National High Court Decision 2007west4537 (Law No. 8.14, 2008)

In cases of transfer to a project implementer before obtaining authorization for project implementation, whether special transfer income tax is recognized.

The capital gains tax shall be calculated based on the standard market price even in cases where the project implementer implements the project before authorization for project implementation is granted and the project implementer transfers the real estate to the project implementer.

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

Article 96 (Transfer Price)

Article 104-2 (Operation of Designated Area)

1. The defendant's rejection disposition against the plaintiff on July 30, 2007 against KRW 193,95,376 of the capital gains tax of 2006 shall be revoked.

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

The same shall apply to the order.

1. Circumstances of the disposition;

(a)transfer of real estate by the plaintiff;

o On November 15, 1998, the Seoul Mapo-gu Seoul Metropolitan Government acquired 89.6 square meters of land in 3904 and above-ground buildings (hereinafter referred to as the “instant real estate”).

o 2005. 5. 4. 소외 주식회사 ★★디엔씨에게 이 사건 부동산을 매도하기로 계약을 체결하였다.

o 2006. 6. 30. 주식회사 ★★디엔씨의 이 사건 부동산에 관한 매매계약상의 매수인의 지위를 승계한 소외 주식회사 메이저디벨로프먼트(이하 '소외 회사')에게 이 사건 부동산을 양도하였다.

(b)return, payment and request for correction of the Plaintiff’s transfer income tax;

o In February 2, 2007, in calculating the gains from the transfer of real estate in this case, the transfer income tax amount of KRW 217,535,740 was reported and paid after calculating the gains from the transfer of real estate in this case.

o Around May 2007, the real estate of this case was subject to the special taxation of capital gains tax under Article 85 of the former Restriction of Special Taxation Act (amended by Act No. 8146 of Dec. 30, 2006; hereinafter referred to as the "Special Taxation Act") (hereinafter referred to as the "the special taxation provision of this case") and filed a correction request to refund 193,95,376 won in difference between the tax amount originally paid and the tax amount initially paid.

(c)a disposition rejecting the correction of the defendant;

On July 30, 2007, the Plaintiff rejected the correction on the ground that the non-party company was not designated as a public project operator at the time of transferring the instant real estate to the non-party company (hereinafter referred to as the "disposition of this case").

(d)designation of urban environment rearrangement zone and authorization of project implementation;

O The Seoul Mapo-gu, where the instant real estate was located, was designated as a speculative district other than the housing on June 30, 2005. In addition, the Mapo-gu, where the instant real estate is located, was designated as a balanced development facilitation district under the Seoul Metropolitan Government Notice No. 2003-374 on November 18, 2003, and was designated as an urban environmental improvement district under the Seoul Metropolitan Government Notice No. 2006-87 on March 13, 2006.

The non-party company acquired the instant real estate, etc. to implement an urban environment improvement project within 001 zones, while formulating an urban environment improvement project implementation plan for 001 zones, was notified by the head of Mapo-gu Seoul Metropolitan Government on May 4, 2006 of measures to preserve cultural heritage related to an urban environment improvement project. On June 16, 2006, the non-party company was subject to conditional decision on traffic impact assessment by the Seoul Metropolitan Council of Traffic Impact Deliberation Committee. On June 29, 2006, the non-party company was notified by the Seo-gu Seoul Metropolitan Government Office of Education of the results of prohibited acts and removal of facilities in the school environmental sanitation and cleanup zone, and was notified by the head of Mapo-gu Seoul Metropolitan Government on June 30, 2006.

O) After the date of the transfer of the real estate in this case, the non-party company filed an application with the head of Mapo-gu on December 22, 2006 for the authorization to implement the urban environmental improvement zone of 01. The head of Mapo-gu notified the non-party company on May 25, 2007 to implement the urban environmental improvement zone as a project implementer.

[Reasons for Recognition] Unsatisfed Facts, A.I.2 Evidence, I.2 Evidence, I.2 Evidence (including paper numbers), the purport of the entire pleadings

2. Whether the disposition is lawful;

(a)the recommendations and points of the Parties;

(1) The plaintiff: since the plaintiff acquired the real estate of this case before the designation of the rearrangement zone, which is the time limit for acquisition under the special provisions on taxation of the case, and transferred it to the company other than the urban environment rearrangement project implementer on June 30, 2006, the transfer income tax should be calculated on the basis of the standard market price, as the special provisions on taxation of the transfer income tax following the transfer of the real estate of this case are applied.Therefore, the disposition of this case is unlawful

(2) Defendant 2 asserted that the instant special taxation provision does not apply since Nonparty Company, the transferee of the instant real estate, was not authorized to implement an urban environment rearrangement project and was not an implementer of the project, until the transfer of the instant real estate.

(3) Therefore, the issue of the instant case is whether the instant special taxation provision can be applied in calculating the capital gains tax by deeming the project implementer under the conditions as stipulated in the special taxation provision of this case, where real estate has been transferred to a project implementer who implements a project without obtaining authorization for project implementation within the urban environment rearrangement zone and after transferring the real estate to the project implementer.

