early trial 2015-Divisions-4922 and 4923 ( December 22, 2015)

The cancellation of a sales contract without any agreement can not be seen as a cancellation.

In the case of cancelling an agreement on a sales contract, the cancellation of the sales contract without any agreement on the down payment, etc. already paid is an exceptional in light of the empirical rule, and thus cannot be deemed as cancellation.

Article 88 (Definition of Transfer) of Income Tax Act

2016Guhap21245 (Revocation of Disposition of Imposing Transfer Income Tax)

Mai Mai 1

Head of Suwon Tax Office

October 21, 2016

November 11, 2016

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition imposing capital gains tax of KRW 302,670,380 for the year 2009 against Plaintiff △△△△ on June 5, 2015 and disposition imposing capital gains tax of KRW 314,672,790 for the year 2009 against Plaintiff △△△△△ on May 12, 2015 are revoked.

1. Details of the disposition;

A. The Plaintiffs owned 1/2 shares in each of 1/2 of 1283-11 and 496.2 square meters of the same building in Gwangju ○○-dong, Gwangju ○○-dong, 1091 and 280 square meters of its ground, 1283-11 and 496.2 square meters of the same building (hereinafter referred to as “mining owner’s real estate”), 256-7 and 356-7 and 296.5 square meters of an aggregate building in Jeonju-si, ○○-dong, and 356-7 and 296.5 square meters of such aggregate building (excluding five stories), respectively.

B. On October 1, 2009, the Plaintiffs entered into an exchange contract with the effect that the names of ParkA, ParkBB, ParkBB, and ParkCC are co-ownership of ParkA, ParkB, ParkB, and ParkCC. However, the Plaintiffs paid KRW 150,000,000,000 in addition to the exchange contract of this case by November 6, 2009, by evaluating the value of Gwangju’s real estate and 3,251.2m2m2 (hereinafter “resanable real estate”) and the value of Gwangju’s real estate as indicated below, but the Plaintiffs paid KRW 1,50,000,000,000 in addition to the exchange contract of this case by November 6, 2009.

Objects

Jeonju Real Estate

Gwangju Real Estate (1/2)

Busan Real Estate

Owners

Plaintiffs

Plaintiffs

Park A, etc. (A) (A)

The appraised value (won)

2,070,000,000

1,500,000,000

5,000,000,000

Succession

Amount of debt (cost)

Bank Loans

1,180,000,000

800,000,000 (banks)

100,000,000 (glocks)

3,200,000,000

Deposit for lease;

20,000,000

-

180,000,000

Net asset value (cost)

870,000,000

600,000,000

1,620,000,000

1,470,000,000

Exchange difference (cost)

150,000,000

C. As a result of the investigation of capital gains tax on the Plaintiffs, the Defendant: (a) decided and notified Plaintiff △△△ on May 12, 2015 on the ground that the Plaintiffs did not report capital gains tax after the instant exchange contract; and (b) on June 5, 2015, the Defendant corrected the capital gains tax for the transfer of the Plaintiffs’ Busan real estate at zero won for the transfer of the real estate (hereinafter “instant disposition”).

D. The Plaintiffs filed an appeal after filing an objection, and in the process, the Defendant re-revision the capital gains tax on Plaintiff △△△△ (hereinafter “Plaintiff △△△”) to KRW 302,670,380, and the capital gains tax on Plaintiff △△△ (hereinafter “Plaintiff △△”) to KRW 314,672,790, respectively, and the Tax Tribunal dismissed the appeal on December 22, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 3, 4, Eul evidence Nos. 1, 2, 3 and 4 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

① After the conclusion of the instant exchange contract, the Plaintiffs and thisA alleged that thisA had been assessed at a low price of Busan real estate, and at the same time, they agreed to receive KRW 441 million from the Plaintiffs, except for shares of KRW 1/2 of Gwangju real estate subject to exchange, but at the same time, this agreement was reached between the Plaintiffs and thisA to cancel the instant exchange contract. Ultimately, since it is difficult to view that the instant exchange contract was rescinded by agreement and transfer of assets, the transfer income tax may not be imposed on the Plaintiffs.

② Even if taxation is possible, since the actual transaction price cannot be confirmed in the exchange contract of this case, the defendant is in violation of Article 114(7) of the Income Tax Act and Article 176-2 of the Enforcement Decree of the same Act by imposing capital gains tax on the basis of the appraised value of each real estate under the exchange contract of this case.

