Open Decision Ledger · Tax & international taxation
Criteria for Determining the Scope of Deemed Gift Taxation on Converted Shares in a Nominee Trust of Convertible Bonds
Translated from the Korean original. Read the Korean
Supreme Court, Sept. 10, 2019, 2016Du1165 (judgment)
Case name: 증여세부과처분취소
Official text on the National Law Information Center
Question
Can gift tax be levied again on shares converted from registered convertible bonds held in a nominee trust?
Holding
The Court held that registered convertible bonds fall within the property subject to deemed gift, because entry of a transfer in the bond register constitutes the opposability requirement (assertability against third parties). It stated that shares received upon conversion are separate property, for which a new nominee trust relationship arises. Nevertheless, it drew the line by holding that, in principle, it bars the re-imposition of tax on shares corresponding to convertible bonds that were taxed or could have been taxed as deemed gifts at the outset. In doing so, it cited together the scope necessary to prevent tax avoidance, the inconsistency with the effect of the initial deemed gift, the continuity of value without any additional payment, and the equity of avoiding double taxation.
Summary of the holding, verbatim
[1] 구 상속세 및 증여세법(2007. 12. 31. 법률 제8828호로 개정되기 전의 것) 제45조의2 제1항 본문(이하 ‘위 조항’이라 한다)은 “권리의 이전이나 그 행사에 등기 등을 요하는 재산에 있어서 실제 소유자와 명의자가 다른 경우에는 국세기본법 제14조의 규정에도 불구하고 그 명의자로 등기 등을 한 날에 그 재산의 가액을 명의자가 실제 소유자로부터 증여받은 것으로 본다.”라고 정하고 있다
Unofficial English translation
[1] Article 45-2 (1), main text of the former Inheritance Tax and Gift Tax Act (as before amended by Act No. 8828 on December 31, 2007; hereinafter 'the said Article') provides: 'In the case of property for which registration or the like is required for the transfer or exercise of rights, where the actual owner and the person in whose name the registration is made differ, notwithstanding Article 14 of the Framework Act on National Taxes, on the date the registration or the like is made in the name of such person, the value of such property shall be deemed to have been received as a gift by that person from the actual owner.'
Disposition
Reversed and remanded Stated in the decision
원심판결을 파기하고, 사건을 서울고등법원에 환송한다.
Unofficial English translation
The judgment of the court below is reversed, and the case is remanded to the Seoul High Court.
Form of the test
Elements stated Stated in the decision
[1] 구 상속세 및 증여세법(2007. 12. 31. 법률 제8828호로 개정되기 전의 것) 제45조의2 제1항 본문(이하 ‘위 조항’이라 한다)은 “권리의 이전이나 그 행사에 등기 등을 요하는 재산에 있어서 실제 소유자와 명의자가 다른 경우에는 국세기본법 제14조의 규정에도 불구하고 그 명의자로 등기 등을 한 날에 그 재산의 가액을 명의자가 실제 소유자로부터 증여받은 것으로 본다.”라고 정하고 있다
Unofficial English translation
[1] Article 45-2 (1), main text of the former Inheritance Tax and Gift Tax Act (as before amended by Act No. 8828 on December 31, 2007; hereinafter 'the said Article') provides: 'In the case of property for which registration or the like is required for the transfer or exercise of rights, where the actual owner and the person in whose name the registration is made differ, notwithstanding Article 14 of the Framework Act on National Taxes, on the date the registration or the like is made in the name of such person, the value of such property shall be deemed to have been received as a gift by that person from the actual owner.'
Factors
- 기명식 전환사채는 그 이전에 관하여 사채원부의 명의개서가 대항요건으로 되어 있으므로(상법 제479조 참조), 위 조항에서 정한 ‘권리의 이전이나 그 행사에 등기 등을 요하는 재산’에 해당한다.
- 위 조항은 조세회피목적의 명의신탁행위를 방지하기 위하여 실질과세원칙의 예외로서 실제 소유자로부터 명의자에게 해당 재산이 증여된 것으로 의제하여 증여세를 과세하도록 허용하는 규정이므로, 조세회피행위를 방지하기 위하여 필요하고도 적절한 범위 내에서만 적용되어야 한다.
Unofficial English translation
• Since, with respect to the transfer of registered convertible bonds, a transfer of registration in the bond register constitutes the opposability requirement (see Article 479 of the Commercial Act), they fall under the category of 'property for which registration or the like is required for the transfer or exercise of rights' as provided in the said Article.
