Cho High-depth2014Gu3208 ( October 07, 2014)

Whether the act of submitting a false contract at the time of return of transfer income tax can be seen as a fraudulent or other unlawful act of global income tax

The Plaintiff filed a false real estate transfer contract with the tax authority to report a penalty received upon termination of the contract, and to conceal such fact at the time of filing a transfer income tax return. Such series of acts constitute “Fraud and other unlawful acts, which make it impossible or considerably difficult to impose and collect global income tax.”

Article 26-2 of the National Tax Basic Act

Article 21 of the Income Tax Act

2015Guhap20055 Global income and revocation of disposition

AA

O Head of tax office

April 28, 2015

May 19, 2015

1. The plaintiff's claim is dismissed.

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

The disposition of imposition of global income tax of KRW 405,346,130, which the former Defendant issued to the Plaintiff on January 7, 2014, shall be revoked.

1. Basic facts and circumstances of dispositions;

A. Real estate sales contract between the Plaintiff and BB

1) On February 27, 2006, the Plaintiff drafted a sales contract with the content that the Plaintiff sold the instant real estate and its above-ground buildings (hereinafter referred to as “instant real estate”) for KRW 6.28,000,000,000 for purchase price, and received KRW 628,000,000 from BB as the down payment on the following day.

However, as BB did not pay any balance until the date of the balance agreement, the Plaintiff sent to BB a certificate of content that “The Plaintiff cancelled the sales contract and confiscated the already paid down payment.”

2) After that, on November 16, 2006, the Plaintiff prepared a sales contract to sell the instant real estate at KRW 6.28 billion with BB and the Plaintiff (hereinafter referred to as “instant sales contract”). On the other hand, the Plaintiff prepared a separate document stating “written waiver of real estate sales contract (hereinafter referred to as “written waiver of the down payment”) and “written waiver of the down payment” (hereinafter referred to as “written waiver of the down payment”) and “written statement of obstacles, crops, trees, etc. in accordance with the real estate sales contract, and the cost of transfer, loss, etc. (hereinafter referred to as “written agreement of the pre-sale cost”). The main contents of each of the above documents are as follows.

3. Validity of a contract;

1) The instant contract is an extension of the transaction of real estate between the Plaintiff and BB on February 27, 2006 with respect to the instant real estate, and the down payment of KRW 628,000,000 paid by BB to the Plaintiff under the said contract shall be succeeded as it is to the instant contract.

4. The balance payable on the date of the balance under this contract and the date of the payment thereof shall be five thousand won,652,000,000 won and the date of payment of the balance shall be November 30, 2006.

7. All obstacles (other than buildings owned by others) to the real estate in this case subject to disposal and inspection of obstacles (other than buildings owned by others) shall be included in the sale subject, and the explanation of obstacles shall be dealt with by the plaintiff on his responsibility. The waiver of down payment in this case shall be dismissed.

2. (Planning) BB promises to waive 628,00,000 won paid to the Plaintiff as a sales contract deposit on February 27, 2006 and to not claim the return of the down payment for any reason after the date of the payment to the Plaintiff.

3. Article 3(1) and Article 4 of the instant sales contract provide for the recognition of succession to the down payment and Article 3(1) of the instant sales contract are prepared for the convenience of BB, recognizing that the said contract is false and void. BB promises not to claim the effect of the said down payment for any reason thereafter.

4. The actual purchase price of the instant real estate sales contract is KRW 7 billion. If BB pays to the Plaintiff the remainder of KRW 5,652,000,000 and the cost of KRW 750,000,000 under the instant sales contract, the refusal of this renunciation is no longer effective. The instant agreement on expenses for surrendering the name of the Plaintiff is valid.

2. The total cost of surrenderation of various obstacles existing in the instant real property is KRW 750,00,000.

3) On the other hand, on November 20, 2006, the Plaintiff and BB drafted a sales contract with the content that the sales price of the instant real estate was KRW 7 billion on February 27, 2006, and the date of the sales contract was February 27, 2006, and BB paid to the Plaintiff a total of KRW 6.42 billion to the Plaintiff (= KRW 5.652 billion transferred to the OCC account of the Plaintiff and the Plaintiff (= KRW 5.66 billion + KRW 6 million) + KRW 750 million paid directly to the Plaintiff as a check).

B. Plaintiff’s report of capital gains tax and Defendant’s correction and notification of capital gains tax

1) On January 30, 2007, the Plaintiff reported to the Defendant a transfer income tax base based on the standard market price along with the instant sales contract, and filed a revised return by applying the actual transaction price to the part of the instant real estate on March 19, 2007.

2) On the other hand, the Defendant, based on the result of the investigation into capital gains tax by the director of the regional tax office on the Plaintiff, deemed that the Plaintiff transferred the instant real estate by unlawful means, such as preparation of a false contract, even though the Plaintiff received KRW 7 billion from the transfer price, and accordingly, notified the Plaintiff of KRW 1,419,253,420 for capital gains tax reverted to the year 2006 on October 16, 2012.

