D. S.C. (Law Firm Sejong, Attorney Doi-hun, Counsel for the plaintiff-appellant)

Head of Seoyang-si (Law Firm TELS, Attorneys Lee Young-young, Counsel for the defendant-appellant)

January 14, 2014

1. The Defendant’s imposition of acquisition tax of KRW 485,861,270 against the Plaintiff on December 14, 2010; KRW 36,941,510; KRW 447,519,260; KRW 89,506,270; KRW 333,83,590; KRW 429,92,470; KRW 80,548,370; and KRW 433,83,590; and KRW 429,92,470; and KRW 80,548,370, respectively.

2. All remaining claims of the Plaintiff are dismissed.

3. 9/10 of the costs of lawsuit shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

The Defendant’s imposition of acquisition tax of KRW 485,861,270 against the Plaintiff on December 14, 2010; KRW 36,941,510 for special rural development tax; KRW 447,519,260 for local education tax; KRW 89,50 for acquisition tax; KRW 28,652,670 for special rural development tax; KRW 2,545,480 for special rural development tax; and KRW 28,372,720 for local education tax; and KRW 5,309,010 for local education tax.

1. Details of the disposition;

가. 원고는 주택건설 및 토목건축공사업 등을 주된 사업목적으로 하여 설립된 회사로서 ○○○○ 아파트 등을 신축하기 위하여 2005. 12. 9.경부터 2010. 5. 14.까지 고양시 (주소 생략) 외 581필지 529,248.34㎡ 및 건물 1,766.22㎡(이하 ‘이 사건 부동산’이라 한다)를 매수하여 그 무렵 피고에게 그 매수대금 299,250,005,675원을 취득가액으로 하여 취득세 등을 신고·납부하였다.

B. As a result of conducting a tax investigation with respect to the Plaintiff, the Defendant confirmed that the Plaintiff omitted financial costs of KRW 14,088,712,259 (hereinafter “interest on construction funds of this case”) and the disposal trust fees, etc. from the tax base; on December 14, 2010, the Defendant imposed acquisition tax on the Plaintiff with the tax base of KRW 14,90,489,989,985, total of the omitted values, KRW 485,861,270, KRW 36,941,510, registration tax, KRW 447,519,260, local education tax, KRW 89,50,50 (including additional tax), and KRW 60,60, respectively (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap evidence Nos. 3 and 4, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) In imposing acquisition tax and registration tax according to the consistent authoritative interpretation of the Ministry of Government Administration and Home Affairs, local governments are included in the tax base of acquisition tax and registration tax if the interest on construction funds was accounted for as an asset account in accordance with corporate accounting standards as an injury to the head of the Ministry of Government Administration and Home Affairs. However, in the case of accounting of expenses and interest, practices not included in the tax base of acquisition tax and registration tax have been formed, and the interest on construction funds managed by corporate accounting have not been imposed acquisition tax and registration tax. Therefore, when calculating acquisition tax on the Plaintiff who accounts for the interest on construction funds as a cost account, the interest on construction funds is not the tax base. The instant disposition against this is against the principle of trust protection, corporate accounting principles, and Article 111(5) of the former Local Tax Act (wholly amended by Act No. 10221, Mar. 31, 2010; hereinafter the same shall apply) (hereinafter “Plaintiff’s first assertion”).

2) Even if the interest rate on domestic construction fund is included in the tax base of acquisition tax, the instant disposition to the effect that it shall be converted into deductible expenses for the financial expenses of the loan borrowed to acquire the pertinent asset (hereinafter “specific loan”) under Article 28(1)3 of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter the same) and Article 52(1) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010; hereinafter the same shall apply). As such, the instant disposition to the effect that it shall be converted into deductible expenses for the general loan, which provides that the corporation may choose whether to include the general loan in deductible expenses, is in accordance with the Corporate Tax Act and the Enforcement Decree thereof, and violates the principle of retroactive taxation prohibition, the principle of substantial taxation (hereinafter “Plaintiff’s assertion”).

3) In addition, in light of the aforementioned circumstances, there is a justifiable reason that the Plaintiff did not include interest on construction funds in filing a return on acquisition tax, etc., and thus, at least the amount of additional tax on negligent tax and additional tax on negligent tax for arrears among the instant disposition should be revoked (hereinafter “the third assertion by the Plaintiff”).

