Cho-2015-China-5028 ( December 28, 2017)

Article 163 (9) of the Enforcement Decree of the Income Tax Act applied when calculating the acquisition value of real estate acquired through donation does not go against the principle of no taxation and tax equality.

Article 163 (9) of the Enforcement Decree of the Income Tax Act, which provides that in case of transfer of assets acquired without compensation, the acquisition value of assets shall be deemed the actual transaction value at the time of acquisition under the provisions of Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of the date of commencing the inheritance or the date of donation.

The proviso of Article 97 (1) 1 (a) and (5) of the Income Tax Act, the proviso of Article 163 (9) of the Enforcement Decree

Incheon District Court 2018Gudan521 Revocation of Disposition of Imposing Capital Gains Tax

HongA

BB Director of the Tax Office

2018.06.26

208.21

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 of imposition of capital gains tax of KRW 654,813,580 against the Plaintiff on August 1, 2017 is revoked (the date on which the Plaintiff receives a notice of tax payment is August 7, 2017; the date of disposition is August 1, 2017; the date of disposition is August 1, 2017; thus, partly correcting the purport of the claim).

1. Details of the disposition;

A. On August 30, 1988, the Plaintiff acquired shares of 265.2 square meters in Seoul** Dong 1337-11 site, 265.2 square meters in commercial buildings, and 640 square meters in commercial buildings (hereinafter “instant real estate”) as a gift, and transferred the same to an auction on November 10, 2016, and then filed a preliminary return on the tax base of transfer income belonging to the year 2016 as of January 31, 2017, the transfer value was KRW 2,718,41,736 in the auction price, while filing a preliminary return on the tax base of transfer income belonging to the year 2016. The transfer value was KRW 521,147,326 in the converted value under Article 97(1)1 (b) of the Income Tax Act (the Plaintiff did not actually pay the transfer income tax).

B. However, in accordance with Article 97(1)1(a) and (5) of the Income Tax Act and the proviso of Article 163(9) of the Enforcement Decree of the Income Tax Act, the Defendant recognized the acquisition value of the instant real estate from the accumulated total amount of KRW 383,398,212 minus KRW 64,604,277 won as KRW 318,793,935, which was the standard market value, and notified the Plaintiff of KRW 654,813,580,580, which was the sum of KRW 654,813,580,580, which was the total of KRW 615,728,276, and the total of KRW 39,085,309, which was the average amount of capital gains tax in relation to the

C. Accordingly, the Plaintiff filed a tax appeal seeking revocation of the portion exceeding KRW 561,062,810, which was the initial return amount, by asserting that Article 163(9) of the Enforcement Decree of the Income Tax Act (hereinafter “instant provision”) applied by the Defendant at the time of calculating acquisition price was unconstitutional against the principle of no taxation without representation and the principle of tax equality, but was dismissed.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence No. 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The provision of this case provides for the purport that "the value assessed under the provisions of Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of the date of commencing an inheritance or donation shall be deemed the actual transaction value at the time of acquisition." This is a violation of the principle of no taxation without law that the taxation requirements and the procedures for imposing and collecting taxes should be enacted by law. In addition, the provision of this case is to evaluate the past as a future evaluation method, and it is against the principle of no taxation without law (Prohibition of Legislation) as it is to retroactively impose inheritance and gift tax that has been terminated. In the case of onerous acquisition, the application of the provision of this case is unconstitutional since it violates the principle of no taxation without law as it violates the principle of no taxation without law.

B. Determination

In relation to the provision of this case, the Supreme Court (Supreme Court Decision 2006Du1326 Decided October 26, 2007) ruled as follows.

According to Articles 94(1), 96(1), and 97(1)1(a)(proviso) and (c) of the former Income Tax Act (amended by Act No. 7006, Dec. 30, 2003; hereinafter the same), where a transferred asset falls under a expensive house, etc., the transfer value and the acquisition value shall be calculated on the basis of the actual transaction value. In this case, where the actual transaction value at the time of acquisition cannot be confirmed, the amount calculated by applying the transaction example, appraisal value, or conversion value as prescribed by the Presidential Decree in sequential order may be the acquisition value. Meanwhile, Article 97(5) of the former Income Tax Act provides that "the necessary matters concerning the calculation of necessary expenses, such as the scope of the actual transaction value required for acquisition, calculation of gift tax amount, etc., shall be determined by the Presidential Decree." In applying the proviso of Article 97(1)1(a) of the Act to the inherited or donated assets, the provision of this case provides that "the actual transaction value appraised at the time of acquisition or donation."

In full view of the purport of the above provisions, the assets are not inherited or donated by the transferred assets.

In case where gains on transfer from such transfer are calculated based on the actual transaction value, in accordance with the proviso of Article 97 (1) 1 (a) of the former Income Tax Act because it falls under a high-priced house, etc., if it is impossible to confirm the actual transaction value required for such acquisition, it shall be calculated based on the transaction example, appraisal value, or conversion value prescribed by the Presidential Decree. However, in case where gains on transfer are to be calculated based on the actual transaction value pursuant to the proviso of Article 97 (1) 1 (a) of the former Income Tax Act because the assets inherited or donated fall under a high-priced house, etc., a separate provision is needed as to the actual transaction value at the time of acquisition as at the time of acquisition, and accordingly, in case of the assets inherited or donated under the provisions of this case, the value assessed pursuant to

Therefore, the provision of this case is a provision under Article 97 (5) of the former Income Tax Act, which delegates necessary matters concerning the calculation of necessary expenses such as the "scope of actual transaction price required for acquisition" so that it can be prescribed by the Presidential Decree, and thus cannot be deemed as a provision for invalidation without delegation of the parent law. In addition, in case where the assets inherited or donated are transferred, the value corresponding to the tax base of inheritance tax or gift tax (the value assessed under Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of the date of commencement of inheritance or donation) can be deemed as necessary expenses when calculating transfer margin and the imposition of transfer income tax may prevent tax evasion or double taxation only when the amount of transfer exceeds the above value.

In the end, in a case where the transfer value is calculated based on the actual transaction value as a general asset, and the actual transaction value required for the acquisition cannot be confirmed, it shall be calculated based on the transaction example, appraisal value, or conversion value. However, in a case where the transfer value as an inherited or donated asset is to be calculated based on the actual transaction value, there is no actual transaction value at the time of acquisition, and thus, there is no separate provision as to the actual transaction value at the time of acquisition. In the case of the assets inherited or donated, this case’s provision provides that the amount assessed under the provisions of Articles 60 through 66 of the Inheritance Tax and Gift Tax Act as of the date of commencing an inheritance or donation shall be deemed as the actual transaction value required for the acquisition, and it cannot be deemed as a provision which is based on the provisions of Article 97(5) of the former Income Tax Act, which is delegated for the purpose of determining the scope of the actual transaction value required for acquisition, and the imposition of transfer income tax cannot be considered as a violation of the principle of prohibition of retroactive taxation or double taxation.

Therefore, the Plaintiff’s assertion that the instant provision is unconstitutional and illegal is rejected.

3. Conclusion

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