Whether the provision on deemed donation of title trust can be applied to shares

Even if the plaintiffs received shares in title trust, they do not seem to have received shares in accordance with the proviso of Article 41-2 (1) 1 of the former Inheritance Tax Act due to the lack of the purpose of tax avoidance.

Donation of title trust property under Article 41-2 of the former Inheritance Tax and Gift Tax Act

1. On January 18, 2005, the imposition of gift tax of KRW 699,832,00 on the Plaintiff ○○○○○○○, of KRW 193,149,60 on the gift tax on the Plaintiff ○○○○○○○, of KRW 78,383,200 on the gift tax on the Plaintiff ○○○○○○○○○, and the imposition of KRW 78,383,200 on the gift tax on the Plaintiff ○○○○○○○○○ on January 19, 2005 is revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. The plaintiff ○○○○○○○○○ (the trade name before the change: ○○○○○○○○○, the non-party company; hereinafter referred to as the "non-party company") is the wife of ○○○○○○○○○, and the plaintiff ○○○○○ and the non-party company was established on March 28, 198. The non-party company was established on March 28, 198. The 7,000 shares issued at the time of the establishment as indicated below, among the 10,000 shares, were 10,000 shares, 1,000 shares were 0 shares under the name of ○○○○○○○○○○○○, the 40 shares were ○○○○○○○, the 200 shares were ○○○○○, and the 1,000 shares were ○○○○, and the 200 shares were 1,500 shares issued on May 20, 20013.

Capital increase

(States)

Relation

"8.3.28", (100 million won)

“8.7.22”, “(100 million won)

“92.6.20”, “(100 million won)”

‘93.5.13' (200 million won)

"0.1.31", (acquisition)

"0.2.2" (1.5 billion won)

Consolidateds

(Share Holding Ratio)

Kim Jong-young

Principal

7,000

7,000

7,000

14,000

3,000

114,000

152,000

(76%)

Of batteries ○

wife

500

500

500

1,000

9,000

12,000 (6%)

Jeon Young-young

Yong-Nam

1,000

1,000

1,000

2,000

15,000

20,000 (10%)

Maximum decided ○

Ministry of Maritime Affairs and Fisheries

400

400

400

800

6,000

8,000

(4)%

Maximum Chang-gu

Maximum ○ Maca

200

200

200

400

3,000

4,000

(2)%

Maximum academic field ○

Maximum ○ Maca

200

200

200

400

3,000

4,000

(2)%

Maduk○

-

500

500

500

1,000

△△△,000

Gambling ○

-

200

200

200

400

△△,000

Consolidateds

10,000

10,000

10,000

20,000

150,000

200,000

(unit: State)

"After the request of the Board of Audit and Inspection was made on January 18, 2005, the Defendants deemed that ○○○○ was a title trust with the Plaintiffs, and thus, pursuant to the provisions of Article 41-2 (1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6780, Dec. 18, 2002; hereinafter referred to as the "former Inheritance Tax Act"), the Plaintiffs deemed that the instant shares were donated from ○○○○○○○○○○○○○○○○○○ on the basis that the value of the instant shares was assessed as KRW 109,980 per share, and the head of Defendant ○○○○○○○○○○○○○ on January 18, 2005, on the ground that the said value was assessed as KRW 69,832,000, KRW 193, KRW 149,600 on the Plaintiff○○○○○○○, KRW 78,300,1381,200 each of this case.

2. Whether the disposition is lawful;

A. The plaintiffs' assertion

Each disposition of this case is unlawful for the following reasons.

(1) ○○○ issued the instant shares and capital increase with the use of the Plaintiffs’ name stolen, not by title trust to the Plaintiffs, rather than by ○○○○.

(2) Even if the Plaintiffs were to be stated in the statement of stock change or audit report at the time of Nonparty Company’s corporate tax declaration, the Nonparty Company cannot be deemed to have held title trust as to the instant shares, since it did not have a register of shareholders as one de facto one company, and thus no transfer was made.

(3) Even if ○○○○ has held title trust with the Plaintiffs of the instant shares, this does not intend to meet the number of promoters required under the Commercial Act at the time of the establishment of ○○○○○, but does not aim at tax avoidance. Thus, it cannot be deemed as a donation pursuant to the proviso of Article 41-2(1)1 of the former Inheritance Tax Act.

(4) In addition, the plaintiffs' expression of title trust due to the mistake of motive that ○○○○ caused. Since the plaintiffs cancelled it around November 7, 2006, it cannot be deemed that the title trust has the effect.

