National Tax Service Review Income 2011-0157 (2012.09)

The act of allowing a person with a special relationship to use land does not constitute the denial of wrongful calculation because it is difficult to view that the act lacks economic rationality.

It is difficult to view that the Plaintiff’s act of using land to a person with a special relationship lacks economic rationality due to abnormal transactions contrary to sound social norms or transaction practices, and thus cannot be deemed as subject to unfair calculation.

2012Guhap1636 global income and revocation of disposition

XX

The Director of Gangnam District Office

September 11, 2012

October 11, 2012

1. The Defendant’s imposition of KRW 000 of global income tax for the year 2006, the imposition of KRW 000 of global income tax for the year 2007, the imposition of KRW 000 of global income tax for the year 2007, the imposition of KRW 000 of global income tax for the year 2008, the imposition of KRW 00 of global income tax for the year 2008, the imposition of KRW 00 of global income tax for the year 2009, the imposition of KRW 00 of global income tax for the year 200, and the imposition of KRW 000 of global income

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 June 27, 198, the Plaintiff acquired from Gangnam-gu Seoul Metropolitan Government 617-5 and 551.6 square meters (hereinafter referred to as “instant land”); on December 14, 1996, with respect to the shares of 55.6/51.6 shares in the instant land to Cho Dong on February 21, 200; on May 23, 2001, on the shares of 60/51.6 shares in the instant land to ChoB on May 23, 2001; and on the shares of 298/51.6 shares in the instant land by completing the ownership transfer registration for each trade for the shares of 298/51.6 shares in the instant land.

B. On April 12, 2001, 201, the Plaintiff’s spouse, acquired and owned the 2nd floor of the Exemplary building on the ground of the instant land (hereinafter “instant building”). The Plaintiff leased the instant building from the DaCC without compensation and operated the hospital under the trade name of “Dsan father”.

C. On the ground that the Plaintiff leased the instant building without compensation to the Plaintiff, the Defendant: (a) deemed that the Plaintiff omitted KRW 000 from 2006 to 2010, the total amount of rent revenue for each pertinent taxable period was determined and notified as follows; and (b) on September 1, 201, on the ground that the Plaintiff leased the instant land to ChoCC, the owner of the instant building, the owner of the instant building, without compensation, by applying the wrongful calculation method method (i.e., the land (ii) from 2006 to 2000, 2000, 2000, 2000, 200, 200, 200, 200, 200, 200, 200, 200, 200, 200, 200, 200, 200, 200, 200, 200, 200, 200, 3.

E. On December 2, 2011, the Plaintiff filed a request for review against the instant disposition with the Commissioner of the National Tax Service, but was dismissed on February 13, 2012.

[Reasons for Recognition] Gap evidence Nos. 1, 2, 3, 5 (including branch numbers, if any; hereinafter the same shall apply), Eul evidence Nos. 1 to 5, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff leased and used only the instant building, other than the instant land, from the ChoCC, the spouse, and the instant land part was used by himself as its owner, and there is no room for taxation cause. However, the instant disposition based on the premise that the leased income equivalent to the rent for the instant land was omitted is in violation of the substance over form principle. Furthermore, even if the Plaintiff and ChoCC did not unfairly reduce the tax burden, the instant disposition, which was made by applying the provision of the unfair calculation calculation calculation registry, was erroneous in the misapprehension of the legal principle on the denial of unfair calculation calculation.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) The relationship between the Plaintiff and ChoCC’s use of the instant land and buildings

As seen earlier, in light of the fact that the instant building is located on the instant land, and it is reasonable to deem that the building cannot exist regardless of its site, and that the owner of the building occupies the building site by owning the building, etc., it is reasonable to deem that the Plaintiff, who is the owner of the 138/51.6 share out of the instant land, had a spouse, CC gratuitously used the instant building from April 12, 2001 to 138/51.6 share out of the instant land. Meanwhile, since the Plaintiff leased and used the instant building free of charge from Mediation, it is reasonable to deem that the Plaintiff leased the instant building free of charge to CC with respect to the 138/51.6 share out of the instant land, and at the same time leased the building free of charge from CC.

2) Whether the subject of wrongful calculation falls under the subject of wrongful calculation

According to Article 41(1) of the former Income Tax Act (amended by Act No. 10408, Dec. 27, 2010), where it is deemed that an act or calculation by a resident with business income has reduced the tax burden on such income due to a transaction with a resident and a related party, the income amount in the pertinent taxable period may be calculated regardless of the resident’s act or calculation. The rejection of unfair act and calculation in this context refers to a resident’s act or calculation in a transaction with a related party and without reasonable method of the ordinary economic person and without using the normal economic person’s reasonable method in the transaction with a related party, and the determination of whether the unfair act and calculation in this context should be made specifically in light of the economic rationality or sound and reasonable practice of 200 in light of the economic rationality of 25% of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Dec. 30, 201).

In light of such legal principles, the following circumstances acknowledged as a whole based on the evidence as seen earlier and the overall purport of oral argument are as follows. ① ordinarily leased a building is entailing the use of the part of the building site as a matter of course, and the amount equivalent to the rent of the building site is included in addition to the rent of the building itself. ② In the case where the owner of the land is different from the owner of the building, and at the same time the owner of the building leases the land, the owner of the land is obliged to pay rent for the building site (the rent for the part of the building + the rent for the building itself). Ultimately, considering the fact that the payment of rent for the part of the building site constitutes a land rent for the owner of the building, it does not appear that the payment of rent for the building site itself is natural and unreasonable from the perspective of ordinary people. ③ In the instant case, the Plaintiff’s payment of rent for the part of the building site, which is the object of unfair calculation, is difficult to view that the Plaintiff’s act constitutes an unfair calculation of the rent for the building site.

3. Conclusion

The plaintiff's claim is justified and accepted.