[1] Where the head of a Si/Gun/Gu who has received a report on real estate transaction under the former Business Affairs of Licensed Real Estate Agents and Report of Real Estate Transactions Act reveals an actual transaction price different from the reported amount through a field investigation, etc. regardless of the verification procedure by the real estate transaction price verification system, whether the actual transaction price can be the tax base for acquisition tax by applying Article 111(5)5 of the former Local Tax Act (negative)

[2] The case holding that in a case where Party A, who purchased the land of KRW 6.3 million, filed a report on real estate transaction and completed the registration of ownership transfer with the administrative agency based on the transaction price, and the administrative agency imposed acquisition tax and registration tax with the actual acquisition price of KRW 6.3 million based on the deeming that the acquisition or registration of the land falls under Article 111 (5) 5 of the former Local Tax Act, and thus the administrative agency imposed acquisition tax and registration tax, etc. with the actual acquisition price of KRW 6.3 million based on the actual transaction price verification system, the actual transaction price cannot be deemed as the tax base for acquisition tax and registration tax, regardless of the appropriateness verification by the administrative agency based on the real estate transaction price verification system

[1] In light of the text and legislative intent of Article 28 of the former Business Affairs of Licensed Real Estate Agents and Report of Real Estate Transactions Act (amended by Act No. 8120 of Dec. 28, 2006), “verification” in this context means a procedure to determine the price reported by the parties to a transaction of the land or building according to a certain standard based on the real estate transaction price verification system, which is appropriate, but is not a procedure to determine whether the reported price is an actual transaction price or to determine actual transaction price different from the reported price. Thus, Article 111(5)5 of the former Local Tax Act (amended by Act No. 8835 of Dec. 31, 2007) provides that the reported price should be determined as appropriate based on the real estate transaction price verification system, barring special circumstances to deem that the reported price is substantially different from the real transaction price and thus, it should be interpreted that the reported price should be the acquisition tax base of acquisition tax, regardless of whether the reported price is the actual transaction price or not.

[2] The case holding that in a case where Party A, who purchased the land of KRW 6.3 million, filed a report on real estate transaction with the competent administrative agency and completed the registration of ownership transfer, and the administrative agency imposed acquisition tax and registration tax with the actual acquisition price of KRW 6.3 million based on Article 111 (5) 5 of the former Local Tax Act (amended by Act No. 8835, Dec. 31, 2007; hereinafter the same shall apply), on the ground that the acquisition and registration of the land in question fall under Article 111 (5) 5 of the former Local Tax Act, and thus the actual acquisition price of KRW 6.3 million is not reported on real estate transaction or the administrative agency verified the appropriateness by the real estate transaction price verification system, and it is merely a fact revealed by the administrative agency regardless of propriety verification, and thus, the actual transaction price of KRW 6.3 million cannot be deemed as the acquisition tax and registration tax base.

[1] Articles 11(5)5 (see current Article 10(5) and 130(3) (see current Article 27(3)) of the former Local Tax Act (Amended by Act No. 8835, Dec. 31, 2007); Articles 27(1) and 28 of the former Licensed Real Estate Agents’ Business Affairs and Report of Real Estate Transactions Act (Amended by Act No. 8120, Dec. 28, 2006); Articles 111(5)5 (see current Article 10(5) and 130(3) (see current Article 27(3)); Article 27(3) of the former Licensed Real Estate Agents’ Business Affairs and Report of Real Estate Transactions Act (Amended by Act No. 8120, Dec. 28, 2006); Article 28 of the former Local Tax Act / [2] Articles 111(5) and 111(5)5 (see current Article 10(5)5) and (3) (3)); Article 28(1) of the former Real Estate Transactions Act No. 208.

Plaintiff 1 and one other (Attorney Kim Jae-hwan, Counsel for the plaintiff-appellant)

Haan-gun (Law Firm Geum River, Attorneys Kim Won-tae et al., Counsel for the plaintiff-appellant)

Busan High Court Decision 2008Nu1474 decided September 12, 2008

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

The grounds of appeal are examined.

1. Article 111(5)5 of the former Local Tax Act (amended by Act No. 8835, Dec. 31, 2007; hereinafter the same) provides that "acquisition price is de facto the tax base of acquisition tax" as one of the cases where "acquisition price is verified by submitting a report pursuant to Article 27 of the Business Affairs of Licensed Real Estate Agents and Report of Real Estate Transactions Act, and verified by verification pursuant to Article 28 of the same Act." Article 130(3) of the former Local Tax Act provides for the same purport as to the tax base of registration tax.

In addition, Article 27(1) of the former Business Affairs of Licensed Real Estate Agents and Report of Real Estate Transactions Act (amended by Act No. 8120 of Dec. 28, 2006; hereinafter “former Report of Real Estate Transactions Act”) provides that the party who prepared a contract document for the transaction of land or building shall report the actual transaction price, etc. to the head of the competent Si/Gun/Gu having jurisdiction over the location of the land or building (hereinafter “report of Real Estate Transactions”). Article 28(1) provides that the Minister of Construction and Transportation shall establish and operate a system for verifying the transaction price of real estate under paragraph (2) of the same Article.

In light of the language and text and legislative intent of Article 28 of the former Report on Real Estate Transactions Act, the term "verification" means only the procedure to determine whether the reported price of the land or building is appropriate according to a certain standard based on the verification system of real estate transaction price, not the procedure to confirm whether the reported price is the actual transaction price or to clarify the actual transaction price different from the reported price. Thus, Article 111(5)5 of the former Local Tax Act provides that where the reported price of the land or building is determined to be appropriate by the verification system of real estate transaction price, the reported price shall be deemed to be the actual acquisition price, unless there are special circumstances to deem that the reported price is different from the actual transaction price, and the head of the Si/Gun/Gu who has received the report on real estate transaction shall not extend to the purport that the reported price can be the tax base of acquisition tax, regardless of the verification procedure.

2. According to the reasoning of the judgment below, on May 3, 2005, the plaintiffs entered into a sales contract with 162 square meters of forest land (hereinafter referred to as "land of this case") such as 37,686 square meters of forest land (number 1 omitted) from the non-party on 10,000,000 won, and the plaintiffs and the non-party agreed to change the purchase price of 630,000,000 won on May 4, 2006 to 630,000, 30,000,000 won for new sales contract and 30,000,000 won for the land of this case, and the plaintiffs reported the actual transaction price of this case to the defendant on 10,000,000 won for the real transaction of this case to 30,000,0000 won for the real transaction of this case and 160,000,000 won for the real transaction of this case.

However, according to the facts acknowledged by the court below, with respect to the actual transaction price of this case 630,000,000 won, the plaintiffs filed a report on real estate transaction or the defendant verified the propriety by the verification system of real estate transaction price, and the actual transaction price is nothing more than that of the defendant, regardless of the above verification of propriety. In light of the above legal principles, the above actual transaction price cannot be viewed as the tax base of acquisition tax and registration tax based on Article 111 (5) 5 of the former Local Tax Act.

Nevertheless, the lower court determined that the instant disposition, based on Article 111(5)5 of the former Local Tax Act, based on the said real transaction price as the tax base for acquisition tax and registration tax, was lawful. In so doing, the lower court erred by misapprehending the legal doctrine on Article 111(5)5 of the former Local Tax Act, thereby adversely affecting the conclusion of the judgment. The allegation in the grounds of appeal assigning this error is with merit.

3. Therefore, without examining 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 on the bench

Justices Kim Nung-hwan (Presiding Justice)