208 Appellate Court Decision 0305 ( November 24, 2008)

Special Taxation on Transfer Income of Assets of Non-Profit Domestic Corporations

The special taxation for the transfer income of assets of non-profit domestic corporations is claimed to be applied at the time of transfer of assets, but the special taxation for the transfer income of all assets generated in the business year concerned is not applicable if profit-making corporations are operated

The contents of the decision shall be the same as attached.

Article 3 (Scope of Taxable Income under the former Corporate Tax Act)

Article 29 (Inclusion of Reserve Funds for Reserve Fund for Business in Loss)

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposing corporate tax of KRW 636,261,300 against the Plaintiff on August 20, 2007 shall be revoked.

1. Circumstances of the disposition;

A. On September 3, 2003, the Plaintiff, a non-profit domestic corporation, is Pyeongtaek-si ○○○○○ Group.

○○○○○○-2 ○○-2 ○○-2 ○○○-5 4,109 m2 prior to the same Ri ○○○○-5 m2, and 6,191 m2,191 m2,248,800,000 m2, and 622 m22 m2, including 28,266,000 m2, and 327 m2, such as m28,266,000 m2, each of which was sold to Nonparty ○○○ on September 16, 2003 (hereinafter referred to as “instant six m2 m2”).

B. On November 11, 2003, the Plaintiff estimated KRW 95,337,140 as corporate tax, which is calculated by the method prescribed in the Income Tax Act (based on the standard market price) pursuant to Article 62-2 of the Corporate Tax Act with respect to the transfer income of the instant land, and paid voluntarily.

C. On December 2, 2003, the Plaintiff purchased the Gangseo-gu Seoul Metropolitan Government ○○○○-dong 799-10 large 596.7 square meters ground commercial buildings (ground 3 floors, underground 1 floors). On December 5, 2003, the Plaintiff was issued a business registration certificate with the content that the Plaintiff started the rental-making business as of December 2, 2003 by the director of the Gangseo-gu Tax Office.

D. On August 20, 2003, the Defendant imposed 810,782,580 won as corporate tax for the business year of 2003, which was calculated by the method (based on actual transaction price) prescribed in the Corporate Tax Act, on the ground that Article 62-2 of the Corporate Tax Act cannot be applied to the transfer income of the instant land since the Plaintiff engaged in real estate leasing business in the business year of 2003. Meanwhile, the Defendant issued a corrective disposition to reduce it to 636,261,30 won on September 1, 2008 (hereinafter “instant disposition”). Meanwhile, in calculating the tax base of the instant disposition, the Defendant recognized the Plaintiff as deductible expenses for the business year of 224,887,900 won that was actually paid to the principal business between November 7, 2003 and April 10, 2004.

E. On November 16, 2007, the Plaintiff dissatisfied with the instant disposition and filed a request for examination with the Board of Audit and Inspection on November 16, 2007, but on November 24, 2008, the Board of Audit and Inspection decided to dismiss the Plaintiff’s

[Ground of recognition] Evidence Nos. 1 to 4, Evidence Nos. 1 to 5

2. The assertion and judgment

A. The plaintiff's principal

(1) Article 62-2 of the Corporate Tax Act, which provides for a special taxation for the transfer income of assets of a non-profit domestic corporation, applies as a matter of course to a non-profit domestic corporation if it did not operate a business as provided in Article 3(2)1 of the Corporate Tax Act at the time of the transfer of assets. Thus, even in the case of the Plaintiff, Article 62-2 of the Corporate Tax Act can be applied, but the disposition that excluded the Plaintiff from the application

(2) In calculating the Plaintiff’s income amount for the business year of 2003, the Defendant should include the reserve funds for proper purpose business (50/100 of the transfer income of the instant land) under Article 29(1) of the Corporate Tax Act as deductible expenses, but the instant disposition otherwise reported is unlawful.

B. Relevant statutes

Article 3 (Scope of Taxable Income under the former Corporate Tax Act)

Article 29 (Inclusion of Reserve Funds for Reserve Fund for Business in Loss)

Article 62-2 (Special Taxation for Transfer Income of Assets of Non-Profit Domestic Corporations)

Article 56 (Inclusion of Reserve Funds for Reserve Funds for Business in Loss)

C. Determination

(1)For the first note:

The first sentence of Article 62-2 (1) of the Corporate Tax Act provides that "in case where a non-profit domestic corporation (excluding a non-profit domestic corporation operating a profit-making business under the provisions of Article 3 (2) 1; hereafter the same shall apply in this Article) has income accruing from the transfer of assets falling under any of the following subparagraphs (hereafter referred to as "income accruing from the transfer of assets" in this Article) as income under Article 3 (2) 4 and 5, notwithstanding the provisions of Article 60 (1), a return of tax base may not be filed, and Article 60 (9) of the same Act provides that "the matters necessary for the application of special cases to the transfer of assets under the provisions of paragraphs (1) through (8) of the same Article shall be prescribed by the Presidential Decree", and Article 99-2 (2) of the Enforcement Decree of the same Act provides that "the special cases to the transfer of assets under the provisions of each subparagraph of Article 62-2 (1) of the same Act shall not apply to the transfer of assets for each business year:

The purpose of Article 62-2 of the Corporate Tax Act is to stipulate that special taxation under Article 62-2 (1) of the Enforcement Decree of the Corporate Tax Act shall be applied to each business year to which the date of transfer of assets belongs and each non-profit domestic corporation shall be subject to the application of special taxation under Article 62-2 (2) 1 of the Corporate Tax Act in light of the following: (a) if a non-profit domestic corporation runs a private business in a business under Article 3 (2) 1 of the Corporate Tax Act during a business year in order to simplify the tax payment procedure by filing a tax base return in accordance with the taxation system of capital gains tax on assets transfer income; and (b) if it pays the corporate tax as corporate tax on the amount calculated accordingly, it shall be substituted for the corporate tax base return; and (c) as corporate tax is a fixed-term taxation, the taxation requirement is completed at the end of a business year; and (d) if a tax law is amended during the business year, the entire assets generated in the business year shall not be subject to Article 62-2 of the Corporate Tax Act.

Therefore, the prior plaintiff's assertion on a different premise is without merit.

(2) As to the second argument

Article 29 (1) of the Corporate Tax Act provides that where a non-profit domestic corporation appropriates the reserve fund for proper purpose business for proper purpose business or designated donations as deductible expenses for each fiscal year, they shall be included in deductible expenses in calculating the income amount for the concerned fiscal year. However, as the plaintiff did not appropriate the amount equivalent to 50/100 of the transfer income of the land of this case as the reserve fund for proper purpose business according to the settlement of accounts, even though the plaintiff did not make 50/10 of the transfer income tax due to transfer income in deductible expenses as the reserve fund for proper purpose business, even though the plaintiff did not appropriate 50/10 of the transfer income as deductible expenses, in excess of the amount actually paid for the proper purpose business in

3. Conclusion

If so, the plaintiff's claim is without merit, so it is judged the same as the order.