If there is no way for tax authorities to indicate the real transfer value, the transfer value shall be applied in sequence of business example and appraisal value.

Where the transfer value is based on the actual transaction value and there is no evidentiary document, such as a sales contract, or there is no reliability in the important part or false part, and where there is no method by which the tax authority can disclose the actual transfer value, the transfer value may be determined or corrected by applying the transaction example, transaction value, and appraisal value in sequence pursuant to Article 176-2 (3) of the Enforcement Decree.

Determination and correction of Article 176-2 of the Enforcement Decree of the former Income Tax Act

2016Gudan6133 Revocation of Disposition of Imposing capital gains tax

○○

○○ Head of tax office

2017.03.15

2017.04.26

1. On April 24, 2015, the Defendant revoked the part exceeding KRW 265,220,840 among the disposition of imposition of KRW *** of the disposition of imposition of KRW 265,220,840 against the Plaintiff.

2. The plaintiff's remaining claims are dismissed.

3. The costs of lawsuit are divided into two parts, one of which is to be borne by the plaintiff, and the remainder by the defendant respectively.

Cheong-gu Office

The Defendant’s disposition of imposition of capital gains tax ***** won is revoked for the Plaintiff on April 24, 2015.

1. Details of the disposition;

가. 원고는 1985. 6. 27. PP시 HH동 **5-5 대 615.5㎡와 같은 동 **5-6 대 436.3㎡(이하 이들을 합쳐 '이 사건 토지'라 한다)를 취득하여 보유하다가 2004. 6. 7. 김JJ, 김WW, 김GG, 최QQ 등 4명(이하 '매수인들'이라고 한다)에게 양도한 후 양도가액을 969,900,000원으로 하여 양도소득세 신고를 하였다.

B. On April 24, 2015, the Defendant: (a) deemed that the Plaintiff extended the form of loan certificate in addition to the above transfer value as indicated in the sales contract and additionally received the transfer price of KRW 1,065,300,000; and (b) calculated the total transfer value of the instant land as KRW 2,035,200,000; and (c) notified the Plaintiff of the correction and notification of KRW ***** (hereinafter “instant disposition”).

C. The Plaintiff appealed and filed an appeal with the Tax Tribunal on August 15, 2015, but was dismissed on October 29, 2015.

[Ground of recognition] No dispute, Gap 3, 4, Eul 1, and 2 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition is based solely on the purchaser’s false assertion that he/she actually traded in KRW 2,035,200,000 per square year, not KRW 969,900,000, which is calculated as KRW 3,050,000 per square year as stated in the sales contract of the instant land, and thus, should be revoked in violation of the taxation requirements and the taxation basis principle.

B. Relevant statutes

Attached Form 1.

(c) Fact of recognition;

1) According to the sales contract (A; hereinafter referred to as "the contract of this case") dated April 13, 2004 concerning the land of this case which the plaintiff submitted when he reported the transfer income tax on April 13, 2004, the sale and purchase contract (A; hereinafter referred to as "the contract of this case") is written as "the plaintiff," "the purchaser," "the other three persons," "the purchase and sale price column," "Gu paid KRW 00,000,000,0000,0000 won (per m2)," and the down payment KRW 0,000,000,000,000 won (per m2,000,0000 won) appears to be written as the clerical error in the part payment at the time of the contract, and the remaining payment is written as of June 7, 2004. Each of the above receipts (A2-1, 202) are kept by the plaintiff.

2) In fact, following the preparation of the above sales contract, the name of the purchaser was changed at the request of the FapF (the husband of Kim J).

3) According to the loan certificate (B. 4; hereinafter "the loan certificate of this case") dated April 13, 2004, the buyer asserted that the total transfer value was KRW 2,035,200,000 and submitted to the defendant on the grounds of the claim that the buyer was KRW 2,035,200,000, the balance of the land will only be paid if the balance of the land is borrowed as the purchase price of the land of KRW 2,035,200,00, with the statement "1,000,0000,0000 won (1,065,30,300,000)" under the title "the loan certificate of this case", and then the name and seal of the buyer and the F.

4) During the process of the buyer’s loan of the instant land from the Nonghyup Cooperatives* (hereinafter referred to as “BFF”) branch as collateral, BBF assessed KRW 1,682,880,000 on April 8, 2004 upon request by the OOEM to appraise the instant land.

5) On June 7, 2004, 2004, the remainder payment date of the land of this case, ABC created each collateral security right with the purchaser’s maximum debt amount of KRW 350,000,000 for each purchaser, and loaned the purchaser a total of KRW 250,000,000 for each of the buyers.

6) On the day BBC, each of the KRW 100 million in face value and KRW 100,000 in face value and KRW 10,100,00 in face value and KRW 100,00 in total and KRW 22 in each of the KRW 10,00,000 in face value were issued. Of them, two of the KRW 10,000 in face value and KRW 10,000 in face value were deposited into the account of StateA among the Plaintiff’s individuals.

