Cho Jae-2014-west-2568 (Law No. 16, 2015)

Since a series of title trust acts cannot be concluded to be irrelevant to the purpose of tax avoidance, the imposition of gift tax is legitimate.

In a case where the act of stock title trust, etc. does not interfere with the determination of tax, if such act was made with the intent to make it impossible or considerably difficult to collect tax, it shall also be deemed that such act constitutes a case where the purpose of tax avoidance exists.

Legal fiction of donation of title trust property under Article 45-2 of the Inheritance Tax and Gift Tax Act

2015Guhap6264 Revocation of Disposition of Imposition of Gift Tax

Is 7 et al.

O Head of tax office

July 12, 2016

September 1, 2016

1. The plaintiffs' claims against the defendants are all dismissed.

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

Cheong-gu Office

Each gift tax (including additional tax) specified in the attached Table 1 list that the Defendants made against the Plaintiffs shall be revoked.

1. Details of the disposition;

A. Nonparty HongA, and JeongB decided to transferCC, DD, and EE (hereinafter referred to as “CC”) that they operated to FF (hereinafter referred to as “FF”) Co., Ltd. (The GovernmentB, in fact, delegated the sale ofCC that they operated, to RedA).

B. The RedA decided to transferCC to FF in a way that it accepts the entire shares of HH by offering new shares of HH Co., Ltd. (hereinafter “H”) that it held 80% of its shares.

C. On March 27, 2009, HongA held title trust with the Plaintiffs (the total number of shares issued by H was 30,000 shares issued after the capital increase was 30,000 shares) of 17,00 shares out of the shares issued by H during the capital increase process of H’s capital increase (hereinafter “one shares per share”).

D. On April 14, 2009, HongA entered into a contract with F for acquisition of H’s shares and acquisition of management rights (hereinafter “instant acquisition of shares”) with F, and 4 billion won out of 8.4 billion won in price, the amount of KRW 8.4 billion in stocks of Nonparty Co., Ltd. (hereinafter “GG”) and the remainder of KRW 4.4 billion in cash.

E. On the same day, HongA trusted the title trust of 29,675 shares of the GG shares so acquired (hereinafter referred to as “second shares”) with the Plaintiff EA, AO, AO, BO, CO, and PO (whether transfer has been made or not).

F. The Defendants, applying Article 45-2(1) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 9916, Jan. 1, 2010; hereinafter referred to as the “former Inheritance Tax and Gift Tax Act”), determined and notified each of the gift taxes (including additional taxes) listed in the separate sheet No. 1 to the Plaintiffs (hereinafter referred to as the “instant disposition”).

[Ground of recognition] Facts without dispute, Gap evidence 1 through 3, 28, Eul evidence 1 through 4, 6 through 9 (including paper numbers) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

First, in order to prevent the risk of stock price decline due to the change of the largest shareholder, and to maintain the management right of GG, F requested to divide the names of 1,2 shares, and the HongA, which was in the financial crisis, could not refuse the request of the said company, and not otherwise have the purpose of tax avoidance.

Second, since F’C’s exclusive license establishment cost of service mark right held separately by HongA is included in F’s 8.4 billion won, it was erroneous that the Defendants calculated 2.8 billion won per share (=8.4 billion won ± 30,000 won per share) in view of the total amount of KRW 8.4 billion as transaction example of HH shares.

Third, unlike the description in the contract, the contract amount actually agreed upon by the HongA and the F is merely 4.4 billion won, and the shares of the GG granted under the name of the remaining 4.4 billion won are merely transferred to secure the payment of the above 4.4 billion won. In fact, the amount of the shares, cash, etc. actually received by the HongA from F is not only the amount of KRW 3.0 billion by comprehensively considering all the values of the shares, cash, etc. received by the HongA from F. Therefore, the provision on the constructive gift of trust property should not be applied to the two shares transferred for the purpose of transfer for security.

Fourth, without examining whether the list of shareholders exists in GG, the Defendants issued the instant disposition on the basis of only the statement of changes in stocks, etc., but Article 45-2(3) of the former Inheritance Tax and Gift Tax Act, which served as the basis of the above disposition, can only be applied where the list of shareholders is not prepared. Thus, without additional proof on this part, the instant disposition on the 2 shares cannot be justified.

B. Relevant statutes

Attached Form 2 is as listed in the relevant statutes.

C. Determination

1) Whether there was no purpose of tax avoidance

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 using the title trust system and realizing the tax justice. Thus, the proviso of the same Article can be applied only where the purpose of tax avoidance is not included in the purpose of the title trust, and in such a case, the burden of proving that there was no purpose of tax avoidance exists, not the purpose of tax avoidance. In this context, the burden of proving that there was no purpose of tax avoidance can be proven by means of proving that there was a purpose other than the purpose of tax avoidance. However, as the title holder who bears the burden of proof, there was an obvious purpose irrelevant to the tax avoidance in the title trust to the extent that it is recognized that there was no purpose of tax avoidance in the title trust, and it is necessary to prove that there was no tax avoidance in the future at the time of the title trust or in the absence of tax avoidance in the future by objective and supporting evidence (see, e.g., Supreme Court Decision 200

However, according to the background of the above disposition, since both the issues 1 and 2 are not the FF’s issued shares, and the distribution of the title of ownership does not affect the FF’s organization, and only the distribution of the title of GG shares affects the management right of the GG. Thus, it is difficult to understand whether the issue 1 and 2 shares were for any purpose other than the tax avoidance.

