In case where a title trust is transferred without real name conversion until the grace period, whether it constitutes fraud or other unlawful methods

Fraudulent or other unlawful act requires a deceptive scheme or other active act that makes it impossible to impose and collect taxes as a means of tax evasion with the intention of tax evasion. However, if a title trust was transferred without going through the real name registration under the Act on the Registration under Actual Titleholder’s Name, it does not constitute fraud or other unlawful means.

Article 26-2 (Period for Excluding Assessment of National Taxes)

Article 12-3 (Initial Date for Exclusion Period for National Taxes)

1. The defendant's appeal is dismissed.

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

1. Purport of claim

The Defendant’s imposition of capital gains tax of KRW 18.026.200 on December 1, 2005 against the Plaintiff and the disposition of promoting payment of KRW 5,430,780 on January 10, 206, respectively.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Details of the imposition;

A. On September 22, 1989, the Defendant: (a) acquired 712 square meters equity interest in the 712 square meters (hereinafter “share in the land of this case”) from Hanyang-si, Namyang-si, ○○○○○-si, ○○○-si (hereinafter “the land of this case”) in the name of 70 million won; (b) entrusted ○○ Construction Co.,, Ltd. (hereinafter “○○ General Construction”) with the title of 450 million won; (c) on the ground that on December 1, 2005, the Plaintiff did not report the income; (d) obtained gains from the resale of ○○ General Construction Co., Ltd. (hereinafter “○ General Construction”), but did not report the income; and (e) did not obtain gains from the transfer of 1997 square meters; and (e) did not report the income; and (e) did not impose capital gains tax on the Plaintiff on December 1, 2005 (hereinafter “the land of this case”).

B. The Plaintiff did not pay the capital gains tax by December 31, 2005, which is the due date for payment of the capital gains tax. On January 10, 2006, the Defendant sent a demand notice to the Plaintiff to urge the payment of KRW 181,026,200 as well as KRW 5,430,780 as well as additional dues (hereinafter the demand notice to pay the above additional dues).

C. On February 16, 2006, the Plaintiff dissatisfied with the instant disposition and filed a request for examination with the Commissioner of the National Tax Service, but received a decision of dismissal on October 30, 2006.

[Ground of recognition] Facts without dispute, Gap evidence 1, Gap evidence 2-1, Gap evidence 2-2, Gap evidence 7, the whole purport of the pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) The assertion that no title trust was held

The Plaintiff invested funds necessary for the purchase of real estate to ○○ Nam and received the distribution of investment principal and profit after the land was sold, and there was no fact that the Plaintiff purchased the instant land shares and trusted the instant land shares to ○○ Nam. Therefore, the instant disposition based on the premise that the instant land shares were trusted in title to ○○ Nam is unlawful.

(2) Violation of the principle of substantial taxation

Even if the Plaintiff, a title trust of the instant land shares to ○○○○ Construction, the instant land shares were transferred in sequence from ○○ Nam to ○○○○ Construction through Haak, and the instant land shares were directly transferred from ○○○○○ Construction by means of intermediate omission registration. As such, the instant disposition premised on the Plaintiff’s direct transfer of the instant land shares to ○○○○○ Construction is contrary to the substance over form principle.

(3) the purpose of the exclusion period; and

Where a taxpayer of capital gains tax fails to report the tax base of capital gains tax within one association member's relocation right, the exclusion period of capital gains tax is seven years from the date on which the capital gains tax may be imposed. The capital gains tax following the transfer of ownership of the instant land was imposed on December 1, 2005 when seven years have elapsed from June 1, 1998, which was the date on which the transfer income tax could have been imposed. Accordingly, the instant disposition of imposition was imposed

(b) Related statutes;

Article 26-2 (Period for Excluding Assessment of National Taxes)

Article 12-3 (Initial Date for Exclusion Period for National Taxes)

(c) Fact of recognition;

(1) The land of this case was originally owned by the ○○ ○○ Macm clan. The land of this case was purchased from the said clan by investing money in 1/2 around December 198, 198, which had been residing near the land of this case. The Plaintiff had a two-friendly relationship to the extent that it had formed a religious agenda. The Plaintiff is maintaining a two-friendly relationship to the extent that it had formed a religious agenda, and the Plaintiff bears 70 million won, and 30,000,000 won and 30,000,000 won and the Plaintiff jointly purchased 1/2 of the shares of Han-gu among the land of this case. Of the land of this case, the Plaintiff agreed to jointly purchase 1/2 of the Plaintiff’s shares to the extent of 700 square meters, and completed the registration of transfer of ownership in the name of Salt on September 22,

(2) Subsequent to June 8, 1990, the paddy field 2,303 square meters among the instant land was divided into 71-O, Namyang-si, ○○○○-do, 1,157 square meters, and the paddy field 1,207 square meters into 71-O, 1,207 square meters, and the paddy field 1,209 square meters into 71-O, 1,109 square meters, respectively, 71-O, 2,303 square meters in the same Ri, 71-O, 1,018 square meters in the same Ri, 71-O, 71-O, and 71-287 square meters in the same Ri, respectively, on the same day.

