Supreme Court Decision 2012Du58483 ( April 13, 2017)

The fact that the shares are re-acquisitiond in the name of the same person with the initial sale price of the shares held in title trust should be proved by the taxpayer.

The fact that the shares are re-acquisitiond in the name of the same person with the initial sale price of the shares held in title trust should be proved by the taxpayer.

Article 41-2 (Presumption of Donation of Title Trust Property)

2012du5848 Revocation of Disposition of Imposing gift tax

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@@세무서장

November 1, 2017

December 2017 08

1. Of the Plaintiff’s appeal, the part concerning KRW 566,659,893 of the disposition imposing gift tax on the Plaintiff on December 31, 2006, which was rendered by the Defendant against the Plaintiff on October 1, 2009, is dismissed.

2. The Plaintiff shall bear the total costs of the lawsuit following the filing of an appeal as to the part as set forth in paragraph 1.

1. The decision of the court of first instance is revoked. The defendant shall revoke all imposition of gift tax of KRW 1,335,142,690 on October 1, 2009 against the plaintiff on December 31, 2004, and KRW 89,745,860 on July 15, 2005, and KRW 586,674,940 on the gift on December 31, 2006, and KRW 252,561,280 on the gift on September 30, 207, and KRW 52,721,160 on the gift on December 31, 2007.

1. Scope of the judgment of this court;

A. The record reveals the following facts.

1) The court of first instance dismissed the Plaintiff’s claim, and the Plaintiff filed an appeal against this.

2) Before remanding the judgment of the court of first instance, this court revoked the part of the judgment of the court of first instance against the plaintiff equivalent to "the portion exceeding 89,745,860 won of gift tax on July 15, 2005 against the plaintiff on October 1, 2009, and 252,561,280 won of gift tax on September 30, 2007, and 52,721,160 won of gift tax on the portion of gift on December 31, 2007, and 586,674,940 won of gift tax on December 31, 206 and dismissed the remaining appeal by the plaintiff.

3) As to the part against which the defendant did not appeal and only the plaintiff lost

The appeal was filed. The Supreme Court reversed the part against the plaintiff as to the donation on December 31, 2006 among the judgment of this court prior to the remand, and dismissed the remaining appeal by the plaintiff while returning the case to that part.

B. Therefore, the subject of the judgment of this court is only 56,659,893 won in the disposition of imposition of gift tax of 586,674,940 on October 1, 2009 against the plaintiff on December 31, 2006 (hereinafter "the subject disposition of this case"), and only 00,130 shares in the ○ industry corresponding to the donated portion on October 31, 2006 are subject to the judgment of this court.

2. The reasons for the partial decision are as follows: “foreign currency securities” in column 1 in column 1 in column 4 in column 3 in the first instance judgment; “120%” in column 5 in column 4 in column 5 in the fourth instance judgment; “82,48,936 won” in column 6 in column 4 in the fourth instance judgment shall be deemed as “934,363,014 won”; and “the reasons for the disposition” in the first instance judgment shall be deemed as “the reasons for the disposition” in Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act. Therefore, this shall be cited in accordance with the main sentence of Article 420 of the Civil Procedure Act.

3. Whether the disposition of this case is legitimate

A. The Plaintiff’s assertion, B. related Acts and subordinate statutes, C. Recognition, D. 1) The reasoning for the partial judgment is as follows: (a) the entry of the title trust of the shares in this case from 3 to 11, and 16, except for the issuance of a part of the judgment in the first instance court as follows. Therefore, it shall be cited in accordance with Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

The ○ 4th parallel 1 to 6th parallel are as follows:

“2) Even if BB held the title trust of the instant shares to the Plaintiff, it was aimed at securing a favorable voting right from the defense source for management rights to the ○○ industry, along with the purpose of providing the Plaintiff with economic assistance as a profit from a stock transaction. In other words, ○○ Industrial Chairperson, who is a part of BB, need to secure a favorable voting right in the dispute over the management right of the ○○ industry, ○○○○○○○ and Kim○, etc. over the management right, and BB purchased 80,000 shares of the ○ Industries, which was held by ○○○○○○○ in the name of the Plaintiff immediately after the opening of the securities account in the name of the Plaintiff on July 15, 2004. In the event 204 and 2005, the transfer income tax is imposed on the Plaintiff as well as the amount of global income tax on the dividend income avoided by a title trust. There was no purpose at the time of a title trust.”

In the 4th 12th 12th 12th , "it is illegal because it violated the principle of heavy taxation," and "in particular, the part of imposing gift tax on the shares acquired after 2005 among the dispositions of this case is against the principle of no taxation without law, equality of taxation, proportionality, private property security, and double taxation prohibition."

After the 4th 12th 12th 2th 2th 2, “i.e., the acquisition of the instant shares based on the same intention of title trust as the acquisition of ○○ Industrial Shares 82,690 shares (hereinafter “the instant shares”). Even if the existence of a new intention of title trust is recognized with respect to the shares acquired under the name of ○○ Industrial Shares 82,690 shares, among the instant shares, as long as it is impossible to separate the portion acquired as the price for selling the instant shares out of the instant shares from the part acquired as the price for selling the instant shares, the entire disposition imposing gift tax on the instant shares should be revoked (after the remand, the Plaintiff added the conjunctive assertion to the effect that the portion acquired with funds other than the price for selling the instant shares cannot exceed 74.7% of the sales price for the first shares in the acquired financial resources).”