7) On August 1, 2013, the voluntary auction had been initiated by the Nonghyup Co., Ltd. on the instant land. On March 21, 2014, HHdong**5-6 land was sold to Nonparty Jeong* KRW 700 million, and on March 27, 2014, KRW *5-5 land was sold to Nonparty New* KRW 1 billion and the voluntary auction procedure was revoked.

8) In the first instance, the purchaser reported the transfer income tax on the land of this case at the transfer price of approximately KRW 1.7 billion, and accordingly, the Defendant imposed the transfer income tax on the purchaser. Upon filing an application for correction, the purchaser asserted that KRW 1,065,300,000 as stated in the loan certificate of this case constitutes the acquisition price of the land of this case, in addition to the above KRW 969,90,000 as stated in the loan certificate, if the purchaser paid the Plaintiff with the purchase price of the land of this case at KRW 1,065,30,000,000 as stated in the loan certificate of this case.

9) In addition to the above assertion by the purchaser, the Defendant took the instant disposition by including KRW 1,065,30,000 as stated in the above loan certificate in the Plaintiff’s transfer value on the ground that the purchaser and the purchaser were loans more than the remainder on the contract as collateral of the instant land from the Nonghyup at the time of the payment of the remainder, and the appraisal value of the said land at the time was assessed as KRW 1,682,880,00,000 on the ground that the said loan certificate was assessed as KRW 1,682,80,000

10) The PP City area where the instant land is located was designated as an speculative area as of February 26, 2004. The change in the officially assessed individual land price regarding the instant land between the Plaintiff and the buyer as of February 26, 2004 and a third party after the lapse of 2004, which was at the time of sale or sale between the Plaintiff and the buyer, was as follows. According to the following table, the standard market price of the instant land was increased by 81% from the amount of KRW 930,274,60 in 204 (=950,000 + 792,000 + 615.5 square meters + 792,000 square meters + 436.3 square meters] to KRW 1,701,594,70 [1,702,000 + 615 square meters + 1,49,000 square meters + 3 square meters].

11) Meanwhile, this Court was assessed as KRW 1,472,520,00 (hereinafter referred to as the “instant appraisal price”) as the result of the market price commission as of April 14, 2004 as to the land** An appraiser*, an appraiser*, who belongs to the Corporation***.

[Ground of recognition] Further to the evidence mentioned above, Gap 1, 2, 5, Eul 4 through 7 (including each number), Eul 8-2, witness F, and witness testimony of Eul, part of the testimony of this court's appraiser*

D. Determination

1) Relevant legal principles and statutes

The actual transfer value of the relevant asset, which serves as the basis for calculating capital gains tax, refers to the value of assets transferred by the transferor at the time of transaction and received as a consideration therefor, which is objectively recognized by a sales contract or other documentary evidence (see, e.g., Supreme Court Decision 2010Du27592, Feb. 9, 2012). In an administrative litigation seeking revocation of a taxation disposition on the grounds of illegality of the taxation disposition, the burden of proving the legality of the taxation disposition and the existence of the taxation requirement is, in principle, a tax authority (see, e.g., Supreme Court Decision 2010Du4599, Oct.

Meanwhile, comprehensively taking account of the relevant provisions such as Articles 100(1) and 114 of the former Income Tax Act (amended by Act No. 7335, Jan. 14, 2005; hereinafter the same) and Article 176-2(1) through (3) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18705, Feb. 19, 2005; hereinafter referred to as the “Enforcement Decree”), where the transfer value is calculated based on the actual transaction value in calculating the transfer margin of land, and there is no evidentiary document such as a sales contract or sales contract, or there is no reliability that the important part thereof is insufficient or false, and where the tax authority has no other way to indicate the actual transfer value, the transfer value may be determined or revised by applying the transaction example and appraisal value in order pursuant to Article 176-2(3) of the Enforcement Decree of the Income Tax Act.

2) Whether the transfer value calculated by the Defendant is KRW 2,035,200,000

In light of the above legal principles, comprehensively considering the following circumstances revealed through the health team and the facts acknowledged earlier, the evidence submitted by the Defendant, witness leapF, and part of the testimony by the StateA cannot be deemed as the actual transfer value of the instant land solely on the sole basis of the evidence submitted by the Defendant and the witness leapF, and the testimony by the purchaser, etc., and it cannot be deemed that there is sufficient proof of the Defendant as to the transfer value as the requirement of the instant disposition on the ground that there is no other evidence.

○ Basicly, buyers and the Plaintiff have a conflict of interest as to the amount of capital gains tax to be paid by each party in relation to the sales price of the instant land. The tax authorities shall exercise prudence in calculating the transfer value or acquisition value on the grounds of a convenience assertion. If either party’s statement is not supported by a neutral third party’s statement or objective evidence, such as a sales contract or a financial account statement prepared by both parties, the tax authorities shall not calculate the transfer value or acquisition value on the basis of such statement.

