Cho Jae-2015-Jung-4686 (2016.08)

A tax disposition legitimate because there is no proof that a part of the transfer price was returned.

No evidence exists on the Plaintiff’s assertion that the transfer value is confirmed due to the details of remittance by the purchaser and that part of the purchase price was returned, the taxation disposition is legitimate. The financial confirmation cannot be deemed as a tax investigation, and the exclusion period of imposition for the false report of the transfer value is 10 years.

Article 94 (Scope of Capital Gains)

2018Guhap11369 Revocation of Disposition of Imposing capital gains tax

Yellow AA

BB

April 5, 2018

April 19, 2018

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of capital gains tax of KRW 141,741,520 (including additional tax) for the Plaintiff on July 1, 2015 shall be revoked.

1. Details of the disposition;

A. On June 16, 2005, the Plaintiff sold 111-11 m2,515 m2,515 m2,676 m2,676 m2,000 m2,000 m2,000 m2,000 m2,000 m2,000 m2,000 m2,000 m2,000 m2 (hereinafter referred to as “Plaintiff’s land”), to the Plaintiff on the same day.

On May 31, 2006, the Plaintiff reported and paid capital gains tax with the transfer value of the Plaintiff’s land as KRW 235,500,000 at the competent tax office.

B. Meanwhile, on the other hand, on June 11, 2009, the new and doorA sold the Plaintiff’s land to KimA on or around June 11, 2009, the director of the tax office of BB conducted a tax investigation on capital gains tax on the Plaintiff’s land (hereinafter “the primary tax investigation of this case”) around September 201, and in the process, he/she concluded that the new and doorA acquired the Plaintiff’s land from the Plaintiff as KRW 471,90,000, and that on November 15, 2010, he/she notified the Defendant of taxation data that the transfer value of the Plaintiff’s land reported by the Plaintiff differs from the above acquisition value of the newA.

C. The Defendant, from February 1, 2015 to April 201 of the same year, conducted a tax investigation on the transfer income tax on the Plaintiff’s land (hereinafter “the second tax investigation of this case”) and deemed that the transfer value of the Plaintiff’s land was KRW 471,90,00,00, and on July 1, 2015, issued a correction and notice of the Plaintiff’s transfer income tax amounting to KRW 141,741,520 (including additional tax) for the year 2005 (hereinafter “instant disposition”).

D. On September 7, 2015, the Plaintiff filed an appeal with the Tax Tribunal on September 7, 2015, and the Tax Tribunal rendered a decision of reinvestigation on June 8, 2016. The Defendant decided to maintain the instant disposition following a reinvestigation from June 27, 2016 to August 16, 2016.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 5, 6, 12, 14, Eul evidence Nos. 1 and 2 (including paper numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Since the instant tax investigation of the 1 and 2nd tax investigation is unlawful due to the following defects, the instant disposition based thereon is unlawful.

A) The director of the Incheon Tax Office, while conducting the instant tax investigation on the sales price of the Plaintiff’s land between the newA, literatureA, and the Plaintiff, did not perform the duty to select the Plaintiff as a person subject to investigation and notify the Plaintiff.

B) Although the Defendant was notified by the head of Incheon Tax Office of taxation data on the Plaintiff, neglected to investigate the Plaintiff for not less than four years, and was deprived of the opportunity for the Plaintiff to explain by securing relevant data. The head of Incheon Tax Office concluded the first tax investigation of this case without confirming the Plaintiff only with oral statement even though there was no financial data. This constitutes abuse of the right to tax investigation.

2) The Plaintiff sold the Plaintiff’s land in KRW 235,50,000 to the New A and literatureA, and received the same amount from the New A and literatureA. Therefore, the instant disposition on the ground that the transfer value of the Plaintiff’s land is KRW 471,90,000 is unlawful.

3) Since the Plaintiff did not have prepared a double contract, etc. while transferring the Plaintiff’s land, the exclusion period for imposition of capital gains tax for the Plaintiff is five years. Therefore, the instant disposition is unlawful since it was imposed after the exclusion period of five years expires.

(b) Relevant u300 statute;

It is as shown in the attached Form.

(c) Fact of recognition;

1) The Plaintiff and EA are married couple, and EA is adjacent to the Plaintiff’s land, and EA is adjacent to the Plaintiff’s land.

AAri 11-11 Miscellaneous land 786 square meters of miscellaneous land, 111-11 miscellaneous land 625 square meters of miscellaneous land of the same Ri (hereinafter referred to as "MaA land") and 111-11 miscellaneous land of the same miscellaneous land 5,154 square meters of 3,703/5,154 shares of 11-11 land of the same miscellaneous land (hereinafter referred to as "1-1 land").

2) On May 7, 2005, the Plaintiff and LA entered into a sales contract with the Plaintiff and LA to sell the Plaintiff’s land and LA’s land (hereinafter “previous sales contract”). On May 10, 2005, the Plaintiff and LA entered into an agreement to revise the terms and conditions of the previous sales contract (hereinafter “instant agreement”) with the NewA and LA, and the main contents of the instant agreement are as follows.