3) On December 6, 2012, the Plaintiff appealed and filed a request for adjudication on December 6, 2012. The Tax Tribunal decided that the Plaintiff’s receipt of KRW 7 billion, which is KRW 6.28 billion in the purchase price and KRW 628 million in the penalty (hereinafter “instant penalty”) and KRW 120 million in the name of the Plaintiff (hereinafter “instant penalty”) and KRW 120 million in the name of the Plaintiff, and that the imposition of the transfer income tax is unlawful by calculating the transfer margin as the actual transaction price for the entire real estate of this case, regardless of whether the penalty is imposed as other income.

C. Defendant’s correction and notification of global income tax and Plaintiff’s objection

1) On January 7, 2014, the Defendant initially revoked the disposition of correction and notification of capital gains tax, and revised and notified the Plaintiff of KRW 405,346,130 as global income tax for the year 2006.

2) The Plaintiff appealed and filed an objection on March 7, 2014, but was dismissed by the Commissioner of the National Tax Service on April 18, 2014. The Plaintiff filed an appeal on June 9, 2014. However, the Plaintiff was dismissed by the Tax Tribunal on October 7, 2014.

[Recognition] Facts without dispute, Gap evidence Nos. 1 through 10 (including branch numbers, if any; hereinafter the same shall apply), Eul evidence Nos. 1, 2 and 4, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff did not know that the penalty of this case was subject to global income tax, and submitted the actual contract at the time of filing the report. However, according to the BB’s demand not to disclose the transfer income tax, the receipt of the penalty of this case is merely a mere failure to report the fact in the process of filing the global income tax. Therefore, the instant disposition, which applied the exclusion period for imposition of ten years by deeming that the Plaintiff failed to file the global income tax return on the penalty of this case as fraudulent or other unlawful act, was unlawful (if the Plaintiff submitted the false contract at the time of filing the report of transfer income tax, it cannot be deemed that the Plaintiff committed fraud or unlawful act in the

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) According to Article 26-2(1) of the Framework Act on National Taxes (amended by Act No. 8139, Dec. 30, 2006; hereinafter the same), national taxes shall not be imposed after five years from the date on which they can be imposed ( Subparagraph 3): Provided, That in cases where a taxpayer evades national taxes or obtains refund or deduction by deceit or other unlawful acts, it shall not be imposed after ten years ( Subparagraph 1), and in cases where a taxpayer fails to file a tax base return within the statutory due date of return, dispositions taken after the expiration of the exclusion period of national tax imposition shall be null and void (see, e.g., Supreme Court Decision 2008Du10522, Dec. 23, 2010). Meanwhile, in cases where it is deemed that it is considerably difficult for the Plaintiff to file a tax return by means of fraudulent or other unlawful acts that enable the Plaintiff to evade taxes, i.e., to do so by means of a fraudulent act or other unlawful acts, it shall be deemed that the Plaintiff did not have any other active acts under taxation or unlawful acts.

① While the Plaintiff submitted at the time of filing a report on the transfer income tax to the effect that the instant sales contract that the Plaintiff shall succeed to KRW 628,000,000,000 already paid down payment, it did not submit a written waiver of the instant down payment and an agreement on the instant express cost agreement to invalidate the provisions on succession to the down payment and to vest the said down payment in the Plaintiff as a penalty for breach of contract. It is reasonable to deem that the Plaintiff submitted a written contract that includes false information.

② Although the Plaintiff included the instant penalty amount in KRW 750 million received from BB on November 21, 2006, the agreement on the cost of surrendering the instant goods merely stated that the total cost of surrendering various obstacles is KRW 750,000,000,000, and does not include any reference to the penalty of this case.

③ The Plaintiff received KRW 6.28 billion, which is the purchase price of the instant real estate, from the Plaintiff or the Plaintiff’s account, but received KRW 7.5 million, which includes the penalty of the instant case, by directly receiving a cashier’s check, and immediately commercialized it. Such series of acts appear to be reliable in the instant sales contract that included KRW 6.28 billion, which was already paid, in the purchase price of the instant real estate, KRW 6.28 billion, and at the same time, to conceal the penalty of the instant case.

④ The Plaintiff asserted that the written waiver of the down payment of this case was only prepared at the request of BB. However, it is difficult to believe the Plaintiff’s assertion in light of the following: (a) the Plaintiff’s signature and seal of BB representative director was only affixed at the bottom of each written statement, without the Plaintiff’s signature and seal; and (b) the overall content of each written statement is aimed at securing the Plaintiff’s right

⑤ Since the Plaintiff recognized that the Plaintiff had been assisted by a tax agent at the time of filing a return and revised return of capital gains tax, it seems that the Plaintiff knew or could have sufficiently anticipated that penalty would be subject to global income tax.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.