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Determination on the Plaintiff’s first argument

A) In general, in tax legal relations, in order to apply the principle of trust and good faith to a tax authority’s act, the tax authority must issue a public opinion list that is trusted to taxpayers. Once the interpretation of tax-related Acts or the practice in tax administration is generally accepted by taxpayers, any act or computation according to such interpretation or practice shall be deemed justifiable, and no tax shall be imposed retroactively by a new interpretation or practice. In order to establish a non-taxable practice as referred to in Article 82 of the former Local Tax Act (amended by Article 82 of the former Local Tax Act), the tax authority must have an intention not to impose taxes on a considerable period of time due to any special circumstance, while the tax authority must know that it is able to impose taxes on the matter, and such public opinion or intent must be expressed explicitly or implicitly (see Supreme Court Decision 95Nu10181, Nov. 14, 1995).

B) In the instant case, the interpretation of the tax base of acquisition tax relating to the interest of construction funds was modified as follows.

In other words, the Minister of Government Administration and Home Affairs has consistently authoritative interpretation that even though the tax authorities are not included in the tax base of acquisition tax, if the corporation accounts for the interest interest interest interest interest interest as assets in accordance with corporate accounting standards, and the tax base of acquisition tax is not included in the tax base of acquisition tax if the corporation accounts for the interest interest interest interest interest interest interest interest interest interest interest interest interest interest as expenses such as interest paid, etc., but whether it falls under the tax base of acquisition tax.

In imposing the acquisition tax and registration tax (in the case of registration tax, the acquisition price is actually proved by the corporate accounting books, so the actual acquisition price is treated with the same criteria, so it is substantially treated with the same criteria as the acquisition tax) on the basis of the authoritative interpretation of the Minister of Government Administration and Home Affairs from around 2004 to around 2006, if a corporation liable to pay acquisition tax and registration tax accounts for interest to the cost account in accordance with its accounting policy, the interest interest on the construction was not included in the tax base for acquisition tax and registration

However, the Minister of Government Administration and Home Affairs decided on Jan. 23, 2006 that construction funds should be included in the tax base of acquisition tax in accordance with Article 82-2 (1) of the former Enforcement Decree of the Local Tax Act (wholly amended by Presidential Decree No. 22395, Sep. 20, 2010; hereinafter the same) under the review and decision of Article 206-16 of the former Enforcement Decree of the Local Tax Act (wholly amended by Presidential Decree No. 22395, Sep. 20, 2006). On the basis of the above decision, when the new tax law interpretation is different from the previous interpretation in accordance with the principle of prohibition of retroactive taxation stipulated in Article 18 (3) of the Framework Act on National Taxes, the new interpretation becomes effective after the date of the new interpretation. Thus, in the case of construction funds, the aforementioned interpretation should be included in the tax base of acquisition tax (Article 82-2 (1) of the Local Tax Act).

C) According to the above facts, the Minister of Government Administration and Home Affairs, the head of a local government’s leading office on the imposition of local taxes, has consistently authoritative interpretation with the purport of respecting corporate accounting by the method of corporate accounting for the purpose of respecting corporate accounting, and in fact local governments have operated taxation practice based on the authoritative interpretation. As such, the taxpayer’s trust was formed with respect to the public opinion of the tax authorities on the inclusion of construction funds and tax base up to that time, and it is reasonable to view that a corporation established a non-taxable practice that does not include the interest of construction funds in the tax base in the acquisition tax and registration tax, if it accounts for the interest of construction funds at the expense according to its accounting policy.

However, as the Minister of Government Administration and Home Affairs expresses internal and external that construction funds interest should also be included in the tax base of acquisition tax, etc. through the review and decision No. 2006-16 of Jan. 23, 2006, it is difficult to view that construction funds and non-taxation practices as above are subject to trust.

Therefore, it is reasonable to view that the inclusion of construction funds in the tax base up to January 23, 2006 as to the portion for which tax liability was established before January 23, 2006 violates the principle of trust protection or the principle of prohibition of retroactive taxation. However, it is reasonable to view that the portion of the construction funds interest accrued before January 23, 2006 among the construction funds interest of this case is included in the tax base of acquisition tax, etc. generated before January 23, 2006, because it is difficult to view that the portion of the construction funds interest accrued before January 23, 2006 among the instant disposition is included in the tax base of acquisition tax, etc.