Rather, even in a case where the act of title trust, etc. of stocks does not interfere with the determination of tax, if such act was made with the intention of making it impossible or considerably difficult to collect tax, it shall also be deemed that it constitutes a case of tax evasion (see, e.g., Supreme Court en banc Decision 2005Do9546, Feb. 15, 2007). According to the circumstances of the above disposition, RedA distributed one share in the process of issuing new shares of HH in the name of the plaintiffs and entrusted the trust of this issue in the process of issuing new shares of H. The issue that was acquired as the price for transferring the above shares, once again distributed and entrusted the two shares in the name of some of the plaintiffs, and the issue that was acquired as the price for transferring the shares was distributed and entrusted in the name of some of the plaintiffs, and the above issue 2-maz., which was able to become the responsible property without reporting the transfer income generated in the process, as seen in the above case 3). Therefore, there is no room to conclude this part of the Plaintiffs’s allegation.

2) Whether it is appropriate to assess the issue value per share of KRW 280,000 per share;

A) Facts of recognition

(1) The main contents of the instant contract are as follows (in the instant contract, the term “B” includes the qualification of the representative of other HH shareholders, and the term “B” means the expression “B” in the event that the RedA individual is named. (1) refers to the expression “B” as it is, and the term “B” refers to the expression “B” as it is.

① The purpose of the instant transfer agreement is to exchange the shares of H 30,000 shares and cash of GG owned by F, and to set the exclusive license to H with respect to “C” service mark rights owned by HongA among “B” (Article 1).

② H also owns an absolute right, without infringement or restriction, to all projects and assets ofCC from any third party (Article 2(1)).

(3) “B” has undergone an appraisal of H stocks, which are subject to transfer, by an O-accounting firm, and the assessed value is eight billion won (Article 3(1)).

④ The book value of 82,491 shares of GG to be exchanged by F is 4 billion won (Article 4).

5) If the FF pays 82,491 shares of GG to “B”, “B” shall pay and transfer HH shares 18,929 shares to “B”, and if the F pays 4.4 billion won in cash to “B”, “B” shall pay 11,071 shares of HH shares to the F and transfer of ownership to “B” (Article 5(1) and (2).

6. “B” is subject to registration of H with respect to “C” service mark registration number No. 00-000, No. 00-0000, and No. 00-00000, through a separate contract, as an exclusive licensee of absolute authority. The period of the above exclusive license shall be ten years. “B” confirms that HH is the sole subject of all the powers, including the exclusive license, overCC (Article 7).

(2) The OO Accounting Corporation assessed the value of H’s stock per share as KRW 282,226 (as of April 7, 2009). There is no mentioning in the above evaluation statement about “C”’s service mark right.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 2 and 26, the purport of the whole pleadings

B) Determination

According to the above facts, Article 2(1) of the contract provides that the transferee of H is able to obtain the same effect as accepting theCC and to operate the said private teaching institute without any restriction. Articles 1 and 5 of the contract of the acquisition of HH shares and the transfer of the instant case consider the exchange object of the GG shares and cash equivalent to 30,000 and 8.4 billion won as the exchange object of the HH shares, 'C' service mark rights are not separately assessed, and the OO accounting corporation also did not consider the existence of the above service mark right while evaluating the value of HH shares, and it does not seem to have taken into account the existence of the above service mark right. Considering such circumstances, it appears that the acquisition of the instant case was lawful, i.e., the principal interest of HongA and F in the purchase of the instant shares, which were parties to the contract, and that only the purchase price of the instant shares would have been set at 00 billion won or more, and thus, it appears that the Defendants had no special interest in the agreement between 800 billions.

3) Whether the issue 2 shares were transferred for the purpose of transfer;

The court shall, in principle, recognize the existence and content of the expression of intent in accordance with the language and text stated in the above document, unless there is any clear and acceptable reflective evidence that denies the contents of the statement in the disposal document (see, e.g., Supreme Court Decision 2010Da58728, May 13, 201). The fact that the transfer of the instant disposal document, also stated in the contract that the GG shares, including the instant two shares, are paid in lieu of KRW 4 billion out of HH share purchase price of KRW 8.4 billion, as seen earlier.

In addition, comprehensively taking account of the overall purport of the arguments in Gap evidence Nos. 12 through 19, 23 through 25, it is additionally acknowledged that HongA received 4.1 billion won (the balance of 300 million won) in cash, stocks, promissory notes, etc. from May 28, 2009 to May 25, 2012 after consultation on several times with FF, and that HongA received the remainder of 4.1 billion won (the remainder of 300 million won) in cash, stocks, or promissory notes, etc., and that HongA used the GG stocks held on February 12, 2010, prior to the completion of the settlement procedure separately from the above 4.1 billion won, which were held on February 12, 2010, for repayment of personal debt amounting to 1.3 billion won to the ParkJ. According to the above recognition, under the premise that each of the above 200 billion won shares was not transferred to 30 billion won or more, it appears that the above shares were transferred to 3000 billion won.

4) Whether a taxation disposition based only on the statement on the status of changes in stocks is legitimate

In full view of the purport of the evidence Nos. 9 and 10 as a whole, it is recognized that the statement of changes in stocks, etc. of GG, which the Defendants used as the basis for the disposition of the instant case, was submitted to the tax authority by GG, and that GG concluded a transfer agency contract with an OO bank, but did not transfer the register of shareholders. According to the above findings, it is consistent with the empirical rule to view that the list of shareholders alleged by the Plaintiffs is inappropriate, or that even if it was actually completed, it is consistent with the statement of changes in stocks, etc. directly prepared and submitted by GG. Accordingly, the Plaintiffs’ assertion on this part is without merit.

3. Conclusion

Therefore, the plaintiffs' claims against the defendants are dismissed as it is without merit. It is so decided as per Disposition.