Seoul Administrative Court-2015-Gu Group-1208 ( October 30, 2015)

Excessive sales agency fees shall not be deemed necessary expenses.

Since the Plaintiff’s payment of KRW 66 million under the pretext of a sales agency fee is considered to have been made for the purpose of evading taxes or reducing taxes unfairly, it is reasonable that the Defendant denied the above KRW 66 million as an unfair act concerning capital gains.

2015Nu68583 Revocation of Disposition of Imposing capital gains tax

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Director of the District Office

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July 7, 2016

August 18, 2016

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The Defendant imposed capital gains tax of KRW 45,190,875 on the Plaintiff on January 2, 2014, as the capital gains tax of KRW 45,190,875.

The cancellation shall be revoked.

2. Purport of appeal

The same shall apply to the order.

1. Details of disposition;

A. On November 11, 2011, the Plaintiff is a ○○ Construction Co., Ltd. (hereinafter “Nonindicted Company”).

ter ○○○○○-si ○○○○○-gu ○○○○○-do 254-36 land 1,777 square meters (hereinafter referred to as “the entire land of this case”) were acquired, but on June 26, 2012, 1,282 square meters of 495 square meters (150 square meters, hereinafter referred to as “instant land”) were transferred to B, and the transfer income tax was not reported.

B. The Defendant: (a) the Plaintiff’s acquisition value of the instant land was KRW 19,476,00; and (b) the transfer value was KRW 90 million.

On January 2, 2014, the Plaintiff issued a disposition of imposition of capital gains tax of KRW 45,190,875 (hereinafter referred to as “instant disposition”) to the Plaintiff in 2012.

C. The plaintiff appealed and filed an appeal, but all of which were dismissed.

[Ground of recognition] Facts without dispute, Gap evidence 1, Gap evidence 6, Gap evidence 7, Eul evidence 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

1) Plaintiff

Since the sales agency fee of KRW 66 million has been paid to the non-party company with respect to the transfer of the instant land, the disposition of this case which did not deduct the amount, even though it should be deducted as necessary expenses in calculating the transfer income tax, is unlawful.

2) Defendant

Although the non-party company was able to transfer the instant land to the immediately preceding BB, it merely went through the Plaintiff in the middle to evade corporate tax or transfer income tax, and thus, the Plaintiff and the non-party company’s sales agency contract itself is doubtful or invalid as it is for the purpose of tax evasion even if it was concluded.

Even if there is a sales agency contract concluded between the plaintiff and the non-party company, the plaintiff's excessive payment of sales agency fees to the non-party company shall be denied by wrongful calculation.

B. Relevant statutes

It is as shown in the attached Form.

(c) recognised facts

1) The non-party company is a company that acquires land, etc. and sells it to others or sells it to others, and the plaintiff is referred to the representative director of the non-party company as a sales agent.

2) On August 1, 2011, the non-party company acquired the entire land of this case on August 1, 201, and sold 495 square meters among them to KimD at KRW 6,50,000 per square meter, and the remainder of 1,282 square meters is owned as it is.

The former had been.

3) Of that, the Plaintiff and the non-party company concluded a sales agency contract with the following terms: “The Plaintiff purchased the remaining 1,282 square meters of the entire land of this case at a usual rate of KRW 1.30,00,000 per annum, and the Plaintiff received only KRW 1.60,000 per annum and paid the remainder as sales agency fee to the non-party company; and the non-party company bears all office rent, employees’ benefits and allowances, communications expenses, expenses for partition of land, and all other expenses.” (hereinafter referred to as the “instant contract”).

4) Under the instant contract, on November 11, 201, the Plaintiff purchased the remaining 1,282 square meters of the entire land of this case from the non-party company, and among which the instant land was sold in lots to B by the employees of the non-party company at KRW 90 million of the total purchase price.

5) Of the above total purchase price of KRW 90 million, KRW 24 million (1.6 million per square year x 150 square year) was paid to the Plaintiff, and the remainder of KRW 66 million was reverted to the non-party company under the pretext of a sale agency fee.

6) The non-party company issued a tax invoice to the Plaintiff on the sales agency fee, and reported the value-added tax on the revenue from the sales agency fee. The non-party company also paid the sales commission and the sales commission, the representative director, and the former director with each performance fee.

7) After that, the non-party company discontinued its business and did not pay value-added tax and corporate tax, and the representative director of the non-party company was not designated as the second taxpayer.

[Ground of recognition] A without dispute, Gap evidence 1 to 5, Gap evidence 15, and Gap evidence 16,

the purpose of each entry (including each number in the case of a tentative number), the testimony of E with witness of the first instance trial, and the purport of the whole pleadings.

D. Determination

1) Whether the Plaintiff paid the sales agency fee to the non-party company

In light of the following circumstances revealed by the facts of recognition as seen earlier, namely, the content of the land sale agency contract (Evidence A2) made between the Plaintiff and the non-party company, the details of passbook transaction (Evidence A 1 through 6, and Evidence A) of the non-party company, and the details of the tax invoice (Evidence A5) issued by the non-party company to the Plaintiff regarding the sales agency fee by the non-party company (Evidence A) and the tax invoice issued by the non-party company to the Plaintiff as to the sales agency fee by the non-party company, the Plaintiff sold the land of this case to the non-party company and paid the non-party company 6 million won as the sales agency fee to the non-party company. It is difficult to see that the Plaintiff paid the performance

2) Whether there was a purpose of evading tax under the instant contract

A) The Plaintiff asserts to the effect that the Plaintiff’s transfer of the instant land at low price to the Plaintiff is not the transfer of the instant land for the purpose of tax evasion, on the ground that the sales price would be improved by selling another parcel of land with high investment value after promptly selling the land unsold in lots rather than holding the land unsold in lots, and that the transfer of the instant land at low price would not be the transfer of the instant land to the Plaintiff for the purpose of tax evasion. In other words, the Plaintiff asserted that the Nonparty Company sold 1,282 square meters, including 495 square meters of the instant land, to the Plaintiff on the ground that there was land located ○○-gu, ○○-dong, ○○-dong, ○○-dong, 93-1 (hereinafter “○-dong land”) where the ownership transfer registration should be made by paying a balance

section 30.

