Whether the retroactive appraisal value may be recognized as acquisition value.

The value of retroactive appraisal shall not be recognized as acquisition value.

Seoul Administrative Court-2016-Gu Group-575

AA

Head of Yeongdeungpo Tax Office

oly 5, 2016

November 16, 2016

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of KRW 61,511,906 against the Plaintiff on December 1, 2015 shall be revoked.

1. Details of the disposition;

A. On August 24, 200, the Plaintiff removed the building and the commercial building (hereinafter referred to as the “instant building”) after purchasing the building as well as 172.2m2m2 (hereinafter referred to as the “land”) on August 24, 200.

After the new construction, on October 22, 2001, the registration of initial ownership of the instant building was completed.

B. On March 27, 2015, the Plaintiff: (a) sold the instant land and buildings in KRW 1141 million to Company *; (b) the acquisition price of the instant land to the Defendant is the actual transaction price; and (c) the acquisition price of the instant building was the average amount of the appraised values calculated by requesting two appraisal institutions around March 2015 to the Plaintiff.

C. On December 1, 2015, the Defendant issued a correction and notification of capital gains tax of KRW 61,546,117 to the Plaintiff on December 1, 2015 (hereinafter “instant disposition”) by applying the conversion value to the effect that it cannot recognize the retroactive appraisal value conducted after the lapse of 13 years from the time of completion of the instant building.

D. The Plaintiff dissatisfied with the instant disposition and filed a request for examination with the Commissioner of the National Tax Service on January 11, 2016, but the Commissioner of the National Tax Service dismissed the said request for examination on March 11, 2016.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Article 176-2(3)2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26982, Feb. 17, 2016; hereinafter the same) (hereinafter “Enforcement Decree provision of this case”) provides that the appraisal value applicable in cases where it is impossible to verify actual transaction value shall be the appraisal value that was conducted within three months before and after the date of transfer or acquisition, respectively. However, the instant provision of the Enforcement Decree exceeded the bounds of delegated legislation of the parent law, and is unlawful and invalid as it excessively limits citizens’ freedom to exercise property rights, contrary to the principle of no taxation without law and substance over form, and is contrary to the principle of no taxation without law. Even if the instant provision of the Enforcement Decree does not constitute an unlawful and invalid provision, the said provision of the Enforcement Decree of the Income Tax Act is merely an exemplary provision, and thus, it is unlawful to recognize the appraisal value for the determination of acquisition value after three months from

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Article 97(1)1(b) of the former Income Tax Act (amended by Act No. 1358, Dec. 15, 2015; hereinafter the same shall apply) provides that “where the actual transaction value at the time of acquisition cannot be verified in cases falling under the main sentence (a) of Article 97(1)1(b) of the former Enforcement Decree of the Income Tax Act, the term “business example value, appraisal value or conversion value prescribed by Presidential Decree” under Article 163(12)1(b) of the former Enforcement Decree of the Income Tax Act refers to the value under the provisions of Article 176-2(2) through (4) as to whether the provision of the said Enforcement Decree exceeds the bounds of delegated legislation or limits the freedom to exercise property rights.” Since the provision of the said Enforcement Decree provides that “The value of the pertinent assets (excluding stocks, etc.) evaluated by at least two appraisal business entities within three months before and after the date of transfer or acquisition shall not be deemed as the average value of the appraisal value determined within the scope of the appraisal value per one month before and after transfer date.”

2) Whether it violates the principle of no taxation without law

Under the principle of no taxation without law, the interpretation of tax laws shall be interpreted in accordance with the text of the law unless there are special circumstances, and it shall not be permitted to expand or analogically interpret without reasonable grounds. However, where it is necessary to clarify the meaning through mutual interpretation between the laws and regulations, it is inevitable to make a combined interpretation in view of the legislative purport and purpose to the extent that it does not undermine the legal stability and predictability pursued by the principle of no taxation without law (see Supreme Court Decision 2007Du4438, Feb. 15, 2008).

However, the provision of the Enforcement Decree of the instant case provides that the base date for appraisal shall be limited to those within three months before and after the date of transfer or acquisition, and the Plaintiff’s preliminary return on capital gains tax based on the appraisal value calculated by requesting it to an appraisal agency after the expiration of 13 years from the date of acquisition of the instant building is identical as seen earlier. As such, the instant disposition that did not recognize the appraisal value calculated by the Plaintiff is lawful and does not violate the principle of no taxation

(3) An appraiser for determining the acquisition value by appraisal value conducted after three months from the date of acquisition;

Whether the amount is recognized as the amount

Article 97 (1) 1 (b) of the former Income Tax Act provides that where it is difficult to confirm the actual transaction value at the time of acquisition in cases where the actual transaction value, which is one of the necessary expenses to be deducted from the transfer value when calculating transfer margin, shall be calculated based on the transaction example value, appraisal value or conversion value as prescribed by the Presidential Decree. In addition, Article 163 (12) of the former Enforcement Decree of the Income Tax Act provides that "the value of transaction example, appraisal value or conversion value as prescribed by the Presidential Decree" under Article 97 (1) 1 (b) of the former Income Tax Act means the value under Article 176-2 (2) through (4) of the former Enforcement Decree, not only the actual transaction value at the time of acquisition but also the value calculated by applying the following methods in order if the actual transaction value is determined or revised by calculating the transfer value or the acquisition value at the time of acquisition (see subparagraph 1 of the same Article 2 of the former Enforcement Decree) but also the value of the appraisal value at the time of acquisition or sale within 3 months before or after the date of acquisition.

4) Therefore, the Plaintiff’s assertion is without merit.

3. Conclusion

The plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.