National High Court Decision 2007Gu3508 ( November 20, 2007)

A return on actual transaction price and a revised return shall not be made at the standard market price after the due date.

In case where the effect of the preliminary or final return on the tax base of transfer income is maintained by the time limit for the final return on the tax base of transfer income, it is not allowed to make the revised return based on the standard market price after the expiration of the final return period.

The contents of the decision shall be the same as attached.

1. The plaintiff's claims are all dismissed.

2. The plaintiffs shall bear the litigation costs.

The Defendant’s imposition disposition of capital gains tax of KRW 89,236,050 against Plaintiff Gangwon-A on July 10, 2007 exceeds KRW 25,881,025 among the imposition disposition of capital gains tax of KRW 89,236,050, and the imposition disposition of capital gains tax of KRW 89,236,050 against Plaintiff ChoiB, which exceeds KRW 25,81,025, respectively, shall be revoked.

1. Circumstances of the disposition;

A. On January 9, 2003, the Plaintiffs acquired KRW 291,50,000 and transferred KRW 650,000 to SongCC and KimD on February 23, 2004, the Plaintiffs acquired KRW 650,000,000 in 0,000 ○○-dong ○○○○-dong 66-31, 929 m29 m23 and 66-43 m26 m26 m23 of the same Act (hereinafter “each of the instant lands”).

B. On April 30, 2004, the Plaintiffs made a preliminary return on the tax base of transfer income based on the actual transaction price by taking the transfer value of each of the instant lands as KRW 316,00,000,000, and the acquisition value as KRW 291,50,000. Accordingly, the Plaintiffs paid KRW 3,826,080 as capital gains tax calculated accordingly.

C. From June 11, 2007 to December 22, 2007, the Defendant conducted a tax investigation and confirmed that the Plaintiffs reported the actual transaction amount differently from the facts. The Plaintiffs calculated transfer margin on June 21, 2007 based on the standard market price during the said tax investigation period (transfer value of 325,000,000, acquisition value of 148,000,000).

D. The defendant does not accept the above revised return, and on July 10, 2007, the defendant imposed capital gains tax of KRW 89,236,050 on the plaintiffs based on the actual transaction price confirmed as a result of the tax investigation (hereinafter "each taxation of this case").

[Ground of recognition] Facts without dispute, Gap evidence 2, Eul evidence 1 to 6 (including numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether each taxation of this case is legitimate

A. The plaintiffs' assertion

(1) The proviso of Article 114(4) of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005; hereinafter referred to as the "former Income Tax Act") may be exceptionally applied only to cases where: (a) imposing gains on transfer calculated based on the actual transaction price confirmed by the actual transaction price is smaller than gains on transfer based on the standard market price; and (b) if the transfer price reported by the actual transaction price is confirmed to be not the actual transaction price, it is only possible for the Defendant to calculate gains on transfer based on the standard market price and impose gains on transfer based on the actual transaction price, unless it is favorable for the

(2) Since the revised return can be made even after the due date for final return, the revised return must be calculated on the basis of the standard market price so long as the plaintiffs reported the erroneous actual transaction value and lawfully reported the revised return.

(3) Therefore, the instant disposition that did not calculate the transfer margin based on the standard market price is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Articles 96 (1) and 97 (1) 1 (a) of the former Income Tax Act provide that the transfer value and acquisition value of assets under Article 94 (1) 1 and 2 of the same Act shall be based on the standard market price in principle. In exceptional cases where the actual transaction price is based on the actual transaction price, one of the cases where the transferor files a return on the actual transaction price at the time of transfer and acquisition to the chief of the district tax office having jurisdiction over the place of tax payment by the due date for final return of tax base of transfer income along with the evidential documents at the time of transfer and acquisition. Article 114 (4) of the same Act provides that where a resident files a preliminary or final return on tax base of transfer income pursuant to the proviso of Articles 96 (1) 6 and 97 (1) 1 (a) of the same Act, and where the reported value is different from the actual transaction price, the transfer value or acquisition value verified shall be corrected by correcting the transfer value and tax base of transfer income.

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 transaction price as an exception to the principle of taxation of the standard market price within the period of 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, etc., "where a preliminary return or final return of the tax base of transfer income has been filed under the proviso of Article 114 (4) and Article 96 (1) 6 and the proviso of Article 97 (1) 1 (a) of the former Income Tax Act" means cases where the effect of the preliminary return or final return of the tax base of transfer income based on the actual transaction price is maintained by the deadline for final return of the tax base of transfer income by the deadline for final return of the tax base of transfer income, the chief of the competent district tax office, etc. may correct the tax base and amount based on the actual transaction price

(2) On the other hand, the Plaintiff asserts to the effect that the taxation based on the actual transaction price under the proviso of Article 114(4) of the former Income Tax Act should be limited to cases where the taxpayer is favorable to the latter. However, since there is no ground to interpret the said proviso in a limited manner, the Plaintiff’s above assertion is not accepted (this part of the Plaintiff’s assertion is based on the interpretation of the Supreme Court’s precedent that, even if the reported actual transaction price was reported under the former Act before the introduction of the aforementioned proviso, there is no ground to calculate transfer margin in the case where it is confirmed that the reported value is not the actual transaction price, and thus, it is not appropriate to newly prescribe the said proviso after the amendment of the Act).

(3) In addition, the Plaintiff asserts that the transfer margin should be calculated on the basis of the standard market price since the Plaintiff made a lawful revised return. However, according to the above legal principle, where the effect of the preliminary or final return on the tax base of transfer income is maintained by the deadline for the final return on the tax base of transfer income, it is not allowed to make a revised return on the basis of the standard market price after the lapse of the deadline for the final return on the tax base of transfer income. However, it is reasonable to interpret that only the revised return on the amount of tax

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.