(5) Article 41-2 of the former Inheritance Tax Act, which is a basis provision for each of the dispositions of this case, is contrary to the principle of no taxation without law or the principle of fair burden in that it is deemed that the donation is not a real donation.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Whether ○○○ has stolen the Plaintiffs’ name

The testimony of ○○○○○○ alone with the documentary evidence submitted by the Plaintiffs and the testimony of ○○○○○○ alone is insufficient to deem that ○○○○ used the Plaintiffs’ names in connection with the instant shares, and there is no other evidence to acknowledge otherwise. Rather, comprehensively taking account of the overall purport of the pleadings in each written evidence Nos. 4 and 5, the Plaintiffs prepared a loan certificate stating that the Plaintiffs borrowed an amount equivalent to the amount paid from ○○○○○○ in connection with the capital increase for capital increase on February 2, 2000. The Plaintiff○○○○○ was investigated in relation to the instant case by the ○○○ Regional Tax Office and stated to the effect that the Plaintiff○○○○○ was notified of the capital increase by ○○○○○○○ on July 29, 2002, and on the 26th of the same month, and on the 25th of the same month, it is reasonable to deem that the Plaintiffs used the Plaintiffs’ names in relation to the instant shares.

Therefore, this part of the plaintiffs' assertion is without merit.

(2) Whether title trust has not been made due to the absence of the register of shareholders

In full view of the purport of each of the evidence Nos. 3, 4, and 12-1, 2, 13, and 14 of the evidence Nos. 12-2, 13, and 14 as a whole, the plaintiffs are listed as shareholders according to the contents of stock change as seen earlier in the list of shareholders of the non-party company held on July 21, 198 and May 13, 1993. The facts that the minutes of the non-party company's temporary general meeting of shareholders held on January 200 are attached to the list of shareholders, and in light of these facts, it is reasonable to deem that the shares of this case were registered in the name of the plaintiffs on the list of shareholders. Accordingly, the prior plaintiffs' assertion on a different premise is without merit.

(3) Whether ○○ had no purpose of tax avoidance

① At the time of the incorporation of the non-party company, ○○○ owned 7,000 shares, which amount to 10,000% of the total shares generated from the non-party company under its own name, and most of the remaining shares were in the name of the plaintiffs. At the time, the plaintiffs’ shareholding ratio was 10% in the case of the plaintiff ○○○, 4% in the case of the plaintiff ○○○○, 2% in the case of the plaintiff ○○○, and ○○○, respectively. ② The shares holding ratio was 2% in the case of the non-party company’s capital increase due to the increase of the non-party company’s reasons for its establishment, and there was no change in the shareholding ratio up to now. ③ The non-party company was established on March 28, 1989, and did not have any dispute over the fact that it did not have any tax in arrears or distribution until the date of its establishment. In light of the above facts, it cannot be seen that the above shares were for the purpose of the non-party company’s taxation or other oligopolistic shareholders under the Local Tax Act.

On the other hand, the defendants asserted that the surplus carried forward by the non-party company has been continuously increased to KRW 4,580,121,825,940 in 200, KRW 4,020, KRW 243,350 in 201, KRW 4,344, KRW 714, KRW 414, KRW 4414, KRW 2003, KRW 4,512, KRW 350,716 in 2004, KRW 4,580,00 in 204, and KRW 4,898,48, KRW 480,995 in 205. However, the non-party company is a de facto one of the ○○○○○○○, and thus it is possible to actually distribute dividends as earned surplus, unlike the external disclosure, it cannot be viewed as a different purpose of tax avoidance.

Therefore, even if the plaintiffs received the title trust of the shares from ○○○○, it is not deemed that the plaintiffs received the value of the shares under the proviso of Article 41-2(1)1 of the former Inheritance Tax Act due to the lack of the purpose of tax avoidance. Therefore, each of the dispositions of this case imposing gift tax on the plaintiffs on different premise should be revoked because it is unlawful to view the remaining arguments of the plaintiffs.

3. Conclusion

Therefore, the plaintiffs' claims are reasonable, and it is decided as per Disposition by admitting them.

Related Acts and subordinate statutes

(1) The former Inheritance Tax and Gift Tax Act (amended by Act No. 6780 of Dec. 18, 2002)

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

(1) In case where the actual owner and the nominal owner are different in property (excluding the land and buildings; hereafter in this Article the same shall apply), which requires a registration, etc. for the transfer or exercise of rights, the value of the relevant property shall be deemed to have been donated by the actual owner on the date when it is registered, etc. as the nominal owner, notwithstanding the provisions of Article 14 of the Framework Act on National Taxes:

1. Where assets are registered, etc. in the name of another person without the purpose of tax avoidance;

2. Where the name of the real owner is converted from the name of the other person during the period until December 31, 1998 (hereafter in this Article referred to as the "suspension period") with respect to the stocks, etc. entered in the register of stockholders or the register of members or the transfer of holders in the name of the other person pursuant to the trust or agreement before January 1, 1997 from among the shares of the corporation which issued the relevant stocks, etc. (hereafter in this Article referred to as the "stocks, etc."): Provided, That the same shall not apply where the name is converted from the name of the person having a special relationship with the shareholders (including investors) of the corporation who issued the relevant stocks, etc.

