Where Gap incorporated foundation Gap, a non-profit domestic corporation not operating a profit-making business, starts real estate rental business within the same business year after transferring land, the case affirming the judgment below which held that Article 62-2 of the former Corporate Tax Act, which is a special provision on taxation of capital gains from the transfer of land, can be applied.

The case affirming the judgment below holding that Article 62-2 of the former Corporate Tax Act, which is a special taxation provision, can be applied to capital gains, in light of the legislative purport that a non-profit corporation which does not engage in profit-making business under Article 62-2 of the former Corporate Tax Act (amended by Act No. 8141, Dec. 30, 2006; hereinafter the same) should not be more severe than capital gains tax in consideration of the language and structure of Article 62-2 of the former Corporate Tax Act and the fact that a non-profit corporation which does not engage in profit-making business is not a corporation pursuing profit-making business, since capital gains was generated by transferring the land during the period in which the corporation did not engage in profit-making business, even if the corporation runs profit-making business within the same business year thereafter.

Articles 3(2)1 (see current Article 3(3)1) and 62-2(1) and (2) of the former Corporate Tax Act (Amended by Act No. 8141, Dec. 30, 2006);

Daewon (Law Firm Grandmark, Attorney Choi Sung-hoon, Counsel for the plaintiff-appellant)

Director of the District Office

Seoul High Court Decision 2009Nu18396 decided January 21, 2010

The appeal is dismissed. The costs of appeal are assessed against the defendant.

Article 62-2 (1) of the former Corporate Tax Act (amended by Act No. 8141 of Dec. 30, 2006; hereinafter the “Corporate Tax Act”) provides that a non-profit domestic corporation (excluding a non-profit domestic corporation operating a profit-making business under Article 3 (2) 1 of the Corporate Tax Act) may choose not to file a return of tax base, notwithstanding the provisions of Article 60 (1), where there is any income accruing from the transfer of land or building (hereinafter “property transfer income”), and Article 60 (2) of the same Act provides that with respect to the transfer income of assets for which no return of tax base is filed pursuant to Article 92 (1) of the Income Tax Act shall be paid as corporate tax calculated by applying the tax rate under each subparagraph of Article 104 (1) of the same Act to the tax base calculated by applying the provisions of Article 92 (Calculation of Tax Base of Transfer Income Tax) (hereinafter “the special taxation of this case”) and Article 3 (2) 1 of the Corporate Tax Act and (hereinafter “profit-making Business”).

In full view of the adopted evidence, the court below recognized the fact that the plaintiff, a non-profit domestic corporation that does not engage in a profit-making business, started a real estate rental business, which is a profit-making business, around December, 2003 after the transfer of the land of this case on September 2003. The court below determined that the special taxation of this case should be applied even if the plaintiff runs a profit-making business within the same business year, considering the following as follows: "non-profit domestic corporation that runs a profit-making business at the time when the transfer income occurs" under the language and structure of the above provision; when the special taxation of this case is applied, the preliminary return of the transfer income tax base and the voluntary payment should be made within 2 months from the end of the month to which the transfer date belongs pursuant to Article 62-2 (7) of the Corporate Tax Act, and thus, it is necessary to choose whether to apply the special taxation of this case as of the time of the transfer of assets.

In light of the legislative purport of the special taxation provision of this case to prevent the burden of corporate tax on assets transfer income from excessive capital gains in consideration of the fact that a non-profit corporation that does not engage in profit-making business is not a corporation pursuing profit-making business, the above judgment of the court below is just, and there is no error of law by misunderstanding the legal principles on interpretation and application of Article 62-2 of the Corporate Tax Act as alleged in the grounds of

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Park Poe-young (Presiding Justice)