[1] In a case where the transferor fails to report the actual transaction price at the time of transfer or acquisition by submitting documentary evidence within the date of determining the tax base and amount of capital gains tax, or where the reported value is not verified as the actual transaction price, the standard for calculating gains on transfer (=base

[2] The standard for determining whether the transfer value of assets constitutes "a certain size or larger" among the notice given by the National Tax Service based on the "standards determined by the Commissioner of the National Tax Service" under Article 166 (4) 2 of the former Enforcement Decree of the Income Tax Act, which provides that the transfer value of assets shall be based on actual transaction value

[3] In a case where a transferor submits a false contract which is different from the fact at the time of transfer and acquisition as a documentary evidence when he returns the actual transaction price at the time of transfer and acquisition, whether it constitutes a case where a false contract is prepared for the purpose of evading the tax burden under Article 166 (4) 2 of the former Enforcement Decree of the Income Tax Act

[1] Under Articles 96 subparag. 1 and 97(1)1 of the former Income Tax Act (amended by Act No. 6051 of Dec. 28, 199), in the case of assets under Article 94 subparag. 1, etc., the transfer value or acquisition value shall be based on the standard market price at the time of transfer or acquisition of the assets concerned, but in such a case as prescribed by the Presidential Decree, it shall be based on the actual transaction price. Accordingly, Article 166(4)3 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 16664 of Dec. 31, 199), one of the exceptional cases where the actual transaction price can be based on the actual transaction price, and the actual transaction price at the time of transfer and acquisition are reported to the head of the district tax office having jurisdiction over the place of tax payment. This provision is an exception to the principle of taxation on the standard market price where a taxpayer under the principle of taxation on the transfer margin transfers a certain asset, and thus, if the actual transaction price is not confirmed by the actual transaction price.

[2] Article 166 (4) 2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 16664 of Dec. 31, 199) provides that "the case of acquiring or transferring real estate through fraudulent means, such as preparation of a false contract, false transfer of resident registration, etc., in order to avoid tax burden where the actual transaction price is based on the actual transaction price," and the National Tax Service Notice (Notice No. 1996-16 of Feb. 15, 1996) provides that "the case where the transfer price by transaction unit is at least KRW 100 million, and the area of transferred land is at least 330m2 in the urban planning zone" as its standard, barring any special circumstances, whether the transfer area by transaction unit constitutes real estate above the above size shall be determined based on the total area of the entire real estate subject to a single sales contract.

[3] Article 166 (4) 2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 16664 of Dec. 31, 199) stipulates that "a case of acquisition or transfer of real estate by unlawful means, such as preparation of a false contract, false transfer of resident registration, etc., for the purpose of evading tax burden" as an exception to the principle of standard market price taxation, where the transfer value and acquisition value are calculated based on the actual transaction value. Thus, the case of acquisition or transfer of real estate is not a case of acquisition or transfer, but a case of submission of false contract which is different from the fact in reporting the actual transaction value at the time of transfer or acquisition by the transferor as documentary evidence cannot be deemed as falling under Article 166 (4) 2

[1] Article 94 subparagraph 1 of the former Income Tax Act (amended by Act No. 6051 of Dec. 28, 1999), Article 96 subparagraph 1 of the Income Tax Act (see current Article 96 (1)), Article 97 (1) 1 of the Income Tax Act, Article 166 (4) 3 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 1664 of Dec. 31, 199), Article 96 subparagraph 1 of the former Income Tax Act (amended by Act No. 6051 of Dec. 28, 1999), Article 97 subparagraph 1 of the Income Tax Act (see current Article 96 (1) of the Income Tax Act), Article 97 (1) 1 of the former Income Tax Act (amended by Presidential Decree No. 1664 of Dec. 16, 196), Article 16 subparagraph 6 of the former Income Tax Act (see current Article 96 subparagraph 16 subparagraph 4 of the former Enforcement Decree of the Income Tax Act) 96 of Dec. 16 (see current Article 196 subparagraph 4)

[1] Supreme Court Decision 99Du7227 decided Apr. 11, 2000 (Gong2000Sang, 1213), Supreme Court Decision 99Du7227 decided Apr. 11, 200 (Gong2000Sang, 1213), Supreme Court Decision 99Du9421 decided Apr. 25, 200 / [2] Supreme Court Decision 98Du5811 decided Jun. 13, 200 (Gong200Ha, 1683) / [3] Supreme Court Decision 98Du16088 decided Jun. 27, 200 (Gong200Sang, 1785)

Plaintiff (Attorney Park Jin-jin, Counsel for the plaintiff-appellant)

Head of Namgu Tax Office

Daegu High Court Decision 9Nu975 delivered on December 10, 1999

The appeal is dismissed. The costs of appeal are assessed against the defendant.

