Cho Jae-2015-2452 (Law No. 12, 2015)

Whether the purpose of tax evasion is to avoid tax because the shares in question were trusted in trust to the plaintiffs who were new shares

The title truster cannot be deemed to have been specified in light of the actual largest shareholder's exercise of rights and management rights, such as appointing executives of the company and receiving business reports from the president.

Article 42 of the Inheritance Tax and Gift Tax Act

2015Guhap9853 Revocation of Disposition of Imposition of Gift Tax

NowonA Foreign Affairs

AA Head of the tax office

on October 28, 2017

on October 21, 2017

1. The plaintiffs' respective claims against the defendants are dismissed in entirety.

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

Cheong-gu Office

Imposition of each gift tax indicated in the details of notice of gift tax by Plaintiff 1, which the Defendants against the Plaintiffs.

(including additional tax) shall be revoked.

1. Details of the disposition;

(a) AAA (hereinafter referred to as "AA") is a company that runs the wholesale and retail business of publication of books on January 12, 1990.

B. On November 15, 2004, thisA, who was in office as the representative director of the AA, transferred 60,000 shares of the AA (hereinafter referred to as "share shares") held by it to its officers and employees, including the plaintiffs, and completed the transfer.

C. The Defendants applied Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter “former Inheritance Tax and Gift Tax Act”) to the Plaintiffs on the ground that the Plaintiffs received title trust from the U.S., the actual owner of the AAA’s shares (hereinafter “instant disposition”). As indicated in the notice of gift tax by the Plaintiff, the Defendants determined and notified gift tax (hereinafter “instant disposition”).

D. The Plaintiffs were dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on April 20, 2015, but was dismissed on August 12, 2015.

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

The Plaintiffs received title trust from the PacificA, which is not a U.S. individual, and since the PacificAA is exempt from taxation on profit-making business as a religious organization, there is no room to acknowledge the purpose of tax avoidance. There is a doubt as to whether the PacificA, which is a religious organization, may be a shareholder of the AAA which performs profit-making business, and if the AA becomes a juristic person operated by the PacificA, there is a concern that the AA might be disadvantaged, and there was a concern that its officers and employees may suffer disadvantages, and there was no attempt to avoid tax as a title trust to the Plaintiffs, who are new teachers, for such reasons as inspiring their self-esteem and inspiring their confidence.

(b) Related statutes;

Attached Form 2 is as shown in the relevant Acts and subordinate statutes.

C. Determination

1) Determination as to the title truster of outstanding shares

A) The Defendants asserted that the title truster of the shares at issue is the United StatesA in consideration of the fact that the United StatesA appoints executives of the AA and receives a business report from the president, etc., and exercises rights and management rights as the largest shareholder, but it is insufficient to recognize the fact that the relevant shares are owned by the United StatesAA solely on the basis of each of the statements in subparagraphs 2 through 14, and 16 through 30 above.

B) However, the Plaintiffs are parties to the title trustor of the pertinent shares, and the Defendants added the same content to the grounds for disposition through a preparatory document dated December 19, 2016. Generally, the subject matter of a taxation revocation lawsuit is the objective existence of the amount of tax determined by the tax authority. As such, the tax authority may submit new data that can support the legitimacy of the tax base and tax amount recognized in the pertinent disposition, or exchange and change the reasons within the scope of maintaining the identity of the disposition, and it does not necessarily mean that only the data at the time of the disposition should determine the legitimacy of the disposition or that only the reasons for the disposition at the time of the disposition can be asserted (see, e.g., Supreme Court Decision 2009Du1617, Jan. 27, 201). According to the aforementioned circumstances, it is not reasonable to view the Plaintiffs’ assertion that the initial reason for the disposition of the instant shares was the primary reason for the disposition of the instant shares and the grounds for additional disposition only within the scope of 2009Du170, supra.

2) Determination as to whether the purpose of tax avoidance exists

A) As long as the fact of title trust is acknowledged, the claimant has the burden of proving that there was no purpose of tax avoidance. The nominal owner who bears the burden of proving the burden of proof has a clear objective of tax avoidance to the extent that there was no objective of tax avoidance in the title trust, and that there was no tax avoidance in the future at the time of the title trust or in the future, and should be attested to the extent that there was no doubt if the ordinary person is based on objective and conclusive evidence (see, e.g., Supreme Court Decision 2007Du17175, Sept. 8, 201). The burden of proof for non-taxable practice is determined by Supreme Court Decision 2001Du403, Sept. 5, 2003.

B) Article 3(1) and (2) of the former Corporate Tax Act (amended by Act No. 8141 of Dec. 30, 2006) provides that a non-profit domestic corporation shall levy corporate tax on income earned from profit-making business. Each statement in Gap evidence Nos. 4 and 22 (including the serial number) is insufficient to recognize that a non-taxable practice that grants a permanent exemption from corporate tax, etc. to a religious organization was established. Rather, even according to the plaintiffs' assertion, since all shares issued by AA or its affiliates (excluding some affiliates that held shares in the name of the EAA) were nominal trust in the name of the EA’s faith, it is difficult to recognize that the EA or its affiliates were in a state of nominal trust in the name of the EA’s new company. Accordingly, the EA could escape from the application of progressive tax rate for dividend income, secondary tax liability under the Framework Act on National Taxes, deemed acquisition tax under the Local Tax Act, etc., and the plaintiffs’ assertion that Article 15(2) of the former Tax Act could not be denied the application of wrongful calculation.

3. Conclusion

Therefore, the plaintiffs' claims against the defendants are dismissed as it is without merit. It is so decided as per Disposition.