Whether the transfer income tax is subject to taxation where the land transaction permission is not obtained and registered as a gift;

As long as a sales contract is null and void, even if the purchase price was paid to the transferor, it cannot be deemed that it constitutes a transfer of assets subject to capital gains tax, or that there was an income from the transfer of assets.

Article 88 (Definition of Transfer) of Income Tax Act

1. The Defendant’s imposition of capital gains tax of KRW 397,691,470 against the Plaintiff on January 27, 2005 shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. On July 1, 200, the Plaintiff acquired 53,464 square meters (hereinafter “instant land”) of the aggregate of five parcels of land, including ○○○○○○○-○, ○○-○, ○○-○, ○-○, ○-○, ○○-○, ○○-○, and ○○-○, ○○-○, and other five parcels of land. On January 16, 2004, the Plaintiff concluded a sales contract to sell the instant parcel of land in KRW 1.892 billion with Kim○-○, and received down payment of KRW 20 million of the down payment and the remainder of KRW 1.69 billion on January 30, 2004, respectively.

At the time of the above sale, the instant land was located within the land transaction contract permission zone. However, in order to avoid regulation on land transaction, the Plaintiff and Kim○○ et al., the above buyers, including the Plaintiff and Kim○, prepared a document for registration of ownership transfer as if the Plaintiff donated the instant land to the above purchaser on January 24, 2004, and completed the registration of ownership transfer on January 31, 2004 under the said purchaser’s name as to the instant land.

B. Meanwhile, on March 24, 2003, prior to the sale of the instant land, the Plaintiff acquired ○○○○○○-dong ○○○○○○ apartment, and acquired 1,898 square meters in total on April 15, 2003, by acquiring ○○○○-dong ○○○○○○ apartment, and acquired 1,898 square meters in total on two parcels, including ○○○○○-ri ○○○ and ○○○, ○○, and two parcels.

C. The defendant calculated gains from transfer under Article 96 (1) 5 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005) based on the actual transaction price (transfer price of 1.89 million won, acquisition price of 5 million won, 524, 308, 100 won) of the former Income Tax Act (amended by Presidential Decree No. 18705 of Feb. 19, 2005) and issued a disposition of this case to transfer or acquire real estate more than three times for a period of not more than one year retroactively from the date of transfer of real estate by a member of one household under Article 162-2 (2) 4 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18705 of Feb. 19, 2005), on January 27, 2005, by calculating gains from transfer under the actual transaction price of this case.

[Grounds for Recognition] Unsatisfy, A2, B1

2. Whether the instant disposition is lawful

A. The parties' assertion

As to the Defendant’s assertion that the instant disposition is lawful on the grounds of relevant statutes, the principle of substantial taxation, and the purport of the land transaction permission system, the Plaintiff asserted that the instant disposition is unlawful on the following grounds.

① The instant sales contract was finally null and void by completing a registration of transfer of ownership based on a gift without obtaining land transaction permission. As long as the sales contract becomes null and void as seen above, even if the above sales contract was paid to the Plaintiff, it cannot be deemed as constituting a transfer of assets subject to capital gains tax or an income accrued from the transfer of assets, and thus, it is not subject

(2) Even if not, the term “transfer or acquisition” under Article 162-2(2)4 of the former Enforcement Decree of the Income Tax Act refers to the case where a separate transaction except transfer subject to the pertinent taxation takes place three times or more during the previous one year, and the Plaintiff has only two times or more during one year prior to the sale of the pertinent land. Thus, the sale of the instant land shall not be calculated on the basis of the actual transaction price by applying the above provisions of the Enforcement Decree.

(3) In addition, even if the above provision of the Enforcement Decree, including the transfer subject to the pertinent taxation, is deemed to have been engaged in more than three times a year, the above provision of the Enforcement Decree and Article 96 (1) 5 of the former Income Tax Act provides that the transfer margin may be calculated on the basis of the actual transaction price if not only the transfer subject to the pertinent taxation, but also the two times transactions during the previous one year are conducted by unlawful means, such as the preparation of a false contract, and the false transfer of resident registration, etc. Therefore, unless there is any evidence to acknowledge that the Plaintiff’s two times transactions conducted during the one year prior to the sale of the instant land, the transfer margin cannot be calculated on the basis of the actual transaction price as to the sale of the instant land

