The meaning of “ de facto acquisition” under Article 105(2) of the former Local Tax Act / In cases where a title truster and a title trustee entered into a contract title trust agreement with the owner who was unaware of the fact that a title trust agreement was concluded and the title trustee was the party thereto, whether a title trustee is liable to pay acquisition tax even if the registration of ownership transfer was not completed if the purchase price was paid in full (affirmative), and whether the same applies to cases where the first seller, even after the sale of the real estate to a third party, completed the registration of ownership transfer as if the first seller sold the real

According to Article 105 of the former Local Tax Act (amended by Act No. 7843, Dec. 31, 2005), acquisition tax is imposed on a person who acquires real estate, etc., which is an object of taxation of acquisition tax (Paragraph 1), and is deemed to have been actually acquired even if the person fails to comply with registration, etc. under related Acts and subordinate statutes, such as the Civil Act (Paragraph 2). Here, “ de facto acquisition” refers to a case where the person fails to meet the formal requirements for acquisition of ownership, such as registration, but satisfies the substantial requirements for acquisition of ownership, such as payment of purchase

Where a title truster and a title trustee entered into a contract title trust agreement with the owner who was unaware of the fact that the title trustee was a party to the contract and entered into a contract on real estate with the owner who was unaware of the fact that the title trustee was a party to the contract, such contract is valid without being different from the general contract, and thus, even if the registration of ownership is not completed, the title trustee is liable to pay acquisition tax. The same shall also apply where the title truster and the title trustee

Article 105(1) and (2) of the former Local Tax Act (amended by Act No. 7678 of Aug. 4, 2005) (see current Article 7(1) and (2) (see current Article 7(2)); Article 2 subparag. 1 and Article 4 of the Act on the Registration of Real Estate under Actual Titleholder’s Name.

Supreme Court Decision 98Du17067 Decided November 12, 1999 (Gong1999Ha, 2538) Supreme Court Decision 2004Du6761 Decided June 30, 2006 (Gong2006Ha, 1439) Supreme Court Decision 2012Du28414 Decided July 11, 2017 (Gong2017Ha, 1653)

Plaintiff (Law Firm Won, Attorneys Kim Gi-hun, Counsel for the plaintiff-appellant)

The head of Gangdong-gu Seoul Metropolitan Government

Seoul High Court Decision 2014Nu59896 decided February 12, 2015

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

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

According to Article 105 of the former Local Tax Act (amended by Act No. 7843 of Dec. 31, 2005), acquisition tax is imposed on a person who acquires real estate, etc., which is an object of taxation (Paragraph 1), and is deemed to have been actually acquired even if registration, etc. is not performed under related Acts and subordinate statutes, such as the Civil Act (Paragraph 2). Here, “ de facto acquisition” refers to a case in which, in general, it does not meet the formal requirements for acquisition of ownership, such as registration, but does not meet the substantive requirements for acquisition of ownership, such as payment of purchase price, and satisfies the substantive requirements for acquisition of ownership (see Supreme Court Decisions 98Du17067, Nov. 12, 199; 2004Du6761, Jun. 30, 2006, etc.).

Where a title truster and a title trustee entered into a contract title trust agreement with the owner who was unaware of the fact that the title trustee was a party to the contract and entered into a contract on real estate with the owner who was unaware of the fact that the title trustee was a party to the contract, such contract is valid without being different from the general contract, and thus, even if the registration of ownership is not completed, the title trustee is liable to pay acquisition tax. The same shall also apply where the title truster and the title trustee

The court below, citing the reasoning of the judgment of the court of first instance, acknowledged the facts as indicated in its holding. Then, based on the following circumstances: (a) DMD Co., Ltd. agreed to purchase the real estate of this case, which was held as an auditor for the smooth promotion of the apartment sales business; (b) the Plaintiff entered into a sales contract with the Nonparty on the said real estate in its name and paid the purchase price in full; (c) the Plaintiff filed a lawsuit against the Nonparty seeking the implementation of the registration procedure for transfer of ownership of the said real estate; and (d) the Plaintiff and the Nonparty did not assert that they were the trustee in the process of the said lawsuit; and (e) determined that the Plaintiff actually acquired the said real estate by becoming the party to the sales contract in accordance with the contract title trust agreement with DMDD Co., Ltd. and was liable to pay acquisition tax, etc

In light of the aforementioned legal principles and records, the lower court did not err in its judgment by misapprehending the legal doctrine on a person liable to pay acquisition tax and substance over form principle, contrary to what is alleged in

2. Regarding ground of appeal No. 2

citing the reasoning of the judgment of the court of first instance, the court below acknowledged the facts as stated in its holding. Then, the court below determined that the plaintiff committed an active act that makes it difficult to impose and collect taxes in relation to the acquisition of the above real estate, since it is reasonable to deem that the plaintiff committed a 10-year statute of limitations for the acquisition of the above real estate, since it is reasonable to deem that the plaintiff committed an active act that makes it difficult to impose and collect taxes in relation to the acquisition of the above real estate without going through the plaintiff.

Examining the relevant legal principles and records, the lower court did not err in its judgment by misapprehending the legal doctrine on the exclusion period of imposition of local taxes, contrary to what is alleged in the grounds of appeal.

3. Conclusion

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 on the bench.

Justices Park Poe-young (Presiding Justice)