Whether a claim for correction can be filed by the standard market price after the lapse of the deadline for the final return by a person who actually made a preliminary return.

Whether or not to report capital gains tax amount as actual price or standard market price is left to the taxpayer's choice, and as long as it was impossible to make a final return due to the relation not knowing that it may be reported as the standard market price, a request for correction within the period of request for reduction correction can be made.

Article 96 of the former Income Tax Act

Transfer income tax on real estate for public service in the designated area under Article 85 of the Restriction of Special Taxation Act

1. The defendant's refusal to file an application for rectification on April 21, 2006 against the plaintiff for the transfer income tax belonging to 2004 shall be revoked.

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

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. On March 2, 1970, the Plaintiff acquired and owned two lots of land (hereinafter “instant land”) including ○○○○-dong ○○○○○-○ 327 square meters, etc. However, the Plaintiff, including the instant land, was designated as an area where the transfer value and acquisition value are calculated based on the actual transaction value pursuant to Article 96(1)6-2 of the former Income Tax Act (amended by Act No. 7837, Dec. 31, 2005; hereinafter the same) on February 23, 2004; and (b) the Plaintiff agreed on and transferred the instant land to ○○○○ City pursuant to the Act on the Acquisition of Land, etc. for Public Works and the Compensation therefor, and made a preliminary return of transfer income tax to the Defendant on December 21, 2004, and voluntarily paid KRW 384,397,97,97.

C. However, as the former Restriction of Special Taxation Act was amended by Act No. 7322 on Dec. 31, 2004, Article 85 of the same Act was newly established a special provision on capital gains tax (hereinafter "the special provision of this case") which can calculate capital gains on the basis of the standard market price, notwithstanding the provisions of Articles 96 (1) 6-2 and 97 (1) 1 (a) (proviso) of the former Income Tax Act.

[Grounds for recognition] Evidence Nos. 1 to 6, and the purport of the whole pleadings

2. The legality of the instant disposition

A. The plaintiff's assertion

As Article 85 of the former Restriction of Special Taxation Act is newly established so that the Plaintiff may file a preliminary return of capital gains tax on the basis of the actual market price after making a preliminary return of capital gains tax and then file a return of acquisition by transfer as standard market price, the Defendant, who met the requirements of Article 45-2(1) of the Framework Act on National Taxes and filed a request for correction of this case within the deadline for filing a request for correction, shall be deemed liable to make

B. Defendant’s assertion

As the Plaintiff did not make a different return by the deadline for the final return of capital gains tax after having made a preliminary return of capital gains tax on the actual transaction price, the capital gains tax on the transfer of land in this case cannot be calculated based on the actual transaction price, and it is reasonable for the Defendant to refuse to request for correction of the difference of capital gains tax

C. Relevant statutes

former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005)

Article 94 (Scope of Transfer Income)

(1) Transfer income shall be the following incomes generated in the relevant year:

1. Income accruing from transfer of land (referring to a lot of land subject to registration of land category in the cadastral record under the Cadastral Act) or buildings (including the facilities and structures annexed to such buildings);

2. Income accruing from transfer of any right to the real estate falling under any of the following items:

(a) Right to acquire real estate (including the right to acquire a building upon completion of its construction and its appurtenant land);

(b) Superficies;

(c) Chonsegwon and registered real estate lease; and

Article 96 (Transfer Price)

(1) The transfer value of assets as prescribed in Article 94 (1) 1 and 2 shall be the standard market value at the time of the transfer of the relevant assets: Provided, That where the relevant assets fall under any of the following subparagraphs, it shall be the actual transaction value between the transferor and transferee (hereinafter referred to as the “actual transaction value”):

6. Where the transferor reports the actual transaction price at the time of transfer and at the time of acquisition to the head of tax office having jurisdiction over the place of tax payment by the deadline for final return under Article 110

6-2. Where the rate of increase of real estate prices in the relevant area is higher than the national consumer price inflation rate, which falls under real estate stipulated by the Presidential Decree from among those located in the area designated by the Minister of Finance and Economy according to the standards and methods prescribed by the Presidential Decree, as the real estate price inflation or

§ 97. Necessary expenses for capital gains

(1) In calculating gains on transfer of a resident, necessary expenses to be deducted from the transfer value shall be as follows:

