Cho-2015-China-1267 ( October 29, 2015)

Appropriateness of the disposition of imposing gift tax by applying Article 45-2 of the Inheritance Tax and Gift Tax Act to the claimant;

Since the Plaintiff is the title truster of the instant shares as aaa Shipping, and the Defendant added the same content as a preliminary disposition through a preparatory document, the disposition based on the premise that the title truster is a Aa Shipping is lawful. However, the instant disposition that applied the premium rate of 30% as the largest shareholder’s shares is unlawful.

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

Incheon District Court 2015Gudan50174 Revocation of Disposition of Imposing Gift Tax

○ ○

○○ Head of tax office

2017.06.27

oly 2017.18

1. On December 11, 2014, the part that exceeds 14,793,950 won out of the gift tax of 26,763,780 won owed to the Plaintiff for the year 2012 shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. Of the litigation costs, 50% is assessed against the Plaintiff, and the remainder is assessed against the Defendant, respectively.

Cheong-gu Office

The Defendant’s disposition of imposition of KRW 26,763,780 against the Plaintiff on December 11, 2014 is revoked.

1. Details of the disposition;

A. On February 24, 1999, 000, ○○○ Shipping Co., Ltd. (hereinafter “○○○ Shipping”) was a corporation established for the purpose of the maritime passenger and cargo transport business, and changed the total number of issued and outstanding shares from 40,000 to 340,000 shares by offering new shares around June 24, 2001.

B. On December 31, 2012, the Plaintiff completed the transfer of the Plaintiff’s shares 15,000 shares (hereinafter “instant shares”) issued by ○○ Shipping on December 31, 2012, from the ○○○, ○○, and △△, the transfer of the shares was completed.

C. The director of the regional tax office of ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ was a de facto owner of the shares issued by ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ (hereinafter

D. On December 11, 2014, the Defendant considered the Plaintiff as the largest shareholder holding more than 50/10 of the total number of outstanding shares of ○○ Shipping pursuant to Articles 45-2 and 63(3) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 13557, Dec. 15, 2015; hereinafter “former Inheritance Tax and Gift Tax Act”). The Defendant assessed the value per share of the instant shares as KRW 26,763,780 (including additional taxes; hereinafter “instant disposition”) by adding 30% of the total number of outstanding shares of ○○ Shipping and assessed as KRW 26,763,780 (including additional taxes; hereinafter “instant disposition”).

E. The Plaintiff appealed to the instant disposition and filed an appeal with the Tax Tribunal, but was dismissed on May 1, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 3, Eul evidence No. 1 (including branch numbers, if any) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Since the actual owner of the instant shares was not the deceased but the Plaintiff, ○○ Shipping, to escape from the limitation on the acquisition of treasury shares under the Commercial Act, it cannot be deemed that there was an objective of tax avoidance. Thus, the instant disposition based on a different premise is unlawful.

2) Although the deceased did not hold more than 50% of the total shares of ○○ Shipping, the instant disposition that was made by applying the maximum shareholder 30% increase rule is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) The title truster of the instant shares

Although the Defendant asserts that the actual owner of the instant shares is the Deceased, insofar as there is no proof of factual relations that could specifically determine the subject of the title trust, such as the process of raising the price for the instant shares, it is difficult to recognize the fact that the Deceased was likely to exercise a substantial authority or have received a delivery of funds for the management of ○○ Shipping, and the evidence presented by the Defendant alone is insufficient to recognize the fact that the actual owner of the instant shares is the Deceased, and there is no other evidence to acknowledge it as the title truster of the instant shares.

However, the Plaintiff is the title truster of the instant shares as ○○ Shipping, and the Defendant also added the same cause to the grounds for disposition through a preparatory document dated June 8, 2017. As such, the lower court examined whether the instant disposition is lawful on the premise that the title truster is ○○ Shipping.

2) Whether the purpose of tax avoidance exists

The legislative purport of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act is to recognize an exception to the substance over form principle with the purport of effectively preventing the act of tax avoidance by using the title trust system and realizing the tax justice. Thus, the proviso of the same Article is applicable only where the purpose of tax avoidance is not included in the purpose of the title trust. In such a case, the burden of proving that the purpose of tax avoidance was not included in the purpose of the title trust lies on the nominal owner who asserts it (see, e.g., Supreme Court Decision 2010Du24968, Mar. 28, 2013). In addition, in light of the legislative purport of Article 45-2(1) of the former Inheritance Tax and Gift Tax Act, if it is recognized that the title trust was made for other reason than the purpose of tax avoidance, and it is merely a minor reduction incidental to the said title trust, it cannot be readily concluded that there was "tax avoidance purpose" in such title trust. However, it cannot be deemed that there was no other purpose of tax avoidance, etc.

As to the instant case, since ○○○ Shipping’s acquisition of the instant shares violates the provisions of the Commercial Act restricting the acquisition of treasury stocks, it is reasonable to view that the title trust of the instant shares by ○○ Shipping was intended to evade the provisions on the restriction on the acquisition of treasury stocks under the Commercial Act. However, as alleged by the Plaintiff, in the event that ○○○ Shipping sells the instant shares under the real name transfer to ○○○ Shipping, it is likely that it would be subject to the high corporate tax rate by adding gains from transfer to the corporate tax base, and there is a possibility that it would be subject to the application of the corporate tax rate higher than the transfer income tax rate. Therefore, in light of these circumstances, it is difficult to conclude that the title trust of the instant shares was intended to evade the Plaintiff’s tax avoidance purpose solely on the basis of the Plaintiff’s assertion, and there is no other evidence to acknowledge this, this part of the Plaintiff’s assertion has

3) Whether the application of the certificate as the largest shareholder’s shareholding is legitimate

The Defendant assessed the value of the shares of this case by applying the premium rate of 30% as stipulated in Article 63(3) of the former Inheritance Tax and Gift Tax Act on the premise that the title truster is the deceased’s largest shareholder holding more than 50 percent of the total number of shares issued. However, as seen above, the deceased cannot be deemed the title truster. Since there is no evidence to prove that ○○ Shipping, which is specified as the title truster, holds more than 50 percent of the total number of shares issued, the disposition of this case by applying 30 percent of the total number of shares owned by the largest shareholder is unlawful. Accordingly, the Plaintiff’s assertion on this part is with merit

4) Scope of revocation of the instant disposition

In a litigation for revocation of a taxation, even where it is deemed that the taxation disposition is unlawful because it was erroneous in the process of calculating the amount of tax, when the amount of tax to be imposed lawfully is calculated based on the data submitted until the conclusion of the pleadings at the fact-finding court, the court shall not revoke the entire amount of the taxation disposition as unlawful, but shall revoke only the unlawful portion by deeming the portion exceeding the reasonable amount of tax assessment (see, e.g., Supreme Court Decision 97Nu19496, Sept. 29, 200) as unlawful (see, e.g., Supreme Court Decision 97Nu19496, Sept. 29, 200). The value per share of the shares of this case, to which 30% of the total amount of tax held by the largest shareholder is 6,899 won, and the amount of tax calculated based on this, is 14,793,950 won (including additional

3. Conclusion

Therefore, the plaintiff's claim of this case is justified within the scope of the above recognition, and the remaining claim is dismissed as it is without merit. It is so decided as per Disposition.