In cases of calculating the acquisition value of donated assets by applying mutatis mutandis Article 16-2 of the former Enforcement Rule of the Corporate Tax Act, whether it may be based on the appraisal value of an individual appraiser who is not an appraisal corporation (affirmative)

The acquisition value of the property donated to a corporation shall be based on the "price at the time of acquisition" under Article 37 (1) 3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998). Such price means the price at the time of normal purchase of the property from others, which is the objective exchange price. If the market price is unclear, it shall be calculated by applying Article 16-2 of the Enforcement Decree of the same Act (amended by Ordinance of the Prime Minister No. 622 of Mar. 29, 1997). Thus, if the donated property is land, the acquisition value shall be based on the appraised value by the appraisal corporation, and if there is no appraisal value, it shall be limited to the officially assessed individual land price according to Article 5 (2) 1 (a) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 196), and it shall be limited to the appraisal price at an objective and reasonable method.

Article 17(2) and (4) of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998; see current Articles 41(1) and (4), 40(2), and 41(2) of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 31, 1998); Article 37(1) and (see current Article 72(1) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998); Article 16-2 of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Prime Minister No. 622 of Mar. 29, 199); Article 5(2)1(a), and Article 50(1) of the Enforcement Decree of the Inheritance Tax Act (amended by the Inheritance Tax and Gift Tax Act of Dec. 31, 1996)

Pu Construction Co., Ltd. (Attorney Cho Jong-dae, Counsel for the defendant-appellant)

Head of Nam Busan District Tax Office

1. The disposition of imposition of corporate tax of 858,609,880 won against the Plaintiff on May 22, 1997 and special rural development tax of 50,891,600 won shall be revoked.

2. The costs of lawsuit shall be borne by the defendant.

The same shall apply to the order.

1. Details of the instant disposition

The following facts are acknowledged in full view of the whole purport of the pleadings in the descriptions of Gap evidence 1-1, 2, Gap evidence 2, Gap evidence 7-1, Eul evidence 1-1, and Eul evidence 1-3.

A. The Plaintiff, a corporation whose business purpose is the construction business, etc., is the representative director of the Plaintiff and the non-party Housing Construction Co., Ltd. (hereinafter only referred to as a "Rain Housing"), entered into a contract with the Plaintiff on May 29, 1995 on the following: (a) Non-party 10 forest land 29,505 square meters owned by the Plaintiff and the Plaintiff on May 29, 1995; and (b) 40/100 of forest land 6,150 square meters, each of which is 13 forest land 6,150 square meters owned by the Plaintiff and the Plaintiff; and (c) the respective 60/100 shares, each of which are donated to Rain Housing.

B. However, the forest land of the above two parcels was divided into six parcels, including the registration conversion and area correction process, and the Plaintiff’s increase in the number of shares was changed from 40/100 to 41/100 (hereinafter the above six parcels are the land of this case).

C. On May 29, 1995, the Plaintiff donated the instant land on the 31st of the same month, and kept it in the form of asset increase profits, and promoted apartment building projects jointly with Rain Housing. On September 4, 1995, the Plaintiff completed the registration of ownership transfer on the instant land.

D. In filing and paying corporate tax for the business year of 195, the Plaintiff: (a) assessed the value of the instant land as KRW 2,428,198,760 on May 29, 1995, and calculated the total tax base of corporate tax for the pertinent year by adding it to the gross income by applying the period of increase in the number of the instant land to KRW 169,000 per square meter, a donation contract date; and (b) reported and paid corporate tax for the pertinent year to the Defendant on March 30, 1996, the Plaintiff voluntarily reported and paid corporate tax of KRW 598,62,080 and special rural development tax of KRW 30,56,130 on March 30, 196.

E. However, the Defendant calculated the value of the instant land as KRW 4,741,453,200 on June 15, 1995 and additionally included the difference between the value reported by the Plaintiff and the value of KRW 2,313,254,440 on the basis of the appraisal, on the ground that a certified public appraiser Lee Jae-soo entrusted with an appraisal of the market value of the instant land from Rain Housing as at June 15, 1995, the Defendant determined the amount of corporate tax for the Plaintiff as at KRW 81,457,271,961, special rural development tax for rural development tax for KRW 858,609,80,500 after deducting the Plaintiff’s voluntary payment tax from each of the above taxes (hereinafter the instant first disposition).

F. After that, the Defendant again assessed the value of the instant land as KRW 5,747,216,00 by applying the value of the instant land to KRW 400,00 per 1 kilometer, a publicly announced individual land price in 1995, on the grounds that the period of increase in the number of the instant land should be considered as the date of donation (as of May 29, 1995) rather than the date of donation contract (as of September 4, 1995), and additionally imposed and notified additional imposition of KRW 382,262,90 and special rural development tax amount of KRW 22,126,780 on the Plaintiff (as of May 29, 195, 200, KRW 1,240,872,790, + KRW 809,382,262,910, KRW 810,081,086,3086,781,786,786,70800.

