Where the transfer value of land and buildings is unclear, the value calculated by the standard market price shall be taxed.

The Plaintiff’s assertion that it is unreasonable for the Plaintiff to calculate the transfer value at the amount calculated by calculating the total purchase price of the instant land and buildings based on the standard market price of the land at the time of transfer, considering that the Defendant’s distinction between the transfer value of the land and buildings is unclear.

Article 96 of the Income Tax Act shall be calculated by calculating the tax base under Article 48-2 of the Enforcement Decree of the Value-Added Tax Act.

1. Of the instant lawsuit, the part of the Defendant’s claim seeking revocation of the portion exceeding KRW 28,585,960, out of the imposition of capital gains tax of KRW 32,649,970 for the Plaintiff for the year 2001 shall be dismissed.

2. The plaintiff's remaining claims are dismissed.

3. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s disposition of imposition of capital gains tax of KRW 32,649,970 against the Plaintiff on December 07, 2005 is revoked.

1. Details of the disposition;

A. On September 13, 198, 198, the Plaintiff acquired 3,489 square meters of land for ○○○○○, 3,489 square meters of land for a factory, 42 square meters of land for ri○○○○○, 42 square meters of land for a factory, 1,646 square meters of land for a ri○○○, the same on January 18, 199, and 486 square meters of land for ri○○○, the same as ri○○○, 486 square meters of land for each of the above land (hereinafter referred to as “each of the above land”), and newly constructed a factory and neighborhood living facilities 1,193.2 square meters of land on the instant land from January 1, 199 to April 199.

B. Thereafter, on November 30, 2001, the Plaintiff transferred all of the instant land and the instant building to Nonparty ○○○○○○○○○○○ (hereinafter “Nonindicted Company”) and on the same day, filed a preliminary return on the tax base of capital gains tax at KRW 50,260,000,000 as the actual transaction price, and KRW 76,50,000 as the actual transaction price. The acquisition price of the instant building was KRW 229,643,581, and the standard market price was KRW 226,893,80 as the standard market price.

C. As a result of the tax investigation conducted with the Plaintiff from September 12, 2005 to November 3, 2005, the Defendant recognized the actual transaction price for KRW 52,60,000 as the content of the report, but decided on December 7, 2005 by calculating the amount divided into the standard market price of the instant land at the time of transfer by applying Articles 100(2) and 114(2) and (4) of the former Income Tax Act and Article 48-2(4)1 of the former Enforcement Decree of the Value-Added Tax Act by deeming that the transfer price of the instant land and building was unclear as the transfer price of the instant building at the time of transfer, and by calculating the transfer price of the total purchase price of the instant land at KRW 152,723,00,000, the transfer price was calculated and notified to the Plaintiff on December 7, 2005.

D. The Plaintiff filed a request for review with respect to the instant disposition with respect to the Commissioner of the National Tax Service, and the Commissioner of the National Tax Service, in the said request for review, calculated the transfer value of the instant land without adding the value-added tax to the standard market price of the building in calculating the transfer value of the instant land. As a result, the Plaintiff partly accepted the Plaintiff’s decision on the ground that the transfer value was calculated in excess of KRW 6,851,00. The Defendant issued a disposition to reduce or correct capital gains tax of KRW 4,064,012 on May 29, 2006 (hereinafter “the instant disposition”).

Facts without dispute, Gap evidence 1-2, A-2, 2, 3, 5-1, Eul evidence 1-1, the purport of the whole pleadings

2. Whether the part of a claim seeking the revocation of the portion exceeding 28,585,960 won in the initial disposition is lawful.

ex officio, as seen earlier, the part exceeding KRW 28,585,960 ( KRW 32,649,970-4,064,012) of the capital gains tax from the initial disposition that the Defendant made against the Plaintiff on December 7, 2005 was extinguished by the Defendant’s decision of reduction. As such, seeking revocation on this part is unlawful as there is no benefit of lawsuit.

3. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) At the time of concluding a sales contract for the instant land and building, the Plaintiff and the Nonparty Company classified the sales price of the instant land as KRW 288,88 million, among which the sales price was KRW 76.5 million, and the sales price of the instant building as KRW 211,150 million, and entered them separately in the sales contract or the minutes of the board of directors’ meeting of the Nonparty Company. Ultimately, the instant disposition was unlawful on the premise that the transfer of the instant land constitutes a case where the classification of the value of the instant land and the building is obvious, even though it constitutes a case where the division of the value of the instant land and the building is unclear.

