신탁과세에 관한 현행법의 문제점 검토- 가장 초보적인 유형의 신탁 관계로부터

Abstract

This article discusses how to tax income arising from a “plain vanilla” type of trust arrangement, where a property owner puts his / her property in a trust so that the trustee pays a third party beneficiary, a natural person, the annual income arising from the property. This is a matter much more complicated than it first seems, especially in Korea where exemption level for gift tax is low. The ideal solution seems to dictate that gift tax should be levied on the beneficiary at the time of the initial transfer of property to the trustee, when the trustee attains the legal title thereto. However, the evaluation of the beneficiary’s rights to the annual income arising from the said property, discounted at present value, is not always feasible. The practice in Korea, indeed, is to merely levy income tax on the beneficiary on each receipt of the annual income, and gift tax is usually foregone due to the provision in the Inheritance and Gift Tax Act that blocks double taxation of income and gift taxes on the same increase in net wealth. This article argues that this practice, albeit simple, lacks in justification in the sense that its overall tax burden is too low, compared with other types of transaction that could be used for similar purposes, thus infringing tax neutrality. The said practice is also problematic in that the relevant income is taxed in the hands of someone who are not viewed as the owner of the property for tax purposes. Considering certain features peculiar to Korean income tax law, this article suggests instead that the annual income should be first taxed in the hands of the trustee, and then the beneficiary be taxed on receipt of the said income from the trustee. Although difficult to fully defend as a matter of income tax theory, this alternative is easy to administer and reasonably expected to bear a result similar to that under the apparently ideal way of taxation (i.e., a combination of gift tax and income tax), as long as the payment of the trustee to the beneficiary is not deductible from the trustee’s taxable income. Since this article deals with only the most basic, “plain vanilla”-type of trust arrangement, the analyses of this article should be further tested and developed against diverse and more complex types of trust that exist in the real world. The author believes, however, that fundamental principles of income taxation such as tax neutrality and the rules governing “tax ownership” or attribution of income should always serve as guiding principles even though trust is a relatively new and somewhat incongruous phenomenon in Korean legal system.