A taxation for Trust without beneficiaries: Focussing on review in “Inheritance Tax and Gift Tax Act”
Authors:   KOREAN SOCIETY OF TAX LAW, Hwang Heon Sun 
Published: November 2022

In general, there are grantor, trustee, and beneficiaries in a trust. And the grantor transfer grantor’s property to the trustee to grant profits to the beneficiary. However, trust can be established in accordance with a ‘contract between the grantor and the trustee’. So, the existence of a beneficiary is not essential in the establishment of the trust.
In terms of the tax law, if there is a beneficiary fixed by the grantor when establishing the trust, the beneficiary will be deemed to have received profits from the grantor and bear the tax obligation. However, if there is no beneficiary, only grantor and trustee exist as trust parties. At this time, the grantor transferred and disposed of own property to the trustee, so grantor will no longer have a tax obligation with respect to the property.
From the trustee’s point of view, the trust property is in trustee’s name, but trustee will argue that paying the beneficiary the profits generated through the management and operation of the trust property is the main task and only receiving remuneration. In other words, the trustee will argue that the trust property is formally in trustee name, but the trustee is not a real owner who can use, profit, or dispose of the trust property like own property, so there is no tax obligation.
This paper review trust without beneficiary in Inheritance Tax and Gift Tax Act. First, it will review the problems of the current regulations related to the judgment of the taxpayer. And this paper presents its own views through comparative legal review with foreign legal systems.
First, in consideration of the relationship between the Trust Act and the Tax Act, it is necessary to prepare provisions on the duration of a trust without beneficiary to prevent unnecessary tax delays and difficulties in evaluating trust property.
Second, in the trust without beneficiaries under Article 33 (2) of the current Inheritance Tax and Gift Tax Act, taxation on grantor did not reflect the Substance over form. In addition, since double taxation problems may arise in this regard, it is not logically reasonable for the grantor to give to the grantor, which should be solved by income tax. In addition, taxation based on Substance over form taxation should be promoted by referring to foreign concepts such as trust taxation in the United States.
Third, if a beneficiary occurs after the trustee’s heir pays the tax, it is necessary to more clearly define. In this case, it is considered logically to give gifts from the grantor’s heir to a new beneficiary, not the grantor, and it is necessary to refer to Japanese legislation.
Fourth, there is a need for taxation on trustees in a trust withot beneficiary. In terms of grantor taxation, it can also be seen in foreign legislation that grantor taxation can be recognized even if the grantor does not enjoy economic benefits. It is necessary to discuss trustee taxation in trust for the existence of beneficiaries by more actively referring to these thinking methods or criteria.
It is expected that the above discussions will contribute to discussions on the literary interpretation and taxation method of the provisions on taxation in the trust without beneficiaries under the Inheritance Tax and Gift Tax Act in the future.