Seoul Administrative Court 2014Guhap9226 ( November 21, 2014)

In cases where there are other purposes than tax avoidance and the avoided tax is merely a minor reduction of tax, the taxation of gift tax on constructive gift of title trust is illegal.

If a title trustee goes through a prior trial, the title truster may file an administrative suit claiming the revocation of the disposition even without going through the prior trial procedure. If the title trustee is merely a minor tax reduction incidental to the title trust, the gift tax is illegal if the title truster is subject to a title trust for the purpose of defending management rights in the process of management dispute.

Donation of title trust property under Article 45-2 of the Inheritance Tax and Gift Tax Act

2014Nu72578 Revocation of Disposition of Imposition of Gift Tax

United StatesA

○ Head of tax office

Seoul Administrative Court Decision 2014Guhap9226 decided November 21, 2014

June 4, 2015

June 25, 2015

1. Revocation of a judgment of the first instance;

2. On February 6, 2013, the Defendant’s imposition disposition of gift tax ○○○○○○○, which the Plaintiff rendered, is revoked.

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

The same shall apply to the order.

1. Details of the disposition;

The court's explanation in this part is the same as the corresponding part of the reasoning of the judgment of the court of first instance (from No. 4 to No. 39). Thus, it shall be cited in accordance with Article 8 (2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act.

2. Determination as to the legitimacy of the instant lawsuit

A. The defendant's main defense

As the Plaintiff did not follow the procedure of the previous trial, the instant lawsuit is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

(1) Under Article 56(2) of the Framework Act on National Taxes, the provisions of Article 18(2) and (3) of the Administrative Litigation Act do not apply to a tax suit. However, if two or more administrative dispositions are taken in the course of phased and developmental process and are related to each other, the tax authorities have changed the taxation disposition subject to such disposition while transmitting the tax office, and the tax authorities have changed the tax disposition subject to such disposition, and the same reason is common to others, or if one of the taxpayers bears the same obligation through the same administrative disposition, it shall be substituted by the preceding disposition, or when one of them has gone

the Tax Tribunal may re-determine the basic facts and legal issues;

If there is a justifiable reason, such as granting a meeting only and allowing the person liable for duty payment to undergo the procedure of the preceding trial, etc., the person liable for duty payment shall undergo the procedure of the preceding trial.

In addition, it should be deemed that an administrative litigation can be filed to claim the revocation of the taxation disposition (legal method).

Supreme Court Decisions 89Nu923 delivered on January 23, 1990; 93Nu387 delivered on May 27, 1993; 99Du1557 delivered on September 26, 200, etc.).

(2) On February 6, 2013, the Defendant: (a) rendered a disposition of gift tax amount of KRW 00 on April 23, 2003; (b) on May 15, 2003, KRW 00,000; (c) on December 31, 2007, imposing the gift tax amount of KRW 30,00; (d) on the gift tax amount of KRW 13,00,00,000 on KRW 2,00,00,000 on KRW 3,00,00,000; and (e) received a decision to revoke the disposition of gift tax on each gift on April 23, 2003 and May 15, 200; (e) on the gift tax amount of KRW 13,00,000,000,000,000,000,000,000 won were 1,07,07,000.

As such, the Defendant: (a) imposed the same amount of gift tax on the Plaintiff on February 6, 2013 on the ground of the title trust of the instant shares on December 31, 2007; (b) KimCC raised by KimCC on the same assertion as the Plaintiff; and (c) the Defendant also corrected gift tax on the Plaintiff in accordance with the purport of the judgment of the Supreme Court on taxation regarding KimCC. Article 45-2(1) of the Inheritance Tax and Gift Tax Act provides that the donee shall be jointly and severally liable for the gift tax to be paid by the donee if the donee falls under any of the following subparagraphs; (d) Article 4(4) of the Inheritance Tax and Gift Tax Act provides that the donee is not liable to pay gift tax if it is difficult to secure tax claims because his/her address or domicile is unclear; and (d) Article 9-2 of the Enforcement Decree of the same Act provides that the donee shall be jointly and severally liable for the taxation of gift tax on the instant case without any specific reason that the donee would be liable to pay gift tax on the grounds of title trust.

(3) Therefore, the instant lawsuit is lawful, and the Defendant’s main defense to this different purport is not acceptable.

3. Determination on the legitimacy of the instant disposition

A. The plaintiff's assertion

(1) On January 17, 2007, KimCC offered loans to ○○○○○○○ on May 14, 2007, and purchase funds to ○○○○○○○○○○○○ on or around July 2007, which was deposited securities as collateral, as an employee of EE, and acquired the instant shares with the intention to own them actually. The KimCC sold the instant shares to the Plaintiff with more favorable sales to the Plaintiff, a major shareholder, if EE is acquired under MaE’s Multinational Security Agreements. As such, the instant shares are owned by KimCC and do not constitute title trust.