(2) Even though it is unclear that the value classification of the instant land and building for household affairs is unclear, in calculating the instant transfer income tax, the amount of KRW 288 million, which is the total purchase price, shall be calculated proportionally according to the ratio of each standard market price of the land and building. As for the instant building, the Defendant calculated the transfer value by the method of calculating the transfer income tax based on the standard market price as reported by the Plaintiff, as a result, the total transfer value of the instant building and building exceeds KRW 288,00,000 from the actual sale price.

Therefore, the instant disposition should be revoked as an unlawful disposition that violates Article 100 of the Income Tax Act and the substance over form principle.

B. Relevant statutes

Attached Acts and subordinate statutes.

C. Determination

(1) Whether the value of the instant land and the building is clearly distinguished

According to the evidence Nos. 6, 7, and 1, 2, and 10 of the evidence Nos. 7, 8, respectively, the following facts are acknowledged when the plaintiff and the non-party company prepares a sales contract, and when the non-party company prepares the minutes of the board of directors, it is recognized that the purchase price of the land and buildings of this case is KRW 76.5 million, and KRW 21.5 million, respectively.

However, comprehensively taking account of the overall purport of arguments as to Gap evidence 3, Eul evidence 1-2, Eul evidence 2, and Eul evidence 3, the standard market price of the land at the time of transfer is 256,157,400 won, the standard market price of the building at issue is 226,893,800 won, and the plaintiff's public official belonging to the defendant in the process of tax investigation is not based on any account book or standard, but divided according to the method demanded by the non-party company," and the confirmation document is prepared. In light of the above facts and related laws, the standard market price of the land or building is set below the trading price of the building at a lower level than 21,50,00 won, which is the purchase price of the building at issue, and the value of the land at issue is set below the acquisition price of the building at a lower level than the sale price of the building at issue, but the price of the land at issue is set below 29.8% of the standard market price at the time of transfer.

Therefore, although the purchase price of the land of this case reported by the Plaintiff is formally divided from the purchase price of the building of this case, such division seems to have been determined arbitrarily by the needs of the Plaintiff and the non-party company, and further, it seems that the division has considerably lost objective validity. In such a case, if transfer income tax is imposed only on the Plaintiff’s report on the sole basis of the Plaintiff’s details of return, it would rather go against the principle of substantial taxation, since it would be contrary to the principle of substantial taxation, the Plaintiff’s assertion that the value of the land of this case and the building of this case is clearly distinguishable only from the documents voluntarily prepared by the Plaintiff

(2) Whether the transfer value of the instant building ought to be calculated in accordance with the calculated method

The Plaintiff asserts to the effect that the sum of the transfer values of the instant land and buildings recognized by the Defendant exceeds KRW 288,000,000,000, which is the actual sale price, and thus, violates the substance over form principle as a result of calculating the actual sale price of the instant land and buildings in proportion to the standard market price of the land and buildings when the Plaintiff recognized the transfer value of the instant building as reported by the Plaintiff.

On the other hand, as alleged by the Plaintiff, the Defendant calculated the transfer value according to the standard market price according to the Plaintiff’s report as to the building of this case. The fact that the Defendant calculated the transfer value based on the actual transaction price according to the method of calculation only for the land of this case is recognized as above, and according to the evidence No. 1-1 of the evidence No. B as a result of the above calculation, it is recognized that the sum of the transfer value of the land of this case and building of this case exceeds 280 million won, which is the actual transaction

However, in principle, capital gains tax should be calculated on the standard market price pursuant to Article 96 (1) of the former Income Tax Act, but when a taxpayer makes a return on the basis of his/her actual transaction price by clarifying the actual transaction price, in principle, whether to report the transfer value as the standard market price or to report it as the actual transaction price depends on the taxpayer's choice in principle. However, the head of a tax office or the director of a regional tax office may correct the tax base and tax amount only when there is an omission or error in the details of his/her return pursuant to

