Cho High Court Decision 2007Du4646 (Law No. 14, 2008)

A project operator in the special taxation of capital gains tax on real estate for public works in designated areas

Where the project implementation is implemented after transferring the land to the project implementer who implements the project without obtaining authorization for the project implementation within the urban environmental improvement zone, the project implementer in an unauthorization for the project implementation may be deemed the project implementer prescribed in the special provisions

The contents of the decision shall be the same as attached.

1. The defendant's disposition rejecting a request for correction of transfer income tax belonging to the year 2006 against the plaintiff on July 24, 2007 shall be revoked.

2. The costs of lawsuit shall be borne by the defendant.

The same shall apply to the order.

1. Basic facts

(a) Details of the disposition;

(1) On March 3, 2003, the Plaintiff acquired a building of 388-29 square meters and 433.8 square meters on its land (hereinafter referred to as “the instant real estate by combining the land and the buildings”) and decided to sell it to Non-Party CCC (hereinafter referred to as “Non-Party Co., Ltd”) around May 4, 2005, and transferred the instant real estate by receiving full payment from the Non-Party Co., Ltd. on December 20, 2006.

(2) On February 28, 2007, the Plaintiff reported and paid 388,302,584 won (the standard amount of taxation 1,230,964,765 won) as capital gains tax calculated on the basis of the actual transaction price of the real estate in this case as the real estate in this case falls under an speculative area upon the Defendant’s preliminary return and payment of capital gains tax for the year 2006 following the transfer of the real estate in this case. On May 30, 207, the Plaintiff returned and paid to the Defendant on May 30, 2007 the amount of capital gains tax for the real estate in this case was revised and deleted by Act No. 8146 of Dec. 30, 2006 (hereinafter “Special Taxation Regulation”) under Article 85 of the former Restriction of Special Taxation Act (hereinafter “Special Taxation Regulation”), which changed the amount of capital gains tax to the effect that the amount of capital gains tax is calculated on the basis of the standard market price under the above provision.

(3) On July 24, 2007, the Defendant rendered the instant disposition rejecting the Plaintiff’s claim for correction on the ground that the Nonparty Company, the transferee of the instant real estate, was not designated as a public project operator until the time of transfer of the instant real estate.

(b) Designation of an urban environmental improvement zone and authorization for project implementation;

(1) Seoul Mapo-gu, to which the instant real estate belongs, was designated as an urban environment improvement zone on June 30, 2005, and on the other hand, AA1 zone in Mapo-gu, where the instant real estate is located, was designated as a balanced development facilitation district on November 18, 2003, and was designated as an urban environment improvement zone under Article 2006-87 of the Seoul Metropolitan Government Notice on March 13, 2006.

(2) The non-party company acquired the instant real estate, etc. to implement an urban environment improvement project within AA1 zone, while formulating an urban environment improvement project implementation plan for AA1 zone, was notified by the head of Mapo-gu Seoul Metropolitan Government on May 4, 2006 of measures to preserve cultural heritage related to an urban environment improvement project. On June 19, 2006, the non-party company received conditional decision on traffic impact assessment from the Seoul Metropolitan Government traffic impact review committee. On June 29, 2006, the non-party company was notified by the Seo-gu Seoul Metropolitan Government Office of Education of prohibited acts and the result of removal of facilities in the school environment improvement zone, and was notified by the head of Mapo-gu Seoul Metropolitan Government Construction Committee on June 30, 2006.

(3) After that, the non-party company filed an application for authorization to implement the urban environmental improvement zone AA1 with the head of Mapo-gu on December 22, 2006, which was after the date of settling the remainder of the real estate in this case, and the head of Mapo-gu notified the non-party company as a project implementer of the authorization to implement the urban environmental improvement zone and with the examination.

[Reasons for Recognition] Unsatisfy, Gap evidence 1 to 7, Eul evidence I and 2, the purport of the whole pleadings

2. The parties' arguments and issues

The Plaintiff acquired the instant real estate before the designation of a rearrangement zone, which is the time of acquisition as prescribed by the special taxation provision of this case, and transferred it to the assignee of the urban environment rearrangement project, which is within the time of its transfer. As such, in calculating the transfer income tax following the transfer of the instant real estate, the instant special taxation provision is applied, and the transfer income tax should be calculated according to the standard market price. Thus, the instant disposition rejecting the Plaintiff’s request for correction is unlawful

The defendant asserts that the special taxation provision of this case does not apply because the non-party company, the transferee of this case, was not authorized to implement the urban environment rearrangement project until the time of transfer of the real estate in this case.

Therefore, the issue of this case is whether the special taxation provisions of this case can be applied in calculating the transfer income tax by deeming the project implementer in an unauthorized state as the project implementer stipulated in the special taxation provisions of this case, in case where the project implementation implementation authorization has been granted after transferring the land to the project implementer who implemented the project in the unauthorized state within the urban environmental improvement zone

3. Related statutes;

It is as shown in the attached Form.