(2) Even if the instant shares were held in title trust, when considering the fact that the Plaintiff was for the purpose of securing a favorable share in the management right dispute with the U.S.B, and the acquisition of shares in the Plaintiff’s name could stimulate the competitor’s U.B, thereby causing the stock price increase due to mutual gathering, etc., and the KOSDAQ Listing Regulations (amended by the Korea Exchange Regulation No. 300 of Dec. 7, 2007), the taxes to be avoided due to the title trust (global income tax) were minor, the KimCC acquired the instant shares, and then re-transfers the Plaintiff in the future only one year after the acquisition of the instant shares, and the Plaintiff did not change the status of the EE oligopolistic shareholder, the title trust with respect to the instant shares was for the purpose of defending the management right, and there was no purpose of tax avoidance.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Facts of recognition

(1) Management dispute

(A) On August 3, 2005, the Plaintiff was appointed as the representative director of EE, but from around 2007, there was a dispute over the management rights of BB and EE, who is the birth, and the articles related thereto were published as follows.

(B) On December 14, 2007, the representative director of EE changed from the Plaintiff to the UBB, and the Plaintiff and UBB’s annual stock holding status are as follows.

Current status of shares (%) (as at the end of each year,

2007 2008 2010 2009

23.36 22.93 23.87 27.33 30.67

B.23.25 23.13 27.13 27.13 27.13

(C) On November 22, 2012, the Plaintiff was sentenced to a fine of KRW 00,00,00 on the ground that a special crime of assault was found to have been committed against E on January 9, 2013, 2013, i.e., an application for provisional disposition prohibiting access to the register of shareholders for provisional disposition prohibiting access (2012○○), and on January 9, 2013. Meanwhile, on November 29, 2013, the Plaintiff was sentenced to a fine of KRW 20,00,00 on the ground that “the Plaintiff launched gun type gas sprayers, which is a dangerous object, was excluded from the management of EE” by Seoul Southern District Court (2013○○).

(2) Acquisition, etc. of the instant shares

(A) From January 2007 to June 2007, the Plaintiff lent ○○○○○○, an EE employee, and KimCC purchased the EE shares in several installments. In addition, at that time, KimCC took out loans from banks and securities companies and purchased the EE shares. On October 24, 2007, the Plaintiff borrowed ○○○○○○○○ from △ Policy on November 14, 2007 and lent ○○○○○○○ to KimCC for the repayment of the above loan, and on March 12, 2008, repaid the Plaintiff’s loan ○○○○ and interest thereon to △△ Securities.

(B) On August 21, 2008, the Plaintiff acquired EE stocks from KimCC to ○○○○○○○○○○○○○○○○○○○○○○○ in the price, from KimCC on August 25, 2008, and from Maximum F to ○○○○○○○○○○○○○ in the price (the instant shares are included in the shares acquired from KimCC as above). On August 21, 2008, the Plaintiff borrowed ○○○○○○○○ in the account of KimCC’s ○○○○○○○○○○○○○○○○ in the same day as the acquisition price of stocks. Of that, the Plaintiff returned ○○○○○○○○○○○○○○○○○○ in the account transfer securities again from the account transfer of △○○○○○○ in the name of △○○○○○○ in the name of transfer of stocks to the account transfer price of ○○○○○ in the account.

On the other hand, on August 27, 2008 with respect to the acquisition of the above shares, the plaintiff prepared a loan certificate (No. 2) stating that "the plaintiff will settle the remainder of the amount of the original loan (000 won) out of the purchase price of EE shares held by creditor KimCC (the purchase price of 000 won) at the time of the sale of the company, and will borrow 00 won at the rate of 7.5% per annum." (On the other hand, the plaintiff will pay 00 won at the time of the sale of EE shares held by creditor KimCC at the same day, and will borrow 7.5% per annum (the payment at the time of repayment) at the interest rate of 7.5% per annum (the premium No. 4)."

(3) Sales negotiations, etc. on E;

(A) On June 7, 2007, the Plaintiff entered into an agreement on the acquisition of a business with the content that transferred the management right of EE to EE to Y. In this case, YE demanded the Plaintiff to proceed with the sale negotiation by mutual agreement with EB.

(B) On April 16, 2008, EE received a decision to designate issues of management and suspended stock trading on the ground that it falls short of the standards for stock distribution under Article 28 of the KOSDAQ Market Listing Regulations from the Korea Exchange, and on the ground that it met the standards for stock distribution on May 23, 2008. EE shares were traded at the level of ○○○○ or ○○○○○○○○○○ level in the KOSDAQ market around 2008.

(C) On November 19, 2010, EE was given an opportunity for a mid-to-mid-term corporate sale in 2008. Around 19, 2010, EE was given an opportunity for a mid-to-mid-term corporate sale. He was given an opportunity for a global security company to purchase shares and management rights on the line of ○○○○○ Won per share. A concrete proposal was made to purchase shares and management rights on the line of major shareholders. Considering the share price (○○○○○) at the time, an article was published.

