Daegu District Court-2015-Gu Partnership-259 ( December 15, 2015)

Where a transfer income tax is reported by submitting a false sales contract when the standard market price principle is applicable;

As long as a revised return based on the standard market price is not made within the period of final return after the final return of the capital gains tax was made based on the actual transaction price, the disposition of this case that corrected the tax base and tax amount based on the conversion price based on the standard market price at the time of acquisition of the real estate of this case and the actual transaction price confirmed at the time of transfer

Article 114 of the Income Tax Act

Daegu High Court 2016Nu4004

00

00. Head of tax office

Daegu District Court Decision 2015Guhap259

September 30, 2016

October 14, 2016

1. The plaintiff's appeal is dismissed.

2. The plaintiff's claim extended in the trial is dismissed.

3. The costs of appeal (including the costs arising from the extension of the claim) shall be borne by the plaintiff.

1. Purport of claim

Section 13,782,826 of the capital gains tax belonging to the year 2004 against the Plaintiff on July 1, 2013

The portion exceeding 57,414,426 won of the excessive disposition and the amount exceeding 2,784,944 won of the imposition of additional tax 57,820,272 won shall be revoked (the plaintiff extended the purport of the claim in the trial).

2. Purport of appeal

The judgment of the first instance shall be revoked. On July 1, 2013, the part exceeding KRW 57,987,525 of the disposition of imposition of capital gains tax of KRW 113,782,826 against the Plaintiff for the year 2004 and the part exceeding KRW 3,344,411 of the disposition of imposition of KRW 57,820,272 shall be revoked.

1. Details of the disposition;

A. On April 29, 2004, the Plaintiff transferred the instant real estate to CCC (hereinafter referred to as “instant transfer”) on April 29, 2004, Daegu ABB Dong 611-11, 172m2, the above ground buildings, and the Daegu AAB BB Dong 611-17m2, and the above ground buildings (hereinafter collectively referred to as “the instant real estate”). On June 30, 2004, the Plaintiff reported the transfer value of the instant real estate of KRW 390,000,000, calculated tax amount of KRW 54,536,514, and the tax amount to be voluntarily paid was KRW 49,082,863, and paid the transfer income tax for 204 (hereinafter referred to as “the instant report”).

B. From May 1, 2013 to September 19, 2013, the Defendant investigated the difference between the transfer value of the instant real estate reported by the Plaintiff and the acquisition value reported by CCC in transferring the instant real estate to DDD on September 27, 2012, and confirmed the actual transfer value of the instant real estate as at the time of the transfer, and on July 4, 2013, deeming the acquisition value as KRW 204,174,924, which is the conversion value based on the standard market price at the time of acquisition, as KRW 348,563,406, the Plaintiff’s tax base for capital gains tax belonging to the year 2004 as at July 4, 2013; the total determined tax amount as KRW 171,603,098 (calculated calculated tax amount + KRW 1113,782,826 + KRW 57,820,272), and disposed of less than KRW 54,53614,517

C. On August 21, 2013, the Plaintiff dissatisfied with the instant disposition, filed an objection with the commissioner of the Daegu Regional Tax Office on August 21, 2013, and the objection was dismissed on October 2, 2013, the Plaintiff filed an appeal with the Tax Tribunal on December 26, 2013, and the Tax Tribunal dismissed the Plaintiff’s claim on November 6, 2014.

[Ground of recognition] Unsatisfy, Gap evidence 1, 8, 9, Eul evidence 1 to 4, 9, 11, 12

Second, the purport of the whole pleading

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) According to the main sentence of Article 96(1) of the former Income Tax Act (amended by Act No. 7289, Dec. 31, 2004; hereinafter the same), the transfer value of assets for calculating transfer income tax shall, in principle, follow the standard market price at the time of transfer. In exceptional cases, where the transferor files a report on the actual transaction price at the time of transfer or acquisition (hereinafter referred to as "actual transaction price") with the head of the district tax office having jurisdiction over the place of tax payment by the deadline for final return on the thickness between evidential documents and the final return on the actual transaction price, the transfer income tax may be calculated based on the actual transaction price. The Plaintiff only submitted evidentiary documents related to the actual transaction price at the time of transfer of the instant real estate and written only the conversion price based on the standard market price at the time of acquisition. Thus, the disposition of this case calculated based on the actual transaction price

