Article 158 of the former Enforcement Decree of the Income Tax Act

Seoul Administrative Court Decision 2003Guhap10077 decided Oct. 1, 2006

2. The plaintiff's claim against the defendant ○○ director is dismissed.

3. Of the costs of lawsuit, the part arising between the Plaintiff and Defendant ○○ Head of the tax office is assessed against the Plaintiff, and the part arising between the Plaintiff and Defendant ○ Head of the tax office is assessed against the Plaintiff.

A. On September 5, 1997, the Plaintiff: (a) on ○○○○○ (hereinafter “○○○○○○○”); (b) on ○○○○○-dong ○○○○○○○○○○○-dong ○○○○○○○○○○-dong 127.8m2; (c) on ○○○○-dong 129.6m2; and (d) on 15.9m2, the above site was the 6th floor of the ground reinforced concrete structure slive roof; and (e) on 1,431.01m2 of the above site (hereinafter collectively including the entire land and its ground, the instant real estate was combined with the right to permit the display of outdoor advertisements, etc. on the rooftop of the above building (hereinafter “○○○○○-dong ○○○○○○○-dong ○○○○ ○○ ○○ ○○ ○○ ○○ ○○ ○○ ○, the right to permit.

B. On September 9, 1997, the Plaintiff reported and paid KRW 37,710,580 of the transfer income tax calculated based on the standard market price of the instant real estate to the head of Defendant ○○ Tax Office, and reported and paid KRW 125,500,000 of the value-added tax on the instant real estate to the head of Defendant ○○ Tax Office in 197.

C. The above purchase price of KRW 9.7 billion is deemed to include KRW 3.626 billion in the transfer value of the instant electric sign board permit. In relation to the sale of the instant electric sign board permit, Defendant ○○○ Head of the tax office imposed KRW 1,828,164,90 on July 6, 2001, and Defendant ○○○ Head of the tax office imposed KRW 329,636,630 (the transfer value of the instant electric sign board permit right of KRW 3.62,663,637 won (the transfer value of the instant electric sign board permit of KRW 3.66 billion), excluding value-added tax, KRW 329,636,636,000 multiplied by the value-added tax amount of KRW 10,000 ± 101). Defendant ○○ Head of the tax office imposed penalty tax amount of KRW 3636,64,6527,279).

D. On December 6, 2002, the Commissioner of the National Tax Service, upon the Plaintiff’s request for national tax review, corrected the tax base and tax amount on the ground that the transfer of the right to permit ○○○ electronic display board was not subject to capital gains tax, and dismissed the remainder of the claim.

E. On March 7, 2003, the head of the tax office rendered a correction of KRW 1,828,164,90 to KRW 1,785,323,830, which was initially imposed upon the Plaintiff on the Plaintiff on March 7, 2003 (hereinafter “the disposition imposing the capital gains tax of this case”).

(The respective descriptions of evidence 1-8, Nos. 1-2, 5, and 10 and the purport of the whole pleadings)

2. The legality of the disposition imposing the transfer income tax of this case

With respect to this case on September 2, 2004, this Court requested an adjudication on the unconstitutionality of Article 94 subparagraph 5 of the former Income Tax Act (amended by Act No. 5580, Dec. 28, 1998; hereinafter the former Income Tax Act), which is the legal basis for the imposition of the transfer income tax in this case, and the Constitutional Court declared that Article 94 subparagraph 5 of the former Income Tax Act was unconstitutional on February 23, 2006.

Therefore, since the disposition of imposition of transfer income tax of this case is an illegal disposition based on the unconstitutional law, the plaintiff's assertion on the disposition of imposition of transfer income tax of this case

3. The legality of the imposition of value-added tax in this case

A. The assertion of the window

The Plaintiff, while selling the instant real estate in KRW 9.7 billion, did not gratuitously transfer the instant right to permission on the electronic display, nor did the instant right to permission on the electronic display are dependent on the real estate, etc. on which the electronic display is installed, and there is no clear ground that the transfer value of the instant right to permission on the electronic display is KRW 3.626 billion.

(b) Fact of recognition;

(1) On March 4, 1996, the Plaintiff purchased the instant real estate from ○○ Shipping Co., Ltd. (hereinafter referred to as ○○ Shipping Co., Ltd.) for KRW 4.5 billion [Article 4.5 billion in sales contract (Evidence 5) but it is stated that the Plaintiff purchased the instant real estate at KRW 5.2 billion in the prosecutor’s statement, etc. against the Plaintiff at KRW 5.5 billion.]

(2) On July 24, 1997, the Plaintiff sold the instant real estate to ○○○ in 9.7 billion won (excluding value-added tax 125 billion won for the building).

(3) However, ○○ requested the Plaintiff to change the buyer to ○○○○○○ upon paying only the down payment and the first and second intermediate payment of KRW 1.8 billion.

(4) On September 5, 1997, the Plaintiff entered into a sales contract with ○○○○○ upon the request of ○○○○○○○○, to sell and purchase the instant real estate at KRW 9.7 billion ( separate from value-added tax of KRW 125 billion on the building), and received an remainder of KRW 1.846 billion from ○○○○○○○○, and the remainder of the sales amount was paid to ○○○○○○○○, etc., for payment of the Plaintiff’s obligation to the financial institution, etc. in lieu of payment.

