regional Tax Office filed a complaint with the investigation agency on the ground that the PP acquired MM shares, including the key shares, under the premise that the actual owner of the instant shares was the Plaintiff NN’s model, and that it evaded

F. The prosecutor prosecuted the TPP on the charge of violating the Act on the Aggravated Punishment, etc. of Specific Crimes (Tax) and the criminal appellate judgment (Seoul High Court Decision 2008No145, Jun. 4, 2008) rendered a judgment of conviction on the TPP, and the substantial owner of the instant shares was recognized as the TPP. The prosecutor and the TPP appealed on each of the above judgments, but each of the appeals was filed by the prosecutor and the TPP, but the instant shares in each of the appellate brief do not dispute whether it is owned by the TPP.

G. The appeal filed on May 1, 2007 by the Plaintiffs was dismissed on February 4, 2008.

2. Whether the disposition is proper or not. The plaintiffs' proposal

1) The actual owner of the instant shares is the Plaintiff Han-A. Since Plaintiff Han-A acquired the key shares after remitting its funds to Plaintiff Lee N, it cannot be deemed that Plaintiff Lee N made a title trust with Plaintiff Han-A.

2) Even if the Plaintiff Han-A did not recognize that it was the actual owner of the shares at issue, the actual owner is not the Plaintiff NN, and thus, the instant disposition was unlawful as it was erroneous by misapprehending the facts underlying the disposition.

3) Even if the key shares were to be a property trusted to Plaintiff Han-A from the PP to the Plaintiff, it cannot be deemed as a gift pursuant to Article 45-2(1)1 of the Act, since there is no purpose of tax avoidance in such title trust.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Whether the actual owner of the instant shares is Plaintiff NN

All of the instant dispositions are based on the premise that the Plaintiff NN was a de facto owner of the outstanding shares, and that the title of ownership was deposited in the Plaintiff HanA.

First of all, as to whether Plaintiff NN’s actual owner of the outstanding shares was entrusted to Plaintiff Han-A with the title of ownership, each statement of Nos. 2 through 10 (including each number), is insufficient to recognize it, and there is no other evidence to acknowledge it. Rather, in full view of the overall purport of the pleadings in each statement of Nos. 7, 8, and 9, the actual owner of the outstanding shares is Plaintiff Lee NN’s type, and the fact that this PP was held in title trust to Nonparty 8, including Plaintiff Han-B, is recognized is merely a fact that this case’s shares, including the outstanding shares, were held in title trust to Plaintiff Han-B et al.

Therefore, the instant disposition, based on the premise that the Plaintiff NN entrusted the ownership of the shares in question to the Plaintiff Han-A, was unlawful as it found the fact that the disposition was the cause of the disposition.

2) If the title truster is found to be erroneous, whether the imposition of gift tax against the title trustee is legitimate or not, as seen earlier, is not the actual owner of the shares at issue, but the fact that the title trustee is not the title trustee. In such a case, whether the imposition of gift tax against the Plaintiff Han-A

In this case’s disposition on the ground of title trust, Plaintiff Han-A may be exempted from the burden of gift tax by proving that there was no tax avoidance purpose in the above title trust. However, in proving this point, the Plaintiff Han-A will bring about an important difference in the assertion, method of proof, etc. as to who is the truster. As such, the tax authority should specify who is the title truster when imposing gift tax on the ground of a nominal title trust. If such determination is not made, the title trustee must prove that the title truster was either specified by himself/herself as the truster or on the premise of several persons who are the virtual trusters, and that the burden of proof on the fact of title trust, which is a tax requirement, exists with the tax authority.

The instant disposition was based on the premise that the title truster of the shares at issue is Plaintiff N, and there is no evidence to prove that the title truster of the shares at issue is Plaintiff N, as seen earlier. Therefore, the instant disposition is unlawful as it was conducted without any taxation requirement.

3) Sub-decisions

In the end, the disposition of this case is illegal by recognizing the fact that is the cause of the disposition.

3. Conclusion

Therefore, the plaintiffs' claims of this case are justified, and all of them are accepted, and it is so decided as per Disposition.