Cho-2015-China-0974 (Law No. 16, 27 January 2016)

Even if a transferor under a sales contract makes an unregistered pre-sale, there is a tax liability, except in extenuating circumstances.

If the objective meaning of the language and text is clear, barring any special circumstance, the existence and content of the expression of intent should be recognized. Therefore, even if the transferor is not in a state of non-registration under the sales contract, a capital gains tax obligor

Article 96 of the Income Tax Act

Article 98 of the Income Tax Act: Time of Transfer or Acquisition

2016Guhap50288 Revocation of Disposition of Imposing capital gains tax

AA

BB Director of the Tax Office

September 15, 2017

November 10, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The disposition of imposition of capital gains tax of KRW 189,615,230, which the Defendant rendered to the Plaintiff on November 3, 2014, shall be revoked.

1. Details of the disposition;

A. With respect to the land (hereinafter referred to as “each of the instant land”) located on the ○○○○○○○○○○ (hereinafter referred to as “○○○○”) located on which CCC or DD (the two parties are married) had completed the registration of ownership transfer to EE, FF, and GG (hereinafter referred to as “the instant buyers”) as follows.

B. On November 3, 2014, the Defendant: (a) purchased each of the instant lands from CCC and DD, and sold to the instant buyers a total of KRW 445,00,000,000 on a total of KRW 445,000; and (b) on November 3, 2014, the Defendant decided and notified that the Plaintiff rendered a decision and notification (hereinafter referred to as the “disposition of this case”) to grant KRW 189,615,230 [the Plaintiff KRW 189,615,230 [the determined tax amount + KRW 105,70,000 + Additional tax returns + KRW 42,280,00 + Additional tax returns + KRW 41,635,230), KRW 5,00,00 as necessary expenses].

C. The Plaintiff dissatisfied with the instant disposition and filed an objection against the Defendant on December 1, 2014, and the Defendant dismissed the Plaintiff’s objection on December 30, 2014. On February 2, 2015, the Plaintiff filed a petition for adjudication seeking revocation of the instant disposition with the Tax Tribunal, and the Tax Tribunal dismissed the Plaintiff’s petition on January 27, 2016.

Facts without any dispute arising in recognition, Gap's Nos. 1, 2 (including branch numbers, if any; hereinafter the same shall apply), Eul's 1 through 3, and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The assertion that the registration is not a pre-sale.

The Plaintiff intended to enter into a consulting contract with CCC and DD to exclusively exercise the exclusive right to deal with each of the instant lands. However, CCC and DD failed to reach an agreement with CCC and DD on consulting, and entered into a sales contract with 180,000 won per average sale price, which is the desired price, as sales amount, due to the Plaintiff’s failure to believe the Plaintiff, in a formal manner, and paid 40,000 won as a security deposit for securing the intent of transaction, not a pre-registration.

2) Claim concerning necessary expenses (preliminary assertion)

Even if the Plaintiff is obligated to pay capital gains tax as a resale because the purchase and sale of each of the instant lands constitutes an unregistered pre-sale, not only KRW 5 million for brokerage expenses for HH recognized as necessary expenses at the time of the instant disposition, but also for brokerage expenses for the seller, KK, and HH, each of the introduction expenses paid by the Plaintiff to the seller, JJ, KK, and HH, which introduced the seller, KRW 8 million,12 million,10 million, and KRW 18 million, which was paid to MM that introduced EE, shall be deemed necessary expenses and deducted prior to the calculation of capital gains tax.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Determination as to whether the registration constitutes an unregistered pre-sale

A) Relevant legal principles

The interpretation of a declaration of intent is to clearly confirm the objective meaning that the parties have given to the act of expressing intent, and where the contents of a contract are written in writing, which is a disposal document, it shall not be cited in the phrase used in the document, but it shall reasonably interpret the objective meaning that the parties have given to the act of expressing intent according to the contents of the document, regardless of the internal intent of the parties. In such cases, if the objective meaning of the text is clear, barring any special circumstance, the existence and content of the declaration of intent shall be recognized (see, e.g., Supreme Court Decision 2012Da4471, Nov. 29, 2012)

B) the facts of recognition

The following facts may be acknowledged in full view of each statement of evidence Nos. 4 to 10, witness HH, and DD’s testimony and overall purport of the pleading.

