Plaintiff (Attorney Im Jong-soo et al., Counsel for the plaintiff-appellant)

Head of the Northern Port (Attorney Kim Jong-sik, Counsel for the plaintiff-appellant)

December 19, 2003

Daegu District Court Decision 2002Guhap8505 Delivered on January 16, 2003

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the plaintiff.

The lower judgment is revoked. The Defendant’s disposition imposing a penalty surcharge of KRW 714,751,950 against the Plaintiff on May 30, 2002 is revoked.

1. Details of the disposition;

The following facts are either not disputed between the parties, or acknowledged by considering the whole purport of the pleadings in each description of Gap evidence 1, 2, and 3, and Eul evidence 2.

A. On March 5, 1996, the Plaintiff purchased from Nonparty 1 and 2 the same (number omitted), approximately 282.6 square meters, and approximately 282.4 square meters, from Nonparty 1 and 2.436 million won. On May 2, 1996, the Plaintiff concluded a title trust agreement with Nonparty 3 with respect to each of the above lands, and completed the registration of ownership transfer under Nonparty 3’s name. From around that time to December 1997, the Plaintiff purchased from each original seller the seven parcels of the land indicated in the “object” and three buildings on that ground (hereinafter “instant real estate”). After purchasing from each original seller the following particulars, the Plaintiff sold each registration of ownership transfer on the third party’s date of title trust (registration date) under the name of Nonparty 3’s name indicated “No.4, 199.”

B. On December 22, 2001, the Defendant notified the head of the Seoul Regional Tax Office of the fact that the Plaintiff violated Article 3(1) of the Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”) by completing the registration of ownership transfer for the instant real estate purchased by him under the name of each of the above title trustees. On May 30, 2002, the Defendant issued the instant disposition that imposed penalty surcharge of KRW 714,751,950 on the Plaintiff pursuant to Article 5(1) of the Real Estate Real Name Act.

2. Whether the instant disposition is lawful

A. The parties' assertion

The defendant asserts that the disposition of this case is lawful on the grounds of the above disposition and the related Acts and subordinate statutes. The plaintiff asserted that the disposition of this case is legitimate on the grounds of violation of the Real Estate Real Name Act: ① The penalty surcharge of this case on the grounds of violation of the Real Estate Real Name Act is imposed and notified within five years from the date of registration of title trust, which is the date on which the liability for payment of the penalty surcharge is established, as in the case of local taxes pursuant to Article 5 (6) of the Real Estate Real Name Act, Article 30-4 of the Local Tax Act, and Article 14-2 (1) 2 of the Enforcement Decree of the same Act. The part on the real estate of this case No. 1, 2, 6, and 7, which was entered after the five-year exclusion period of imposition of the penalty surcharge from the disposition of this case, was completed after the lapse of the imposition right of the penalty surcharge; ② The registration of title trust of this case was purchased on the part of the non-party company as well as the real estate in this case's name of this case.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(i) Whether the exclusion period has expired or not

(i) the exclusion period of the right to impose penalty surcharges under Article 5 of the Real Estate Real Name Act;

Article 5(7) of the Real Estate Real Name Act provides that “The matters necessary for the imposition, collection, etc. of penalty surcharges under the provisions of paragraph (1) shall be prescribed by the Presidential Decree,” and Article 3(5) of the Enforcement Decree of the Real Estate Real Name Act, upon delegation, provides that “other than paragraphs (1) through (4), matters necessary for the imposition and collection of penalty surcharges, shall follow the example of the collection of local taxes,” and does not provide for the exclusion period separately. However, according to the above provision, where local taxes are not imposed for five years (ten years where a taxpayer evades, returns, or is reduced due to fraudulent or other unlawful means) from the date on which the local taxes can be imposed (ten years where the taxpayer is subject to the imposition of penalty surcharges under the provisions of Article 5 of the Real Estate Real Name Act). In this case, the exclusion period of imposition of penalty surcharges under the provisions of Article 5 of the Act on Real Estate Real Name shall also apply.”

(ii) the starting date of the exclusion period;

Article 30-4 (1) of the Local Tax Act provides that "the period of exclusion from the time when the local tax can be imposed is in progress" and delegates it to the Presidential Decree. Article 14-2 (1) of the Enforcement Decree of the Local Tax Act provides that "the date on which the local tax may be imposed under the proviso of Article 30-4 (1) of the Act refers to the date falling under any of the following subparagraphs," and subparagraph 2 provides that "the date on which the local tax, other than the local tax under subparagraph 1, comes into existence in case of local tax other than the local tax under subparagraph 1" is "the date on which the liability for payment of the relevant local tax can be imposed". Only in light of these provisions, the limitation period of the right to impose the penalty under Article 5 of the Real Estate Real Name Act can be immediately imposed if the violation continues at any time, so long as the registration of title trust continues to exist, it is against the principle of fair imposition of the penalty surcharge (see Article 14-2 (1) of the Enforcement Decree of the Local Tax Act).

3) Therefore, the disposition of this case, which was made before the lapse of five years from June 11, 1999, on which the title trust relation was terminated, did not impose the exclusion period for imposition. Thus, the plaintiff's above assertion is without merit.

As to the reduction of penalty surcharge

1) Article 5(1) of the Real Estate Real Name Act provides, “The imposition of a penalty surcharge within the limit of an amount equivalent to 30/100 of the real estate price shall be imposed on a title truster who violates the obligation to register in the name of the person having the actual right.” Article 5(3) of the same Act provides, “The imposition of a penalty surcharge under paragraph (1) shall be determined by the Presidential Decree in consideration of the real estate price under paragraph (2), the period of violation of Article 3, and the purpose of evading taxes or avoiding restrictions under the Acts and subordinate statutes,” and Article 3-2 of the Enforcement Decree of the Real Estate Real Name Act provides, “The imposition of a penalty surcharge shall be calculated by multiplying the imposition rate of a penalty surcharge based on the appraised value of the real estate by the imposition rate of a penalty surcharge based on the past period of the violation of the obligation to register in the name of the person having the actual right: Provided, That where it is not for tax evasion or avoiding restrictions under the Acts

2) Therefore, according to each of the above evidence Nos. 5-1 through 6, 14, and 15 as to whether the registration of title trust of this case was without any purpose of evading taxes or evading statutory restrictions under the proviso of Article 3-2 of the Enforcement Decree of the Real Estate Real Name Act, the Plaintiff’s final return on global income tax related to the transaction of this case was made at the competent tax office on May 31, 200, and the payment of taxes, such as global income tax, resident tax, etc. is recognized. However, on August 9, 199, it is difficult for the Plaintiff to file a complaint with the non-party company on April 29, 200, and there was no other evidence that the Plaintiff could not be found to have evaded the registration of title trust of this case under the above provision of the Real Estate Real Name Act and the Public Notice of Values and Appraisal of Values and Appraisal of Lands (hereinafter “Public Notice of Values”) as evidence for the purpose of evading the registration of title trust of this case.

3) Therefore, the Plaintiff’s above assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit, and the judgment of the court below is just and it is so decided as per Disposition.

【Omission of Imposition of Penalty Surcharges】

Judges Shin Young-chul (Presiding Judge) Kim Sung-soo