2) Although the instant real estate was reconstructed into a commercial building, which is not a house, it was wrong for a tax agent to mistakenly determine that it is a house in a housing speculation area subject to the actual transaction pursuant to Article 96(1)6-2 of the former Income Tax Act. This is unlawful in the instant disposition that calculated capital gains tax based on the actual transaction price, even though it should be calculated based on the standard market price pursuant to the main sentence of Article 114(2) of the former Income Tax Act, where there are omissions or errors in the details of the return under Article 114(2)

3) The Plaintiff destroyed or lost the existing building on January 2004 before the transfer of this case, and on March 1, 2004, newly constructed a building among the real estate of this case and transferred it on April 29, 2004. Therefore, the land among the real estate of this case is subject to the standard market price pursuant to the main sentence of Article 96(1) of the former Income Tax Act, and the commercial building, which is a newly constructed building among the real estate of this case, transfers real estate within one year after its acquisition pursuant to Article 96(1)4 of the former Income Tax Act. Thus, the disposition of this case is unlawful merely because it is subject to the actual transaction price.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Determination on the first argument

A) Relevant legal principles

In principle, the transfer value or acquisition value of assets under the main sentence of Article 96 (1) and Article 97 (1) 1 of the former Income Tax Act shall be based on the standard market price at the time of transfer or acquisition of the relevant assets: Provided, That in exceptional cases stipulated in the proviso of Article 96 (1), the transfer value or acquisition value shall be based on the actual transaction price at the time of transfer or acquisition, and Article 96 (1) 6 shall be one of the cases where the transferor reports the actual transaction price at the time of transfer or acquisition to the head of the tax office having jurisdiction over the place of tax payment by the due date under Article 110 (1) together with evidential documents at the time of transfer or acquisition. This provision is interpreted as a provision to supplement the actual transaction price at the time of acquisition without any disadvantage compared to the actual transaction price at the time of acquisition or transfer under Article 94 (1) 1 of the former Income Tax Act. In addition, in case where a taxpayer transfers a specific asset, the transfer price at the time of acquisition or sale price at the time of the relevant real asset shall be calculated based on the actual transaction price.

B) Determination

Nos. 1 and 11 with respect to the instant case, the purport of the entire pleadings

Comprehensively taking account of the following facts, the Plaintiff acquired the instant real estate on December 28, 1971 and October 14, 1981, which was prior to the date of fictitious acquisition (i.e., January 1, 1985). The Plaintiff submitted evidentiary documents as to the actual transaction price at the time of the instant report, and presented the basis for calculating the actual transaction price at the time of acquisition as to the acquisition price at the price converted from the standard market price on January 1, 1985, the date of acquisition, and the basis for calculating the actual transaction price at the time of acquisition. The Plaintiff may acknowledge the fact that the Plaintiff made a preliminary return and final return of capital gains tax on June 30, 204, which was prior to the date of final return of capital gains tax due to the transfer in this case, on May 31, 2005, which was the date of final return of capital gains tax due to the transfer in this case. According to the above facts, the Plaintiff’s report in this case constitutes an actual transaction price at the time of transfer and acquisition under Article 96(1).

