Seoul Administrative Court 2009Gudan1198 (202.05)

early 2009west0574 (Law No. 29, 2009)

The provision that applies to the transfer of land and buildings together with the taxable assets and non-taxable assets shall also apply mutatis mutandis to each other.

When the classification of land and buildings is unclear, the provisions to be calculated in consideration of the standard market price shall also apply mutatis mutandis to the assets subject to taxation and assets subject to non-taxation. However, the transfer margin of assets subject to taxation calculated in accordance with the calculated calculation shall not exceed the transfer margin of the entire assets subject to taxation

Article 100 of the Income Tax Act

Article 166 of the Enforcement Decree of Income Tax Act

2012Nu3547 Revocation of Disposition of Imposing capital gains tax

XX

Head of Mapo Tax Office

Seoul Administrative Court Decision 2009Gudan11198 Decided February 5, 2010

Seoul High Court Decision 2010Nu10077 Decided September 2, 2010

Supreme Court Decision 2010Du21402 Decided January 26, 2012

April 25, 2012

May 30, 2012

1. The part of the judgment of the court of first instance against the plaintiff falling under the order to revoke the below shall be revoked. The part of the disposition imposing capital gains tax for the year 2007, which the defendant imposed on the plaintiff on January 2, 2009, exceeding KRW 000, which is revoked.

2. The remaining appeal filed by the Plaintiff is dismissed.

3. Of the total litigation costs, 70% is borne by the Plaintiff, and 30% is borne by the Defendant.

The judgment of the first instance shall be revoked. The defendant's disposition of imposition of capital gains tax of KRW 000 on January 2, 2009 against the plaintiff on January 2, 2009 shall be revoked.

1. Details of disposition;

A. On March 9, 2004, the Plaintiff acquired 000 won in a lump sum of 000 won a house and 687.04m24m2 of the building site in Mapo-gu, Seoul and 000m2 on its ground (the above site and building consisting of 191.83m2 and 495.21m2; hereinafter referred to as “land and building in this case”; among them, “the housing part in this case”, “the commercial building and its premises” were transferred to 00m2 on April 4, 2007.

C. After investigating the actual transaction value of the instant land and building, the Defendant additionally imposed and notified the individual land price for the instant commercial building pursuant to Article 100(2) of the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009; hereinafter the same shall apply) on the ground that it is unclear that the transfer value of the instant commercial building and the instant commercial building, which are exempt from taxation as a result of the transfer of the said land and building together, is distinguishable from the instant commercial building subject to taxation; the publicly notified price by the Commissioner of the National Tax Service for the commercial building; and the transfer value and acquisition value for the commercial building by applying the individual housing price for the housing; and the individual housing price for the housing, after calculating the transfer value and acquisition value of the instant commercial building other than the instant commercial building subject to non-taxation as one house for one household; and on January 2, 2009, the Plaintiff additionally imposed and notified the Plaintiff of KRW 00,00

D. After that, on the ground that there is an error in the calculation, such as that the transfer value of January 23, 2009 should be changed to 000 won, the defendant calculated the actual acquisition value and real transfer value of the land and buildings of this case again and corrected the amount to reduce the transfer income tax of KRW 000 from the previous transfer income tax by 00 (the disposition of additional notice of transfer income tax of KRW 00,000 that remains after correction as above upon the request of the plaintiff).

[Grounds for Recognition: Evidence No. 1-1 to 5, Evidence No. 2, 3, 5, Evidence No. 1, 2, and 3, and the purport of the whole pleadings]

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The instant calculation provision is applied only when both the instant land and the buildings are subject to taxation, and the distinction between the value is unclear as it is acquired or transferred along with the instant land and the buildings. Moreover, as a result of the calculated division by analogical application of the instant calculation provision, the Defendant’s calculation by analogically applying the instant calculation provision violates the actual transaction details and the instant commercial building’s transfer margin by calculating only the instant commercial building’s transfer margin at KRW 000,000, and exceeds the total transfer margin of the instant land and the building’s total transfer margin, which is unfair in light of the principle of substantial no taxation without law

2) In the instant case, even if it is possible to analogically apply the Myanmar accounting clause, the instant disposition is unlawful, without going through the process of adding up transfer losses incurred in the part of the housing subject to non-taxation, or removing such unreasonable outcomes through the process of applying the standard market price instead of the individual housing price to the housing portion.

B. Relevant statutes

Attached Form 3 is as shown in the relevant statutes.

C. Determination

1) Article 166(6) of the Enforcement Decree of the Income Tax Act, the proviso of Article 48-2(4)1 of the Enforcement Decree of the Value-Added Tax Act, and Article 99(1)1 of the former Income Tax Act provide that where the transfer value or acquisition value is calculated based on the actual transaction value and where the land and buildings are acquired or transferred at the same time, it shall be calculated based on the standard market price at the time of the acquisition or transfer, and where the distinction of the value is unclear, it shall be calculated as prescribed by the Presidential Decree in consideration of the standard market price at the time of the acquisition or transfer, etc.

2) In addition, the instant provision provides a general and reasonable method for the calculation of common acquisition value and transfer value, and it is difficult to conclude that there is an unreasonable reason to exclude such analogical application as long as it is difficult to present a different reasonable method in view of the fact that the rate of increase in the standard market value of assets subject to taxation and assets subject to non-taxation differs between assets subject to taxation and assets subject to taxation. However, in light of the constitutional principle of no taxation without law and the principle of excessive prohibition, and the legislative intent of Article 102(2) of the former Income Tax Act that provides for the inclusion of transfer losses and transfer gains on assets subject to taxation within a certain scope, even if the instant provision applies by analogy between assets subject to taxation and assets subject to non-taxation, the gains on the transfer of assets subject to taxation calculated pursuant to the instant provision cannot exceed the total gains on transfer of assets subject to taxation and assets subject to non-taxation subject to taxation, and thus, even if the instant provision is applied by analogy, the instant disposition is unlawful within the scope of KRW 00,000, as it does not exceed the total gains on transfer.

3) If a reasonable tax amount to be deducted and notified among the instant dispositions is calculated by deeming the transfer marginal profit of the entire commercial area as KRW 000, the instant disposition is deemed as KRW 000 as indicated in the attached Table 2. The instant disposition is lawful within the scope of KRW 000, and the exceeding part is unlawful.

3. Conclusion

The part of the judgment of the court of first instance against the plaintiff as to the part exceeding the reasonable amount of tax calculated above shall be revoked, and the part exceeding 00 won out of the disposition of this case shall be revoked. The remaining appeal filed by the