Seoul High Court 2011Nu31439 (2012.05)

Cho High Court Decision 2010Du3295 ( October 23, 2011)

If the distinction between the transfer value is unclear by transferring telecom and land collectively, the transfer value shall be applicable.

In light of the fact that no objective ground exists even though a sales contract was set at an abnormal level compared to the purchase price of land, and there is no name or seal of a real estate broker in the sales contract, etc., it is merely a preparation of a sales contract in order to avoid capital gains tax, and there is a high probability that the transfer price of a telecom and land cannot be separated by transferring the telecom and land en bloc.

2012Du22119 Revocation of Disposition of Imposing transfer tax, etc.

-Appellant

Park AAA

-Appellee

The Director of the Pacific District Office

Seoul High Court Decision 2011Nu31439 Decided September 5, 2012

February 14, 2013

The part against the defendant is reversed, and that part of the case is remanded to the Seoul High Court.

The plaintiff's appeal is dismissed.

The grounds of appeal are also examined.

1. Article 100(2) of the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009); Article 166(6) of the Enforcement Decree of the Income Tax Act provides that the transfer value or acquisition value shall be calculated based on the actual transaction value in calculating gains from transfer in order to impose capital gains tax, and where land, buildings, etc. are acquired or transferred together with another person, they shall be entered, respectively, and where the distinction between the land and buildings is unclear, it shall be calculated in proportion to the value calculated according to

2. On November 15, 2003, the Plaintiff and its wife BB (hereinafter collectively referred to as “Plaintiff, etc.”) jointly acquired KRW 000 on November 15, 2003, and the Plaintiff acquired KRW 000 of the instant land used as the parking lot of the mother, and thereafter, the Plaintiff, etc. transferred KRW 000 to EE on July 10, 2008. The lower court determined that the transfer value of the instant apartment and the instant land was divided into KRW 000 and KRW 000 on the grounds that the distinction was unclear. Accordingly, the lower court rejected the Plaintiff’s assertion that the transfer value of the instant apartment and the instant land was unlawful on the basis that the Defendant calculated the transfer value at the ratio of the standard market price of each of the instant mother and the instant land, and that the transfer value of the instant goods should be deducted from the transfer value of the mother’s goods, while the Plaintiff’s assertion that the transfer value of the instant goods should be deducted from 300 billion on the following grounds.

① On June 15, 2008, a sales contract with the sales price of KRW 000 was formulated regarding the instant telecom. As to the instant land, a sales contract with the sales price of KRW 000 was formulated on May 27, 2008.

(2) The EE does not conclude that there was no agreement on the classification of the value of the instant telecom and land in a statement made by the Defendant at the time of undergoing a tax investigation from the Defendant, and even in light of the testimony of the EE and Korea-II, it cannot be deemed that each of the above sales contracts was prepared without an agreement on the classification of value.

③ Even though each sales contract was prepared in a somewhat weak ground for objective calculation, as long as an agreement on the classification of the value is obtained by a false agreement or a false agreement and thus does not reach the degree that such agreement is null and void, the amount of the agreement shall be deemed actual transaction value.

④ The instant telecom and the instant land were traded separately at the time of their acquisition. In the case of the instant land for non-business use subject to heavy taxation, it is necessary to trade with the instant telecom separately from the instant telecom. In view of the transaction price and the officially announced land price at the time of their acquisition and transfer, the inflation rate, and the current status of use and ownership, etc., distinguishing the transfer price of the instant telecom and the instant land from the instant telecom as indicated in each sales contract cannot be deemed to contravene

⑤ On the other hand, in addition to a sales contract for the instant telecom, a sales contract on the instant telecom, was not prepared separately, and even at the time of reporting a real estate transaction contract, a sales contract was reported as KRW 000,000, and as regards the homecomcomtour’s homecomtour’s homecomtour’s homecomtour’s homecomtour’s homecomtour’s homecomtour’s homecomtoir’s homecomtoir’s homecomtoir’s homecomtoir’s homecomtoir

3. In light of the records, the court below is just in rejecting the plaintiff's assertion that the transfer value of the goods of this case should be deducted from the transfer value of the goods of this case, and there is no error in the misapprehension of legal principles as to the burden of proof as otherwise alleged in the ground of appeal.

