Plaintiff (Law Firm Rate, Attorneys Cho Young-sik et al., Counsel for plaintiff-appellant)

The head of Si/Gun/Gu in Daejeon Metropolitan City

June 4, 2009

Daejeon District Court Decision 2008Guhap2332 Decided February 4, 2009

1. Revocation of a judgment of the first instance;

2. The Defendant’s imposition disposition of acquisition tax of KRW 16,272,780 as of January 10, 2007; KRW 15,100 as of January 10, 2007; and ② acquisition tax of KRW 12,19,470 as of January 10, 2007; KRW 4,620 as special rural development tax; KRW 6,534,250 as of January 11, 2007; KRW 1,213,720 as local education tax; KRW 1,213,720 as of January 11, 2007; and KRW 4,89,680 as of January 11, 2007; and KRW 910,120 as of local education tax.

3. All costs of the lawsuit shall be borne by the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On February 18, 2005, the Plaintiff newly constructed a multi-family housing (multi-family housing) and a commercial building in the complex (hereinafter “instant building”) within 00 lux in the housing site development project area 9 Blux, which is identical with 6 Blux, a day-to-day unit of the Daejeon Pluxdong (hereinafter referred to as the “number 1 omitted), the Plaintiff reported and paid the acquisition tax, etc. of the instant building on March 21, 2005, with the construction cost of KRW 54,482,824,591 (the construction cost of the building) and KRW 46,019,313,017 (the said nine lux) as the tax base.

B. As a result of the Plaintiff’s tax investigation, the Defendant deemed that the fee for the guarantee of the sale of housing was omitted from the acquisition value of the instant building; based on this, the Defendant additionally imposed the Plaintiff KRW 16,272,780 on the said six block buildings on January 10, 207, KRW 15,100 for the acquisition tax, KRW 12,19,470 for the said nine block buildings, ② acquisition tax, KRW 12,19,470 for the said nine block buildings, KRW 4,620 for the special rural development tax, ③ KRW 6,534,250 for the said six block buildings, KRW 1,213,720 for the local education tax, KRW 4,89,680 for the said nine block buildings, and KRW 910,120 for the local education tax (hereinafter “instant disposition”).

[Reasons for Recognition]

The facts without dispute, Gap evidence 1-1 to Gap evidence 5-4, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

A housing sale guarantee fee is a guarantee for the total purchase price including land and buildings to guarantee the performance of a sale contract for apartment buyers, and does not constitute an apartment building's "new construction cost". Therefore, the Defendant's disposition of this case that additionally imposes acquisition tax, registration tax, special tax for rural development, local education tax, etc. is unlawful by deeming the housing sale guarantee fee as an indirect cost related to the new construction of apartment and calculating the "acquisition price", which is the tax base of acquisition tax and registration tax, including it.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

The following facts may be acknowledged in full view of the purport of evidence No. 3-2, or there is no dispute between the parties.

(1) On April 10, 200 and October 8, 2002, the Plaintiff entered into a housing sale guarantee contract with the Korea Housing Guarantee Co., Ltd. on April 10, 2002 to sell the instant building to the general public at the same time upon the commencement of the construction, and paid the said company a housing sale guarantee fee (hereinafter “instant housing sale guarantee fee”). The said housing sale guarantee fee is calculated by multiplying the guaranteed amount by the rate and guarantee period according to the credit rating of each business operator. The said house sale guarantee fee paid by the Plaintiff includes not only the instant building but also the site.

(2) Meanwhile, according to generally recognized corporate accounting standards, housing sales guarantee fees are not treated as the acquisition cost of a building, but as sales expenses and general management expenses.

D. Determination

According to Articles 111(5), 130(3), and 260-3(1) of the former Local Tax Act (amended by Act No. 7843, Dec. 31, 2005; hereinafter “former Local Tax Act”), and Article 5(1) of the Act on Special Rural Development and Fisheries where a tax base is determined based on actual acquisition price as in the instant case, the amount of acquisition tax, registration tax, special tax for rural development, local education tax, etc., shall be determined based on the tax base of acquisition tax. Thus, the following is about whether the fee for housing sale guarantee of the instant building can be included in the tax base for calculating the acquisition tax of the instant building.

(1) According to Article 111(5)3 and (7) of the former Local Tax Act, Articles 82-2(1)2 and 82-3(1) of the Enforcement Decree of the same Act, where acquisition price is verified by the president, assistant director, receipts and disbursements statement, settlement of accounts, etc. prepared by a corporation, “actual acquisition price,” which serves as the tax base, means all the expenses paid or to be paid (including direct and indirect expenses (excluding value added tax) for the acquisition of the pertinent object, such as subscription fees, design expenses, late payment charges, interest on the installment, and interest on the amount appropriated for the construction fund, etc., but excluding late payment charges and interest thereon, if a person other than a corporation acquires the pertinent object).

The acquisition price pursuant to the above provisions shall include not only the price of the object in question itself (direct costs), but also the expenses for the acquisition procedure (such as interest, design, etc.) equivalent thereto, which can be deemed to have been actually paid at the price of the object in question (such as interest, design, etc. of the amount appropriated for construction funds). However, if it is related to an object or right not subject to acquisition, and thus it cannot be deemed to be the price of the object in question, it shall not be deemed to have been included in the acquisition price of the object in question, even if the cause of payment occurs or has been determined before the time of acquisition of the object subject to taxation prior to the time of acquisition (see Supreme Court Decision 95Nu4155 delivered on January 26, 196, etc.).

