early 2014 Middle 4290 ( November 11, 2014)

No transfer income tax shall be deducted as gift tax paid.

Transfer income tax and gift tax may not be deducted as already paid tax amount of gift tax because they are different from taxpayers, taxation requirements, etc.

Article 2 (Gift Tax Taxables) of Inheritance Tax and Gift Tax Act

2015Guhap156 Pre-Announcement of Imposition of Gift Tax

AA et al. 79

BB Director of the Tax Office

October 23, 2015

November 20, 2015

1. All of the plaintiffs' claims are dismissed.

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

Cheong-gu Office

The Defendant’s taxation disposition on the gift tax and its additional tax on the amount of each claim stated in attached Form 1, which was filed by the Defendant against the Plaintiffs, shall be revoked.

1. Details of the disposition;

A. Plaintiff CCC, DDD, EE, and FF are residents of 00:00:00, who were members of Nonparty 001ri Development Committee (hereinafter “MMri Committee”); and Plaintiff HH is the heir of Nonparty YJ, as well as the heir of Nonparty 1 JJ.

B. On April 26, 1994, the MMri Committee completed the registration of transfer of ownership with respect to the land of 000-0 forest land of 000,050 square meters per 00 00 00 - 00 -00 - 1,091 - 694 m2 prior to 000-0 - 694 m2 prior to 000 - 00 - 00 - 40,463 m2 (hereinafter referred to as “the total land of this case”).

C. On November 31, 2007, the MMri Committee sold the instant land in KRW 6 billion to KK Co., Ltd., and the registration of ownership transfer was completed on June 17, 2008 in relation to the instant land except the above 00 Ri 000-0 694 square meters among the instant land (the above 00 Ri 00-0 00-0 m204 m2 on the same day).

D. Around September 1, 2008, MMri Committee distributed the above transfer proceeds to 00 village residents ZZ and 101 others (hereinafter referred to as “distributions of this case”), and the above community residents reported and paid the transfer income tax on the transfer proceeds distributed to each of them (the basic deduction amount for the transfer income shall be KRW 255,000,000 in total as KRW 331,378,210 in total).

E. From September 7, 2009 to September 25, 2009, the Defendant conducted an investigation of capital gains tax on the instant land, and denied KRW 1.3 billion among necessary expenses. Considering that MMri Committee is a resident, the above community resident’s total deduction of KRW 252,50,000 among the total deduction of capital gains tax of KRW 102,00,000 shall be deemed to have been deducted excessively. On December 1, 2009, the Defendant added the previous disposition of KRW 1,043,984,320 to the MMri Committee for correction and notification of capital gains tax of KRW 1,043,984,320 (hereinafter referred to as the “former first disposition”), and then, the MMri Committee imposed capital gains tax of KRW 700,00,000,000 which was actually paid as graveyard equipment, KRW 300,407,400,201, 207,4001.

F. The Committee filed a lawsuit seeking revocation of the above disposition against the Defendant, asserting that the above disposition was unlawful, as the case was against the previous disposition No. 1, and filed an appeal with the Tax Tribunal, but dismissed on December 29, 2010. Accordingly, since the instant land belongs to the co-ownership or co-ownership of members of the Committee on MMri, capital gains tax should be imposed on the members equally and equally, the said disposition should be imposed on the members of the Committee on MMri, but the said court filed a lawsuit seeking revocation of the above disposition against the Defendant as 201-Guhap592, the Chuncheon District Court, 201, but the said court rendered a judgment dismissing the claim of the Committee on MMri on February 10, 2012 on the ground that the above disposition was lawful. Accordingly, although the MMri Committee filed an appeal with the Seoul High Court Decision 2012Nu244, the appeal was dismissed on May 16, 2012, the said judgment became final and conclusive as is.

G. On the other hand, the MMri Committee appealed to the previous Disposition No. 2 of this case and filed a request for review with the National Tax Examination Committee, but was dismissed on August 6, 201. Accordingly, the MMri Committee filed a lawsuit against the Defendant claiming revocation of the above Disposition by asserting the same content as that of the lawsuit previously taken place, but the above court rendered a judgment dismissing the claim for revocation of the disposition of additional dues among the above Disposition on November 16, 2012 and dismissed the remainder of the claim. The MMri Committee filed an appeal with the Seoul High Court Decision No. 2012Nu1421, Jul. 10, 2013; however, the appeal was dismissed by the Supreme Court Decision No. 2013Du17015, Nov. 28, 2013.

H. After that, on January 28, 2014, the Defendant notified the Plaintiffs of the pre-announcement of taxation on the grounds that the Plaintiffs had not reported gift tax on the transfer price received by MMri Committee. On March 5, 2014, the Defendant issued a disposition imposing gift tax and penalty tax on the Plaintiffs as shown in attached Form 1 (hereinafter “instant disposition”).

