Seoul Administrative Court-2016-Gu Partnership-75937 ( April 20, 2017)

Cho-2016-west-1682 (2016.30)

The market price of land rent, which is the basis for the disposition of wrongful calculation, shall not be deemed the market price under the relevant statutes, because it is deemed that it was leased to a related corporation

Since the market price of rent calculated by the Defendants cannot be deemed as the market price under the Act on the Services of Lease of Shares 2/3 of Land of this case, each of the dispositions of this case based on the market price of the above rent is unlawful.

Article 50 of the former Enforcement Decree of the Value-Added Tax Act, and rejection of wrongful calculation under Article 98 of the former Enforcement Decree of the Income Tax Act

Disposition to revoke imposition of value-added tax and global income tax

00

00. Tax office et al.

on October 29, 2017

on 19, 2017

1. Revocation of a judgment of the first instance;

2. On January 1, 2016, the head of the tax office having jurisdiction over the global income for the plaintiff on January 1, 2016, the value-added taxx,x,x,x,x,x, 201 on the first anniversary of the year 2010, the value-added taxx,x,x,x,x, 1st of the value-added tax for the year 201, on the second anniversary of the year 2011, the number,x,x, x, 1st of the value-added tax for the year 20, the second anniversary of the year 2012, the number,x,x, 20x, 1st of the value-added tax for the second anniversary of the year 20, the number,x, 20x, 1st of the global incomex, the number,x1st of the value-added tax for the year 20, the number,x1st of the second anniversary of the year 2014, respectively.

3. The total costs of the lawsuit shall be borne by the Defendants.

The judgment of the court of first instance is the same as the judgment of the court of first instance (the plaintiff shall reduce or correct each disposition in accordance with the purport of the judgment

Accordingly, the purport of the claim and appeal was reduced.

X.x.x.x.x.x.x.x. 00 00 00-1 760 m2, 275-2, 413 m2, 000-3, 180 m2, 200 m2, 180 m2, 200-1, and 2/3 of the above above 00-1, 200-1, 180 m2 above m2, 300 m2, 1/3 of the above m2, 1/3 of the above m20 m2, 1/3 of the above m2, m200 m2, aa, the Plaintiff’s mother, inherited each of the above m2, m2, m3, m2, m3, m2, m2, m3, m2, m2, m3, m2, m2, m5.

The director of the tax office on global income shall conduct an integrated investigation into the Plaintiff on October 1, 2015; the amount obtained by deducting the agreed management expenses from the total revenue from the instant land and buildings that BB received from a third party; the market price of the instant land by means of calculating the appraisal price and the appraisal price of the instant building; and the Plaintiff’s rent for the instant land shall be deemed to have reduced unfairly from the tax burden on land rent by leasing 2/3 shares at low price to bbbb, which was then subject to Article 29(4) of the Value-Added Tax Act; Article 62 of the Enforcement Decree of the Income Tax Act; and Article 41 of the Income Tax Act with respect to the global incomex 1, 2016,x 2xx 1,x 2,x 3, 2010,x 2,x 1, 202,x1, 2,x2, 2011,x1, 2, 2012,x2, x1, 2, x1.

On April 18, 2016, the Plaintiff dissatisfied with each of the above dispositions and filed a request for adjudication with the Tax Tribunal on April 18, 2016, but was dismissed on June 30, 2016. After that, the head of the tax office having jurisdiction over the Defendant 00 was dismissed on May 30, 2017, in accordance with the purport of the judgment of the first instance court of this case on May 30, 2017, the portion exceeding the X,xx,xx, andxx in the disposition of imposition of the first-time value-added taxx,xx, andxxx in the disposition of imposition of the global income tax for the year 2012 (hereinafter “each of the instant dispositions”).

[Ground of recognition] Facts without dispute, Gap 1 to 5 evidence, Eul 3 and 11 evidence (including paper numbers), the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The instant land is divided into approximately KRW x,x mix (hereinafter referred to as "parking lot part") used as a parking lot according to the actual use status and the remaining parts. The parking lot part is leased by a third party as a parking lot and there is a price generally transacted between third parties who are not related parties under Article 89(1) of the Enforcement Decree of the Corporate Tax Act. Therefore, the Plaintiff’s lease revenue in this part should be separately calculated according to the Plaintiff’s share and bbb share based on the lease revenue received by a third party.

In addition, in the case of the remainder of the parking lot, it is only the share of the land leased to bB by the Plaintiff who is a specially related party, so it shall not include the building rental income in calculating the Plaintiff's lease income, and as long as there is no objective case in calculating the Plaintiff's lease income, it shall be calculated by the method of Article 89 (4)

Therefore, each of the dispositions of this case, which calculated the Plaintiff’s lease income based on the total lease income of the land and buildings of this case, is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

(c) Fact of recognition;

1) The Plaintiff was appointed as the representative director of X.x.x.x.x.x. bb. from 2010, he/she had more than 50% of the shares of bbb (x per the end of 2013) with his/her spouse and children, and operated bb.