(1) Framework Act on National Taxes (amended by Act No. 7008 of Dec. 30, 2003)

Article 39 (Secondary Liability for Tax Payment of Contributors)

(1) If the property of a corporation (excluding a corporation whose stocks are listed on the Korea Stock Exchange) is insufficient to cover the national tax, additional dues, and disposition fee for arrears that are imposed on or to be paid by the corporation, the person falling under any of the following subparagraphs as of the date on which the liability to pay the national tax is established shall be subject to the secondary liability to pay such shortage: Provided, That in the case of an oligopolistic stockholder under subparagraph 2, the limit of the amount calculated by multiplying the amount obtained by dividing the shortage by the total number of stocks issued (excluding non-voting stocks; hereafter the same shall apply in this Article) or total amount of investment of the corporation, the stocks owned by the oligopolistic stockholder (excluding non-voting stocks) or investment amount (in

1. General partners;

2. An oligopolistic stockholder who falls under any of the following items:

(a) A person who exercises a substantial right over the stocks or investment shares in excess of 51/100 of the total issued stocks or total investments of the relevant corporation;

(b) an honorary president, president, vice president, managing director, managing director, director, or any other person who actually controls the management of the juridical person, notwithstanding their titles;

(c) The spouse (including the person in de facto marital relations) of the persons under items (a) and (b) and the lineal ascendants and descendants sharing their living

(2) The term "point stockholder" in paragraph (1) 2 means a stockholder or one limited partner and his relatives or other persons having special relations with him as prescribed by the Presidential Decree, whose total amount of stocks held or investments is 51/100 or more of the total number of stocks issued or investments of the juristic person concerned.

m. Local Tax Act (amended by Act No. 6312 of Dec. 29, 2000)

Article 22 (Secondary Liability for Tax Payment of Contributors) In case where the property of a corporation (excluding a corporation whose stocks are listed on the Korea Stock Exchange) is imposed on such corporation or where it is insufficient to cover the impositions of a local government to be paid by such corporation, the person falling under any of the following subparagraphs as of the tax base date or the date on which the tax liability comes into existence (in case of a tax item with no provision concerning this, the date of commencing the tax payment period) shall take the secondary liability for tax payment of such shortage: Provided, That in case of an oligopolistic stockholder under subparagraph 2, the tax liability shall be limited to an amount calculated by multiplying the shortage by the number of stocks owned (excluding non-voting stocks; hereafter in this Article the same shall apply) or investments (in case of an oligopolistic stockholder under subparagraph 2 (a) and (b), the number or investments by

1. General partners;

2. A person falling under any of the following items from among oligopolistic shareholders (referring to the persons in whose case the total amount of stocks held or investments made by a stockholder or a partner with limited liability and relatives or other persons having special relations with him as prescribed by the Presidential Decree is 51/100 or more of the total number of stocks issued or total investments of the relevant corporation

(a) A person who exercises a substantial right over the stocks or investment shares in excess of 51/100 of the total issued stocks or total investments of the relevant corporation;

(b) an honorary president, president, vice president, managing director, managing director, director, or any other person who actually controls the management of the juridical person, notwithstanding their titles;

(c) Spouse (including a person in de facto marital relationship) of the persons prescribed in items (a) and (b) and the lineal ascendants and descendants sharing the same livelihood

Article 105 (Persons Liable for Tax Payment, etc.)

(6) Where a person becomes an oligopolistic stockholder pursuant to the provisions of subparagraph 2 of Article 22 by acquiring the stocks or equity shares of a corporation (excluding the case where he becomes an oligopolistic stockholder by acquiring the stocks or equity shares issued at the time of incorporation of a corporation), he shall be deemed to have acquired the real estate, vehicle, machinery equipment, aircraft, standing trees, vessels, mining rights, fishing rights, golf membership rights, condominium membership rights or membership rights to use the athletic facilities complex of the corporation concerned: Provided, That this shall not apply to the portion where the acquisition tax

(A) Commercial Act (amended by Act No. 3724, Apr. 10, 1984)

Article 288 (Promoters) At least seven promoters shall be required for the incorporation of a stock company.