Cho Jae-2016-China-3444 (Law No. 12, 2016.09)

Value-added tax and transfer income tax after distributing the issues of real estate after the standard market price is legitimate.

In light of the fact that the transfer value of the real estate at issue is merely 36.8% compared to the standard market price, and that it is difficult to deem that the transferee also operates the telecom and the building itself particularly changed, it is difficult to deem that the transfer value of the real estate at issue was reported in accordance with reasonable standards.

Article 100 (Calculation of Gains on Transfer of Income Tax Act)

Cheongju District Court-2017-Gu Partnership-198 ( April 20, 2017)

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o Head of the tax office

2017.05.25

2017.20

1. The plaintiff's claims against the defendants are all dismissed.

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

Cheong-gu Office

On February 11, 2016, the head of the competent tax office revokes each imposition of KRW 50,583,480 on the first quarter of 2013 against the Plaintiff and KRW 48,794,630 on February 11, 2016 against the Plaintiff by the head of the competent tax office and the head of the competent tax office of Incheon.

1. Details of the disposition;

A. On June 26, 1996, the Plaintiff acquired from these Rules the land of this case and the five-story Moel Building (hereinafter referred to as the “instant building”) on the same **-17 large 256 square meters (hereinafter referred to as the “instant land”) and its ground. The Plaintiff purchased from these Rules the instant land and buildings, and the sales contract prepared at the time of acquisition stated the total purchase price of the instant real estate in KRW 1 billion.

B. On June 3, 2013, the Plaintiff transferred the instant real estate to Go*, Yellow**, and the sales contract written on March 29, 2013, prepared at the time of transfer, stated the total purchase amount of KRW 1.3 billion, the total purchase amount of KRW 1,116,50,000, and the building sales amount of KRW 183,50,000.

C. On August 28, 2013, the Plaintiff separately reported and paid KRW 15,388,042 of capital gains tax to the head of the Incheon District Tax Office on August 28, 2013, and value-added tax amounting to KRW 21,201,643 to the head of the Incheon District Tax Office on July 23, 2013.

D. However, according to the result of the periodic audit of the Daejeon Regional Tax Office, the Defendants deemed the transfer value reported by the Plaintiff at arbitrarily determined without any reasonable proportional distribution standard, and calculated the transfer value of the instant real estate as follows in proportion to the ratio of the standard market price, and as follows, the value of the instant real estate is calculated as KRW 764,180,367, and as KRW 535,819,633. Based on this, the head of the Daejeon Regional Tax Office imposed KRW 48,794,630 for the transfer income tax of February 11, 2016 and KRW 50,583,480 for the first period of February 201, 2013 on the Plaintiff (hereinafter “each of the instant dispositions”).

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1, 2, 3, 5, Eul evidence Nos. 1 through 5, 9, 10 (including provisional numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

At the time of the acquisition of the instant real estate, the Plaintiff determined the value of land multiplied by 1.56 as the standard market price at the time of the transfer of the instant real estate, and as at the time of the transfer of the instant real estate, the purchase price of land shall be approximately 1.56 times the standard market price, and the purchase price of buildings shall be determined by setting the amount excluding the purchase price of land as above from the total purchase price, and the sale and purchase agreement shall be clearly divided into the land and the building price, and thus, the transfer of the instant real estate constitutes “when the distinction between the value of the land and the building, etc. is unclear” under Article 100(2) of the former Income Tax Act (amended by Act No. 12738, Jun. 3, 2014; hereinafter referred to as the “former Income Tax Act”) and

In particular, the land price increases, but the building is generally recognized as depreciation, and the building needs large repair even after the time of the transfer of the real estate in this case. In fact, the transferee of the building in this case suspended and repaired the business for three months after the purchase, and the appraisal value of the land in this case at the time of the transfer of the real estate in this case is less than 1,029,120,000 won, which is less than 10% of the Plaintiff’s reported amount and 10%, the transfer of the real estate in this case must be respected as it trades with reasonable appraisal standards between private persons. However, the Defendants made each disposition in this case on the basis of the standard market price for the imposition of taxes, which is unlawful and revoked.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) The details of book value of real estate rental on the instant real estate in the balance sheet submitted by the Plaintiff at the time of reporting global income tax are as follows.

2) Meanwhile, on October 28, 2015, the head of the competent tax office notified the Plaintiff of the imposition of capital gains tax on the transfer of the instant real estate. On the other hand, the Plaintiff requested retroactive appraisal of the instant land on March 29, 2013, which was prepared by the appraiser on November 19, 2015 after the investigation on November 19, 2015, the appraised value of the instant land is KRW 1,029,120,000.

[Based on recognition] Evidence No. 6, Evidence Nos. 6, Eul Nos. 6, 7, 8, and 11, the purport of the whole pleadings

D. Determination

1) According to Article 100(2) of the former Income Tax Act, Article 166(6) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 24638, Jun. 28, 2013) and Article 48-2(4) proviso 1 of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013), where land and buildings are transferred together, and the transfer value is calculated based on the actual transaction value, if the classification of land and buildings is unclear, it shall be calculated in proportion to the value calculated according to the standard market price as of the date of the transfer contract. Here, the term “if the classification of land and buildings is unclear” means not only the case where the land and buildings are transferred without distinguishing the value of land and buildings, but also it shall be interpreted that even if the value of land and buildings under a contract is clearly divided, it shall not be deemed true between the parties, or it shall not be deemed a reasonable distinction from ordinary transaction

2) According to the circumstances leading up to the above disposal of real estate: (a) KRW 1,16,50,00 of the land indicated in the sales contract at the time of the transfer of the instant real estate; (b) KRW 183,50,00 of the instant building; (c) the value of the instant real estate was 107.3% compared to the standard market price (i) the value of the instant real estate was 1,300,000,000, 210, 68,000 x 1000, 106, 300, 300, 400, 60, 600, 600, 600, 600, 600, 60, 106, 306, 60, 106, 100, 100, 100, 60, 106, 106, 106, 100, 6, 100.

3) Therefore, each of the dispositions of this case on which transfer income tax and value-added tax are imposed is legitimate after calculating the transfer value of land and buildings based on the standard market price by deeming that the Defendants’ classification of the value of the land and buildings in this case falls under the case where the classification is unclear. The Plaintiff’

3. Conclusion

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

July 20, 2017