Presumption of donation related to the purpose of tax avoidance in stock trust;

All of the facts that the Plaintiff and the Defendant borrowed the name between the Plaintiff and the Defendant are recognized. Accordingly, the fact of title trust can be presumed, and the tax disposition is legitimate unless the Plaintiff presents objective and acceptable evidence that the Plaintiff did not have the purpose of tax avoidance.

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

Article 41 Presumption of Donation of 2 Title Trust Property

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s disposition of imposing gift tax of KRW 190,239,000 against the Plaintiff on July 16, 2005 shall be revoked.

1. Details of the disposition;

A. On May 24, 2001, the director of the regional tax office of ○○○○○○○, a stock company △△△△△△△ (hereinafter “○○○○”) and a non-resident ○○○ Kim (hereinafter “△△△△△△”) conducted a survey on the capital increase of △△△△△△ (hereinafter “△△△△△”) and confirmed on July 20, 201 that the said company’s shares 50,000 shares (one US dollars per share and 650,500,000 won per share in Korean won; hereinafter “instant shares”).

B. The Defendant, based on the taxation data of the director of ○○ Regional Tax Office, deemed that the Plaintiff received the instant shares from ○○○○ in title trust, and applied the provision on constructive gift of title trust under Article 41-2 of the Inheritance Tax and Gift Tax Act, determined and notified the Plaintiff of KRW 190,239,000 (hereinafter “instant disposition”) on July 19, 2005.

C. On October 7, 2005, the Plaintiff filed an appeal with the National Tax Tribunal under the jurisdiction of the National Tax Tribunal ○○○○○○○○○○, but the National Tax Tribunal dismissed the Plaintiff’s appeal on April 17, 2007.

[Ground of recognition] Facts without any dispute, Gap 1, Eul 1, and 2

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) Since △△△○, the Plaintiff’s spouse, was preparing for the registration of the KOSDAQ at the time of investing USD 500,000 in △△△△△△△△, the instant disposition that is based on the premise that there was a tax avoidance purpose is unreasonable, on the ground that the fact of making an overseas investment in the name of Park○ or △△△△△, the representative director of △△△△△△△△, was not entirely helpful for the KOSDAQ listing examination, and that it would not be helpful for the company’s shareholders, and Park○ was also acquiring the instant shares by lending the Plaintiff’s name, and that at the time of the Plaintiff’s title trust, it did not have any intent of tax avoidance regarding any tax items, such as capital gains tax, gift tax, dividend income tax, global income tax, etc., on the premise that there was a tax avoidance purpose.

(2) The Plaintiff, without knowing the reason for remittance in detail, lent only the remitter’s name, and there was no intention to receive title trust between Park○-○ and the Plaintiff as the Plaintiff did not have any intention to receive title trust. Therefore, the Plaintiff cannot be deemed to have received the instant shares. Moreover, even if it is not a domestic affairs, the Plaintiff cannot be deemed to have received the title trust. Furthermore, considering that the Plaintiff extended the deadline for payment of the gift tax of this case, paid some taxes to the Plaintiff himself, and the dividend related to the instant shares did not have been made once, the Defendant’s disposition is unreasonable.

(b) the relevant regulations;

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

Legal fiction of title trust property referred to in Article 41-2

(1) Where the actual owner and the nominal owner are different in property (excluding land and buildings; hereafter the same shall apply in this Article) which requires a registration, etc. for the transfer or exercise of rights, the value of such 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 Article 14 of the Framework Act on National Taxes: Provided, That the same shall not apply

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

2. Where conversion is made to the name of the real owner 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 shareholders or the register of members in the name of another person or the transfer of a title to the register of members, from among the stocks or equity shares (hereafter in this Article referred to as the "stocks, etc."): Provided, That the same shall not apply to cases where the conversion is made to the name of a person having a special relationship with the shareholders (including investors) of the corporation which issued the relevant stocks, etc. or to the name of a minor as of January 1, 1997.

(2) Where property is registered, etc. in the name of another person and the name of stocks, etc. is not converted into the name of the actual owner during the grace period under paragraph (1) 2, it shall be presumed that there exists an objective of

(3) Paragraph (1) 2 shall apply only where a person who has converted stocks, etc. to a real owner during a grace period submits the details of conversion to the corporation which issued the relevant stocks or to the head office or head office of the invested corporation, under the conditions as prescribed by the Presidential Decree.

(4) Paragraph (1) shall not apply where a fact that is a trust property under the Trust Business Act or the Securities Investment Trust Business Act is registered, and where a nonresident registers it in the name of a legal representative or administrator.

(5) The term "taxes" in paragraphs (1) and (2) means the national tax and local tax as provided in subparagraphs 1 and 7 of Article 2 of the Framework Act on National Taxes and the customs as provided in the Customs Act.

(6) The scope of persons in special relationship under paragraph (1) 2 shall be prescribed by Presidential Decree.

○ former Income Tax Act (amended by Act No. 6557 of Dec. 31, 2001)

Article 118-2 (Scope of Transfer Income)

Transfer income from the transfer of assets abroad of a resident (limited to a person who has his domicile or residence in the Republic of Korea for not less than five years consecutively until the date of transfer of the relevant assets) shall be the following income generated by the transfer of assets abroad in the relevant year:

3. Income accruing from the transfer of stocks or contribution quota determined by the Presidential Decree; and

The rate of five transfer income tax under Article 118-5.

(1) The amount of income tax on capital gains from overseas assets shall be calculated by applying the following tax rates to the tax base of capital gains during the relevant year:

3. Assets under subparagraph 3 of Article 118-2: 20/100 of the tax base of transfer income;

C. Determination

(1) In full view of the relationship between the Plaintiff and Park○-○ as seen earlier, and the fact that the Plaintiff lent the remitter’s name to Park○-○, etc., it can be presumed that the Plaintiff was aware of the fact that the instant shares were held in title trust when the Plaintiff lent the remitter’s name to Park○-○. Thus, the Plaintiff is the title trustee of the instant shares.

(2) The legislative intent of Article 41-2 of the former Inheritance Tax and Gift Tax Act is to effectively prevent the act of tax avoidance using the title trust system, thereby recognizing an exception to the principle of substantial taxation. As such, the proviso to Article 41-2 of the same Act can be applied only where the purpose of tax avoidance is not included in the purpose of the title trust, and in this case, the burden of proving that there was no purpose of tax avoidance. Therefore, the burden of proving that there was no purpose of tax avoidance, not the purpose of tax avoidance, can be established by means of proving that there was a purpose of tax avoidance. However, the nominal owner who bears the burden of proving the burden of proof has obvious objective and non-related to the tax avoidance to the extent that it is recognized that there was no purpose of tax avoidance in the title trust, and that there was no tax avoidance at the time of the title trust or in the future, must be proven to the extent that there was no doubt in the ordinary person, based on objective and conclusive evidence (see, e.g., Supreme Court Decisions 2004Du120, Sept. 225, 2006).

(3) In the instant case, the evidence submitted by the Plaintiff alone is insufficient to acknowledge that there was no tax avoidance purpose in the title trust of the instant shares by the Plaintiff or Park ○○. There is no other evidence to acknowledge otherwise.

(4) Therefore, the instant disposition is lawful unless it is acknowledged that the title trust of this case was conducted for reasons other than the purpose of tax avoidance.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.