Abstract

By the current trust tax law, The beneficiary as the person who is involved with its earning is a major tax payment obligor. However, the current trust taxation applied the conduit theory which allows the grantor would not distribute their trust earnings to beneficiary, due to tax deferal of trust reservation interest, and lack of the regulation about the perpetuity of period trust, makes the beneficiary ineffective. Moreover, It is not clear that being taxed to the beneficiary. Thus taxation to the beneficiary should be clear on trust tax law and entity theory should need to be introduced to conduit theory which is current trust taxation. The improvements are followings listed below. First, The current structure of the trust taxation which dose not assign compulsory distribution to grantors makes a beneficiary ineffective. To improve this, the perpetuity of period trust and entity theory should be added to the trust taxation. Second, The current trust taxation does not define the scope of taxation and classify the beneficiary. Classifying the beneficiary can be applied correspondingly trust taxation or regulated as independent system on tax law. Furthermore, The main criteria should be set up granotr's control to determine the earning's actual substantial possession from the trusted asset. To determine whether under grantor's control or not, following are should be applied, designating the beneficiary,authority of change the beneficiary and, adjustment on dividend. Third, since current taxation system does not have standard on transitional serial interests beneficiary, criteria of grantor's control should be set up first, then transitional serial interests beneficiary's the scope of assessment could be determined. Forth, under the current trust taxation system, profit and loss distribution standard is not clear to the multiple beneficiary. To improve this profit and loss distribution standard should be set up depending on whole amount of trusted assets. Through this, profit and loss distribution standard should depends on establish rate by case by case on trust contract. The loss rate should be considered depends upon earning rate if earning rate is different to loss rate taxation to beneficiary on trust. Thus by examine thoroughly beneficiary on trust taxation system, With these effort, Korean trust taxation system would contribute invigorating trust system.

Keywords

• income beneficiary
• principal beneficiary
• multiple beneficiary
• perpetuity period of trust
• transitional serial interest

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