(5) ○○○○○ completed the registration of ownership transfer of the instant real estate on October 7, 1997.

(6) The Plaintiff and ○○○○○○ entered into a sales contract for the instant real estate, and prepared a separate contract for the transfer of the instant electric sign board license in addition to the sales contract for the instant real estate.

(7) In a sales contract (Evidence A No. 5) drawn up between the Plaintiff and Lee ○○, the right to permit electronic displays on the ○○○○-dong ○○○○○○-dong ○○○○○-dong ○○○○-dong ○○○-dong ○○○-dong ○○○○-dong ○○○○○-dong dong ○○○○○

(8) The real estate sales contract (No. 6 No. 1) made between the Plaintiff and ○○○○○○○ entered the sales price of the instant real estate in KRW 5.4 billion.

(9) In the draft form drawn up by ○○○○○○○○○○○○○○○ Kim○○, the purchase price for the instant real estate is KRW 5.525 billion, and the transfer price for the instant electronic displays and the permission for electronic displays is KRW 4.3 billion.

(10) The transfer contract between the Plaintiff and the ○○○○○○○ on the instant electronic sign board (Evidence A-1 of No. 7) drafted on September 5, 1997 between the Plaintiff and the Plaintiff and the ○○○○○○○○○○ is written that all administrative documents and costs necessary for the change of name are borne by A (the Plaintiff) and that Eul (○○○○○○○) take charge of the removal of the existing electronic sign board, and the transfer amount is not written.

(11) The appraisal report prepared by the ○○○○○○○○ on April 20, 1996 is written with the appraisal value of 4,90,597,100 won (site 4,181,490,000, building 719,107,100), and written with the appraisal value of 5,075,625,300 won (site 4,345,470,000, building730, building 730,155,300) at the request of the ○○○○○○○○○○○○○○○○○, which was written on January 12, 200.

(12) On March 20, 2001, the Plaintiff sold the instant real estate at KRW 5.525 billion, including value-added tax, at the time of undergoing an investigation by ○○○ Regional Tax Office, and stated in the total purchase price of KRW 9.7 billion that the amount excluding land and building prices is the transfer value of electronic sign board permission.

(13) On March 20, 2001, the confirmation document submitted by the Plaintiff to the director of the regional tax office of ○○○○○ on the transfer of outdoor advertisement permission right was not indicated as the amount of sale when preparing an electronic sign board permission contract for the change of outdoor advertisement name with the ○○○ Office on the transfer of outdoor advertisement permission right. However, this contract was a formal meaning contract for the change of name, and the fact was transferred to 3.6 billion won.

(14) ○○○ stated that the electronic sign board of ○○ Building is located in the highest location among the domestic electronic sign boards, and its advertising revenue reaches KRW 3 billion per annum (Article 10-10), and that “○○○ Building, which is the representative director of ○○○○○○, was classified into “○○ Building,” but it was evaluated that the rooftop electronic sign board was at the highest location of the Republic of Korea and was at the highest level of competition (Article 8-1).

(A-10 Evidence Nos. 1-10, Nos. 1-14, ○○ Market, and ○○○○ Head of the Gu, respectively, and the purport of the whole pleadings)

C. Determination

The transfer of the right to permission of the electronic display is the transfer of the right similar to the business right, and thus constitutes a taxable object of value-added tax.

Furthermore, in full view of the following circumstances, the imposition of the value-added tax by the head of the Defendant ○○ Tax Office, which determined that the Plaintiff sold the instant electronic display board license to ○○○○○○○ in KRW 3,296,363.637, etc., on the transfer value of the instant electric display board license, is lawful, and the Plaintiff’s assertion is without merit.

(1) The plaintiff purchased the real estate of this case from ○○ Shipping on March 4, 1996 at KRW 4.5 billion to KRW 5.7 billion

(2) The ○○ Appraisal Board assessed the value of the instant real estate from around 1996 to around 2000 as KRW 5 billion.

(3) The existing electronic display board that existed on the instant real estate is not recognized as the economic exchange value due to the relationship expected to be removed.

(4) It is indicated in the internal documents of ○○○○○○○, that the purchase price of the instant electronic displays and the pertinent permit is KRW 4.3 billion.

(5) The fact that ○○○○, who is a party to the first sales contract of the instant real estate, or ○○○○○○○, and the Plaintiff Cho Jae-do stated the value of the instant right to permission on the electronic display at the time when an investigation is conducted by the National Tax Service or an investigative agency, within KRW 4

(6) In light of the fact that the Plaintiff and ○○○○○○, as well as the right to permit the electronic sign board in the indication column of the real estate in the sales contract on the instant real estate, separately prepared the transfer contract on the instant electronic sign board in addition to the sales contract on the instant real estate, it appears that the Plaintiff and ○○○○○○, upon entering into the instant sales contract, thought that the instant right to permit the electronic sign board was an important concern for the lack of the instant real estate itself.

4.In conclusion

Therefore, since the disposition of imposition of the transfer income tax of this case by Defendant ○○ Head of the tax office is unlawful, the disposition of imposition of the transfer income tax of this case by Defendant ○○ Head of the tax office is legitimate, and this part of the claim is dismissed.

Seoul High Court Decision 2006Nu14638 (Law No. 03, Apr. 03, 2007)

2. The costs of appeal shall be borne by the Plaintiff.

Therefore, the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.