Seoul Administrative Court 2006Guhap4309 ( October 17, 2007)

National High Court Decision 2006No1881 (Law No. 9.05)

In case where a securities account is opened in the name of a trustee to obtain additional loans, and stocks are held in trust, deemed donation of title trust.

In the case of stock title trust, if it is deemed that there was an incidental intention of tax avoidance as well as other purpose, it cannot be said that there was no purpose of tax avoidance. However, the Plaintiff cannot be said that there was no purpose of tax avoidance in view of the fact that the securities account was opened in the name of the trustee and omitted in the dividend income generated by acquiring stocks

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

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

Purport of claim and appeal

1. Purport of claim

The Defendant’s disposition of imposition of gift tax of KRW 498,51,360 for the Plaintiff on February 4, 2006, and KRW 160,090,620 for the gift tax of KRW 106,482,660 for the gift tax of year 2002, and KRW 123,341,380 for the gift tax of KRW 203 for the gift tax of KRW 203 is revoked.

2. Purport of appeal

It is the same as the disposition.

1. Imposition of gift tax;

From 2001 to 2003, ○○ has acquired 292,410 shares of 11 listed corporations (the total market price as of the date of transfer of title equivalent to 2,002,360,000 won as of the date of transfer of title; hereinafter the same shall apply) in the name of the Plaintiff, which is an ASEAN.

Accordingly, the Defendant determined that the instant shares were trusted in title to the Plaintiff for the purpose of evading tax, and applied the provision on the constructive gift of title trust property under Article 41-2 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 7010, Dec. 30, 2003; hereinafter the same) to the Plaintiff, thereby imposing each gift tax as stated in the purport of the claim on the Plaintiff (hereinafter the instant disposition).

After that, on May 4, 2006, the Plaintiff filed a request with the National Tax Tribunal for a trial on the instant disposition, but the National Tax Tribunal dismissed the Plaintiff’s request on September 5, 2006.

[Grounds for recognition] The items in Gap evidence 1-1, 2, Eul evidence 1-1, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The plaintiff's assertion

(A) The loan amount per capita and the relationship between the Plaintiff’s lending amount and the financial institution’s debt, which was no longer possible to obtain additional loans, title trust the Plaintiff with the instant stocks to obtain a stock security loan by borrowing the Plaintiff’s name, and the tax avoidance resulting therefrom was merely the minor that resulted from the incidental to the instant title trust, and thus, it cannot be deemed that ○○ was the purpose of tax avoidance in the title trust of the instant stocks to the Plaintiffs, and thus, the instant disposition was unlawful.

(B) Unless otherwise, the deemed donation system for the property held in title trust is an exception to the principle of substantial taxation, and the gift tax imposed on this, has the nature of a kind of sanction for the property held in title trust rather than having the nature of tax in the original sense. Therefore, like other administrative sanctions, the instant disposition is subject to the principle of proportionality or the principle of excessive prohibition, which is the principle of restriction on fundamental rights under the Constitution, just like other administrative sanctions. The instant disposition imposes excessive sanctions compared to taxes evaded due to the title trust, and is in violation of the principle of proportionality under the Constitution or the principle of excessive prohibition.

(2) Defendant’s principal

The intent of tax avoidance was to reduce the burden of global income tax, etc. through the distribution of dividend income even if the pertinent shares are held in title trust to the Plaintiff. Since the amount of tax reduction cannot be deemed to be merely a minor tax difference, the purpose of tax avoidance was to ○○ was to achieve tax avoidance. Thus, the instant disposition is lawful.

(b) Related statutes;

It is as shown in the attached Form.

(c) Fact of recognition;

In May 199, ○○ was damaged by a stock investment from around May 199. Moreover, even though intending to obtain a loan from a financial institution for the purchase of stocks, it was no longer possible to obtain a loan due to an existing debt to a financial institution, and even from Korean Securities Finance Corporation that mainly traded by ○○, it was impossible to obtain an additional loan in accordance with the loan limit provision (the above loan limit was increased from KRW 1 billion on April 29, 2002 to KRW 3 billion).

0) At 0, ○○ was opened a securities account in the name of not only the Plaintiff but also 15 persons, including his wife, children, relatives, relatives, relatives, and employees of the company, etc., and the shares acquired in the name of the remaining persons, other than the Plaintiff entrusted the instant shares, etc., was opened and entrusted, and the shares acquired in the name of the other persons were provided as collateral, and used as a loan from the Korea Securities Finance Corporation several times for the settlement of the purchase price

In the year of 2000, the O200 had no record of trust with the third party of the name of his own stock, and the title trust was made since 2001, the comprehensive taxation on financial income was enforced from that time.