B. On April 1, 2014, the Plaintiff filed an objection with the head of TT Tax Office on April 1, 2014, but the head of TT Tax Office dismissed the Plaintiff’s objection on May 15, 2014. Although the Plaintiff filed an appeal with the Tax Tribunal, the Tax Tribunal dismissed the Plaintiff’s appeal on November 11, 2014.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1, 3, 6, 7 (including each number if there are several numbers), Eul evidence Nos. 3 through 5, 8, 9 and the purport of the whole pleadings

2. Judgment on the Defendant’s main defense

The defendant filed an appeal against the revocation of additional tax without objection to the principal tax as to the disposition of this case, and filed an appeal against the dismissal of the claim, and sought the revocation of the entire amount of the gift tax and the additional tax. Ultimately, since the plaintiff filed the lawsuit of this case without going through the pre-trial procedure regarding the principal tax, the part regarding the gift tax among the lawsuit of this case as to the gift tax is unlawful.

In a case where a tax authority, who received a notice of investigation details and the notification of property seizure before taxation, predicted an objection based on the notification, files a lawsuit through a request for examination and request for judgment, the above disposition should be deemed to have been filed (see Supreme Court Decision 90Nu9155, Apr. 23, 191). According to the aforementioned evidence and the statement in subparagraph 2, the Plaintiffs filed a request for a judgment with the Tax Tribunal as to all the principal gift tax and additional tax, which are the principal tax on the notice of tax advance notice, and the Tax Tribunal dismissed the Plaintiff’s request after examining all the principal tax and additional tax. Thus, the Defendant’s main safety defense is without merit.

3. Whether the instant disposition is lawful

A. The plaintiffs' assertion

In the beginning, it is true that the Plaintiffs reported and paid the transfer income tax individually by deeming that they received the purchase price of land directly from KK as a result, and that they reported and paid the gift tax to be paid for the shares of this case. Ultimately, the said gift tax should be deducted by the transfer income tax reported and paid by the Plaintiffs. Since the Plaintiffs fulfilled their obligation to report under the tax law, it is unlawful for the Defendant to impose the principal tax, gift tax and non-reported penalty tax and penalty tax

B. Relevant statutes

Attached Form 2 shall be as shown in attached Table 2.

C. Determination

1) Since capital gains tax and gift tax vary between taxpayers, taxation requirements, etc., they cannot be deducted from the amount of capital gains tax already paid in calculating gift tax (see Supreme Court Decision 2001Du8452, Feb. 27, 2004). Likewise, the Plaintiffs’ obligation to report gift tax by reporting and paying capital gains tax individually cannot be deemed to have fulfilled their obligation to report gift tax.

2) In order to facilitate the exercise of taxation rights and the realization of tax claims, additional tax under the tax law is an administrative sanction imposed by a taxpayer who violates a tax return and tax liability under the tax law without justifiable grounds, and the taxpayer’s intention and negligence is not considered. On the other hand, it is unreasonable to deem that the taxpayer was not aware of his/her duty, and it is unreasonable to expect that the taxpayer would not be aware of his/her duty, or that it would be unreasonable to expect the party to fulfill his/her duty, and thus, it should be imposed as to failure to fulfill his/her duty under the tax law, unless there is a justifiable reason (see, e.g., Supreme Court Decision 2010Du1622, Apr. 28, 2011).

In light of the following circumstances, which are acknowledged as above, comprehensively taking into account the aforementioned facts, the evidence and the purport of the entire argument, namely, ① The MMri Committee held a general meeting on June 7, 2008 and resolved to divide land purchase price received from KK to its members, and then distributed the above land purchase price to its members, including the Plaintiffs, on July 1, 2008 and July 2 of the same year, and thus, the Plaintiffs were aware that the MMri Committee received the instant shares, and ② even after two years have passed since the judgment on the previous Disposition 1 became final and conclusive, the Plaintiffs cannot be deemed to have any justifiable reason for not being erroneous for the Plaintiffs to have breached their duty to report and pay gift tax.

3) Therefore, the Plaintiffs’ assertion is without merit (in particular, it means that a taxpayer should faithfully comply with the obligations under the tax law, but it is a nature to maintain equity with a person who has made a normal payment, which corresponds to the interest on the statutory due date and the period of payment. However, if a taxpayer can be exempted from an erroneous payment solely on the sole basis of the fact that a transfer income tax was paid instead of a gift tax due to a misunderstanding or site, the relevant provisions of the tax law will accurately grasp the relevant provisions, thereby impairing equity with the payer, and promptly treating those who have not paid a gift tax, rather favorably).

4. Conclusion

Therefore, the plaintiffs' claims of this case are without merit, and they are dismissed. It is so decided as per Disposition.