○ 11. 6. 6. to 16.

D. 2) The legislative intent of Article 45-2(1) of the Inheritance Tax and Gift Tax Act, which is to establish an exception to the substance over form principle, in the purport that the purpose of tax avoidance is to effectively prevent the act of tax avoidance by using the title trust system, thereby realizing the tax justice. Thus, if it is recognized that the title trust was conducted for any reason other than the purpose of tax avoidance, and that only the reduction of minor taxes incidental to the title trust was generated, it is difficult to deem that the purpose of tax avoidance exists in the title trust. However, in light of the legislative intent as seen above, if it is deemed that there was an intention of tax avoidance, not only the main purpose but also the intent of tax avoidance, it should be deemed that there was an intention of tax avoidance. The burden of proving that there was no intention of tax avoidance exists the owner (see, e.g., Supreme Court Decision

Considering the aforementioned facts and the above quoted evidence comprehensively based on the overall purport of the pleadings, it is difficult to view that BB held the title trust of the shares of this case to the Plaintiff for the purpose of ensuring the Plaintiff’s economic assistance or the friendly voting right to the ○○○○○ for the purpose of obtaining a favorable right to vote against the Plaintiff. Furthermore, it is reasonable to deem that BB had the intent to reduce the tax burden, such as capital gains tax, even if there was such a purpose, and it does not appear that BB had no tax avoidance purpose. Accordingly, the Plaintiff’s assertion on this part is without merit.

① It is difficult to believe that BB, who was well aware of the fact that securities transaction experience and related knowledge are subject to a large amount of gift tax in the case of stock title trust with the career of working for 20 years in the Korean Commercial Securities, acquired and traded the instant shares in the name of the Plaintiff for the purpose of providing economic assistance to the Plaintiff only when taking the risk of gift tax imposition.

② In ordinary cases, the Plaintiff purchased shares for the purpose of securing a favorable voting right, and BB continued to sell shares after purchasing shares in the name of the Plaintiff in bulk. In other words, on December 31, 2004, the Plaintiff’s shares were 82,690 shares, and on December 31, 2006, the Plaintiff’s shares were 8,130 shares.

③ The transfer of ○○ Industries shares, which occurred in 2004 and 2005, is subject to capital gains tax as BB Ma. However, if BB, which is a major shareholder of the ○ Industry, traded the shares in its own name, it is highly probable that the Plaintiff could actually avoid capital gains tax by title trust to the Plaintiff. In other words, if BB, which is a major shareholder of the ○○ Industry, traded the shares in ○○ Industries under the name of ○○○○○○, it is clearly revealed that it constitutes subject to capital gains tax due to blood relationship with the Plaintiff. However, if BB acquired and traded the shares in ○○ Industries under the name of the Plaintiff, etc., it is clearly revealed that the total equity ratio of the shares in the ○○ Industries shares held by the Plaintiff, ○○, Ma○○, and ○○○○, etc., which are related to relatives and other specially related persons, exceeds 3/100, but it is difficult for the tax authorities to grasp such facts from their standpoint,

④ In fact, the Plaintiff may transfer income tax on the transfer of ○ Industry’s shares in 2004 and 2005.

The tax authorities did not report and pay, and the tax authorities did not discover the source of the funds for acquiring stocks of this case. The Plaintiff reported and paid the transfer income tax on June 1, 2009 due to the transfer of ○ Industry’s stocks in 2005 only after the commencement of the investigation on the source of the funds for acquiring stocks of this case.

D. 3) Whether the constructive gift of title trust overlaps with the application

A) Relevant legal principles

The main sentence of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007) (hereinafter referred to as the "legal provision of this case") provides that "where the actual owner and the nominal owner are different from that of the property (excluding land and buildings; hereafter the same shall apply in this Article), the value of the property shall be deemed to have been donated by the actual owner on the date when the actual owner and the nominal owner are registered as the nominal owner (where the property requires a change of ownership, referring to the date following the last day of the year following the year in which the date of acquisition of ownership falls) notwithstanding Article 14 of the Framework Act on National Taxes."

In light of the legal provisions of this case, as an exception to the substance over form principle, allowing the imposition of gift tax by deeming the relevant property from the actual owner to have been donated to the title holder in order to prevent the act of title trust for the purpose of tax avoidance, it is necessary and appropriate to prevent the act of tax avoidance. (2) In the case of shares such as this case, where the first title trust shares, which were subject to taxation or are able to be taxed upon the deemed donation, are acquired as the sale price, and another transfer is made under the name of the same person, the imposition of gift tax by separately applying the legal provisions of this case without restriction on other shares transferred to the same person is unreasonable. (3) It is reasonable to view that, inasmuch as the first title trust shares were sold to the same person after the first title trust shares were acquired as the sale price, and then transferred to the same person under the name of the same person, the first person is deemed to have been subject to imposition of gift tax under the name of 10 shares, which are more favorable to the first owner or the first person under the name of the same person (see, 201).