(4) Taxes, etc. paid;

If the dividend on the instant shares is calculated by adding up the Plaintiff’s global income tax to the global income tax, the difference between the global income tax amount due to the margin is ○○○ and ○○○○○ in 2008. Meanwhile, on August 21, 2008, KimCC paid to the Plaintiff securities transaction tax ○○○ upon transferring the EE shares to the Plaintiff, and on August 25, 2008, the securities transaction tax ○○○○○○ upon transferring the EE shares to the Plaintiff.

[Ground of recognition] Unsatisfy, Gap evidence 3 to 13 (including virtual numbers; hereinafter the same shall apply), Eul

Each entry of evidence Nos. 5 to 5, the purport of the whole pleadings

D. Determination

(1) As to whether a title trust constitutes a title trust

The following circumstances revealed based on the above facts: (a) KimCC acquired the instant shares and transferred them to the Plaintiff after about one year; (b) KimCC acquired the instant shares with the money paid by the Plaintiff in the form of loan to KimCC; (c) the Plaintiff appears to have borrowed money from a financial institution and lent it to KimCC; (iv) the Plaintiff’s transfer of ES shares from KimCC and the payment of interest to KimCC was returned to the Plaintiff again; and (v) the Plaintiff borrowed the amount equivalent to the acquisition price of the ES shares from KimCC as interest per annum 7.5% interest per annum (No. (No. (No. (a) 2), it is difficult to see that the Plaintiff’s transfer of shares to the Plaintiff as an unilateral transaction and it is reasonable to consider that the Plaintiff actually acquired the ES shares in the name of the Plaintiff, considering that the Plaintiff did not take any measures to secure the right to manage the loan equivalent to the transfer price; and (b) the Plaintiff’s transfer of shares to the Plaintiff.

(2) As to the purpose of tax avoidance

(A) If it is recognized that the title trust was made for reasons other than the purpose of tax avoidance, and only a minor reduction of tax incidental to the title trust took place, it cannot be deemed that there was "the purpose of tax avoidance" under Article 45-2(1) of the Inheritance Tax and Gift Tax Act (see Supreme Court Decision 2010Du24104, Mar. 24, 201). Moreover, the legislative intent of Article 45-2(1) of the Inheritance Tax and Gift Tax Act is to recognize an exception to the substance over form principle with the intent of effectively preventing the act of tax avoidance using the title trust system and realizing the tax justice. Therefore, only if the purpose of the title trust is not included in the purpose of the tax avoidance, the proviso of the same Article can be applied, and in this case, the burden of proving that there was no purpose of tax avoidance. However, it may be proved by a method other than the purpose of tax avoidance, which proves that there was no purpose of tax avoidance, and if there was no obvious purpose of tax avoidance in the name of the title trust, 2016.

(B) In light of the following circumstances revealed by the evidence and facts revealed in the instant case, the title trust of the instant shares was conducted for the purpose of defending the management right of EE, and the occurrence of minor tax reduction incidental to the said title trust, and thus, cannot be deemed to have existed “the purpose of tax avoidance”.

1) In around 2007, the Plaintiff entered into a dispute over the BB and the management right. On December 14, 2007, the Plaintiff was disqualified from the representative director. As such, there was a need to secure more shares. However, if the Plaintiff acquired EE shares in its own name, there was a concern that there was a possibility of mutual competition, such as suspension of transactions, delisting, etc. if it falls short of the stock-sharing standard. In fact, EE was able to suffer disadvantages due to its failure to meet the stock-sharing standard on April 16, 2008. According to the shares holding from 2005 to 2010, the Plaintiff’s shares shares held in the year 2008, 2008, 2009, 2010, 2006, 2006, 2007, 2007, 2007, 2007, 2008, 2008, etc. were maintained for the purpose of title trust.

2) Even if global income tax is calculated by adding up the dividend of the instant shares to the Plaintiff’s global income tax, the difference in global income tax due to short-term reduction is 007 and 008. This does not extend to 000 won interest of loans received from △△ Securities on October 24, 2007 to provide the Plaintiff to KimCC. The Plaintiff was paid to 00 won of securities transaction tax when receiving EE shares including the instant shares from KimCC, and the Plaintiff was in the status of oligopolistic shareholder regardless of the title trust, so there is no possibility of avoiding secondary tax liability. The Plaintiff acquired the instant shares in the name of KimCC for the purpose of defending the management right of EE, and thereafter acquired the instant shares in the name of ○○ and 008, and thereafter acquired the instant shares in the name of ○○○○○○○○○○○○○○○○○○, etc., the Plaintiff appears to have not been able to have avoided the transfer of the instant shares from the Plaintiff’s acquisition of the instant shares by transfer title trust.

(3) Sub-decisions

Therefore, the instant disposition based on the different premise cannot be deemed to have been an objective of tax avoidance in the title trust of the instant shares, and thus, is unlawful.

4. Conclusion

Therefore, the plaintiff's claim shall be accepted with due reason, and the judgment of the court of first instance is unfair with different opinions, so the plaintiff's appeal is accepted and the judgment of the court of first instance is revoked, and the disposition of this case shall be revoked.