2) Determination on the second argument

A) Relevant provisions

Article 114 (4) (main sentence) of the former Income Tax Act provides that "in case where the chief of a district tax office having jurisdiction over the place of tax payment or the chief of a regional tax office determines or revises the transfer income tax base and the amount of tax under paragraphs (1) through (3), the amount under Articles 96 and 97 shall be the value under the provisions of Article 97 shall be the same." However, in case where the resident makes a preliminary return or a final return on the transfer income tax base under Articles 96 (1) 6 and 97 (1) 1 (a) (proviso), and where the reported amount is different from the fact, if the head of the district tax office having jurisdiction over the place of tax payment or the director of the regional tax office having jurisdiction over the place of tax payment confirms the actual transaction value, he shall correct the transfer income tax base and the amount of tax by the confirmed amount of transfer value or the acquisition value." This is interpreted as a sanction to punish the act of evading the transfer income

B) Relevant legal principles

Meanwhile, in light of the purport that the proviso of Article 96 (1) 6 and Article 97 (1) 1 (a) of the former Income Tax Act stipulates the completion period to be reported based on the actual market price as an exception to the principle of taxation of the standard market price within the period of the final return of the tax base of the transfer income, and the relation between the preliminary return of the tax base of the transfer income and the final return of the tax base, it is reasonable to view that the "case where the preliminary return of the tax base of the transfer income or the final return has been made pursuant to Article 96 (1) 6 and the proviso of Article 97 (1) 1 (a) of the former Income Tax Act" means the case where the effect of the preliminary return or the final return of the tax base of the transfer income is maintained by the actual market price by the date of the final return of the tax base of the transfer income, the chief of the competent district tax office, etc. can correct the tax base and the amount of tax based on the actual market price confirmed, and it does not change because the transferor reported the final return of the standard

C) Determination

(5) The Plaintiff’s disposal of real estate at the time of this case’s real estate transfer income tax return was based on the following circumstances, namely, ① the Plaintiff made a preliminary return and final return on June 30, 2004, which was before May 31, 2005, which was the period for the final return of transfer income tax due to the transfer of this case’s real estate, and the revised return on the standard market price was not made until the said period for the final return of transfer income tax. ② The calculated transfer income tax by applying the standard market price to the entire real estate is more than 58,310,236, and the calculated amount of transfer income tax is more than 54,536,514 won at the time of the report of this case’s transfer. ③ The Plaintiff’s disposal of real estate at the time of this case’s return of this case’s real estate was based on a false sale contract which is 39,000,000 won or more, and ④ the Plaintiff’s sale of real estate at the time of this case’s real estate to 5 billion won.

3) Judgment on the third argument

In light of the purport of the arguments in Gap evidence Nos. 2, 3, 14, and 15, and Eul evidence Nos. 6, the plaintiff was awarded a contract for the construction of the steel-frame (hereinafter referred to as the "construction of this case") to the FF of this case on or around January 2004, for the purpose of using the part of the building of this case to the FF of this case on February 25, 2004 when the construction of this case was in progress, the plaintiff entered into a contract with the FF of this case for the whole of the building of this case for the purpose of using the FF of this case to the FF of this case and the term from March 1, 2004 to February 30, 207, the plaintiff was not equipped with an internal facility of this case for the purpose of using the FF of this case to the FF of this case to the FF of this case on or after the completion of the construction of the construction of the EF of this case from March 1, 2001 to February 307.

The following acknowledged facts and the whole purport of each of the aforementioned evidences are comprehensively established:

In other words, considering the following circumstances: (a) the construction content of the Plaintiff’s contract to a wooden tree is merely repair or repair of the existing building; (b) it cannot be deemed that the existing building was destroyed or newly built because electricity and water supply of the building in the instant real estate was not supplied for a long time; and (c) even according to the contents of the statement made by FF and the confirmation document written by EE, the instant construction is not related to the destruction of the existing building and new building; and (d) it appears that the instant construction would be related to the repair or repair of the existing building, not to the destruction of the existing building and new building; and (e) the Plaintiff transferred the existing building without the registration of destruction of the existing building or the preservation registration of the new building.

Therefore, it is difficult to accept the Plaintiff’s assertion on the premise that the existing building was destroyed and the building among the real estate of this case was newly constructed.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit, and the judgment of the court of first instance is just in conclusion. Thus, the plaintiff's claim extended in the plaintiff's appeal and the court of first instance is dismissed as it is without merit, and it is so decided as per Disposition.