Cho-2015-China-546 (2016.01)

No reason exists that the title trust of the instant shares is a title trust with no purpose of tax avoidance.

In light of the fact that it is difficult to deem that there is an objective evidence to deem that there is a correlation between the requirements for listing on the KOSDAQ of the affiliated company and the purpose of title trust of shares, the disposition is not erroneous

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

Article 79 of the Framework Act on National Taxes

Article 45-2 of the Inheritance Tax and Gift Tax Act

2016Guhap24008 Revocation of Disposition of Imposition of Gift Tax

AA

BB Director of the Tax Office

December 23, 2016

February 3, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

Each disposition of imposition of gift tax of KRW 870,669,560 (including penalty tax for unfair underreporting) on the gift of December 2, 2010 against the Plaintiff on October 6, 2015 and KRW 159,138,50 (including penalty tax for unfair underreporting) on the gift of September 2, 2011 shall be revoked.

1. Details of the disposition;

A. CCC Co., Ltd., DDD Co., Ltd., and EE Co., Ltd. (hereinafter referred to as “Co., Ltd.”) are unlisted companies belonging to a business group under the Monopoly Regulation and Fair Trade Act (hereinafter referred to as “instant business group”). FF is a representative director of CCC, and FF owns 52.59% of CCC’s shares and 31.52% of DDR’s shares, around 2010, and controls the said business group in fact. The Plaintiff is the son of GG, the spouse of FF.

B. On December 2, 2010, the Plaintiff acquired 5,975 shares issued by DD (31.52% of the total number of shares issued, hereinafter “instant shares”) from F in the form of sale and purchase, and on September 2, 201, acquired 2,00 shares issued by E (40% of the total number of shares issued, hereinafter “the instant shares”) from GG in the form of sale and purchase.

C. On September 9, 2013, the Defendant: (a) the transfer of the instant shares between the parties with a special relationship under the former Inheritance Tax and Gift Tax Act (amended by Act No. 11130, Dec. 31, 201; hereinafter the same)

The Plaintiff determined and notified KRW 445,924,290 of the gift tax on the ground that it constitutes a gift of profits accrued from the gift, and the Plaintiff filed a petition for a tax trial on the grounds that the Plaintiff is dissatisfied therewith, and the Tax Tribunal rendered a decision to revoke the imposition of the gift tax on the ground that the transfer of the first shares constitutes a title trust.

D. On October 6, 2015, the Defendant deemed that “the transfer of shares Nos. 1 and 2 in the instant case constitutes a nominal trust for the purpose of tax avoidance” and accordingly decided and notified the Plaintiff of the gift tax amounting to KRW 870,669,560 (including additional tax for unfair underreporting amounting to KRW 183,928,080) on December 2, 2010, and KRW 159,138,500 (including additional tax for unfair underreporting) on September 2, 2011 (hereinafter “instant disposition”).

E. On November 6, 2015, the Plaintiff appealed to the Tax Tribunal. However, the said claim was dismissed on June 1, 2016.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 9, Eul evidence Nos. 1 and 2 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(i) Chapter 1;

FF and GG are under title trust with the Plaintiff to lower their shares ratio based on the advice of the advisory company for listing the CCC. In light of the fact that: (a) the Plaintiff paid taxes on stock transfer; (b) the Plaintiff did not receive dividends from DD and EE; and (c) there was no tax amount to be avoided, such as global income tax, etc.; (d) the Plaintiff discontinued its business around November 2013; (b) the Plaintiff transferred the instant secondary shares to GG again around 2015; (c) the Plaintiff and FG constitute a relative relationship within the fourth degree of interest under the Framework Act on National Taxes; and (d) the Plaintiff and FG constitute a relative relationship within the fourth degree of interest under the title trust of the first shares of the instant case, and thus does not affect the status of oligopolistic shareholders; (b) the status of the secondary taxpayer; and (c) deemed acquisition tax, etc., the purpose of tax avoidance is not recognized.

(ii) Chapter 2;

When the disposition of gift tax imposed on the Plaintiff on September 9, 2013 was revoked by the decision of the Tax Tribunal, the Busan Regional Tax Office extended a tax investigation into the business group of this case without any reason, and accordingly, the Defendant rendered the instant disposition. Thus, the instant disposition was unlawful as it abused its tax authority based on the unlawful tax investigation.