(2) In this case, the sales guarantee fee of this case cannot be deemed to be included in the above acquisition price.

(A) In other words, according to Article 43-5(1)1(a) of the former Enforcement Decree of the Housing Construction Promotion Act (amended by Presidential Decree No. 17793, Dec. 5, 2002; hereinafter “former Enforcement Decree of the Housing Construction Promotion Act”), a guarantee for sale of a house is a guarantee that a project proprietor is liable for the performance of sale of a house (including usage inspection) or refund of rent to buyers if a project proprietor becomes unable to execute a sale contract due to reasons such as bankruptcy. This is not a system to guarantee the acquisition of a new building by a project proprietor, but rather to ensure the performance of a sale contract for buyers of a building by a project proprietor. In addition, according to Article 7(1) of the former Enforcement Decree of the Housing Construction Promotion Act (amended by Presidential Decree No. 17793, Jun. 27, 2003; hereinafter “former Enforcement Decree of the Housing Construction Promotion Act”), a guarantee for sale of a house can not be obtained at the same time for the construction of a new house or a new building for the construction of an occupant.

In light of the above circumstances, the nature of the guarantee fee for the sale of housing is that the cost for the sale of housing is in the same nature as the advertising fee for the sale of housing or the sales agency fee for the sale of housing.

(B) In addition, acquisition tax is not a tax imposed by the purchaser taking advantage of the profits that the purchaser may obtain by using, earning from, or disposing of the goods, but a tax is imposed by taking the value of the goods at the time of acquisition as its tax base. Therefore, if the standard market price is not adequately reflected in the objective value of the property, that is, the market price, it may be in violation of the principle of tax equality or the principle of no taxation without law (see Constitutional Court Order 9Hun-Ga2, Dec. 23, 199

However, in full view of Article 3(1) of the former Housing Construction Promotion Act (amended by Act No. 6916 of May 29, 2003; hereinafter “former Housing Construction Promotion Act”), Article 32(1) of the Enforcement Decree of the same Act, Articles 3(1) and 7(1)2 of the former Rules on Housing Supply, etc., where a project proprietor constructs multi-family housing with less than 20 households at the same time as the commencement of the construction, it is unnecessary to obtain a house sale guarantee if he/she recruits occupants at the same time. In addition, according to Article 7(2) and (6) of the former Rules on Housing Supply, if he/she recruits occupants after reaching a certain construction process, or if a project proprietor recruits occupants at the same time as the commencement of the construction, he/she does not conclude a house sale guarantee contract if he/she is the State, a local government, the Korea National Housing Corporation, or a local public corporation, with the commencement of the construction of the construction of a new building at the same time.

In addition, the housing sale guarantee fee is determined according to the business operator's credit rating, and the price of the land is also considered and calculated.

In light of the above circumstances, it is inappropriate to include the fee for the house sale guarantee in the cost for calculating the objective value of the property.

(C) In addition, even if a housing construction business operator receives funds for the construction of a new building by selling the housing at the same time as the commencement of the construction project and by receiving the payment in advance due to a housing sale guarantee, it cannot be deemed as a “interest on the amount appropriated for construction funds” under Article 82-3(1) of the Enforcement Decree of the Local Tax Act for the following reasons.

In other words, interest appropriated for construction funds may vary depending on the enterpriser's subjective credit rating, financing source or financing method (no interest exists in the case of one's own capital), and in light of the essence of the acquisition tax system as seen earlier, if it is excessively included in the acquisition price, it is likely that the market price of the property will not be appropriately reflected. Therefore, it shall be more strictly interpreted, and it shall not be expanded or inferred.

However, only the amount appropriated for the construction fund, out of the sales price actually received by selling the housing at the same time as the commencement of the construction, can be deemed as “a appropriated for the construction fund” as referred to in the above provision. Even if the sales price was appropriated for the construction fund, the fee itself does not have the nature of interest on the amount appropriated for the construction fund. Thus, the housing sales guarantee fee cannot be deemed as “interest on the amount appropriated for the construction fund.”

(D) Lastly, under the corporate accounting principles under Article 20 of the Framework Act on National Taxes, which applies mutatis mutandis by Article 82 of the former Local Tax Act, the tax authority shall respect corporate accounting standards or practices generally recognized as fair and reasonable. According to the generally recognized corporate accounting standards, housing sales guarantee fees are not treated as acquisition cost of a building, but as sales expenses and general administrative expenses. Thus, it is unreasonable to include housing sales guarantee fees in the acquisition price.

(3) Ultimately, the instant house sales guarantee fee cannot be deemed to have been actually paid not only the price of the instant building itself (direct costs) but also the price of the instant building itself (such as interest, design cost, etc. of the amount appropriated for the construction fund) or to include indirect expenses, such as the acquisition procedure cost (such as the introduction fee, completion inspection fee, etc.). However, the instant disposition that the Defendant included it in the acquisition price is unlawful.

3. Conclusion

Therefore, the plaintiff's claim is justified, and the judgment of the court of first instance is unfair with different conclusions, so the plaintiff's appeal is accepted and the judgment of the court of first instance is revoked, and the disposition of this case is revoked and it is so decided as per Disposition.

[Attachment]

Judges Cho Soo-soo (Presiding Judge) Maximum index