B) However, in full view of the purport of the argument in the statement No. 1 and No. 14, the non-party company sold the above 1,282 square meters to the Plaintiff for total purchase price of KRW 5,44,00,000,000,000,000,000 to KimD before transferring the instant land to the Plaintiff, and the Plaintiff sold the instant land to GB for KRW 97,50,000,000. Meanwhile, the non-party company purchased the instant land for KRW 363,00,000,000. According to the Plaintiff’s assertion, the non-party company sold the 1,282 square meters of the instant land to GB, and the non-party company sold the 5,000,000 square meters of the purchase price of the instant land to the Plaintiff, which is substantially lower than the price of KRW 1282,00,00,000,00.

C) If the non-party company needs funds to raise the purchase price of the land in ○○dong, as alleged by the Plaintiff, it would be far more convenient to borrow money from the Plaintiff instead of selling the said land at a price significantly lower than the above price. Moreover, even if the non-party company selected a method of selling the land owned by the non-party company, only part of the 1,282m2m2 can be sold, and even if it is intended to sell the entire land, it can be viewed as a case of selling the land at a reduced price which is only a quarter of the market price.

D) The plaintiff asserts that in relation to this, the non-party company transferred at a low price to the plaintiff who is able to believe, but the remaining profit was the management strategy that the non-party company acquired as a sales agency fee.

① However, the period during which Nonparty Company acquired the instant land and sold it to the Plaintiff from August 1, 201 to November 11, 201, the said short-term sale contract was no longer entitled to special deduction for long-term holding. ② The Nonparty Company did not pay the value-added tax and corporate tax on the completion of the sales agency completion, ③ the Plaintiff’s representative director, who is the Nonparty Company, was holding only 40% of the shares of the Nonparty Company, was not liable for secondary tax liability for corporate tax. ④ Meanwhile, it is reasonable to deem that the Plaintiff’s ancillary F was the representative director of the Plaintiff’s company (hereinafter “○○○”) to sell the land owned by it through ○○○○, Inc. (hereinafter “○○○”) as the method similar to the instant case, and that the Plaintiff did not pay the transfer income tax to Nonparty 2 by closing its business without paying it to Nonparty ○○○, and that it did not pay the transfer income tax to Nonparty 1, 200, the Plaintiff did not pay the transfer income tax to Nonparty 2.

E) Furthermore, if the tax authority easily recognizes necessary expenses similar to this case, the real estate transferor uses a person in a special relationship with him/her for the purpose of evading capital gains tax and pays the service fees to him/her, and later causes the fees already paid to him/her by cash, etc., and subsequently there is no way to prevent illegal behavior in which the tax authorities subsequently receive the fees already paid from the person in a special relationship with him/her in order to avoid capital gains tax. In addition, if the transferor is a sales agency as in this case, as in this case, if the transferor is a sales agency, it cannot prevent illegal behavior in which taxes are not imposed on capital gains by closing the business without paying the value-added tax on the sales agency fees and the corporate tax after avoiding the high amount of capital gains tax. Accordingly, if an excessive sales agency fee is received between special interested parties, it is necessary to strictly determine

3) Whether it is possible to deny the wrongful calculation of capital gains

A) Article 101(1) of the former Income Tax Act (amended by Act No. 11611, Jan. 1, 2013) provides that "where the head of a regional tax office or the head of a regional tax office having jurisdiction over the place of tax payment deems that any act or computation of a resident having jurisdiction over the place of tax payment unreasonably reduces the tax burden on his/her income through transactions with a related party to the resident, he/she may calculate his/her income during the pertinent taxable period regardless of the resident's act or calculation." Article 98(1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 23887, Jun. 29, 2012) provides that "a related party" means a related party under Article 1-2(1), (2), and (3)1 of the Enforcement Decree of the Framework Act on National Taxes (amended by Act No. 11611, Jan. 1, 2013) provides that "where it is deemed that the tax burden has been reduced unfairly, it falls under any of the following circumstances or transactions:

B) Since the Plaintiff is in a father-child relationship with the representative director of the non-party company, the Plaintiff and the non-party company are in a special relationship pursuant to the above provisions of the law, and the contract of this case concluded between the Plaintiff and the non-party company for the purpose of evading taxes of the Plaintiff and the non-party company is concluded as above. Thus, the Plaintiff’s transfer income tax is reduced unfairly by paying the non-party company an amount equivalent to 94.8%

4) Sub-determination

Ultimately, the Plaintiff’s payment of KRW 66 million to Nonparty Company as a sales agency fee seems to have been made in accordance with the purpose of evading or unfairly reducing the amount of early income. Therefore, it is reasonable that the Defendant denied the above KRW 66 million as an unfair act concerning capital gains and rendered the instant disposition on the basis thereof.

3. Conclusion

Therefore, the plaintiff's claim shall be dismissed as it is without merit, and since the judgment of the court of first instance is unfair with different conclusions, the defendant's appeal shall be accepted and the judgment of the court of first instance shall be revoked and the plaintiff's claim shall be dismissed as per Disposition.