4. Determination

(a) Contents of the Income Tax Act and the Restriction of Special Taxation Act on the method of calculating transfer value;

Article 96 (1) of the former Income Tax Act provides that the transfer value of assets shall be based on the "standard market price at the time of transfer of the assets". However, Article 96 (1) of the Income Tax Act, which was amended by Act No. 7837 on Dec. 31, 2005 and enforced on Jan. 1, 2006, changed the principle of calculating the transfer value of assets to the "actual transaction price of the assets". However, Article 96 (2) of the revised Income Tax Act provides that the transfer value of real estate shall be based on the "standard market price at the time of transfer of the assets to the person who is not real estate within the speculative designated area," and Article 96 (1) of the former Enforcement Decree of the Income Tax Act provides that the transfer value of the real estate shall be based on the "standard market price at the time of transfer of the assets to the person who is similar to that of the designated area under the Act No. 1 or 4 of the Housing Site Development Promotion Act before the date of sale of the real estate within the designated area.

B. Purpose of legislation of the special taxation provision of this case

In full view of the title and contents of the special taxation provisions of this case, each of the special taxation provisions of this case, and each of the subparagraphs of attached Table 7 of Article 79-2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act, with the purpose of public interest, the above laws recognize the right to expropriate the project operator based on the Act on Acquisition of and Compensation for Land, etc. for Public Works Projects, and the decision-making authority on the transfer value of the real estate, even if the transferor transfers the real estate to the project operator through consultation, cannot be considerably restricted. The legislative intent of the special taxation provision of this case is to relieve the taxpayer's tax burden by allowing the transfer value of the real estate within the speculative designated area to be based on the standard market price rather than the actual transaction value if it is transferred or expropriated for public interest purposes (see Supreme Court Decisions 2008Du12597, Feb. 26, 2009; 2007Du127676, Dec. 27, 2007).

C. Scope of a project operator under the special taxation provisions of this case

(1) According to the special taxation provisions of this case and Article 79-2 (1) 9 of the former Enforcement Decree of the Restriction of Special Taxation Act, when the land acquired before the designation date of the improvement zone is transferred to the project executor before December 31, 2006, the transfer value can be calculated based on the standard market price. However, Article 2 (8) of the Restriction of Special Taxation Act, etc. does not have any separate definition provision concerning the project executor, while Article 2 (8) of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (hereinafter referred to as the "Domination Act") provides that the "project executor" refers to a person who implements the improvement project, but does not have English provision that only the project executor who has obtained the authorization for the implementation of the special taxation of this case is deemed to mean only the project executor who has obtained the authorization for the implementation of the project under the Domination Act, or the project executor who has obtained the authorization for the implementation of the project before the designation date of the improvement zone is also included.

(2) Under the principle of no taxation without law, a tax law interpretation shall be interpreted in accordance with the text of the law unless there are special circumstances, and it shall not be extensively interpreted or analogically interpreted without reasonable grounds. However, where it is necessary to clarify the meaning through mutual interpretation between the laws and regulations, a joint-purpose interpretation may be made in light of the legislative intent and purpose to the extent that it does not undermine the legal stability and predictability pursued by the principle of no taxation without law (see Supreme Court Decision 2007Du13784, Feb. 14, 2008).

(3) However, in light of the legislative intent of the Act on the Regulation of Special Taxation and the Enforcement Decree of the Housing Act, the project implementer is not expressly defined as the project implementer who actually implemented the project under the Act on the Regulation of Special Taxation and does not stipulate that the project implementer shall obtain authorization for the implementation of the project as a requirement for the recognition of the project implementer. ② The provisions of the Act on the Regulation of Special Taxation and the Enforcement Decree of the Act on the Regulation of Special Taxation and the Ordinance of the Ministry of Land, Infrastructure and Transport stipulate that if the project implementer is designated as an urban environment improvement zone and actually implemented the project after cooperation with the project owner before the project implementation authorization, the provisions of the Act on the Regulation of Special Taxation and the Ordinance of the Ministry of Land, Infrastructure and Transport should be applied to the project implementer before the project implementation is completed, and the provisions of the Act on the Regulation of Special Taxation and the Ordinance on the Regulation of Special Taxation and the Ordinance on the Regulation of Land, etc. shall be applied to the project implementer before the project implementer obtains the approval for the implementation of the project.

D. Sub-determination

Therefore, the special taxation provision of this case shall apply to the calculation of capital gains in relation to the transfer of the real estate of this case. Thus, the disposition of this case refusing the plaintiff's request for correction on a different premise is unlawful.

5. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is decided as per Disposition by admitting it.