As seen earlier, the Plaintiff reported the transfer value to the instant building at the standard market price. The Defendant calculated the transfer value according to the reported details, and corrected the transfer value pursuant to the relevant Acts and subordinate statutes, considering that there are omissions or errors in the reported portion on the instant land, the reported portion on the instant building is justifiable in accordance with the principle of the standard market price. As such, the Defendant’s calculation of the transfer value of the instant building by the method of calculating the transfer value by the method of calculating the transaction value of the instant building, and the Defendant’s calculation based on the standard market price according to the Plaintiff’s reported details is justifiable and, thereby, even if the total transfer value exceeds the actual sale price, it is difficult to deem the disposition

Therefore, the plaintiff's above assertion is without merit.

4. Conclusion

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

Relevant statutes

○ Income Tax Act (amended by Act No. 6292 of Dec. 29, 2000, and then amended by Act No. 6557 of Dec. 31, 2001)

Article 94 (Scope of Transfer Income)

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

1. Land (referring to any land category to be registered in the cadastral record under the Cadastral Act);

Income accruing from the transfer of buildings (including facilities and structures attached to buildings) or buildings (including facilities and structures attached to such buildings)

Article 96 (Transfer Price)

(1) The transfer value of assets under Article 94 (1) 1 and 2 shall be based on the standard market price at the time of transfer of the relevant assets: Provided, That where the relevant assets fall under any of the following subparagraphs, the actual transaction amount shall be based on:

§ 100. Calculation of gains on transfer

(1) In calculating the gains from transfer, if the transfer value is based on the actual market value (including the value provided for in the provisions of Article 96 (3) and the value of transaction example, appraised value, etc. provided for in the provisions of Article 114 (5) in the case where the said value is applied), the acquisition value shall be based on the actual transaction value (including the value provided for in the provisions of Article 97 (7) and the value of transaction example, appraisal value, conversion value, etc. provided for in the provisions of Article 114 (5) in the case where the conversion value is applied), and if the transfer value is based on the standard market value, the acquisition value shall be based on the standard market value (including the relevant transaction example, appraisal value, conversion value, etc.

(2) In applying the provisions of paragraph (1), where the transfer value or acquisition value is calculated based on the actual transaction value and the land and buildings, etc. are acquired or transferred, they shall be separated and entered, but where the distinction between the land and the buildings, etc. is unclear, it shall be calculated in proportion to the standard market value, etc. at the time of acquisition or transfer as prescribed by the Presidential Decree. In this case, the common acquisition value and transfer expenses shall be calculated in proportion to

(3) Matters necessary for calculating the gains on transfer shall be prescribed by the Presidential Decree.

Article 114 (Decision, Revision and Notification on Tax Base for Transfer Income and Tax Amount)

(1) If a person who is liable to make a preliminary return under Article 105, or who is liable to make a final return under Article 110, fails to make such return, the chief of the district tax office having jurisdiction over the place of tax payment or the director of the regional tax office shall determine

(2) If any omission or error is found in the details of return filed by the person who has made a preliminary return under Article 105 or who has made a final return under Article 110, the superintendent of the regional tax office having jurisdiction over the place of tax payment or the tax amount

(4) The chief of the district tax office having jurisdiction over the place of tax payment or the director of the regional tax office shall, where he decides or revises the tax base for transfer income and the tax amount under paragraphs (1) through (3), follow the values under Articles 96 and

Article 48-2 of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 17041 of Dec. 29, 2000 and amended by Presidential Decree No. 1930g of Dec. 29, 2006)

(4) Where a business operator supplies land, a building built on such land, or other structures (hereafter referred to as "building, etc." in this Article) together, the value of supply of such building, etc. shall be based on the actual transaction price: Provided, That where distinction between the value of land and the value of buildings, etc. is unclear from among the actual transaction price, the value of such building, etc. shall be determined according to

1. Where there are all the standard market prices of land, buildings, etc. under Article 99 of the Income Tax Act (hereafter in this Article, referred to as “standard market prices”), it shall be calculated in proportion to the values calculated according to the standard market prices as of the date of supply contract: Provided, That where there exists the appraised value (referring to the value assessed by the appraisal corporation under the Act on the Publication of Land Prices and the Evaluation of Land, etc.;