[1] Whether Article 23 (4) 1 and Article 45 (1) 1 (a) of the former Income Tax Act stipulating the principle of standard market price in the decision on the transfer margin is unconstitutional (negative)

[2] Whether transfer margin can be determined based on the actual transaction value, not based on the standard market price, in case where the actual transaction value is confirmed after the period for filing the final tax base return expires

[1] In calculating the transfer value and acquisition value, which is the basis of the decision on the transfer margin, the issue of whether to adopt the standard market price taxation principle and whether to adopt the actual transaction price taxation principle is the issue of legislative policy. In addition, there are reasonable grounds to do so that each of the provisions of Articles 23(4)1 and 45(1)1(a) of the former Income Tax Act (amended by Act No. 4661 of Dec. 31, 193) can adopt the standard market price taxation principle by recognizing exceptions to the principle of substantial taxation, and there is a way for the taxpayer to pay taxes based on the actual transaction price. Thus, it cannot be deemed that the taxpayer violates Article 59 of the Constitution that provides for the principle of no taxation without law, Article 11 of the Constitution that provides for the principle of no taxation without law, and Article 23 of the Constitution that provides for the guarantee of property rights.

[2] In case where assets are transferred, in making the preliminary return of gains on transfer or the final return of tax base of assets, if any documentary evidence verifying the actual transaction value is submitted, gains on transfer shall be calculated based on the actual transfer and acquisition value. However, if there is no such report or documentary evidence is submitted even if there is no such report or such report, gains on transfer shall be determined based on the standard market price. Even if the actual transaction value is confirmed after the final return period

[1] Articles 11, 23, and 59 of the Constitution of the Republic of Korea; Article 23 (4) 1 of the former Income Tax Act (amended by Act No. 4661 of Dec. 31, 1993; see Article 96 subparagraph 1 of the current Income Tax Act); Article 45 (1) 1 (a) [see Article 97 (1) 1 (a) of the current Act]; Article 170 (4) 3 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14083 of Dec. 31, 1993; see Article 166 (4) 3 of the current Act); Article 23 (4) 1 of the former Income Tax Act (amended by Act No. 4661 of Dec. 31, 1993; see Article 96 subparagraph 1(a) of the current Income Tax Act); Article 170 (4) 13 (1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 4613 (see Article 17 (1) of the current Article 4)

[1] Supreme Court Decision 94Nu18 delivered on September 30, 1994 (Gong1994Ha, 2899) / [2] Supreme Court Decision 85Nu847 delivered on March 11, 1986 (Gong1986, 654) Supreme Court Decision 93Nu1884 delivered on March 22, 1994 (Gong1994Sang, 1359), Supreme Court Decision 95Nu580 delivered on June 13, 1995 (Gong195Ha, 2425), Supreme Court Decision 95Nu13807 delivered on May 10, 196 (Gong196Ha, 1922)

Kim Young-young (Attorney Jeon Young-gu, Counsel for defendant-appellant)

Head of the Jeonju Tax Office

Gwangju High Court Decision 94Gu4805 delivered on May 11, 1995

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

1. We examine the grounds of appeal by the Plaintiff’s attorney.

A. As to the grounds of appeal Nos. 3 and 4

Articles 23(4)1 and 45(1)1(a) of the former Income Tax Act (amended by Act No. 4661 of Dec. 31, 1993; hereinafter the same) provide that the transfer value or acquisition value shall be based on the standard market price at the time of transfer or acquisition of the relevant assets in case of assets under Article 23(1)1 of the Act. However, in case prescribed by the Presidential Decree, Article 170(4)3 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 14083 of Dec. 31, 1993; hereinafter the same shall apply) provides that "the actual transaction price at the time of acquisition or transfer by documentary evidence submitted by the transferor at the time of report pursuant to Article 95 or 100 of the Act shall be one of the actual transaction price."

In calculating the transfer value and acquisition value, which serves as the basis for determining the transfer margin, whether to adopt the standard market price taxation principle, and whether to adopt the actual transaction value taxation principle, is a matter of legislative policy. In addition, there are reasonable grounds for each of the above provisions to adopt the taxation principle of the standard market price by recognizing exceptions to the principle of substantial taxation, as well as to open a way for taxpayers to pay taxes based on the actual transaction price. Thus, each of the above provisions cannot be deemed to violate Article 59 of the Constitution that provides for the principle of no taxation without law, Article 11 of the Constitution that provides for the principle of no taxation without law, and Article 23 of

In addition, Article 170 (4) 3 of the former Enforcement Decree of the Income Tax Act provides that a taxpayer shall not be disadvantaged by the actual transaction price due to the calculation of transfer margin based on the standard market price. Thus, the period for submission of evidentiary documents related to the actual transaction price was limited to the time of preliminary return or final return, which goes beyond the scope of delegation of this Act, and thus, it cannot be deemed that the invalid provision violates the provisions of the no taxation without law and the Constitutional Court's claim for judgment.

B. As to the grounds of appeal Nos. 1 and 2

Article 23 (4) 1 and Article 45 (1) 1 (a) of the former Income Tax Act and Article 170 (4) 3 of the Enforcement Decree of the same Act are interpreted to the effect that in cases where assets are transferred as seen above, the principle of taxation of the standard market price is adopted in determining gains on transfer. Thus, in cases where assets are transferred and evidential documents are submitted to confirm the actual transaction price in the preliminary return of gains on transfer of assets or the final return of tax base, gains on transfer shall be calculated based on the actual transfer and acquisition price. However, in cases where there is no such report or report, gains on transfer shall be determined based on the standard market price, and even if the actual transaction price is confirmed after the final return period of tax base is completed, gains on transfer shall not be determined based on the actual transaction price (see Supreme Court Decisions 85Nu847, Mar. 11, 1986; 93Nu18485, Mar. 22, 1994; 98Nu18585, Jun. 195, 195).

The judgment of the court below to the same purport is just, and there is no violation of the principle of substantial taxation as provided by Article 7 (2) of the Income Tax Act and the guarantee of property rights under the Constitution, such as the theory of lawsuit.

Article 170 (4) 3 of the former Enforcement Decree of the Income Tax Act only purports that, at the time of filing a preliminary return on transfer margin, evidentiary documents kept by a taxpayer shall not be imposed on the basis of the actual transaction price, unless they are presented to the tax authority at the time of filing the final return of the tax base. It cannot be expanded to the purport that the tax authority that denies or excludes any substantial fact thereafter cannot be interpreted. Such interpretation is a violation of taxpayer's trust interest, and thus, it shall not be admitted as an independent opinion. In addition, Supreme Court Decisions 82Nu221 Decided November 23, 1982 and Supreme Court Decision 91Nu7668 Decided April 24, 192 cited in the theory of lawsuit are not appropriate in this case. All arguments are without merit.

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

Justices Shin Sung-sung (Presiding Justice)