3) On May 16, 2005, the Plaintiff and LA made a sales contract stating that “The purchaser of the Plaintiff’s land under the previous sales contract shall be the new and LA, and the purchaser of the Plaintiff’s land shall be changed to the former and LA,” and that “the purchase and sale contract for the Plaintiff’s land shall be concluded with the new and LA on May 16, 2005,” and “the purchase and sale contract for the Plaintiff’s land shall be 235,500,000,000,000 won for the down payment on May 16, 2005, the remainder, 215,50,000 won for the payment on June 16, 2005 (hereinafter “the instant sales contract”).

4) On July 7, 2005, EA entered into a sales contract with the former on 336-174, to sell 665/5 and 154 shares of the land at KRW 60 million. On 19 August 2005, EA completed the registration of ownership transfer for EA’s land on 7 May 2005.

Meanwhile, the amount reported by HA as the transfer value of the land of HA and the amount reported by HA by HA as the acquisition value of the land of HA is the same as KRW 128,100,000, respectively.

5) In the first tax investigation of the instant case, the new A, the LA, and the formerA (hereinafter referred to as the “NewA, etc.”) asserted that the sales price of the Plaintiff’s land was KRW 471,90,000 ( KRW 300,000 per square year) and the sales price of the Plaintiff’s land was KRW 128,100,000 ( KRW 300,000 per square year) and that the sales price of the Plaintiff’s land was KRW 600,000,000. The payment details of the purchase price of the said assertion are as follows.

6) In the instant lawsuit, the Plaintiff’s sales price of the Plaintiff’s land is KRW 235,500,000 (per square 150,000)

2) The Plaintiff asserted that the purchase and sale price of EA’s land is KRW 63,600,000,000 in total, and the purchase and sale price of EA’s land is KRW 128,100,000. The purchase and sale price of EA’s land is as follows.

7) The financial transaction details from May 7, 2005 to July 7, 2005 of the Plaintiff, Shipping, and NewA, etc. are as follows.

8) In the first tax investigation of this case, the public official in charge of BB tax affairs received an explanatory statement and relevant evidence from NewA, etc. and confirmed that the financial company received the aforementioned financial transaction details, but did not notify the Plaintiff and HA of the above fact, and did not notify the Plaintiff and HA of the fact. The Plaintiff and HA

from the date of the statement or the submission of the material.

[Ground of recognition] Facts without dispute, Gap's entries in Gap's 1, 3, 4, 6, 8, 9, 12, 16 through 18, Eul's 1 to 13, and the purport of the whole pleadings

D. Determination

1) As to the allegation of violation of the selection and notification of the person subject to the investigation of the first tax investigation of this case

Article 81-7 (1) of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 2011; hereinafter the same) provides that "tax officials shall, when they investigate the relevant account books, documents, articles, etc. for the purpose of the investigation on national taxes, notify the taxpayer subject to the investigation of the tax items to be investigated, the period and reason for the investigation, and other matters prescribed by Presidential Decree 10 days prior to the commencement of the investigation." Article 3 (1) of the Regulations on the Management of Investigation Affairs (National Tax Directive No. 1868, Jul. 23, 2010) provides that "tax investigation" means that tax officials shall question taxpayers or those who are deemed to have a transaction with the taxpayer, and shall be classified into general tax investigation and tax investigation, and Article 4 (1) of the Act on the Procedure for the Punishment of Tax Evaders provides that the taxpayer subject to the investigation shall be notified of the selection of a taxpayer subject to investigation or his/her customer subject to the investigation in the course of investigation."

However, as a matter of principle, an investigation that does not have a duty to answer or accept a taxpayer’s business freedom, etc. and that is unlikely to infringe on a taxpayer’s business freedom, etc. or an abuse of the right to conduct a tax investigation does not constitute a “tax investigation to which each provision of Chapter VII-2 of the former Framework Act on National Taxes applies.” Ultimately, whether an investigation by a tax official constitutes such a “tax investigation” ought to be determined individually in a specific case by comprehensively taking into account the purpose and process of the investigation, the subject and method of the inquiry, the materials obtained through the investigation, the scale and period of the investigation, etc. (see Supreme Court Decision 2017Du425

With respect to this case, the Director of the Tax Office BB as seen earlier shall transfer income tax of the newA.

When conducting the first tax investigation on the Plaintiff’s land, the details of the instant tax investigation were heard by NewA, etc. to verify the acquisition value of the Plaintiff’s land, and the Plaintiff did not ask the Plaintiff or submit data from the Plaintiff. The Plaintiff’s financial transaction details were merely provided by the financial company, etc. pursuant to relevant laws. In light of this, it is difficult to view that the first tax investigation on the Plaintiff does not constitute a tax investigation to which Article 81-7(1) of the former Framework Act on National Taxes and Article 44(1) of the Regulations on the Management of Investigations apply to the Plaintiff. Therefore, even if the first tax investigation on the instant case selected the Plaintiff as a person subject to the tax investigation and did not notify the Plaintiff thereof, the instant first tax investigation on the grounds that the Plaintiff’s allegation