3. Relevant statutes;

It shall be as shown in the attached Form.

4. Determination

(a) Details of the Income Tax and the Restriction of Special Taxation Act on the method of calculating transfer value;

Article 96 (1) of the former Income Tax Act (amended by Act No. 7837, Dec. 31, 2005; Act No. 96 (1) of the Income Tax Act (amended by Act No. 7837, Jan. 1, 2006); however, Article 96 (2) of the same Act (amended by Act No. 96 (2) of the Income Tax Act provides that the transfer value of the relevant assets shall be based on the actual transaction value of the relevant assets; however, Article 96 (1) of the same Act provides that the transfer value of the relevant real estate shall be based on the "standard market value as at the time of transfer of the relevant assets;" Article 96 (1) of the same Act provides that the transfer value of the relevant real estate shall be based on the "standard market value as at the time of transfer of the relevant assets;" Article 85 of the Restriction of Special Taxation Act (the provision of this case) shall apply to the person who acquired the relevant real estate within the area designated by Act No. 1 to be subject to new housing development area; Article 13 of the Housing Development Promotion Act.

B. Purpose of legislation of the special taxation provision of this case

In full view of the title and contents of the special taxation provisions of this case, each of the special taxation provisions of this case, and each of the subparagraphs of attached Table 7 of Article 79-2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act, all of the projects planned by the law stipulated in the special taxation provisions of this case and each of the subparagraphs of attached Table 7 of the former Enforcement Decree of the Restriction of Special Taxation Act are public interest purposes, and the above law recognizes the right to expropriate the project operator based on the Act on Acquisition of and Compensation for Land, etc. for Public Works Projects, and the right to make decisions on the transfer value even if the transferor transfers the real estate to the project operator through consultation, the purpose of the special taxation provisions of this case is to relieve the taxpayer's tax burden by allowing the transfer value to be based on the standard market price rather than the actual transaction value if the real estate in the speculative designated area is transferred or expropriated for public interest purpose (see Supreme Court Decision 2006Du16779, Dec. 27, 2007).

(c)the scope of the project operator under the special provisions on the special taxation of the case;

(1) According to the special taxation provisions of this case and Article 79-2 (1) 9 of the Enforcement Decree of the Restriction of Special Taxation Act, the transfer value of the real estate acquired before the date of designation of the rearrangement zone can be calculated based on the standard market price when the relevant project implementer transfers the real estate to the relevant project implementer before December 31, 2006. However, Article 2 (8) of the Restriction of Special Taxation Act, etc. does not have any separate definition provision as to the project implementer, while Article 2 (8) of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (hereinafter referred to as the "Domination Act") provides that the "project implementer" refers to the person who implements the rearrangement project, but does not have any express provision that only the other project implementer who has obtained the authorization of implementation under the Domination Act is deemed the project implementer. Therefore, in the application of the special taxation provisions of this case, it should be interpreted that the project implementer is included in the project implementation authorization after the transfer

(2) Under the principle of no taxation without law, the interpretation of tax laws shall be interpreted as the text of the law, barring any special circumstance, and shall not be extensively interpreted or analogically interpreted without reasonable grounds. However, where it is necessary to clarify the meaning through the interpretation between the laws and regulations, the interpretation can be made for the purpose of interpretation by taking into account the legislative intent and purpose to the extent that it does not undermine the legal stability and predictability pursued by the principle of no taxation without law (see Supreme Court Decision 2007Du13784, Feb. 14, 2008).

(3) In light of the legislative intent of the Act on the Regulation of Special Taxation and the Ordinance of the Ministry of Land, Infrastructure and Transport, Article 28 of the Enforcement Decree of the Housing Act provides that the project implementer shall be granted authorization for the implementation of the project under the Act on the Regulation of Special Taxation and the Ordinance of the Ministry of Land, Infrastructure and Transport (the Act on the Regulation of Special Taxation and the Ordinance of the Ministry of Land, Infrastructure and Transport No. 1) and the Act on the Regulation of Special Taxation and the Ordinance of the Ministry of Land, Infrastructure and Transport (the Act on the Regulation of Special Taxation and the Ordinance on the Regulation of Special Taxation and the Ordinance of the Ministry of Land, Infrastructure and Transport No. 1). The Act provides that the project implementer shall be granted authorization for the implementation of the project under the Act on the Regulation of Special Taxation and the Ordinance of the Ministry of Land, Infrastructure and Transport (the Act on the Regulation of Special Taxation and the Ordinance of the Ministry of Land, Infrastructure and Transport No. 2 and the Act on the Regulation of Land, Infrastructure and Transport No. 8 shall be deemed necessary to obtain the approval for the implementation of the project.

D. Sub-determination

Therefore, since the special taxation provision of this case applies to the calculation of capital gains in relation to the transfer of the real estate of this case, the disposition of this case refusing the plaintiff's request for correction on a different premise is unlawful.

5. Conclusion

A claim for this case shall be accepted as well as reasonable persons.