(b) Related statutes;

○ Division of income under Article 4 of the former Income Tax Act (amended by Act No. 7837 of December 31, 2005)

(1) Income of a resident shall be classified as follows:

3. Capital gains:

Income accruing from the transfer of assets;

○ The definition of transfer under Article 88 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005)

(1) "Transfer" in Article 4 (1) 3 and this Chapter means that any assets are actually transferred for price due to sale, exchange, investment in kind in a corporation, etc., regardless of any registration or enrollment concerning such assets. In such cases, where a donee takes over any obligation of a donor of an onerous donation (excluding cases falling under the main sentence of Article 47 (3) of the Inheritance Tax and Gift Tax Act), the portion equivalent to the amount of such obligation in the donation amount shall be deemed to be actually transferred

Article 94 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005) Scope of capital gains

(1) Transfer income shall be the following incomes generated in the relevant year:

1. Income accruing from transfer of land (referring to a lot of land subject to registration of land category in the cadastral record under the Cadastral Act) or buildings (including the facilities and structures annexed to such buildings);

○ Transfer value of Article 96 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005)

(1) The transfer value of assets as prescribed in Article 94 (1) 1 and 2 shall be based on the standard market price at the time of the transfer of the relevant assets: Provided, That where the relevant assets fall under any of the following subparagraphs, it shall be based on the actual transaction price between the transferor and transferee (hereinafter referred to as the “actual transaction price”):

5. Where real estate is acquired or transferred by illegal means, such as preparation of a false contract or a false transfer of resident registration, which meets the standards as prescribed by the Presidential Decree;

Article 100 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005) shall be calculated on the basis of gains on transfer.

(1) In the calculation of gains on transfer, when the transfer value is calculated based on the actual transaction value (including the value provided for in Article 96 (3) and the value of transaction example, appraisal value, etc. in cases where the provisions of Article 114 (5) are applied), the acquisition value shall be calculated based on the actual transaction value (including the value provided for in Article 97 (7) and the value of transaction example, appraisal value, appraisal value, conversion value, etc. in cases where the value of transaction example, appraisal value, conversion value, etc. is applied pursuant to Article 114 (5)), and when the transfer value is calculated based on the standard

○ Transfer Value of Article 162-2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18705 of Feb. 19, 2005)

(2) The cases where the transfer value of assets is based on the actual transaction value under Article 96 (1) 5 of the Act shall be the cases falling under any of the following subparagraphs, where real estate is acquired or transferred by unlawful means, such as preparation of a false contract or a false transfer of resident registration:

4. Where a member of a household has transferred or acquired real estate at least three times within a year retrospectively from the date of transfer, and the total amount of actual transaction values is at least 300 million won, the termination shall be made;

C. Determination

First, we examine the plaintiff's first argument.

Although a sales contract which was concluded without permission for land within a regulatory zone under the National Land Planning and Utilization Act is in a state of flexible invalidation until permission is obtained, if the registration of ownership transfer based on donation was made without permission for land transaction, the contract is finally null and void, and the registration of ownership transfer is also null and void (see, e.g., Supreme Court en banc Decision 90Da12243, Dec. 24, 1991; Supreme Court Decision 93Da44319, 44326, Dec. 24, 1993; Supreme Court Decision 94Da4806, Dec. 27, 1994; etc.). Thus, insofar as the sales contract becomes null and void, even if the sale price was paid to the transferor, it cannot be deemed that the transfer of assets subject to capital gains tax or income from the transfer of assets is not subject to capital gains tax (see, e.g., Supreme Court en banc Decision 95Nu3806, Mar. 20, 1997).

According to the above facts, since the Plaintiff entered into the instant sales contract and completed the registration of ownership transfer for the reasons of donation in the future of the above buyers, such as Kim ○, etc. without obtaining land transaction permission, the above sales contract became null and void finally and void, and there is no ground for the registration of ownership transfer in the name of the above buyers. Thus, even if the above sales price was paid to the Plaintiff, it cannot be deemed that the said purchase price constitutes the transfer of assets subject to the imposition of capital gains tax

Thus, the disposition of this case is illegal because it is a taxation on what is not subject to the capital gains tax.

3. Conclusion

Therefore, the Plaintiff’s claim seeking revocation of the instant disposition is accepted.