4. However, we cannot agree with the lower court’s determination that the distinction between the transfer value is not clear by accepting the sales price stipulated in each sales contract for the instant telecom and the instant land.

A. Article 14(2) of the Framework Act on National Taxes declares the principle of substantial taxation by allowing the application of the provisions on the calculation of tax base under tax-related Acts according to the substance, irrespective of the name or form of transaction, regardless of its substance. As such, if a taxpayer takes an unreasonable form or appearance different from the substance with respect to the facts requiring taxation for the purpose of evading a tax burden, it shall be imposed according to the substance, notwithstanding the form or appearance. Such legal principle also applies to the taxation of capital gains tax.

B. The reasoning of the lower judgment and the evidence duly admitted by the lower court reveal the following.

① When undergoing a tax investigation by the Defendant, EE agreed with the Plaintiff, etc. to purchase total purchase price of the instant cartel and the instant land in KRW 000, and paid a balance to the Plaintiff, etc., the Plaintiff, at the Plaintiff’s request, prepared two copies of the sales contract by separating the sales price of the instant cartel and the instant land, but the details of calculating the sales price were not well known. As can be seen, it is difficult to deem that the specific division of the sales price without changing the actual terms and conditions of the sales contract at the stage of paying the balance after setting the terms and conditions of the sales contract and performing the said terms and conditions are applied to the transfer income tax rate of the instant land, which is non-business land.

② Considering the overall acquisition value of the instant cartel and the instant cartel, the trend of changes in the respective individual land price of the instant cartel and the instant cartel, and the depreciation of each of the instant cartels during the retention period, it is reasonable to deem that the sales price under the sales contract for the instant cartels was set at an abnormal level compared to the sales price under the sales contract for the instant cartels, there is no reasonable explanation as to the objective circumstance or grounds that the sales price was set at an abnormal level.

③ The sales contract of May 27, 2008 on the instant land states that the purchase price is KRW 000, the down payment is KRW 200 million, the payment date of the down payment is May 27, 2008. The sales contract of June 15, 2008 on the instant telecom shall state that the purchase price is KRW 00, the down payment is KRW 000, the down payment is KRW 000, and the payment date of the down payment is June 15, 2008, respectively. In light of the circumstances, it is doubtful that the late payment by the EE to the Plaintiff on May 27, 2008 exceeds the down payment amount of KRW 00 under the sales contract on the instant land, and that the amount is more than the down payment amount of KRW 200,000 under the sales contract on the instant telecom, which is more than the actual payment amount of KRW 10,000,000 in each of the instant telecom.

④ Although the Plaintiff, etc. and the EEE concluded a sales contract for the instant land with the Plaintiff through a real estate brokerage office, it is difficult to understand that each sales contract does not contain any scambling in which the real estate broker participated, such as the name and seal of the real estate broker.

C. Examining these circumstances in light of the legal principles as seen earlier, each sales contract on the instant telecom and the instant land is merely a form prepared to avoid capital gains tax, and its substance is likely to constitute a case where each transfer value cannot be separated by transferring the instant telecom and the instant land en bloc at KRW 000. Nevertheless, the lower court concluded that the instant telecom and the instant land can be classified as transfer value in accordance with each sales contract and concluded that the disposition imposing capital gains tax was unlawful solely on the grounds stated in its reasoning. In so determining, the lower court erred by failing to exhaust all necessary deliberations, or by misapprehending the legal principles on the classification of transfer value. The Defendant’s ground of appeal pointing this out is with merit.

5. Therefore, the part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. The Plaintiff’s appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.