③ The Plaintiffs did not report the transfer income tax because they did not report the cancellation of the instant exchange contract, and they did not actively induce the tax authority to commit fraud and other unlawful acts. Nevertheless, the Defendant imposed penalty tax on the Plaintiff due to an improper report, which was unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) Whether the agreement is rescinded

The transfer income tax is levied on the premise that the transfer of assets and the income accrued therefrom accrue. If the sales contract was rescinded by agreement, the effect of the sales contract would be lost and the transfer of assets would not be carried out, so it cannot be deemed that the transfer of assets, which is a taxation requirement of the transfer income tax, was carried out (see Supreme Court Decision 92Nu944, Dec. 22, 1992).

A contract termination or termination contract is a new contract, regardless of whether the contract is rescinded or not, the effect of the existing contract is terminated by mutual agreement and return it to the same state as the contract had not been concluded at the beginning. In order to be terminated by mutual agreement, the agreement must be agreed upon as well as the case where the contract is generally concluded (agreement). In order to establish such agreement, the contents of the agreement expressed in the act of indicating both parties should objectively coincide. Of course, in order to establish the agreement, the agreement on restitution should be objectively agreed upon. Of course, even though it is not necessarily required to make an agreement on restitution at the time of termination of agreement, it is equivalent to this example in light of our rule of experience to cancel a contract without any agreement on the return of the down payment, the intermediate payment, and the compensation for damages already paid when the contract is terminated by mutual agreement (see Supreme Court Decision 2006Da2490, Nov. 29, 2007).

The following facts are revealed: (a) whether the instant contract was cancelled after the conclusion of the agreement; (b) No. 100,000,000 won for the transfer of real estate; (c) No. 20,000,000 won for the transfer of real estate; (d) No. 10,000,000 won for the transfer of real estate; and (e) No. 20,000,000 won for the transfer of real estate; (e) No. 10,000,000 won for the transfer of real estate; and (e) No. 20,000,000 won for the transfer of real estate; and (e) No. 10,000 won for the transfer of real estate; and (e) No. 20,000,000 won for the transfer of real estate; and (e) 1, 2010,000 won for the transfer of ownership for the transfer of real estate for the transfer of real estate for the transfer of ownership.

(2) Whether the transfer value calculation is unlawful

The actual transfer value of the relevant asset, which serves as the basis for calculating the amount of capital gains tax, refers to the value that the transferor transfers the asset at the time of the transaction and received as the price for the transfer and is objectively recognized by the sales contract or other documentary evidence. Thus, in case of the transaction exchange, it is a value exchange with the monetary value of the object, especially in case of the transaction exchange accompanied by the settlement procedure for the difference in the appraisal value by conducting the market price appraisal of the object of exchange, the actual transfer value may be confirmed, but in case of a simple exchange, the actual transfer value may not be confirmed (see Supreme Court Decision 98Du19841, Nov. 26, 199).

In addition, even where the tax authority considers that a taxation disposition is unlawful because it was erroneous in the course of determining the tax base and amount of tax, if the tax amount imposed and collected does not exceed the scope of a legitimate calculated tax amount, and the wrong method does not change the scope of the taxable unit and the reason for the disposition, it shall not be deemed unlawful and revoked (see Supreme Court Decision 92Nu10180, Sept. 28, 1993).

In full view of the purport of each statement in Eul evidence Nos. 7 and 9 (including each number), the defendant shall be deemed to have determined the transfer value as 3,570,000 won under the exchange contract with the former real estate and the former real estate value as 1/2 equity (2,070,000 won + Gwangju 1,500,000,000), and the acquisition value as 2,812,050,885 won (the former real estate value as 1,449,000,000 + Gwangju 1,363,050,05 won) based on the actual transaction price as 2,00,000 won (the former real estate value as 1,363,050,885 won) under the exchange contract with the former real estate in consideration of the latter real estate and Busan 2,000,000 won, it is difficult to view that the latter's actual transaction price as 25,000 won under the contract with the latter.

(3) Whether the imposition of penalty tax is illegal

In accordance with Article 47-2 of the former Framework Act on National Taxes (Amended by Act No. 9911, Jan. 1, 2010)

If a taxpayer fails to file a tax return in an unfair manner, penalty tax shall be imposed. Article 27(2) of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 21937 of Dec. 31, 2009) provides that for example, it shall be imposed in an unfair manner. The Plaintiffs are subject to penalty tax as they fall under the case of concealing transactions pursuant to Article 27(2)5 of the Enforcement Decree of the Framework Act on National Taxes, and thus,

3. Conclusion

Therefore, the plaintiffs' claims are dismissed in entirety because they are without merit.