1. Regarding ground of appeal No. 1

Article 96 subparag. 1 and Article 97(1)1 of the former Income Tax Act (amended by Act No. 6051 of Dec. 28, 199) provides that the transfer value or acquisition value of assets under Article 94 subparag. 1 shall be based on the standard market price at the time of transfer or acquisition of the relevant assets: Provided, That in cases prescribed by the Presidential Decree, the actual transaction value shall be based on the actual transaction value at the time of transfer or acquisition. Accordingly, Article 166(4)3 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 1664 of Dec. 31, 1999; hereinafter referred to as the “former Enforcement Decree”) provides that an exceptional case which can be based on the actual transaction value is one where the transferor makes a report on the actual transaction value at the time of transfer and the actual transaction value at the time of acquisition to the head of the tax office having jurisdiction over the place of tax payment. This provision provides that if these assets are transferred and the actual transaction value is not verified by the actual transaction value, 97.

The judgment of the court below to the same purport is just, and there is no error in the misapprehension of legal principles as alleged in the grounds of appeal.

2. Regarding ground of appeal No. 2

A. According to the reasoning of the judgment below, the court below determined that since the plaintiff acquired or transferred the land No. 1 of this case by means of preparing a false contract for the purpose of avoiding tax burden, etc., the defendant may directly investigate and confirm the actual transaction price at the time of the acquisition or transfer of the land No. 1 of this case and calculate gains on transfer based on the same. Article 166 (4) 2 of the former Enforcement Decree of the Act provides that where the real estate is acquired or transferred by unlawful means, such as preparation of a false contract, false transfer of resident registration, etc. for the purpose of evading tax burden, the court below rejected the defendant's assertion on the grounds that there is no assertion or proof as to the fact that the land No. 1 of this case constitutes real estate meeting the criteria set by the Commissioner of the National Tax Service.

B. However, according to the records, when the plaintiff acquires the land No. 1 (area 287 square meters) and the land No. 2 (area 139 square meters) of this case, the defendant prepared a sales contract with a falsity, and its size also constitutes the standard of public notice by the National Tax Service, and the transfer value also constitutes more than KRW 100 million, and thus, in light of the above provision and the sale process of each land of this case, the defendant asserts that this case is subject to the actual transaction price pursuant to Article 166(4)2 of the former Enforcement Decree (record 175), and the claim was not limited to the land No. 1 of this case, and thus, the court below's decision that identified the defendant's assertion

In addition, Article 166(4)2 of the former Enforcement Decree of the National Tax Service cited "cases where real estate is acquired or transferred by unlawful means, such as preparation of a false contract, false transfer of resident registration, etc., for the purpose of evading tax burden" as the actual transaction price. The National Tax Service Notice (Public Notice No. 1996-16, February 15, 1996) provides that "where the transfer price by transaction unit is at least 100 million won and the transferred land area is at least 330 square meters in the case of the land within the urban planning zone." The issue of whether the transfer area by transaction unit constitutes real estate above shall be determined based on the total area of the entire real estate subject to a single sales contract (see Supreme Court Decision 98Du5811, Jun. 13, 200). Thus, according to the records, the court below's determination of whether the Plaintiff's total area of each of the above land is at least 30 square meters in the case of this case's acquisition of the land from the non-party 12.

C. However, Article 166(4)2 of the former Enforcement Decree, an exception to the principle of assessment of the standard market price, one of the cases where the transfer value and acquisition value are based on the actual transaction value, refers to the case where the real estate is acquired or transferred by unlawful means, such as the preparation of a false contract, the false transfer of resident registration, etc., with the intention to avoid tax burden, and the case where the real estate is acquired or transferred by the Commissioner of the National Tax Service. Thus, rather than the case where the real estate is acquired or transferred by the transferor, the case where a false contract is submitted as documentary evidence when reporting the actual transaction value at the time of transfer and acquisition by the transferor, cannot be deemed to fall under Article 166(4)2 of the former Enforcement Decree (see, e.g.

According to the facts established by the court below, it is insufficient to acknowledge that the plaintiff submitted the sales contract, etc. of this case as documentary evidence at the time of the preliminary return of transfer margin or the request for review of legality of taxation, and that the plaintiff falsely prepared the sales contract in acquiring or transferring each land of this case, unlike the records, although the sales contract, etc. submitted by the plaintiff as documentary evidence in filing a tax return as above was falsely prepared, in light of the above legal principles, it cannot be viewed as a case where the transfer margin can be calculated based on the actual transaction price pursuant to the above Enforcement Decree. Thus, the above error of the court below did not affect the conclusion of the judgment, and the defendant's ground of appeal is without merit.

3. Therefore, the appeal is dismissed, and all costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Son Ji-yol (Presiding Justice)