① On October 29, 2010, between the Plaintiff and CCC and DD, the Plaintiff purchased ○○○ 661, 663, and 664 out of each of the instant lands from CCC and DD, in total, KRW 234,00,000,000,000,000,000 out of the down payment of KRW 40,000,000,000,000,000,000, as of the date of the conclusion of the contract, and the remaining 30,000,000,000,000 won was paid on November 9, 201, and the remainder shall be paid on April 30, 201 (hereinafter “instant sales contract”). The instant sales contract is accompanied by the following special terms and conditions attached thereto:

Matters of special agreement

1. The seller shall remove the rice straw on the land of this Agreement by November 10, 2010.

2. The seller permits the access to the land of this Agreement to do civil works and to do so as to do so.

3. Where the personal information of the purchaser is changed before the balance is paid, the seller shall submit all documents necessary for the transfer of ownership to the purchaser irrespective of the number of purchasers;

4. If the buyer needs to perform his/her survey, the seller shall permit the survey even before any balance.

5. After making a deposit of 40 million won as down payment, the buyer shall delegate to the head of HH the sales contract, the balance and the transfer of ownership to the buyer.

6. The balance of KRW 234 million, excluding the down payment of KRW 40 million, out of the total sales amount, shall be determined by ○○○ 661 70,820,000, 31,480,000 on 663 ○○ 64 64 ,000,000 on ○○ 664 ,00.

7. The contract shall be terminated without any penalty for both parties, if no permission for development activities and permission for construction is granted prior to any balance of the land under this contract;

8. Of the down payment, KRW 10 million shall be paid on a gold day and the remainder of KRW 30 million shall be paid on November 9, 2010.

9.to visit the site and to recognize and conclude the present condition of the land under this Agreement (including boundaries).

② As stipulated in this sales contract as down payment, the Plaintiff deposited KRW 10 million in the account of CCC on October 29, 2010, and KRW 30 million on November 9, 2010.

③ On November 16, 2010, the Plaintiff sold 664 of each of the instant lands to FF and GG for purchase price of KRW 165,00,00 (the down payment per contract date KRW 8 million, the intermediate payment of KRW 130,000,000 on November 25, 2010, and the remainder of KRW 27 million on January 11, 201) to FF and GG for purchase price of KRW 165,00,00 (the down payment per contract date is KRW 8 million, the intermediate payment of KRW 13,00,000,000 on November 25, 201, and the remainder of KRW 425-13 on the road abutting on the said land. On the same day, the Plaintiff prepared a sales contract on the same day as CCC as the seller.

According to the above sales contract, the Plaintiff received from FF and GG for KRW 8 million on November 16, 201, the down payment of KRW 130 million on November 25, 201, the intermediate payment of KRW 130 million on November 25, 2010, and the remainder of KRW 27 million on January 11, 201, and the transfer registration was completed in the name of FF and GGG for the land of KRW 664, 425-13 on January 12, 2011 on the following day.

④ On January 21, 2011, the Plaintiff: (a) sold ○○○ 661,663 out of each of the instant lands to EE in total at KRW 280,000,000 (the down payment per contract date, the remainder of KRW 70 million on January 28, 2011, and KRW 21,000,000,000) to EE; (b) on the same day, the Plaintiff entered into a sales contract with CCC and DD as a seller on the same day; (c) each of the instant lands sold ○○ 425-9,000,000 won in total; and (d) the Plaintiff received ownership from EE in the name of EE on January 21, 201, 200, KRW 360,000,000,000; and (e) the Plaintiff received ownership from EE in the name of EE. 166,201.

⑤ On November 25, 2010, the Plaintiff paid 6.3 million won to CCC’s account via HH, a broker, and 19.8 million won to CCC’s account on January 28, 201, and paid cCC and DD the purchase price of each of the instant lands as stipulated in the instant sales contract.

6) HH, which arranged the instant sales contract, testified in this Court as follows.

HH known the Plaintiff as the buyer of ○○○ 661, 663, and 664 among each of the instant lands. At the time of the instant sales contract, CCC and DD received 40 million won from the Plaintiff, not the consulting performance guarantee, and participated in the instant sales contract with the Plaintiff, CCC, and DD at the time of the instant sales contract. However, CCC and DD did not participate in the conclusion of the sales contract with the instant buyer.