2) BB from 2010 to 2014, from 2010 to dd (e parking lot) of the instant parking lot part of the instant land, BB leased deposit KRW x0,000 and monthly rent x0,000 to dd (e parking lot) and leased each of the units of the instant building to individual lessees (after that, BB removed the instant building and leased the instant land to f).

3) The Plaintiff reported to the tax authority the leased income calculated pursuant to Article 89(4)1 of the Enforcement Decree of the Corporate Tax Act based on the annual officially announced value as to the leased portion of 2/3 shares of the instant land owned to bb.

4) The Defendants deemed that the tax burden on income was unjustly reduced due to transactions with a specially related person (Article 29(4)2 of the Value-Added Tax Act) and each disposition of this case was made by deeming that such transactions constituted a case where the tax burden was unjustly reduced (Article 41(1) of the Income Tax Act). The details of calculation by the Defendants of the rental fee omitted by the Plaintiff are as follows.

(unit:,000 won)

Gu Sector

The amount of his reappointment;

(Total rent received from a third party)

Necessary expenses

(Management Expenses, etc.)

500 00

Market Price

Consolidateds

X.x

X.x

X.x

2010

X.x

X.x

X.x

2011

X.x

X.x

X.x

2012

X.x

X.x

X.x

2013

X.x

X.x

X.x

2014

X.x

X.x

X.x

- Calculation of ‘market price of rent' by deducting necessary expenses, such as management expenses, from the total rent received by bb from a third party;

- Distribution of the above rent market price in accordance with the appraisal value of the land and buildings of this case

- The appraisal value is based on the appraisal value (the portion after 2012) requested by BB to GG appraisal corporations as of June 30, 2012, and on the appraisal value (the portion after 2012) requested by Defendant 00 superintendent of the tax office to conduct a retroactive appraisal to HH appraisal corporations on the basis of January 1, 2015, as of September 3, 2015.

- The appraisal value ratio of the instant land and buildings on this basis shall be as follows:

(unit: %)

Gu Sector

2010

2011

2012

2013

2014

Total

100.00%

100.00%

100.00%

100.00%

100.00%

Land:

Xxx%

Xxx%

Xxx%

Xxx%

Xxx%

Buildings

X%

X%

X%

X%

X%

- Calculation of reasonable rents by applying the Plaintiff’s share (2/3) in the land of this case at the market price of divided rents for the land of this case, and by deducting the reported rents from the reported rents.

(unit:,000 won)

Gu Sector

Rent subject to proportional distribution

4 The appropriate rental fee

(2/3) Land portion

(1*2/3)

5 Reporting

Rent

6. Voluntary rent

Omission Report

(➃-➄)

1 Shares in land

2 Building Parts

3rds

(1+2)

Consolidateds

X.x

X.x

X.x

X.x

X.x

X.x

2010

X.x

X.x

X.x

X.x

X.x

X.x

2011

X.x

X.x

X.x

X.x

X.x

X.x

2012

X.x

X.x

X.x

X.x

X.x

X.x

2013

X.x

X.x

X.x

X.x

X.x

X.x

2014

X.x

X.x

X.x

X.x

X.x

X.x

[Reasons for Recognition] Each of the above evidence, evidence Nos. 6 through 11, Eul 1, 2, 5 through 10 (including paper numbers) and images

D. Determination

1) According to the above facts, BB is a related party of the Plaintiff under the Value-Added Tax Act and the Income Tax Act (Article 12(2) of the Value-Added Tax Act, Article 26(1) of the Enforcement Decree of the Value-Added Tax Act, Article 98(1) of the Enforcement Decree of the Income Tax Act, and Article 1-2(

Article 29 (4) 2 of the Value-Added Tax Act provides that the market price of the service shall be considered as the supply price if the service is supplied to a related party for an unreasonably low price, and Article 41 (1) of the Income Tax Act and Article 98 (2) 2, 5, and (4) of the Enforcement Decree of the Income Tax Act provides that if the related party provides assets or services to a related party at a price lower than the market price and reduces the tax burden on the income by providing the related party at a price lower than the market price

Therefore, in order to determine the legitimacy of each of the dispositions of this case relating to the lease services of 2/3 shares in the land provided to BB by the Plaintiff, it is necessary to consider whether the “market price of rent calculated by the Defendants” is appropriate as the “market price under the above Act and subordinate statutes.”