(3) Of the instant land, 302 square meters (3 71-3 square meters of the same Ri, 71-3, 998 square meters after division) were sold in sequence from Ma○nam to Ma○-Jin-Jin-Jin-Jin, and 308 square meters out of the instant land were sold in sequence from Ma○nam to Ma○-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-Jin-K. In addition, ○○ had 700 square meters out of the instant land and 1,850 square meters totaled of 1,850 square meters, 712 square meters from

(4) During the aforementioned series of transactions, the registration of ownership transfer was made in the name of Park In-jin for the last 302 square meters that Park In-jin purchased. However, as to the 1,008 square meters (308 square meters +700 square meters) purchased by Oin-J and the 712 square meters (the Plaintiff’s interest), the above 71-2 square meters (1,150 square meters) was still registered in the name of Oin-J, respectively.

(5) On June 1994, the Plaintiff and Oi-type sold 1,720 square meters in total and 2,870 square meters in total, 1,720 square meters in total, and 2,870 square meters in total, purchased from ○○ ○○ ○○ ○○ ○○ ○ ○○ ○ ○ ○○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○. However, 1,720 square meters in total, excluding 302 square meters in the instant land owned by ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○.

(6) On June 9, 1994, salt Nam entered into a sale and purchase contract with ○○ Construction as the representative of the party to the above land purchase and sale contract at KRW 745,00,00 per square year, and 2,138,000,000 per square year, and paid the Plaintiff a total of KRW 200 million on April 18, 1995 and November 19, 195. The capital gains tax equivalent to KRW 54,269,620 was paid in total in the process of transferring the above land, etc. to ○○ General Construction, and around June 11, 1997, completed the registration of ownership transfer in the name of ○ General Construction with respect to the above land.

(7) On July 1998, the Plaintiff filed a civil lawsuit (Seoul District Court’s 98Gahap90505,000 won - 400 million won for the amount payable out of the land share of 700 square meters in the instant land (the Plaintiff’s land share of 700 square x 745,000 won - the amount already paid) against Down, but was sentenced against the Plaintiff on the ground that the specific settlement of purchase price was not completed on November 24, 1999. The Plaintiff dissatisfied with the above judgment, filed an appeal with Seoul High Court 200Na579 and received 55 million won out of the above adjusted amount. The Plaintiff thereafter received 50 million won out of the adjusted amount.

(8) Meanwhile, the Defendant: (a) had a title trust on the instant land’s share to ○○ Nam; (b) sold it to ○○ Comprehensive Construction; and (c) received information of KRW 450 million as the price. Accordingly, the Defendant issued the instant disposition against the Plaintiff on September 22, 1989, the date of acquisition of the instant land’s share; (d) June 11, 1997, the date of transfer was ○○ General Construction’s registration date; and (e) KRW 70 million, the amount paid by the Plaintiff at the time of the Plaintiff’s acquisition of the instant land’s share; and (e) determined the transfer value as KRW 450 million,000,000, which was actually received from ○○○; and on December 1, 2005, the Defendant issued the instant disposition against the Plaintiff.

[Ground of Recognition] Facts without dispute, Gap evidence 2-1 through 4, Gap evidence 4, Eul evidence 5-1 through 7, Gap evidence 7, Eul evidence 1-7, Eul evidence 2-1 through 4, Eul evidence 3-1, 2, Eul evidence 4 and 5, Eul evidence 6-1 through 8, Eul evidence 6-1 through 6, Eul evidence 7, part of the testimony of the court of first instance Kim ○, ○○-nam's testimony, the whole purport of the oral argument

D. Determination

(1) As to the assertion that no title trust was held

The following circumstances acknowledged by the evidence, i.e., (i) the Plaintiff purchased shares in the instant land under the name of ○○○ Nam, where it was difficult to establish a pro-friendly relationship with the Plaintiff, and (ii) agreed to determine shares in the Plaintiff’s ownership by 700 appraisal; (iii) the Plaintiff was entrusted with the conclusion of the sales contract from the Plaintiff at the time of sale to ○○○ Construction; and (iv) the Plaintiff was required to pay the purchase price to the Plaintiff in receipt of the payment of the purchase price from ○○ Construction; and (iii) the Plaintiff did not complete the sale of the instant land under the name of 121,50,000 (or KRW 70,000,000,000,000) at the time of filing a lawsuit for purchase price on ○○○○ Construction, which was located in the name of 50,000,000,000 won for the Plaintiff’s share in the instant land; and (iv) the Plaintiff’s claim for sale of the instant land under the name of 1400,05,00.

(2) As to the assertion of violation of the principle of substantial taxation

Therefore, the Plaintiff’s assertion of violation of the substance over form principle is without merit, based on the premise that the instant land share was transferred in sequence to ○○ General Construction through ○○○○ Construction, which is the instant land share, based on the fact that the instant land share was transferred directly from ○○ Construction, a title trustee, to ○○ General Construction.