(b) HH receives any balance from the Plaintiff on behalf of CCC, DD, EE, FF, and GG on each balance date set forth in the sales contract with the Plaintiff, and includes land ○○○ 425-9, and 425-13 in the sales contract for the road at issue after the conclusion of the contract, and was present to receive the documents necessary for the registration of transfer of ownership, but there was only interest in receiving the balance of the purchase price calculated at KRW 180,000 per square year from the Plaintiff, and there was no interest in the purchaser of each land of this case from the Plaintiff.

HH’s certificate (Evidence No. 4-10) to the effect that ○○○ 661, 663, and 664 out of each land of this case was sold to the purchaser of this case as a broker of the Plaintiff who entered into a consulting contract with the CCC or DD, was a private person on the part of the Plaintiff’s request after this case.

7) Of the sellers of each of the instant lands, DDR testified to the effect that CCC and DD sold ○○ 61, 663, and 664 out of each of the instant lands to the instant buyers as the Plaintiff’s intermediary, it was not well aware of the content of DDR’s confirmation (Evidence 7-1). Sale of each of the instant lands at KRW 180,000 per ordinary party, and HH and the Plaintiff was known, but HH and the Plaintiff testified that the instant buyers were unaware.

C) Determination

According to the above legal principles, the following facts are revealed: (a) although the sales contract was prepared specifically between the Plaintiff, CCC, and DD, the Plaintiff did not provide the consulting services asserted by the Plaintiff; (b) the Plaintiff purchased each of the instant land from CCC and DD and sold it to the purchaser of the instant land as it is, and did not provide any service to increase the value of each of the instant land (after the sales contract was concluded with the instant purchaser, the part adjacent to each of the instant land was known as CCC and DD; (c) the instant buyer did not pay the purchase price to the Plaintiff; (d) the Plaintiff did not directly pay the purchase price to CCC and DD; and (e) the Plaintiff did not purchase the instant land from CCC and DD, regardless of the amount of the purchase price received from the purchaser; and (e) the Plaintiff paid the purchase price to CCC and DD marginal profits in a short period exceeding 500 million won; and (e) the Plaintiff did not appear to have paid the purchase price to the Plaintiff for each of the instant land.

2) Determination as to the conjunctive assertion regarding necessary expenses

The Plaintiff asserts that, in addition to the brokerage cost of HH as deemed necessary under the instant disposition, the amount of KRW 8 million paid to J as the introduction cost, KRW 12 million paid to KK, KRW 10 million to HH, and KRW 18 million paid to MM, shall be deducted as the necessary expense.

First of all, the statement Nos. 4-8 and 10-10 of the Plaintiff’s assertion as to the introduction fee to HH, J, J, and KK (the confirmation of January 20, 2015 to the effect that the Plaintiff provided HH with the introduction fee of KRW 10 million, KRW 8 million, KRW 12 million, and KRW 12 million to KK) as shown in the Plaintiff’s argument, H and K in the tax investigation into the Plaintiff four years after the date of the conclusion of the instant sales contract. H was signed by H and K in the written document prepared by the Plaintiff among the tax investigation into the Plaintiff, and H and K in the tax investigation into the Plaintiff; H did not have any additional KRW 5 million, in addition to the fact that the Plaintiff received KRW 5 million at the commission of brokerage, it is difficult to find that the Plaintiff signed the above confirmation document, and there is no other evidence to believe that the Plaintiff did not have any other expenses.

Next, according to the reasoning of the evidence No. 6, the Plaintiff’s transfer of KRW 13 million to MM (pre-name: NN) on January 28, 201, and KRW 18 million on April 19, 201. However, the Plaintiff’s transfer of KRW 18 million in total to PM (pre-name: NN) based on the following reasons: (i) the Plaintiff’s transfer of KRW 4-5 and No. 8-1 of the evidence No. 4-5 and No. 8-1 of the entire pleadings and arguments; (ii) the Plaintiff’s transfer of money to PM over 16 times from January 25, 201 to January 28, 201; and (iii) the Plaintiff did not appear to have borrowed part of the money to PM as part of the purchase price for real estate business; and (iv) the Plaintiff did not appear to have borrowed the money to MM as part of the purchase price for real estate sales.

Therefore, the plaintiff's assertion on this part is without merit.

3. Conclusion

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