2) Article 62 subparag. 1 and 3 of the Enforcement Decree of the Value-Added Tax Act provides that the market price shall be the “price continuously traded by a person who is not a specially related person or by a third party in a situation similar to the pertinent transaction.” In the absence of such a price or where the market price is unclear, the price pursuant to Article 98(3) and (4) of the Enforcement Decree of the Income Tax Act or Article 89(2) and (4) of the Enforcement Decree of the Corporate Tax Act shall be deemed the market price. Article 98(4) of the Enforcement Decree of the Income Tax Act provides that Article 89(3) through

In addition, Article 89(4) of the Enforcement Decree of the Corporate Tax Act provides that the market price shall be calculated by multiplying the amount calculated by subtracting the key money or deposits received in connection with the provision of the asset from the amount equivalent to 50/100 of the market price of the asset provided by the fixed deposit interest rate by the amount (Article 89(1) of the Enforcement Decree of the Corporate Tax Act). Article 89(1) of the Enforcement Decree of the Corporate Tax Act provides that the relevant corporation shall be the market price of the "the price generally traded between many and unspecified persons who are not specially related persons or those who are not specially related persons" in similar circumstances to the relevant transaction, and Article 89(2) provides that where the market price is unclear, the appraisal

In full view of the provisions of the above statutes, the market price under the Value-Added Tax Act and the Income Tax Act on the provision of real estate leasing services is a generally traded price between a person who is not a specially related person and a third party who is not a specially related person and a third party who is not a specially related person, and where such market price is unclear, the appraised price by an appraisal corporation shall be based on the appraised price, and where the appraisal price cannot be applied, it shall be calculated by the method

3) Meanwhile, in calculating the market price of land lease services, the individual factors such as the land category, location, surrounding environment, utilization or usable scope of the pertinent land, as well as the reasonable method such as investigating and examining the proper market price of similar land in neighboring areas, or requesting an appraiser to appraise the land. In the case of land where a building is located, the rent for the land and the rent for the land on the land are not necessarily maintained, but the value of the building is affected by the total area or structure of the building as well as the location thereof, and thus, the value, etc. of the building irrelevant to the land itself shall not be the basis for calculating the land rent (see Supreme Court Decision 87Nu1055, Feb. 23, 198).

4) Examining the following circumstances that can be recognized by taking into account the above facts of recognition in light of the aforementioned statutes and legal principles, the market price of the above rent calculated by the Defendants cannot be deemed as the market price under the above statutes concerning the Plaintiff’s land 2/3 equity lease services. Therefore, each of the dispositions of this case based on the above rent rate is unlawful.

① Real estate leased to BB is only the 2/3 share of the instant land. However, the Defendants calculated the market price of the instant building by deducting necessary expenses, such as management expenses, from the total rent received by BB to the third lessee, while leasing the parking lot part of the instant land and each subparagraph of the instant building to the third lessee. This includes a considerable portion of the rent for the instant building irrelevant to the instant land itself.

② The creation of added value due to the lease of the instant building is governed by bB, and if such value is reflected in the calculation of the market price of the Plaintiff’s rent for the lease of the instant land, the market price may be excessively assessed. In addition, each subparagraph of the instant building may be assessed in various ways depending on its use relation, etc., and also arises, such as where rent may be assessed in various ways and where it becomes a public room. Accordingly, if the rent for the changed part of the building is reflected in the calculation of the market price of the instant land rent as it is, the market price of the instant land rent would be affected by the factor irrelevant to the use relation of the instant land itself.

③ The fact that the share of the instant land is leased as a whole for the ownership, use, etc. of the instant building, and that the instant land and buildings are leased by dividing into each unit of the land and each unit of the buildings according to economic utility, etc. is different from the factors constituting transaction prices, such as leased objects and the relationship of use, etc., and the market price of each rent according to the above two types of leases cannot be necessarily responding to the respective appraisal prices of the land and buildings themselves.

④ In particular, in the instant case of the parking lot portion among the instant land, the portion of the land rent is far more than the portion of the land rent for the part of the building, but if the part of the parking lot and the rent for the part of the building are simply combined without any distinction and divided distribution according to each appraisal value of the land and the building, there is any unreasonable reason that part of the rent for the part of the parking lot is transferred to the

5) Furthermore, the determination of the legality of a disposition in a lawsuit seeking revocation of a tax disposition is based on whether the amount exceeds a legitimate tax amount. The parties concerned may submit arguments and materials supporting the objective tax base and tax amount until the closing of arguments in the fact-finding court. When computing a legitimate tax amount to be imposed lawfully based on such materials, only the portion exceeding the legitimate tax amount should be revoked. However, if not, the entire tax disposition should be revoked, and in such a case, the court does not have the duty to calculate the amount of tax actively imposed by its authority (see, e.g., Supreme Court Decision 2015Du622, Sept. 10, 2015).

As seen earlier, in calculating the market price for land lease services, in a case where the market price under the above Acts and subordinate statutes is calculated or such market price is unclear by investigating and examining the individual factors forming the market price of the pertinent land and the appropriate market price of similar land in the adjacent areas, the appraisal corporation shall comply with the appraised price, and in a case where such appraisal price cannot be applied, the method provided for in Article 4(4)1 of the Enforcement Decree of the Corporate Tax Act shall be applied. In this case, since the materials submitted by the parties up to the closing date of argument in the court in this case are not enough to know the possibility of applying the adequate market price or the appraised price, the pertinent tax

3. Conclusion

Therefore, the plaintiffs' claims are justified and all of them are accepted, and the judgment of the court of first instance is unfair with different conclusions, and it is revoked and all of the dispositions of this case are revoked by accepting the plaintiffs' claims.