B) Determination

(1) In full view of each of the above evidence Nos. 4, 6-2, and 10 evidence, the following facts can be acknowledged.

① On July 9, 2004, BB opened a borrowed-name securities account in the name of the Plaintiff to ○ Securities Co., Ltd., and deposited investment money, from March 14, 2005 to March 8, 2005, a transfer of ownership was made in the name of the Plaintiff for the instant primary shares on December 31, 2004. Of them, KRW 1.57 million was deposited from March 14, 2005 to the new bank ○○○ (hereinafter “new bank account”) account in the name of the Plaintiff.

② At ○○○ Branch Securities Account (41510948-01, hereinafter “○○ Securities Account”) in the name of the Plaintiff (hereinafter “○○ Securities Account”) KRW 650 million in total from July 25, 2005 to August 16, 2005, and KRW 220 million in the name of ○○○○○○○○○ Account, respectively.

③ AB repeated purchase and sale of ○ Industries shares through the instant ○ Securities Account from around that time, and deposited KRW 10 million on November 1, 2005, KRW 500 million on November 4, 2005, and KRW 600 million on the account of the instant ○ Bank. On January 10, 2006, all ○ Industry shares were sold on January 10, 2006, and the cash balance at the time was KRW 543,347,122.

④ Since then, BB repeated the purchase and sale of the instant Samsung Securities account. During that process, BB deposited KRW 300 million in total from the instant Samsung Securities account to the instant Samsung Securities account from February 8, 2006 to February 16, 2006, and again sold ○ Industries shares again on April 27, 2006. At that time, the cash balance was KRW 1,020,976,087.

⑤ Since then, BB continued to purchase and sell ○ Industry shares through the instant ○ Securities Account, it deposited KRW 300 million to the instant ○ Bank Account on June 22, 2006. After that, not only the ○ Industry shares but also the central ○0 shares and the ○0 shares were repeated.

④ On December 31, 2006, among the shares transacted through the instant Samsung Securities Account, the entry of the entry of the instant shares in the name of each Plaintiff was made on September 30, 2007 with respect to the Central ○○○ shares 7,168 shares on September 30, 2007, and on December 31, 2007, with respect to 20,50 shares in the name of each Plaintiff.

(2) In light of the facts acknowledged earlier and the following circumstances revealed, the evidence presented by the Plaintiff alone is insufficient to recognize that the issue shares of this case, which were transferred on December 31, 2006 under the name of the Plaintiff, were acquired as the sale price of the first stocks subject to deemed donation, and then transferred to the Plaintiff’s name. There is no other evidence to acknowledge otherwise. Accordingly, the Plaintiff’s assertion on the premise that the sale price of the first stocks of this case was used for the acquisition of the instant stocks. ① Cash is mixed with other cash accounts between the moment when the account is deposited in the account. However, the first stocks of this case, which was partially deposited in the name of ○○○○○○○○○○○○○, were used as the purchase price of the instant stocks, and the amount of KRW 650 million,220,000,000,000, which was repeatedly deposited in the instant Samsung account after which the KRW 600,000,00 new stocks were sold to the Plaintiff’s new account.

As above, the above KRW 650 million, which is a part of the sales price of the first shares of this case, has already ceased to be specific by mixing the above KRW 220 million with the said KRW 220 million, and it is impossible to specify the amount of KRW 600 million, which is again deposited to the new bank account of this case, as the sale price of shares acquired with a fund out of the part of the first sale price of shares and the purchase price in the name of ○○○, and part of the cash remaining in the Samsung Securities account of this case was used for the purchase of shares of other companies. Therefore, it cannot be readily concluded that the above KRW 650 million was used for the acquisition of shares of this case, which was changed on December 31, 2006, and it cannot be concluded that the above KRW 650 million was used for the acquisition of shares of this case, from among the shares in this case, 74.7% (the total amount of the original acquisition fund of this case, KRW 870 million,000,000).

② From the account of the instant new bank to the instant Samsung Securities account, KRW 300 million was deposited again on February 2, 2006, and used for the purchase of ○ Industry shares, but again, KRW 300 million was deposited into the instant new bank account on June 22, 2006, and thereafter purchased and sold not only ○○ Industries shares but also ○○ and ○○ shares.

As above, the sum of KRW 300 million deposited from the new bank account of this case was lost as it was mixed with the existing cash in the instant Samsung Securities account, and thereafter, it was returned to the new bank account of this case as much as KRW 300 million thereafter, and as it purchased other shares from the instant Samsung Securities account, it cannot be readily concluded that KRW 300 million deposited from February 31, 2006 was used for the purchase of the outstanding shares of this case transferred on December 31, 2006.

4. Conclusion

Thus, the key issue disposition of this case is legitimate, and the plaintiff's claim disputing its illegality must be dismissed as without merit. Since the part concerning the key issue disposition of this case among the judgment of the court of first instance is just in conclusion, the plaintiff's appeal on the key issue disposition of this case is dismissed as it is without merit.