○○, however, the loan certificate of this case, which supports the highest transaction price (2,035,200,000 won) claimed by the buyer, is valid if the balance of the land is fulfilled only with the purchase price of the land in this case. The lender and the borrower are not indicated on the loan certificate as follows; the above loan certificate was made in the name of leF rather than the buyer despite the change of the parties to the sales contract; there is no signature or seal of the plaintiff; the witness, who prepared the above loan certificate, prepared a separate sales contract of the 2 billion won original loan with the signature or seal of the plaintiff; although the leF prepared the above loan certificate, he did not explain that the balance of the land in this case is performed only if the balance is performed with the purchase price of the land in this case; the buyer did not have the effect of the loan certificate if the contract is not performed with the signature or seal of the plaintiff at the time of the purchase or sale contract and the intermediate payment and the receipts and seal of this case cannot be paid to the plaintiff at the time of the purchase or sale.

○ Also, solely on the fact that the buyer borrowed KRW 1 billion more than the remainder of the land in this case as collateral from BBC, or that the land was assessed as approximately KRW 1.7 billion as the result of the appraisal request by BBC at the time, there is no evidence of financial transaction, etc. that the above loan was actually paid to the Plaintiff’s side; at the time, BBC appears to have requested an appraisal without receiving the instant contract; and the appraisal value assessed by the financial institution for real estate mortgage loan cannot be the same as the market value recognized by the Defendant, in light of the fact that the Defendant’s actual transfer value certification is insufficient.

If the purchase price of the instant land is KRW 2,035,200,000 as the buyer’s assertion, the buyer is required to prepare the remainder of KRW 1,235,200,000, excluding the total sum of KRW 800,000,000,000 for the down payment and the intermediate payment already paid. The buyer is not natural to explain the unit of face value and the number of marks, etc. issued by BBC on the date of the remainder payment, but there is no objective evidence to obtain the remainder of KRW 235,00,000 and there is no objective evidence.

As seen earlier, it is difficult to understand that the transaction price in 2014, which was 10 billion won after about 2014, compared to the transaction price of the instant land that was claimed by the buyer in 2004 ( approximately KRW 2 billion), was 1.7 billion, given that the instant land was designated as an speculative area even if the transaction price in 2014 includes a part of the sale price in the auction procedure, and that the standard market price in 2014, compared to the standard market price in 2004, was 83% higher than the standard market price in 2004.

○ Meanwhile, in light of the fact that the transfer value calculated by the Defendant is not recognized, the Plaintiff’s first reported amount of KRW 969,900,000 can be seen as the transfer value of the instant land, it is evident that the Plaintiff voluntarily stated that KRW 200,000 capital gains tax and KRW 70,000,000 of real estate brokerage fees were additionally received from the purchaser, and that the witness who had arranged for sale at the time testified that the purchase and sale is not the actual market price, it cannot be seen as the transfer value of the instant land.

3) Method of calculating the transfer value

Ultimately, with respect to the transfer value of the instant land, the transfer value shall be determined or corrected in the order of transaction example, appraisal value, conversion value, and standard market price pursuant to Article 114(7) of the former Income Tax Act and Article 176-2(3) of the Enforcement Decree of the same Act, since there are no books, sales contracts, receipts, and other documentary evidence necessary to confirm the actual transaction value at the time of transfer,

However, there is no business example example among the land in this case under Article 176-2(3)1 of the Enforcement Decree. Although the market price appraisal procedure in this case is based on the result of appraisal conducted at the commission of the court at the expiration of not less than 10 years from the date of transfer of the land in this case, the appraisal procedure in this case would be conducted upon the defendant's request in order to establish the criteria for recommendation for the early adjustment. The appraisal price in this case constitutes the result of appraisal conducted by the court after designating an appraiser with fairness and expertise and entrusting the market price appraisal. The appraisal price in this case is reasonable comparison standard and the appraisal price in this case is determined in consideration of the location, shape, environment, and use of the real estate in this case. The Supreme Court has maintained the position that the retroactive appraisal price which the court entrusted in the process of revocation litigation such as inheritance tax can be deemed as the market price in South Korea beyond the trial limit stipulated in the relevant Enforcement Decree (see Supreme Court Decision 2010Du8751, Sept. 30, 2010).

(e) Calculation of a legitimate tax amount;

Therefore, when calculating the transfer income tax to be paid by the Plaintiff using KRW 1,472,520,00 as the transfer value of the land of this case, the portion exceeding the above KRW 265,220,840 among the disposition of this case should be revoked by unlawful means, as shown in the tax base calculation table of attached Table 2.

3. Conclusion

The plaintiff's claim is partially accepted, and it is so decided as per Disposition.