• Since the said Article is a provision that, as an exception to the principle of taxation based on substance, permits the imposition of gift tax by deeming the relevant property to have been gifted from the actual owner to the person in whose name the registration is made, in order to prevent title-trust arrangements made for the purpose of tax avoidance, it must be applied only within the scope that is necessary and appropriate to prevent acts of tax avoidance.
Relation to precedent
Follows earlier decisions Stated in the decision
[1] 대법원 1987. 10. 13. 선고 87누118 판결(공1987, 1725)
Unofficial English translation
[1] Supreme Court Decision 87Nu118 decided October 13, 1987 (Gong 1987, 1725)
Decisions referred to
[1] 대법원 1987. 10. 13. 선고 87누118 판결(공1987, 1725)
Burden of proof
Not addressed Not in the decision
Open question and revisit condition
If the initial convertible bonds can be taxed, what is left by the initial deemed gift when tax is levied again on the converted shares?
The holding is to be reviewed again once the examination of the possibility of deemed taxation of the initial convertible bonds, the purpose of tax avoidance, and any special circumstances is completed.
Cross-family AI independent reading & axis check
8 of 8 axes matched Gemini 3.1 Pro · 2026-10-16
The cross-family AI independent reading found that all eight axes agree with the first reading. The disposition, the quotation of the original text of the Summary of Decision, the Form of the test, the Factors, the Relation to precedent, and the classification of the Burden of proof are consistent with the wording of the original text.
Lower-court contrast & scope of application
Lower-court reading vs. Supreme Court holding
Lower-court context: The court below found that the plaintiff paid the purchase price for the convertible bonds and comprehensively entrusted Non-party 2 with the subscription for the convertible bonds and the exercise of the conversion right. Proceeding from the premise that shares converted from convertible bonds are, separate from the convertible bonds, automatically subject to the deemed gift of property held in a nominee trust, it held that the disposition taxing the shares in question acquired by the plaintiff through the exercise of the conversion right, by applying the main text of Article 45-2 (1) of the former Inheritance Tax and Gift Tax Act, was lawful. Accordingly, it did not decide whether the provision in question could be applied to tax the convertible bonds themselves.
Supreme Court standard: The Supreme Court, while premising that registered convertible bonds constitute the property subject to the above provision and that converted shares become separate and newly created nominee trust property, nevertheless held that gift tax may not be levied again by applying the above provision to shares allotted, upon exercise of the conversion right, to the nominee holder of convertible bonds that were initially taxed or could have been taxed as a deemed gift, unless there are special circumstances. It pointed out that the court below erred in its legal principle and failed to conduct the necessary examination, in that it found the disposition lawful on the erroneous premise that converted shares were automatically subject to the deemed gift, without determining whether the convertible bonds themselves were capable of being taxed under the provision in question. In its disposition, the Supreme Court reversed the judgment of the court below and remanded the case to the Seoul High Court.
Distinguishing conditions
- A case that does not fall within the scope of cases where the convertible bonds initially held in the nominee trust were taxed or could have been taxed as property subject to deemed gift
- A case in which, in the course of conversion, an additional payment or the like caused a substantive change in economic value before and after conversion, or in which there are special circumstances making separate taxation necessary to prevent tax avoidance
Record verification notes
When applying the legal principle of Supreme Court Decision 2016Du1165 to other cases, first verify the entry of a transfer in the bond register for the registered convertible bonds and whether the initial deemed gift tax was levied. Cross-check, against documentary evidence, the conditions for the exercise of the conversion right and whether any additional payment was made, the change in economic value before and after conversion, and any change in the nominee trust relationship.
