Cho High Court Decision 2009J0917 (No. 18, 2009)

It is not required to bear a joint payment obligation in the case of bypass donation to a third party through transfer.

Where the property is de facto gratuitously transferred by indirect means through a third party, the person to whom the property is transferred shall be deemed to have been donated to the person who transferred the property through the third party at the time of its transfer; and if such donation is deemed to have been made, the donor shall not be liable to jointly pay the gift tax to be paid by the donee.

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

1. The Defendant’s disposition of imposition of KRW 1,007,152,170 against the Plaintiff on November 17, 2008 shall be revoked.

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

The same shall apply to the order.

1. Circumstances of the disposition;

가. 원고는 1999. 12. 18. 자신이 소유한 주식회사 @@관광호텔(이하 '소외 호텔'이 라 한다)의 주식 1만 주(이하 '이 사건 주식'이라 한다)를 이BB에게 양도하였고, 이BB은 2000. 2. 28. 정CC에게 다시 이 사건 주식을 양도하였으며, 정CC는 2000. 6. 22. 원고의 자녀인 배AA에게 위 주식을 양도하였다.

B. Accordingly, the Defendant: (a) deemed that the instant shares were donated to EA through indirect transactions that are transferred in succession to EB, EA, and EA in order to avoid gift tax; and (b) on July 4, 2002, the Defendant imposed and notified EA of KRW 1,007,152,170 on EA.

C. After that, on November 17, 2008, the Defendant: (a) designated the Plaintiff, a donor, as a person jointly and severally liable for the return of the gift tax, as well as issuing a notice of payment of the gift tax (hereinafter “instant disposition”) on the ground that the donee, as a donee, is unable to pay the gift tax and it is difficult to secure the tax claim even after taking a disposition on default.

D. Accordingly, on February 11, 2009, the Plaintiff appealed against the instant disposition and filed an appeal with the Tax Tribunal, but the Tax Tribunal rendered a decision to dismiss the Plaintiff’s claim on May 20, 2009.

[Ground of recognition] Facts without dispute, Gap evidence 1-1, 2, Eul out of subparagraph 1, Eul out of subparagraphs 2 and 3, each entry and the purport of the whole pleadings

2. Whether the disposition is proper; and

A. The plaintiff's principal

The disposition of this case shall be revoked in violation of any of the following grounds:

1) It is true that the Plaintiff is registered as the representative director of the non-party hotel and is the owner of the instant shares. However, the Plaintiff did not enter Korea in Japan and only lent only the name of the representative director, and did not take part in the operation of the non-party hotel. The agreement on the transfer of the instant shares between the Plaintiff and the non-party BB appears to have been made known to the Plaintiff, the husband of the Plaintiff, and the agreement on the transfer of the instant shares between the Plaintiff and the non-party BB is also known to all of them.

2) Even if the Plaintiff entered into each of the above transfer contracts, it is against Article 42(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6301 of Dec. 29, 2000, any of the 'the Act') and does not bear joint payment obligations under the proviso of Article 4(3) of the Act, because it is against Article 42(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 6301 of Dec. 2

3) Even if the Plaintiff’s joint payment obligation is recognized, the instant disposition was calculated by adding the amount of money that the Plaintiff, the husband of the Plaintiff, donated to the Plaintiff, to the amount of the Plaintiff’s gift.

B. Relevant statutes

Attached Form is as shown in the attached Form.

C. Determination

1) First of all, we examine the claim of the above 1). In other words, the non-party hotel was the Plaintiff’s family member holding 10,000 shares each of the Plaintiff’s other children, EE, and EF with 25,000 shares owned by the Plaintiff’s husband, and the non-party hotel holding 10,000 shares owned by the Plaintiff’s husband, and the non-party hotel’s shares were owned by this 30,000 shares of the non-party hotel through B and ECC and became the largest shareholder. It was difficult for the Plaintiff to receive money equivalent to the share transfer price before and after the conclusion of the transfer contract for the shares of this case, and then transfer the shares to the Plaintiff or EB by withdrawing the money equivalent to the share transfer price, and it was also difficult for the Plaintiff to pay the transfer price of the shares to the Plaintiff and EB as the transfer price for the shares of this case without consideration to the Plaintiff and EB. It was also difficult for the Plaintiff to pay the transfer price for the shares of this case.

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

2) Next, according to Articles 4(3) and 42(1) of the Act, where the property is de facto gratuitously transferred through an indirect method via a third party, the person to whom the property was transferred is deemed to have been donated from the person who transferred the property through a third party at the time of its transfer. If such donation is deemed based on the foregoing, the donor does not bear a joint and several liability for the gift tax to be paid by the donee.

However, the Plaintiff’s transfer of this case’s stocks to EA through B and PCC is as seen in Article 42(1) of the Act. Accordingly, the Plaintiff is not obligated to jointly pay gift tax payable by EA as to the gift tax pursuant to the proviso to Article 4(3) of the Act. Therefore, the instant disposition based on the premise is unlawful without further determination as to the remainder of the Plaintiff’s assertion (as seen above, the Defendant asserts that the Plaintiff’s transfer of this case’s stocks to EA as it constitutes gift, and thus, the provision on deemed donation is not applicable. However, Articles 2(4) and 42 of the former Inheritance Tax and Gift Tax Act (amended by Act No. 735 of Jan. 14, 2005) do not regard the transfer of property through a third party without compensation, and thus, it does not accept the aforementioned assertion because the Plaintiff’s transfer of property through an indirect method is a separate donation provision in the form of donation.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition by the assent of all participating Justices.