Dividend income generated from the stocks held by ○○ fever is KRW 92,243,057 in 2001, KRW 49,710,00 in 202, KRW 177,670,100 in 203, and KRW 20,968,000 in 201 and KRW 267,493,035 in 2002, KRW 575,04,699 in 2003.

Until 2003, the global income tax that was avoided by the title trust to the 15 title trustee, including the Plaintiff’s income tax amount of KRW 5,491,00 (excluding additional taxes and resident tax) is the total amount of KRW 101,336,098 (excluding additional taxes and resident tax).

O. On the other hand, it was revealed that ○○○○○○○○○○○○○-gun, Gyeong-gun, without a business registration, was evading the comprehensive income tax due to the failure to file a global income tax return on the amount of income of 11,318,402,221 won from 200 to 2004, while running the cattle breeding business from 11,318,402,221 won. The tax authority received a notice of the estimated tax amount of KRW 239,140,328 and the penalty amount of KRW 159,592,549.

Facts that there is no dispute over recognition, evidence No. 1-2, evidence No. 1-2, evidence No. 1-2, evidence No. 2, evidence No. 4-1-4, the purport of the whole pleadings.

D. Determination

(1) Whether there is a purpose of tax avoidance

"The legislative intent of Article 41-2 (1) of the former Inheritance Tax and Gift Tax Act is to recognize an exception to the substance over form principle with the purport of effectively preventing tax avoidance by using the title trust system, and realizing the tax justice. Thus, if the title trust was recognized to have been conducted for any reason other than the tax avoidance purpose, and it is merely a minor reduction of taxes incidental to such title trust, it cannot be deemed that there was "the purpose of tax avoidance prescribed in the proviso of Article 41-2 (1) of the former Inheritance Tax and Gift Tax Act" (see, e.g., Supreme Court Decisions 2004Du13936, May 25, 2006; 2004Du11220, Sept. 22, 206). Even if the title holder did not engage in the title trust for the purpose of evading taxes, if the amount of tax avoidance was caused as a result, and the amount of reduction reaches a considerable amount of reduction, it cannot be deemed that the Plaintiff did not have any purpose of tax avoidance, including the amount of global income tax evasion by 3010.

In addition, in recognition of the existence of the purpose of tax avoidance, it does not require that the date of the reason for the tax avoidance or the primary purpose of the tax avoidance is the same. Thus, it cannot be deemed that there was an incidental intent of the tax avoidance (see, e.g., Supreme Court Decisions 97Nu1532, Jun. 26, 1998; 97Nu348, Jul. 14, 1998). The following circumstances revealed in the above recognition: (i) 00 billion won, which began from 2001, when the global income tax was imposed on the Plaintiff including the Plaintiff, title trustee title trust shares with 15 persons including the Plaintiff during the period of 2003; (ii) since the general loan amount of the Korea Securities & Exchange Co., Ltd., Ltd., which traded from April 29, 02, increased to KRW 300,000,0000,000,0000,000 shares were more than 100,00.

Therefore, the plaintiff's assertion that ○ did not have the purpose of tax avoidance is rejected.

(2) Whether it is against the principle of proportionality or the principle of proportionality

The imposition of gift tax on a title trust with the purpose of tax avoidance is a means appropriate to achieve the purpose of a deemed donation provision that is to prevent tax avoidance. The imposition of gift tax on a title trust is an appropriate alternative means to prevent the act of tax avoidance, and there is a method of denying the judicial effect of the title trust, imposing a penalty surcharge instead of gift tax on the violator, and imposing a penalty on the person liable for tax evasion. However, the imposition of gift tax on a title trust with the purpose of tax avoidance does not go against the minimum principle of infringement, and at the same time, it does not go against the minimum principle of infringement, and at the same time, the disadvantage of the trustee's business through the imposition of gift tax on a tax avoidance act using the title trust is not considerably unfair when considering its responsibility. However, the imposition of gift tax on a title trust is more likely to contribute to preventing the use of the title trust as a means of tax avoidance, thereby achieving the public interest of tax justice and tax equity (see Constitutional Court Order 200HunBa40, Jun. 30, 2005; 204HunBa405).)

Therefore, we cannot accept the Plaintiff’s assertion that the instant disposition is unlawful against the principle of proportionality under the Constitution or the principle of excessive prohibition.

3. Conclusion

If so, the plaintiff's claim of this case is dismissed, and the judgment of the court of first instance is unfair with different conclusions, so the judgment of the court of first instance is revoked and the plaintiff's claim is dismissed as per Disposition.