Where a sales contract is canceled and the registration of transfer is cancelled, there is no transfer margin.

If the seller and the buyer agree to cancel the sales contract and cancel the registration of transfer of ownership completed in the future and restore them to their original state, it cannot be said that there was a capital gains subject to transfer income tax.

2014Gudan4444 Revocation of Disposition of Imposing capital gains tax

Park ○

Head of Yeongdeungpo Tax Office

November 19, 2014

January 21, 2015

1. The Defendant’s disposition of imposition of capital gains tax of KRW 120,602,821 (including additional tax) for the Plaintiff on February 1, 2013 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On June 19, 199, the Plaintiff acquired 7,438 square meters of forests and fields 51 square meters in 00,000,000 Incheon-gun, Incheon-gun, Incheon-do (hereinafter referred to as “land before division”).

B. The Plaintiff entered into a three-time sales contract with respect to the land before subdivision (hereinafter “the first, second, and third contracts”).

① The primary contract: (a) on June 25, 2004, the agreement was made to sell the land of KRW 7,438 square meters prior to the subdivision to three persons, namely, the price of KRW 400 million; and (b) on the receipt of KRW 200 million.

② Second contract: on December 10, 2004, 7,438 square meters of the same land (Provided, That the parcel number is divided into three parcels of 51, 51-1, 51-2, 51-2 in an amount of KRW 470 million, the sales agreement, the down payment and the intermediate payment shall be replaced by 200 million, which are received at the time of the first contract, and an additional amount of KRW 270 million shall be received at the time of the first contract.

③ The third contract: On September 7, 2006 and November 7, 2006, 2006, the sum of the purchase price of 6,813 square meters in the same land (hereinafter referred to as "the aggregate of 6,813 square meters in the same land") is agreed to sell 26.1 billion won in aggregate, and each land transaction permit has been obtained, and the registration of ownership transfer for the relevant land purchaser is completed in the future.

B. On January 5, 2010, the head of the Goyang Tax Office decided and notified the Plaintiff of KRW 48,609,100 (including additional taxes) for the transfer income tax of KRW 261 million for the year 2006 on the premise that the Plaintiff transferred the key land to the Plaintiff in total in accordance with the third contract (hereinafter referred to as “the first tax disposition”). However, on February 2011, the head of the strengthened Gun investigated whether the actual transaction was in violation of the Act on the Registration of Real Estate under the Actual Titleholder’s Name (hereinafter referred to as “the actual purchaser”) as a result of the investigation of whether the actual transaction was in violation of the said Act in relation to the transaction of the key land, etc., the actual purchaser confirmed the fact that Kim Jong-a and the largest C C was his father Kim r, his father Kim-r, and from among them, he imposed a penalty on Kim A in accordance with the provisions of the Act

Therefore, the Defendant: (a) deemed that the transfer value of the pertinent land was KRW 382 million after the on-site investigation with the Plaintiff (i.e., KRW 470 million received by the Plaintiff according to the second sale contract; KRW 88 million for the land excluded from the object of the third sale contract due to the Plaintiff’s failure to obtain land transaction permission; (b) determined the transfer income tax amount for 2006 as KRW 120,602,826 (including additional tax); and (c) imposed and notified the Plaintiff on February 1, 2013 (hereinafter referred to as “the Defendant issued the entire tax amount”) by adding KRW 71,93,720 after deducting the already notified amount of KRW 48,609,10 as described in paragraph (b).

D. On April 5, 2013, the Plaintiff filed a request for re-determination with the Commissioner of the National Tax Service for the second taxation, but dismissed on December 31, 2013, the Plaintiff filed the instant lawsuit on March 18, 2014. In the absence of any dispute over recognition, the Plaintiff’s written evidence Nos. 1, 1, and 7 (including each number; hereinafter the same shall apply) respectively.

2. Whether the disposition is lawful;

A. Summary of the plaintiff's assertion

1) The second contract, which is the basis of taxation by the Defendant, did not receive the purchase price, and the contracting parties are different, and is null and void without obtaining the land transaction permission. Accordingly, the Defendant’s second tax disposition based thereon is unlawful.

2) The contract between the Plaintiff and Kima, among the secondary contracts that the Defendant considered as the grounds for taxation, was rendered final and conclusive judgment. Since the sales contract between the Plaintiff, Kimrrr, and the operator that was considered as the grounds for taxation became final and conclusive in the judgment of cancellation and cancellation of registration, the Defendant’s secondary taxation is unlawful as long as the contract was rescinded and its restoration was made.

B. Determination

1) According to the Plaintiff’s argument in Section A.1, the following evidence revealed that the Plaintiff transferred the pertinent land in total at KRW 470 million according to the third contract with Ebb, Kimrrr, and Magg, and all of them obtained land transaction permission, and the Defendant was found to have issued secondary taxation based on this. Thus, the Plaintiff’s above assertion is without merit.

2) We examine the Plaintiff’s assertion of Paragraph A.2 of this Article.

The term "transfer" under the Income Tax Act means that an asset is actually transferred for price due to sale, exchange, investment in kind in a corporation, etc. regardless of the registration or enrollment of the asset, and where the ownership of the land is actually transferred for price, it means that the price of the land has been paid to the extent that the price of the land was actually paid in accordance with social norms. Furthermore, if the seller and the purchaser agreed to cancel the sales contract and cancel the registration of transfer completed in the future and restore the ownership to original state, it cannot be deemed that there was a capital gains subject to transfer income tax (see, e.g., Supreme Court Decisions 82Nu286, Feb. 14, 1984; 92Nu1784, Nov. 1, 1993). The same legal doctrine applies not only to the cancellation of agreement between the parties, but also to the restitution through a court decision.

In this case, the defendant's second statement and the purport of the whole argument in Gap's evidence Nos. 2 and 5

- 5- Of the third contracts on which taxation is based, the judgment ordering the registration of transfer of ownership on the grounds of cancellation of the contract between the Plaintiff, Kimr and Yoong was rendered and confirmed, and further the registration of cancellation was made on a part of the land. Therefore, the Defendant’s second taxation disposition, which was based on the premise that the Plaintiff transferred the pertinent land to Kimr and Yoong and caused transfer margin, cannot be deemed unlawful.

Furthermore, with respect to the scope of cancellation by this court, the Defendant’s secondary taxation, which was the first taxation, was added to the subsequent tax base and tax amount as a whole, including the tax base and tax amount of the first taxation, which were determined again, and thus, the subject of adjudication by this court is the second taxation. Moreover, the first taxation is deemed lawful in the instant lawsuit, as long as the Plaintiff lost its independent existence value, and complied with the filing period, due to the Plaintiff’s loss of independent existence value. Furthermore, the second taxation was conducted within the filing period for the second taxation, and the second taxation was conducted within the filing period for the first taxation (see, e.g., Supreme Court Decision 2010Du20843, Jun. 30, 2011). However, the second taxation may be revoked as to the second taxation (see, e.g., Supreme Court Decision 2010Du20843, Jun. 30, 201).

4. Conclusion

Ultimately, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.

Judges Park Jong-chul