(iii) Chapter 3;

The instant disposition in excess of the imposition of KRW 445,924,290, which was revoked by the decision of the Tax Tribunal on September 9, 2013 is unlawful as it violates the principle of prohibition of disadvantageous alteration.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Determination as to the first proposal

A) The legislative purport of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act is to recognize an exception to the principle of substantial taxation to the purport that the act of tax avoidance using the title trust system is effectively prevented, and thus realizing the tax justice. Thus, if the title trust was recognized as having been conducted for any reason other than the purpose of tax avoidance, and only a minor reduction of tax incidental to the title trust occurs, it cannot be readily concluded that there was the purpose of tax avoidance. However, in light of the legislative purpose as seen above, only if the purpose of the title trust is not included in the purpose of tax avoidance, it cannot be determined that there was a purpose of tax avoidance, such as the title trust, by applying the proviso of the above provision, only if the purpose of the title trust is not included in the purpose of tax avoidance, and thus, it cannot be deemed that there was an intention of tax avoidance. In this case, the burden of proving that there was no intention of tax avoidance in the name of the claimant (see, e.g., Supreme Court Decisions 2007Du1931, Oct. 17, 2013>

to the extent that there was a clear objective of tax avoidance and tax avoidance, and there was no tax avoidance in the future at the time of title trust and there was no tax avoidance in the future.

If there is a need to prove beyond doubt (see, e.g., Supreme Court Decision 2004Du11220, Sept. 22, 2006). Whether there was an intention of tax avoidance or not should be determined based on the time of title trust or whether it was actually evaded tax thereafter (see, e.g., Supreme Court Decisions 2003Du4300, Jan. 27, 2005; 2012Du546, Nov. 28, 2013).

B) In light of the above legal principles, the Plaintiff alleged that the title trust of 1 and 2 shares was aimed at lowering the shares ratio of the affiliated company according to the advice of the advisory company for listing CCC. However, according to the CCC report of HH securities corporation, the advisory company, it is necessary to improve the governance structure for the independence and autonomy of the affiliated company. However, the Plaintiff’s control over the pertinent company by title trust of shares owned by the FF and GG, a controlling shareholder, was at a distance from the above opinion. ② The Plaintiff appears to have not been in the heir status of FFF as a busheet of the FF, and the Plaintiff appears to have not been in the position of the oligopolistic shareholder, and thus, it appears that there was no possibility that the title trust of 1 shares of the instant case would be subject to tax avoidance through the old tax rate of 10% for global income under Article 87 of the Framework Act on National Taxes.

2) Determination on the second proposal

After the disposition of gift tax imposed on the Plaintiff on September 9, 2013 was revoked by the decision of the Tax Tribunal, the LL regional tax office extended the tax investigation on the instant enterprise group. This is justified as it is necessary to investigate the title trust relationship that was not recognized at the time of imposing the existing gift tax, and the reason alleged by the Plaintiff alone does not constitute an unlawful tax investigation or an abuse of the tax authority.

Therefore, the plaintiff's assertion on this part is without merit.

3) Determination as to the third proposal

Article 79(2) of the Framework Act on National Taxes provides that "The Council of Tax Judges or the Joint Session of Tax Judges shall not make a decision more unfavorable to the claimant than the disposition for a request for adjudgment in making a decision pursuant to Article 65 which applies mutatis mutandis under Article 81." Thus, this provision applies only to the procedure for a request for adjudgment. This provision applies only to cases where the main contents of the decision for adjudication are more unfavorable to the claimant than the taxation disposition which is the object of the request for adjudgment, and it does not apply to cases where the tax authorities correct the tax base or tax amount which has omissions or errors based on the details revealed in the grounds of the decision for adjudication (see,

Therefore, there is no ground to interpret that the principle of prohibition of disadvantageous change proposed by the Plaintiff in the tax appeal procedure is applied, and instead, to correct errors or omissions by the tax authority is unavoidable by the idea of fair taxation, and it is deemed that the correction may be made without limit to the number of times within the exclusion period of the imposition right. In addition to the fact that a new tax disposition supplementing the illegal cause in the judgment decision is separate from that of the previous tax disposition that was revoked by the judgment decision, and that the tax authority can only make a new disposition favorable to the taxpayer, and that there cannot be deemed to exist a national tax administrative practice that the tax authority cannot make a disposition disadvantageous to the taxpayer, even if it is possible for the taxpayer to make a disposition disadvantageous to the taxpayer, it cannot be said that there is

3. Conclusion

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