[1] The meaning of "value at the time of acquisition" under Article 10 (1) of the Local Tax Act as the tax base for acquisition tax

[2] The case holding that the judgment below erred by misapprehending legal principles, in a case where Gap church's exchange of real estate, including the school site owned by Eul and Eul, and the religious site owned by Eul, and entered into a contract to contribute the difference of appraised value to Eul, and completed the registration of ownership transfer of real estate, such as the above school site, and Gap church transferred the above real estate to Byung, and subsequently reported and paid acquisition tax, etc. based on the appraised value of real estate subject to exchange such as religious site, etc. pursuant to the proviso of Article 50 (1) 3 of the Restriction of Special Local Taxation Act, but the tax base of acquisition tax was requested to correct the difference between the reported and paid tax amount on the premise that the real estate is appraised value of the above school site and the above real estate, but the head of the competent Gu rejected this claim. However, in a case where the amount equivalent to the appraised value cannot be deemed to have been donated to Eul church to Eul, and thus, the tax base of acquisition tax

[1] Article 10(1) of the Local Tax Act / [2] Article 10(1) of the Local Tax Act, Article 18(1)5 and 7 of the former Enforcement Decree of the Local Tax Act (Amended by Presidential Decree No. 28211, Jul. 26, 2017); Article 50(1)3 of the Restriction of Special Local Taxation Act

[1] Supreme Court Decision 2002Du240 decided Sep. 26, 2003 (Gong2003Ha, 2109)

The Korean Association of Arts and the Korean Association of 000 (Attorneys Lee Jong-chul et al., Counsel for the defendant-appellant)

The head of Gangseo-gu Seoul Metropolitan Government (Bae & Yang LLC, Attorneys Gangnam-soo et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2019Nu37211 decided May 23, 2019

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

The grounds of appeal are examined.

1. Case summary

A. On November 30, 2016, the Plaintiff entered into a contract with the Masung Private Teaching Institutes (hereinafter “Masung Private Teaching Institutes”) under which the Plaintiff contributed 2,645,851,000 won (hereinafter “the instant real estate subject to exchange”) free of charge to the Masung Private Teaching Institutes (hereinafter “the instant contract”). The Plaintiff entered into a contract with the Plaintiff on the donation of KRW 2,645,851,00,00 (hereinafter “the difference between the appraised value”) for the content that the Plaintiff contributes 673 square meters to the school site of Gangseo-gu Seoul Special Metropolitan City ( Address 1 omitted), the 4th floor of the relevant ground, and 9 square meters (hereinafter collectively referred to as the “instant real estate”).

B. On February 2, 2017, the Plaintiff completed the registration of transfer of ownership with respect to each of the instant real estate. The Plaintiff reported acquisition tax, etc. based on the appraised value of KRW 5,743,407,00, which is the appraised value of the instant real estate subject to exchange, as acquisition tax base, and was exempted from acquisition tax, etc. pursuant to the main sentence of

C. On September 14, 2017, the Plaintiff transferred each of the instant real property to the Nonparty, and reported and paid acquisition tax base of KRW 229,736,280, local education tax, KRW 222,973,620, and KRW 11,486,810, total of KRW 264,196,710, on October 10, 2017, pursuant to the proviso of Article 50(1)3 of the Restriction of Special Local Taxation Act, etc.

D. On October 31, 2017, the Plaintiff filed an application for rectification to the effect that, on the premise that the tax base of acquisition tax on each of the instant real estate is KRW 3,097,56,00, the appraised value of which is KRW 123,902,240, acquisition tax and KRW 12,390,220, local education tax and KRW 6,195,110, totaling KRW 142,487,570, and KRW 140,000, the Plaintiff filed an application for rectification to the Defendant for the reduction of the difference between the reported and paid tax amount and KRW 121,709,140. On December 1, 2017, the Defendant rejected the said application for rectification (hereinafter “instant disposition”).

2. Judgment on the grounds of appeal

A. The main text of Article 10(1) of the Local Tax Act provides that “The tax base of acquisition tax shall be the value at the time of acquisition.” The “value at the time of acquisition” stipulated in the said provision refers to, in principle, de facto acquisition value incurred in acquiring objects of taxation, such as real estate (see Supreme Court Decision 2002Du240, Sept. 26, 2003).

B. Review of the reasoning of the lower judgment and the record reveals the following facts.

(1) On July 31, 2016, the Postal Research Institute decided to hold a board of directors on the transfer of the △△△ School School curriculum located in each of the instant real estate owned by it to the real estate subject to the exchange of this case owned by the Plaintiff.

(2) As a result of the appraisal by the Korea Appraisal Board, the appraisal value of each of the instant real estate owned by the Korea Appraisal Board was KRW 3,097,556,00, and the appraisal value of the instant real estate owned by the Plaintiff was KRW 5,743,407,00.

(3) On August 30, 2016, the Postal Research Institute applied for approval of a plan to change the location of the graduate school university to the Minister of Education. On January 20, 2017, the Minister of Education approved the plan to change the location on the condition that “The Postal Research Institute and the Plaintiff mutually exchange the instant real estate owned by the Plaintiff and the instant real estate subject to exchange, and the difference between the two,645,851,00 won should be contributed to the Postal Research Institute without compensation by the Plaintiff.”

(4) Accordingly, as seen earlier, the Plaintiff and the friendly Institute entered into the instant contract with the purport that “The value of each of the instant real estate and the instant real estate subject to exchange shall be exchanged at the value of the said real estate, but the difference of 2,645,851,00 won shall be contributed free of charge to the friendly Institute.”

C. Examining these facts in light of the aforementioned provisions and legal principles, the amount equivalent to KRW 2,645,851,000 in the difference of the appraisal of this case cannot be deemed to have been donated to the Maternity Institute, and thus, the tax base of acquisition tax of each real estate of this case shall be deemed to have been KRW 3,097,556,00, which is equivalent to the appraised value. The amount equivalent to the said appraised amount donated by the Plaintiff to the Maternity Institute shall not be deemed to have constituted “the conditions to be borne by the acquirer pursuant to the agreement of the parties (Article 28211, Jul. 26, 2017) or “the expenses equivalent thereto (Article 7)” under Article 18(1) of the former Enforcement Decree of the Local Tax Act, which is indirect expenses included in the acquisition price.

D. Nevertheless, the lower court, on the grounds indicated in its reasoning, determined that the tax base for acquisition tax of each of the instant real estate ought to be the appraised value of the instant real estate subject to exchange, and even if the appraised value of each of the instant real estate is deemed to be “direct expenses paid or to be paid to the counterparty” under Article 18(1) of the former Enforcement Decree of the Local Tax Act, the difference in the appraisal of the instant real estate constitutes indirect expenses included in the acquisition price as “the charges on the terms and conditions for acquiring each of the instant real estate or other equivalent expenses”

3. Conclusion

Therefore, without further proceeding to decide on 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

Justices Min You-sook (Presiding Justice)