From the official text
Points at issue
[1] 기명식 전환사채가 구 상속세 및 증여세법 제45조의2 제1항 본문에서 정한 ‘권리의 이전이나 그 행사에 등기 등을 요하는 재산’에 해당하는지 여부(적극) [2] 최초로 증여의제 대상이 되어 과세되었거나 과세될 수 있는 기명식 전환사채의 명의수탁자에게 전환권 행사에 따라 배정된 주식에 대하여 다시 구 상속세 및 증여세법 제45조의2 제1항 본문을 적용하여 증여세를 과세할 수 있는지 여부(원칙적 소극)
Unofficial English translation
[1] Whether registered convertible bonds fall under the category of 'property for which registration or the like is required for the transfer or exercise of rights' as provided in the main text of Article 45-2 (1) of the former Inheritance Tax and Gift Tax Act (affirmative) [2] Whether gift tax may again be imposed, by applying the main text of Article 45-2 (1) of the former Inheritance Tax and Gift Tax Act, on the shares allocated to the name trustee of registered convertible bonds who was or may have been first taxed on the deemed gift of such bonds upon the exercise of the conversion right (in principle, negative)
Summary of the holding
[1] 구 상속세 및 증여세법(2007. 12. 31. 법률 제8828호로 개정되기 전의 것) 제45조의2 제1항 본문(이하 ‘위 조항’이라 한다)은 “권리의 이전이나 그 행사에 등기 등을 요하는 재산에 있어서 실제 소유자와 명의자가 다른 경우에는 국세기본법 제14조의 규정에도 불구하고 그 명의자로 등기 등을 한 날에 그 재산의 가액을 명의자가 실제 소유자로부터 증여받은 것으로 본다.”라고 정하고 있다. 기명식 전환사채는 그 이전에 관하여 사채원부의 명의개서가 대항요건으로 되어 있으므로(상법 제479조 참조), 위 조항에서 정한 ‘권리의 이전이나 그 행사에 등기 등을 요하는 재산’에 해당한다. [2] 기명식 전환사채의 명의수탁자가 전환권 행사로 발행된 주식을 배정·교부받아 자신의 명의로 명의개서를 한 경우, 전환된 주식은 전환사채와는 별도의 새로운 재산으로서 전환된 주식에 대하여 명의신탁자와 명의수탁자 사이에 전환사채에 대한 종전의 명의신탁관계와는 다른 새로운 명의신탁관계가 형성된다. 그러나 최초로 증여의제 대상이 되어 과세되었거나 과세될 수 있는 기명식 전환사채의 명의수탁자에게 전환권 행사에 따라 배정된 주식에 대해서는 특별한 사정이 없는 한 다시 구 상속세 및 증여세법(2007. 12. 31. 법률 제8828호로 개정되기 전의 것) 제45조의2 제1항 본문(이하 ‘위 조항’이라 한다)을 적용하여 증여세를 과세할 수 없다. 그 이유는 다음과 같다. 첫째, 위 조항은 조세회피목적의 명의신탁행위를 방지하기 위하여 실질과세원칙의 예외로서 실제 소유자로부터 명의자에게 해당 재산이 증여된 것으로 의제하여 증여세를 과세하도록 허용하는 규정이므로, 조세회피행위를 방지하기 위하여 필요하고도 적절한 범위 내에서만 적용되어야 한다. 둘째, 기명식 전환사채가 주식으로 전환된 경우, 증여의제 대상이 되어 과세되었거나 과세될 수 있는 최초의 명의신탁 재산인 전환사채에 상응하여 명의수탁자에게 전환된 주식이 배정되어 명의개서가 이루어졌는데도 그와 같은 주식에 대하여 제한 없이 위 조항을 적용하여 별도로 증여세를 부과하는 것은 증여세의 부과와 관련하여 최초의 명의신탁 전환사채에 대한 증여의제의 효과를 부정하는 모순을 초래할 수 있어 부당하다. 셋째, 전환사채의 경우 그 권리자는 전환청구에 의하여 추가로 신주인수대금을 납입할 필요 없이 전환사채 발행 당시 정해진 조건에 따라 신주를 배정·교부받게 되므로, 전환청구 전·후로 전환사채와 전환된 주식의 경제적 가치에 실질적인 변동이 있다고 보기 어렵다. 넷째, 최초로 명의신탁된 전환사채와 전환된 주식에 대하여 각각 위 조항을 적용하게 되면 애초에 전환사채나 그 인수자금이 수탁자에게 증여된 경우에 비하여 지나치게 많은 증여세액이 부과될 수 있어 형평에도 어긋난다.
Order
원심판결을 파기하고, 사건을 서울고등법원에 환송한다.
Unofficial English translation
The judgment of the court below is reversed, and the case is remanded to the Seoul High Court.
Provisions referred to
[1] 구 상속세 및 증여세법(2007. 12. 31. 법률 제8828호로 개정되기 전의 것) 제45조의2 제1항, 상법 제479조, 국세기본법 제14조 [2] 구 상속세 및 증여세법(2007. 12. 31. 법률 제8828호로 개정되기 전의 것) 제45조의2 제1항, 상법 제479조
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