Where the registration of ownership transfer is made with permission after paying the price for the land located within the zone subject to permission of land transaction, the starting point of the exclusion period of the right to impose the capital gains tax

If a sales contract for the land located within a zone subject to land transaction permission under the Act on the Utilization and Management of the National Territory is in a state of flexible invalidation because it is not subject to land transaction permission, even if the purchase price is paid first, and the transferor is kept in custody, it cannot be deemed that the transfer of assets subject to the transfer income tax or the transfer of assets, and thus, no right to impose the transfer income tax shall accrue until the transaction permission is granted. Since the transfer income tax may be imposed on the land subject to the transfer income tax only when the land transaction permission is granted, it shall be deemed that the exclusion period of the right to impose the transfer income tax after the land transaction permission is granted even if the sale

[1] Article 4 (1) 3 and (3) of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994), Article 27 (see Article 98 of the current Income Tax Act), Article 95 (see Article 105 of the current Act), Article 100 (see Article 110 of the current Act), Article 53 (1) 1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14467 of Dec. 31, 1994), Article 16 (1) 1 of the former Framework Act on National Taxes (see Article 162 (1) 1 of the current Act), Article 21 (1) 1 and 2 of the former Framework Act on National Taxes (amended by Act No. 4810 of Dec. 22, 1994), Article 26 (2) 2, Article 26-2, Article 19-12 (1) 2, Article 19-12 (1) of the former Enforcement Decree of the Framework Act

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Domin, Attorneys Park Young-chul and 1 other, Counsel for plaintiff-appellant)

Lee-young (Seoul International Law Firm, Attorney Lee Sung-ho, Counsel for defendant-appellant)

Head of Suwon Tax Office

1. The plaintiff's claim is dismissed.

2. Litigation costs shall be borne by the plaintiff.

The Defendant’s disposition of imposition of capital gains tax of KRW 80,427,610 against the Plaintiff on January 2, 199 is revoked.

1. Details of the disposition;

The following facts are either disputed between the parties, or acknowledged by Gap evidence 1-1, 2, and 21-1 based on the whole purport of the pleading, and there is no counter-proof.

A. On August 30, 198, the Plaintiff acquired and owned 516-2,838 square meters prior to the date of the registration of ownership transfer, the Plaintiff thereafter made a preliminary return on September 23, 1996, on the land of the same 516-3 1,383 square meters (hereinafter “instant land”) that was subdivided from the said land, on September 23, 1996, for the same 516-3 1,383 square meters (hereinafter “the instant land”). On September 29, 1996, the Plaintiff made a registration of ownership transfer for the Defendant on the ground of sale on September 12, 1996. On November 29, 196, the instant land was transferred on September 23, 1996, which was the date of the registration of ownership transfer, and the Plaintiff made a preliminary return on the gains from the transfer of assets under the Regulation of Tax Reduction and Exemption Act.

B. Accordingly, according to the land characteristics survey table and urban planning confirmation center in 1996, the Defendant: (a) confirmed that the land of this case was used as an industrial research site prior to the transfer date; and (b) did not constitute self-arable farmland for at least eight years at the time of such transfer; and (c) on January 2, 1999, the time of the transfer of this case’s land was deemed as September 23, 1996, which was calculated on the basis of the standard market price, and imposed and notified KRW 80,427,610, the capital gains tax amount corresponding to the portion of 1996, which was calculated on the basis of the standard market price, to the Plaintiff.

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The plaintiff entered into a sales contract on the land of this case with the non-party company on May 4, 1990; the non-party company entered into a sales contract on the land of this case; KRW 20 million for the contract date; KRW 70 million as part of the intermediate payment on May 31, 1990; and KRW 30 million as part of the intermediate payment on June 12, 1990; and KRW 70,920,000 for the remaining intermediate payment on July 9 of the same year; however, the non-party company entered into a registration of ownership transfer under the name of the non-party company on September 23, 196; and the time of transfer of the land of this case was completed on July 9, 190, which is the date of settlement of the balance; thus, the right to impose tax after the lapse of five years from June 1, 1991, which is the date following the expiration of the final return on the tax base of this case, was extinguished.