2) As to the assertion of abuse of tax investigation power

The fact that the defendant was notified by the Director of BB of the Tax Office of taxation data of the plaintiff and did not investigate the plaintiff for not less than 4 years was conducted the second tax investigation of the case, but the following '4)

As seen from "the exclusion period of imposition and argument", the second tax investigation of this case was conducted within the exclusion period, and the transfer value of the Plaintiff's land reported by the Plaintiff is sufficient to recognize that the transfer value of the Plaintiff's land was false, as seen below, as seen in "the Plaintiff's claim for the transfer value of the Plaintiff's land", and there is no evidence to deem that the Defendant's intention not investigating the Plaintiff for more than four years was to interfere with the Plaintiff's vindication or harm the Plaintiff, it cannot be deemed that the first and second tax investigation of this case abuse the right of tax investigation. Therefore, the Plaintiff's above assertion is without merit.

3) As to the Plaintiff’s assertion of transfer value of land

The following circumstances, etc. can be acknowledged in light of the overall purport of the pleading in the above facts of recognition:

In light of the above, the transfer value of the Plaintiff’s land is KRW 471,90,00,000, and EA’s land

The transfer value can be recognized as KRW 600,000,000 in total, which is 128,100,000. Therefore, the Plaintiff’s above assertion is without merit.

① In light of the fact that the Plaintiff’s land is a blind site and the shipA’s land is adjacent to the road, the Plaintiff’s land.

The assertion that the flat value of the land and EA is 300,000 won shall be equal to that of the land is new.

The Plaintiff’s assertion that the usual value of the Plaintiff’s land is KRW 150,00, and the usual value of KRW 300,000 is more reliable. However, according to the agreement of this case, according to the contract of this case, it is reasonable to view that the sale and purchase price of the Plaintiff’s land is set at KRW 300,000,00, and the usual value of the Plaintiff’s land is set at KRW 111-11, the same as the down payment of the previous sale and purchase contract for the Plaintiff’s land and EA land. However, according to the agreement of this case, the purchase and sale contract concluded by EA with respect to the 665,5,154 shares of the former and 111-11 shares of KRW 665,50,00,000, the average value of the Plaintiff’s land is set at KRW 300,000,000, in light of the empirical rule-based agreement, the sale and sale price of the Plaintiff’s land is set at KRW 3600,000.

② From May 10, 2005 to July 7, 2005, the money deposited in the accounts of the Republic of Korea was KRW 593,000,000, which the Plaintiff acknowledged that the Plaintiff received from the new, etc. (excluding KRW 30,000,000 in cash as of May 10, 2005). This is considerably close to KRW 600,000,000 in the acquisition price of the Plaintiff’s land and EA’s land claimed by the new, etc., and the transfer price of the Plaintiff’s land and EA’s land exceeds KRW 363,60,000,00 in excess of that of the transfer price of the Plaintiff’s land and EA’s claimed by the Plaintiff.

③ On June 17, 2005, the Plaintiff’s check on June 17, 2005 as to the difference between the amount of deposit and transfer value.

320,000,000 won out of the deposit amount of KRW 117,80,000 is the remainder of the Plaintiff’s land. It is argued that the check was deposited at the request of the new AA prior to deposit, and then the remainder of KRW 202,20,000,000,000, excluding the remainder, was returned to the new AA. However, there is no evidence supporting the Plaintiff’s assertion, and it is very exceptional that the buyer paid the seller the amount in excess of the balance and received the refund immediately after paying the amount in excess of the balance, and thus, it is difficult to believe this.

④ The down payment of the Plaintiff’s land and EA’s land claimed by the newA, etc. is KRW 67,00,000,000. The amount deposited on May 10, 2005 with the account of EA is the amount equal to KRW 60,000,000. If applying 10%, which is the ratio of the down payment out of the ordinary purchase price, the said amount is equal to the sales price of the Plaintiff’s land and EA’s land claimed by the newA, etc.

4) As to the Do and argument of exclusion period of imposition

The legislative purpose of Article 26-2(1) of the former Framework Act on National Taxes is to extend the exclusion period of the imposition of national taxes to 10 years, in principle, in cases where there is any unlawful act such as making it difficult to discover the taxation requirement of national taxes or making it difficult for the tax authorities to discover the false fact, and it is difficult to expect the exercise of the imposition right due to the lack of tax return.

Therefore, “Fraud or other unlawful act” under Article 26-2(1)1 of the former Framework Act on National Taxes refers to a deceptive scheme or other active act that makes it impossible or considerably difficult to impose and collect taxes (see, e.g., Supreme Court Decision 2013Du7667, Dec. 12, 2013).

As seen earlier, the Plaintiff prepared a false sales contract and filed a false report on capital gains tax even though the transfer value of the Plaintiff’s land was 471,900,000. This constitutes a deceptive scheme or other unlawful act that makes it impossible or considerably difficult to impose and collect taxes. Therefore, the exclusion period for imposition of capital gains tax on the Plaintiff’s land is 10 years, and the disposition of this case was made before 10 years elapse from the date on which the capital gains tax was imposed. Thus, the Plaintiff’s assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.