[1] The meaning of "de facto acquisition" under Article 105 (2) of the former Local Tax Act

[2] In a case where Company A and Company B concluded a share purchase contract with the Korea Land and Housing Corporation by concluding a contract for purchase of a site for multi-family housing with the Korea Land and Housing Corporation, and concluded a share purchase contract with Company B with Company B by transferring 50% of the share of the above land, and Company C and C did not pay any balance, and Company C concluded a contract for succession to rights and obligations with Company C, which succeeds to the status of purchaser under a contract for purchase, and paid acquisition tax, etc. after paying the balance of purchase price to the Korea Land and Housing Corporation; Company A and Company B were deemed to have actually acquired the above land on the outstanding payment date; and the competent market imposed acquisition tax, etc. on Company B and Company B, the case affirming the judgment below that Company A and Company

[1] Article 105(1) and (2) of the former Local Tax Act (Amended by Act No. 10252, Apr. 12, 2010; see current Article 7(2)) / [2] Article 105(1) (see current Article 7(1) and (2) (see current Article 7(2)) of the former Local Tax Act (Amended by Act No. 10252, Apr. 12, 2010);

[1] Supreme Court Decision 2004Du6761 Decided June 30, 2006 (Gong2006Ha, 1439) Supreme Court Decision 2012Du28414 Decided July 11, 2017 (Gong2017Ha, 1653) Supreme Court Decision 2015Du39026 Decided September 12, 2017 (Gong2017Ha, 195) (Gong2017Ha, 195)

Law Firm Construction Co., Ltd. and one other (Attorneys Ba-sik et al., Counsel for the plaintiff-appellant)

Themju Market (Law Firm Pyeongan, Attorneys Lee Do-young et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2017Nu33918 decided September 13, 2017

All appeals are dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. According to Article 105 of the former Local Tax Act (wholly amended by Act No. 10221, Mar. 31, 2010; effective January 1, 2011; hereinafter the same), acquisition tax is imposed on a person who acquires real estate, etc., which is an object of taxation of acquisition tax (Paragraph 1) and is deemed to have been acquired when it is actually acquired even if it fails to comply with registration, etc. under the relevant Acts and subordinate statutes, such as the Civil Act (Paragraph 2). Here, “ de facto acquisition” refers to cases where general requirements for acquisition of ownership, such as registration, such as registration, are not satisfied, but the actual requirements for acquisition of ownership, such as payment of purchase, are satisfied (see, e.g., Supreme Court Decisions 2004Du6761, Jun. 30, 2006; 2012Du28414, Jul. 11, 2017).

2. The lower court acknowledged the following facts by citing the reasoning of the first instance judgment.

A. On March 31, 2009, the Plaintiff member of the Korea Land and Housing Corporation (hereinafter “Plaintiff member”) entered into a sales contract for multi-unit housing land (hereinafter “instant sales contract”) with the Plaintiff member of the Korea Land and Housing Corporation, which purchased KRW 131,418 square meters of the site for multi-unit housing within the land development project area of the Korea Land and Housing Corporation (hereinafter “instant land”) from the Korea Land and Housing Corporation, and paid KRW 327.18,503,90 won the down payment to the Korea Land and Housing Corporation.

B. On March 31, 2009, the Plaintiff member entered into a share sale contract with the Plaintiff Rack Construction Co., Ltd. to jointly carry out the business of constructing and selling apartment units on the instant land. On March 31, 2009, the Plaintiff members agreed that the Plaintiff and the Korea Land and Housing Corporation shall succeed to the rights and obligations of the Plaintiff members under the instant sales contract, which had been the Plaintiff members, by concluding a contract for succession of rights and obligations on April 3, 2009.

C. On July 30, 2009, the Plaintiff member entered into a project and loan agreement with five financial institutions including the new bank, etc. on the instant land that the Plaintiffs promoted with respect to the new apartment construction project on the instant land. On the same day, the Plaintiffs entered into a management-type land trust agreement (hereinafter “the instant trust agreement”) with five financial institutions, such as the Cocco Asset Trust (hereinafter “Cocco Asset Trust”) and the new bank, under which five financial institutions, including the instant land and buildings, are entrusted to the Cocco Asset Trust and the new bank, with five financial institutions, including the new bank, as the first priority beneficiary.

D. On the other hand, on July 30, 2009, the Crocco asset trust concluded a contract on the succession of rights and obligations (hereinafter “instant succession contract”) with the Plaintiffs and the Korea Land and Housing Corporation to succeed the purchaser’s status under the instant contract.

E. On October 15, 2009, Coco asset trust paid the remainder of the purchase price of this case 1,635.5 billion won to the Korea Land and Housing Corporation under the instant sales contract, and paid acquisition tax, etc. around that time.

F. On September 12, 2014, the Defendant deemed that the Plaintiffs actually acquired the instant land on the date of payment of the remainder, and issued the instant disposition imposing acquisition tax, etc. on the Plaintiffs.

3. Furthermore, on the following grounds, the lower court determined that the instant disposition, which was made on a different premise, cannot be deemed as a person liable to pay acquisition tax, etc., on the ground that the Plaintiffs actually acquired

A. While the Plaintiffs did not pay any balance of the instant land, they concluded the instant trust agreement with the Clucco Asset Trust on the instant land while succeeding to the rights and obligations of the purchaser, and withdrawn from the instant sales agreement by concluding the instant succession agreement. Therefore, it is difficult to deem that the Plaintiffs, as of October 15, 2009, maintained the status of purchaser under the instant sales agreement as to the instant land at the time of payment of the balance.

B. Since the Clucco Asset Trust paid any balance to the Korea Land and Housing Corporation, a seller, under the name of the seller, after succeeding the buyer’s status of the instant sales contract under the instant succession agreement, the Clucco Asset Trust constitutes a de facto acquisitor of the instant land as of the outstanding payment date, and it does not change even if the Plaintiffs paid any balance under the agreement on internal cost-bearing stipulated in the instant trust agreement

C. The instant trust agreement is null and void for the purpose of evading the payment of acquisition tax that the Plaintiffs are obligated to pay, or the instant trust agreement and the instant succession agreement do not constitute a three-party registered title trust agreement to register the instant land, while maintaining the status of purchaser under the instant sales contract as to the instant land.

4. Examining the aforementioned provisions and legal principles, the lower court’s aforementioned determination is justifiable. In so doing, it did not err by misapprehending the legal doctrine on a taxpayer of acquisition tax and substance over form principle on real estate.

5. Therefore, all appeals are dismissed, and the 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 Kwon Soon-il (Presiding Justice)