(3) Determination as to whether the exclusion period has lapsed

(A) Whether the exclusion period is 10 years or more

1) The defendant's assertion

The Plaintiff: (a) entrusted the instant land shares to ○○ Nam in the name of the person having the real right to real estate, and (b) sold the instant land under the name of ○○ Nam without real name conversion; and (c) did not report capital gains tax; and (d) did not report capital gains tax. The Plaintiff’s act constitutes “a case where the taxpayer evades national taxes, was refunded, or deducted by fraudulent or other unlawful acts,” under Article 26-2(1)1 of the Framework Act on National Taxes (amended by Act No. 8139, Dec. 30, 2006; hereinafter the same shall apply) and thus, the period for exclusion of capital gains tax on the instant land shares is ten years, which is the period prescribed in subparagraph 1.

2) Determination

Article 26-2 (1) of the Framework Act on National Taxes provides for the exclusion period of the imposition of national taxes and provides for a 10-year period from the date on which the national tax is assessable if a taxpayer evades, obtains a refund or deducts a national tax by fraud or other unlawful means (subparagraph 1); 7 years from the date on which the national tax is assessable if a taxpayer fails to file a tax base return within the statutory declaration period (subparagraph 2); 5 years from the date on which the national tax is assessable if a taxpayer does not fall under subparagraphs 1 and 2 (subparagraph 3). "Fraud and other unlawful acts" under Article 26-2 (1) 1 of the Framework Act on National Taxes mean that the taxpayer has the intention of tax evasion, which makes it impossible or considerably difficult to impose and collect the national tax, and the fact that the taxpayer fails to file a tax by underreporting the tax base without accompanying such acts does not constitute an unlawful act (see, e.g., Supreme Court Decision 2005Do375, Mar. 25, 2005).

In light of the above legal principles, the Plaintiff did not resell the entire land of 1 parcel to ○○ Nam, but did not resell it to a third party. It is nothing more than obtaining gains from resale by resale with other co-owners after title trust with about about 700 square meters of equity shares among the land of this case. There is no evidence to deem that there was an active and timely demand for the Plaintiff’s gains from transfer by paying transfer income tax in its name to ○ Nam, a title trustee, to avoid taxation on the Plaintiff’s gains from transfer; ② pursuant to Article 11 of the Act on the Registration of Real Estate under Actual Titleholder’s Name, which was enforced July 1, 1995 (No. 494 of March 30, 195), it is difficult for the existing title truster to execute the real name registration within a grace period of 1 year from the date of entry into force of the said Act, and thus, if the Plaintiff transferred ownership after the actual name registration, the Plaintiff appears to have not been able to have paid the transfer income tax for the Plaintiff’s transfer income tax under the name of 2.

(B) Whether the exclusion period is expired

Article 26-2 (1) of the Framework Act on National Taxes, which was in force at the time of the transfer of land shares, provides that "national taxes may not be imposed after the expiration of the period prescribed in each of the following subparagraphs," and subparagraph 2 of Article 12-3 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 15968, Dec. 31, 1998) provides that "if a taxpayer fails to file a return of tax base within the statutory due date of return, for seven years from the date on which the national taxes may be levied," and Article 26-2 (3) of the former Enforcement Decree of the Framework Act on National Taxes provides that "the date on which the national taxes may be imposed under Article 26-2 (3) of the Act shall be each of the following dates,"

Meanwhile, Article 105 (1) of the former Income Tax Act, which was enforced at the time of the transfer of land shares, provides that "the resident (excluding the resident who has made a report on the transfer of real estate under Article 165) who transfers the assets under each subparagraph of Article 94 shall report the transfer margin calculated under Article 95 (1) to the chief of the district tax office having jurisdiction over the place of tax payment within 2 months from the last day of the month to which the transfer date belongs under the conditions as prescribed by the Presidential Decree," and Article 110 (1) provides that "the resident having the transfer income amount in the relevant year shall report the transfer income amount to the chief of the district tax office having jurisdiction over the place of tax payment

According to the above relevant Acts and subordinate statutes, the exclusion period of imposition of capital gains tax on the transfer of assets shall expire after June 1 of the following year from the time of transfer of the pertinent assets, which is the next day from the time of the expiration of the final return period of tax base, and after the lapse of seven years from the next day from the time of the final return of tax base. Thus, the exclusion period of imposition of capital gains tax on the transfer of land in this case shall expire from the next day of May 31, 1998, which is the next day of June 1, 1998, which is the time of the expiration of the final return period of tax base of capital gains tax for the transfer of land in this case. Accordingly, the imposition of this case on December 1, 2005 shall be null and void after the expiration of the above exclusion period, and the invalid disposition of this case shall also be null and void.

(4) The theory of lawsuit

Therefore, it is also permitted to seek revocation of the disposition of this case which is null and void. Thus, the plaintiff's claim of this case seeking revocation of the disposition of this case is justified.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified, and the judgment of the court of first instance is just, and the defendant's appeal is dismissed, and it is so decided as per Disposition.