B. Determination on the expiration of the exclusion period

(1) Relevant statutes

Article 4 (1) 3 of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994) provides that the transfer income shall be the transfer income of an asset; Article 4 (3) provides that the transfer income means the transfer of an asset at a price by means of sale, exchange, investment in kind in a corporation, etc., regardless of the registration or enrollment of the asset; Article 27 provides that the time of acquisition and transfer shall be prescribed by the Presidential Decree; Article 53 (1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14467 of Dec. 31, 1994) provides that the date of liquidation of the price of the asset shall be the time of acquisition and transfer of the asset; where the date of liquidation of the price is unclear, the remaining payment agreement date stated in a sales contract shall be the date of payment agreement; Provided, That where the date of payment agreement is not verified or the period from the date of receipt of the register or the date of receipt of the remaining payment agreement is more than one month.

Meanwhile, according to Article 21(1)1 and Article 21(2)2 of the former Framework Act on National Taxes (amended by Act No. 4810 of Dec. 22, 1994), the tax liability shall be established at the end of the taxable period, but with respect to the income tax to be paid by preliminary return and payment, the tax liability shall be established at the end of the month in which the amount constituting the tax base arises. Articles 26 subparag. 2 and 26-2(1)1 provide that the right to impose the income tax, which is a national tax, shall be extinguished at the expiration of the five-year exclusion period from the date on which the national tax can be imposed, and Article 12-2(1)1 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 13192 of Dec. 31, 190), Article 12-2(1)1 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 13192 of Dec. 1, 1990).

(2) Facts

According to Gap evidence Nos. 1 and 2-1, 2, Gap evidence Nos. 4, 6, 8, 9, 10, 13-2, and Gap evidence Nos. 1, 1, 2-2, 2-2, 200 won, and 9-1,000 won for non-party company's land transaction transfer registration of the same 90,000 won for non-party company's land transaction registration of the same 190,000 won for non-party company's land transaction registration of the same 96-1,000 won for non-party company's land transaction registration of the same 96-1,000 won for non-party company's land transaction registration of the same 96-1,000 won for non-party company's land transaction registration of the same 96-1,000 won for non-party company's remaining 15,000 won for non-party company's land transaction.

(3) Determination

If a sale contract for the land located within a zone subject to permission for land transaction under the Act on the Utilization and Management of the National Territory is in a state of passive invalidation because it was not subject to permission for land transaction, even if the transferor is paid the purchase price first and kept in custody, it cannot be deemed that the transfer of assets subject to the transfer income tax or income from the transfer of assets. Thus, no right to impose the transfer income tax may accrue until the permission for transaction is obtained. Since the transfer income tax can be imposed only after the land transaction permission is granted, even if the sale price is fully liquidated before the land transaction permission is granted, it is reasonable to view that the exclusion period of the right to impose the transfer income tax after the land transaction permission takes place (see Supreme Court Decision 97Nu12754, Feb. 27, 1998). Thus, since the exclusion period of the right to impose the transfer income tax cannot be used as the exclusion period of the right to impose the transfer income tax even after the land transaction permission is granted after the expiration of the exclusion period of the right to impose the transfer income tax after the land transaction permission.

As seen above, the land of this case is located within the area where the land transaction contract is permitted, and the land of this case was permitted for the land transaction from May 4, 1990 to September 11, 1996, which was about six years and four months after the date of the conclusion of the above sale contract. Accordingly, even if the settlement of the price was made on July 9, 1990 before the land transaction permission as alleged by the plaintiff, as alleged by the plaintiff, the exclusion period of the right to impose the transfer income tax of this case is to proceed from September 12, 1996, the following day of the above land transaction permission, and it is apparent that the exclusion period of five years has not elapsed from January 2, 1999. Thus, the plaintiff's above assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim based on the premise that the exclusion period of the capital gains tax imposition right of this case has expired is dismissed as it is without merit. It is so decided as per Disposition.

Judges Lee Jin-jin (Presiding Judge)