On the other hand, corporate accounting is the primary purpose of providing financial information to interested parties, while the primary purpose of tax accounting is to provide taxation data on corporate income, which does not necessarily coincide with the standards of corporate accounting and tax accounting. Thus, even if there are principles different from corporate accounting concerning the inclusion of construction funds in the tax base, such as acquisition tax, etc., even if there are principles different from corporate accounting, it shall not be deemed as violating the principles of corporate accounting respect.

Therefore, according to the purport of the evidence Nos. 10 and 11 and the purport of the whole oral argument as to the construction funds of this case, acquisition tax on the real estate of this case shall be 436,806,270 won, special rural development tax shall be 33,83,590 won, registration tax shall be 429,922,470 won, and local education tax shall be 80,548,370 won, and the part exceeding the above amount among the dispositions of this case shall be revoked, and the plaintiff's above assertion is with merit within the above scope of recognition.

2) Judgment on the second argument by the Plaintiff

Article 111(8) of the former Enforcement Decree of the Local Tax Act provides that “The acquisition price which becomes the tax base of acquisition tax shall be the total amount of direct expenses paid or to be paid to the other party or a third party to acquire the relevant goods prior to the time of acquisition, and the interest on loans appropriated for construction funds or other similar financial expenses, etc.” Meanwhile, Article 52 of the former Enforcement Decree of the Corporate Tax Act provides that “interest on loans appropriated for construction funds prescribed by Presidential Decree” under the delegation of Article 28(1)3 of the former Corporate Tax Act shall not be included in deductible expenses pursuant to the delegation of Article 28(1)3 of the former Enforcement Decree of the Corporate Tax Act shall be deducted from the capital expenses incurred in the purchase, production or construction of fixed assets for business (hereafter in this Article referred to as “construction”) by the date of acquisition, regardless of its title, by the date of payment of interest on loans appropriated for construction funds or other similar expenses.”

The Corporate Tax Act provides that interest on construction funds shall not be included in the calculation of losses is based on the principle of profit-making cost response (see, e.g., Supreme Court Decision 95Nu3121, Aug. 11, 1995). However, the provision that the former Local Tax Act requires interest on construction funds to be included in the tax base for acquisition tax is an amount indirectly spent for acquisition (see, e.g., Supreme Court Decision 2009Du17179, Apr. 29, 2010). In addition, the provision that interest on construction funds subject to non-deductible expenses under the Corporate Tax Act is limited to the interest on fixed assets for business, but the interest on construction funds included in the tax base for acquisition tax under the former Local Tax

Therefore, regardless of whether there is a provision that reduces the financial expenses related to general loans under the former Corporate Tax Act, acquisition tax, etc. may be imposed on the financial expenses related to general loans under the former Local Tax Act, and the disposition of this case is not imposed on the purport that the former Corporate Tax Act and subordinate statutes can reduce the financial expenses related to general loans. Thus, the second argument of the plaintiff is without merit.

3) Judgment on the third assertion by the Plaintiff

According to Article 54(1) of the Framework Act on Local Taxes, where penalty taxes are imposed under this Act or local tax-related Acts, the head of a local government shall not impose penalty taxes if the grounds for the imposition thereof fall under the grounds for extending the due date under Article 26(1) or a taxpayer has justifiable grounds for failing to perform the relevant duties. In order to facilitate the exercise of the right to impose penalty taxes and the realization of tax claims under tax law, administrative sanctions imposed as prescribed by the Act where a taxpayer violates various obligations, such as a tax return and tax payment, without justifiable grounds, are not considered as administrative sanctions imposed as prescribed by the Act, but the taxpayer’s intentional intent or negligence is not considered, and the site, error, etc. of statutes does not fall under justifiable grounds for not attributable to the violation of the duty (see, e.g., Supreme Court Decision 2001Du4689, Nov. 13, 2002). The Plaintiff’s assertion ultimately does not constitute grounds for imposition of acquisition tax, etc. by the Plaintiff.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified within the above scope of recognition, and the remaining part is dismissed as it is without merit. It is so decided as per Disposition.

[Attachment]

Judges Kim Su-cheon (Presiding Judge)