G. Accordingly, the Plaintiff filed a request for review with the Board of Audit and Inspection for the reason that the period of increase of the value of the instant land should be calculated by applying the officially assessed individual land price in 194 regarding the date of donation contract. On January 7, 1998, the Board of Audit and Inspection made a decision to revoke only the instant secondary disposition to the Defendant on the ground that the instant secondary disposition should be revoked on the ground that even though the ownership transfer registration was not completed but the Plaintiff is proved to have been actually donated. However, the instant secondary disposition was unfair on the ground that the instant first disposition based on the appraiser’s appraised’s appraised value was justifiable.

H. Accordingly, on February 3, 1998, the defendant issued a disposition of correction to reduce the tax amount as of May 22, 1997 as of May 22, 1997 (hereinafter the remaining amount remaining after reduction, and only the disposition as of May 22, 1997, which imposed the tax amount as of May 22, 1997).

2. Whether the instant disposition is lawful

A. Relevant statutes

Article 17 (2) of the Corporate Tax Act provides that "the acquisition value of assets acquired by a domestic corporation through the purchase, manufacture, etc. shall be the amount which adds the purchase value or the incidental expenses to the cost of the relevant assets." Paragraph (4) of the same Article provides that "the calculation of the acquisition value under the provisions of paragraph (2) and other matters necessary for the assessment of assets, liabilities, etc. shall be prescribed by Presidential Decree." Article 37 (1) of the Enforcement Decree of the Corporate Tax Act provides that "the acquisition value of assets under the provisions of Article 17 (2) and (4) of the Act shall be according to the amount falling under each of the following subparagraphs:

Meanwhile, in applying Article 16-2 of the Enforcement Rule of the same Act (amended by Ordinance of the Prime Minister No. 622 of March 29, 1997), Article 40(1) of the Decree, Article 41(1) of the Decree, Article 46(2) of the Decree, Article 116(2) of the Decree, and Article 116(4) of the Enforcement Decree of the Public Notice of Values and Appraisal of Lands, etc. Act (amended by Ordinance of the Prime Minister of the Prime Minister), where the market price is unclear, it shall be the appraised value by a certified public appraisal corporation under the Public Notice of Values and Appraisal of Lands, etc. Act, and where there is no appraised value, it shall be the appraised value by applying mutatis mutandis Article 5(2) through (6) of the Enforcement Decree of the Inheritance Tax Act (amended by Ordinance of the Prime Minister of the Prime Minister of the Prime Minister). According to Article 5(2)1(a) of the former Enforcement Decree of the Inheritance Tax Act, an appraisal of land shall, in principle, be based on the publicly assessed individual land price under the Public Notice of Values Act.

(b) Markets:

(1) The acquisition value of the assets donated to a corporation shall be based on the "normal price at the time of acquisition" under Article 37 (1) 3 of the Enforcement Decree of the Corporate Tax Act, and the normal price of such assets is the market price that is the objective exchange price, in which case the assets are normally purchased from others. If such market price is unclear, it is reasonable to calculate the price by applying Article 16-2 of the Enforcement Rule of the Corporate Tax Act by analogy (see Supreme Court Decision 94Nu3605 delivered on March 28, 1995).

Therefore, where donated property is land, the acquisition value shall be based on the appraised value by the appraisal corporation, and where there is no appraisal value, it shall be based on the officially assessed individual land price according to Article 5(2)1(a) of the Enforcement Decree of the Inheritance Tax Act. Furthermore, inasmuch as the method of market price calculation is applied by analogy to Article 16-2 of the Enforcement Rule of the Corporate Tax Act, it is not necessary to strictly limit the appraisal value to the appraised value by the appraisal corporation, and it is reasonable to view that the appraisal value in this case includes the value appraised by an individual appraiser as long as it can be deemed that it is evaluated based on an objective

(2) In full view of each of the above Gap evidence Nos. 2 and Gap evidence Nos. 4 and 5, the whole purport of the pleading is as follows: (a) despite the fact that there were military buildings and other standing trees and power transmission towers, etc. in need of relocation to the forest which are used as the reserve forces training place, the above exchange can be acknowledged that the land of this case was evaluated by presenting the land as a new site for apartment construction, and thus, it is difficult to view that the value of the land of this case reflects objective and reasonable exchange prices at the time of proof of the present land. Accordingly, the value of the land of this case shall be determined based on the officially assessed land price of 194.

Therefore, the Defendant’s disposition that imposed corporate tax and special tax for rural development by adding the difference between the value reported by the Plaintiff and the value of the instant land based on the appraisal value of the said transfer to gross income is unlawful.

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and it is so decided as per Disposition.

Judges Kim Jong-soo (Presiding Judge)