Early High Court Decision 201Du4201 ( November 27, 2017)

The validity of the disposition imposing capital gains tax on the instant land acquisition right by deeming the actual person to be the Plaintiff

It is reasonable to view that the actual acquisitor of the instant sales right is yyy, and the Plaintiff is merely the title trustee. Therefore, the Defendant’s disposition of this case premised on the premise that the instant sales right is the Plaintiff’s right is unlawful.

Article 14(1) of the Framework Act on National Taxes (Principle of Actual Taxation)

Suwon District Court 2017Gudan9719 Revocation of Disposition of Imposing Capital Gains Tax

O KimO

O Head of tax office

2018.12

October 17, 2018

1. The Defendant’s imposition of transfer income tax of KRW 71,018,640 (including additional taxes) on the Plaintiff on January 19, 2017 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. On June 9, 2008, the Defendant sold from r to r on June 9, 2008 the purchase price of KRW 240 million in the Plaintiff’s name from 200 million to 334 million in the Plaintiff’s name. On January 19, 2017, the Defendant issued a disposition of imposition of capital gains tax of KRW 71,018,640 (including additional tax) for the Plaintiff in 2009 (hereinafter “instant disposition”).

B. The Plaintiff filed an objection against the instant disposition on April 19, 2017, but was dismissed on May 31, 2017, and again filed an appeal with the Tax Tribunal on August 29, 2017. However, the Tax Tribunal dismissed the Plaintiff’s appeal on December 5, 2017.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, 3, Eul evidence 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

In the event that assets held in title are disposed of, under the substance over form principle, the person liable to pay the relevant capital gains tax is the title truster, who is the subject of transfer. Notwithstanding that the Plaintiff is a title trustee who only lends the name of the purchaser of the instant purchase right to yym high school, the disposition of this case against which the Defendant imposed capital gains tax on the Plaintiff by deeming

B. Determination

1) According to Article 14(1) of the Framework Act on National Taxes, if the ownership of income, profit, property, act, or transaction subject to taxation is merely nominal and there is another person to whom such income, profit, property, act, or transaction belongs, and if there is another person to whom such income, etc. actually belongs, the person to whom such income, etc. actually belongs shall be liable to pay taxes. If a title truster transfers assets to a third party and the transfer income is attributed to the title truster, then the person to whom the income, etc., is liable to pay taxes under the substance over form principle under our tax law, is not the person to whom the transfer is the principal agent (see Supreme Court Decision 93

2) In full view of the following circumstances, comprehensively taking account of the descriptions of evidence Nos. 3 through 9 and the witness yy’s testimony, it is reasonable to deem that the actual acquisitor of the right to sell the instant water is yy, and the Plaintiff is a title trustee. Therefore, the Defendant’s disposition based on the premise that the right to sell the instant water is the Plaintiff’s right is illegal.

A) On May 24, 2008, yyy acquired the ownership of this case in the name of the Plaintiff. As such, yyy bears all the expenses including all obligations and taxes in connection with this, and issued to the Plaintiff a written performance note (Evidence A7) that yy bears the burden of civil and criminal damages to the Plaintiff.

B) On June 5, 2008, the Plaintiff borrowed KRW 180 million from Nonghyup to use it as the purchase fund for the instant sales right.

C) yy paid interest on the Plaintiff’s loan interest passbook by December 7, 2009, including deposit of KRW 1,171,569 on August 7, 2008. By December 7, 2009, repayment of KRW 1,171,569 was made on August 7, 2008.

D) At the time of the acquisition of the instant ownership right, yyy paid to r the witness the purchase price other than the money loaned under the Plaintiff’s name at the time of the acquisition of the instant ownership right, o, and the agent at the time of the sale to t. A witness acquired the instant ownership right in the name of the head of a group’s business entity, which was difficult to acquire in the name of the witness, under the name of the Plaintiff-friendly high school, and the actual purchase price was paid in the amount of KRW 280,00,000 to 290,000,000. At the seller’s request of uu, the witness paid the Plaintiff all of the purchase price. At the time of the acquisition of the instant ownership right, the witness did not know that the instant ownership right was sold in part of the borrowed account used at that time, and thus, it is difficult to prove this fact because the Plaintiff did not know that the instant ownership right was sold in the name of the witness for a long time before the sale of real estate.

E) On May 30, 2017, the Plaintiff obtained a loan of KRW 84,707,050 from a community credit cooperative, and paid KRW 75,705,850 according to the instant disposition following the following day. From June 20, 2017 to August 20, 2018, the Plaintiff paid interest on the said loan in its name or in its name as shown in attached Table 2 to the Plaintiff.

F) yy filed a complaint against the PP on April 4, 2017, and on May 25, 2017, by filing a lawsuit for damages claim under the qq District Court’s www support 2017da7011, and filed a claim for damages on behalf of the Pyy, that the PP sold the instant sales right at KRW 34 million on behalf of the Pyy, and that the P embezzled KRW 94 million on January 30, 2018, by deceiving the sale of KRW 240 million.

3. Conclusion

Therefore, since the plaintiff's claim is based on the grounds, it shall be accepted and it shall be decided as per Disposition.