In a case where Party A reported the transfer income tax on November 6, 2002 after transferring land, etc. to Party B, and Party B again transferred it to a third party, and the tax authority denied the real transfer value on June 3, 201 that the actual transfer value reported by Party A differs from the actual acquisition value reported by Party B, and imposed capital gains tax on Party A, the case holding that the said disposition is null and void as it was imposed after the exclusion period for the imposition of national tax expires.

In a case where Party A filed a transfer income tax report on November 6, 2002 after transferring the land, etc. to Party B, and Party B again transferred the transfer income tax to a third party, and the tax authority denied the actual transfer value that the actual transfer value reported by Party A differs from the actual acquisition value reported by Party B on June 3, 201, and imposed a transfer income tax on Party A, the case holding that the judgment below erred by misapprehending the legal principles on the grounds that the said disposition was made on June 3, 201 when five years have elapsed since June 1, 2003, which was the initial date of the exclusion period for imposition of national tax, and that the actual transfer value of the reported land was consistent with the facts, and there is no reason to extend the exclusion period for imposition of national tax, and thus, the exclusion period for imposition of transfer income tax on land transfer shall be deemed null and void as a taxation disposition made after the exclusion period for imposition of national tax has expired.

Article 26-2(1)1, 2, and 3 of the former Framework Act on National Taxes (Amended by Act No. 9911, Jan. 1, 2010); Article 12-3(1)1 of the former Enforcement Decree of the Framework Act on National Taxes (Amended by Presidential Decree No. 17830, Dec. 30, 2002); Article 110(1) of the former Income Tax Act (Amended by Act No. 9897, Dec. 31, 2009)

Plaintiff (Law Firm Lee & Lee LLC, Attorneys Lee Han-san et al., Counsel for the plaintiff-appellant)

Head of the North Mine District Tax Office

Gwangju High Court Decision 2012Nu1531 decided July 11, 2013

The judgment below is reversed, and the case is remanded to the Gwangju High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Article 26-2(1) of the former Framework Act on National Taxes (amended by Act No. 911 of Jan. 1, 2010) provides that, in principle, the exclusion period for the imposition of national taxes shall be five years from the date on which the relevant national tax is assessable, except for cases where a taxpayer evades, receives a refund or deduction by deceit or other unlawful means (Article 1) or where a taxpayer fails to file a tax base return within the statutory due date of return (Article 2(2)). In addition, Article 12-3(1)1 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 17830 of Dec. 30, 2002), Article 110(1) of the former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009) provides that the exclusion period for the imposition of national taxes shall be calculated on the following year from May 31, 2009.

2. The lower court acknowledged the following facts: (a) on August 27, 2002, the Plaintiff transferred the instant land to the Nonparty on November 6, 2002, and reported transfer income tax to the head of Yeongdeungpo-gu District Tax Office at KRW 29,400,000 with the actual transfer value of the instant land at KRW 29,40,00; (b) on June 20, 2007, the Nonparty again transferred the instant land, etc. to a third party; (c) on June 20, 2007, upon filing a report on transfer income tax with the Defendant at KRW 67,203,00 with the actual acquisition value of the instant land at KRW 67,203,00; and (d) on June 3, 2011, the Defendant denied the actual transfer value reported by the Plaintiff and imposed the instant disposition at KRW 35,287,490 with the real transfer value at KRW 67,200,00.

3. However, the lower court’s determination is difficult to accept for the following reasons.

A tax assessment conducted after the exclusion period of the imposition of national taxes has expired (see Supreme Court Decisions 9Du3140, Jun. 22, 1999; 2007Du24364, May 28, 2009).

According to the above facts, the disposition of this case was made on June 3, 201 after five years from June 1, 2003, which was the initial date of the exclusion period for imposition of national taxes, and the actual transfer value of the land of this case reported by the Plaintiff is consistent with the facts, and there is no reason to extend the exclusion period for imposition. Accordingly, the exclusion period for imposition of capital gains tax on the transfer of the land of this case shall be five years. Thus, the disposition of this case shall be deemed null and void as a taxation made after the exclusion period for imposition of national taxes expires.

Nevertheless, the lower court determined that the instant disposition cannot be deemed null and void solely on the grounds stated in its reasoning. In so doing, it erred by misapprehending the legal doctrine on the exclusion period for the imposition of national taxes, thereby adversely affecting the conclusion of the judgment

4. Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Sang-hoon (Presiding Justice)