1. Acquisition value:

(a) In case of assets as prescribed in Article 94 (1) 1 and 2, the standard market price at the time the assets are acquired: Provided, That in case where the assets concerned fall under any subparagraph of Article 96 (1), it shall be based on the actual transaction price required for the acquisition of such assets;

(b) In cases of assets falling under Article 94 (1) 3 and 4, the actual transaction price required for the acquisition of the relevant assets;

(c) In the case of proviso (a) or (b), where it is impossible to confirm the actual transaction value at the time of acquisition, the transaction example value, appraisal value or conversion value

Enforcement Decree of the former Income Tax Act (amended by Presidential Decree No. 19254 of Dec. 31, 2005)

○ 162-3 Standards, etc. for designated areas

(1) For the purpose of Article 96 (1) 6-2 of the Act, the term "area designated according to the standards and methods prescribed by the Presidential Decree" means an area designated by the Minister of Finance and Economy after going through a deliberation of the Deliberation Committee on Real Estate Price Stabilization under the provisions of Article 162-4 (hereinafter referred to as "designated area"), where the Minister of Construction and Transportation makes a request for designation (including a case where the head of relevant central administrative agency makes a request through the Minister of Construction and Transportation) as he deems that there is a possibility that the increase of real estate prices in the relevant area will continue or might spread to another area in consideration of the nationwide real estate price trend, regional characteristics, etc. from among the areas falling under any of the following subparagraphs. In this case, the Minister of Construction and Transportation shall, with the reason that the Minister of Construction

1. Area wherein the inflation rate of house trade prices in the month immediately preceding that whereto belongs the date of designation (hereafter in this paragraph, referred to as the "immediately preceding month") is higher than 130/100 of the national consumer price inflation rate, which falls under one of the following items:

(a) Area where the monthly average inflation rate of house trade prices during 2 months retroactive from the immediately preceding month is higher than 130/100 of the inflation rate of national house trade prices; and

(b) Area where the annual average inflation rate for one year retroactive from the immediately preceding month is higher than the annual average inflation rate for three years retroactively from the immediately preceding month; and

2. Area wherein the inflation rate of land prices for the immediately preceeding month is higher than 130/100 of the national consumer price inflation rate, which falls under one of the following items:

(a) The area wherein a increasing ratio of monthly average land price for two months retroactive from the immediately preceding month is higher than 130/100 of the increasing ratio of national land price; and

(b) The area wherein the annual average inflation rate of land prices for one year retroactive from the immediately preceding month is higher than the annual average inflation rate of national land prices for three years retroactive.

3. An area (including cases where the head of a central administrative agency or the head of a local government announces the relevant development project, etc.; hereafter the same shall apply in paragraph (9)) in progress for a development project (including a development project not subject to the development charges) and a housing reconstruction project (hereinafter referred to as "development project, etc.") under subparagraph 2 of Article 2 of the Restitution of Development Gains Act, which meets

(a) The inflation rate of house trade price for the immediately preceeding month shall be higher than 130/100 of the national consumer price inflation rate; and

(b) The inflation rate of house trade prices during the immediately preceeding month shall be higher than 130/100 of the inflation rate of national house trade prices; and

4. A prearranged area for housing site development under the Housing Site Development Promotion Act, a planned area for a multifunctional administrative city construction project under the Special Act on the Construction of Multifunctional Administrative City in Yeongi-Gongju Area for Follow-up Measures for New Administrative Capital, or other area determined by Ordinance of the Ministry of Finance and Economy (hereafter referred to as "rearranged area, etc." in this subparagraph), which falls under any of the following items. In such cases, where an administrative agency announces a candidate for a planned area, etc., the candidate shall be deemed a planned area, etc.:

(a) Area wherein the inflation rate of house trade price for immediately preceeding month is higher than the national consumer price inflation rate;

(b) Area wherein a increasing ratio of land price for the immediately preceeding month is higher than national consumer price.

(2) The Minister of Finance and Economy may, if deemed necessary, refer the matters concerning the designation of the designated area to the Real Estate Price Stabilization Deliberation Committee without the request of the Minister of Construction and Transportation.

(3) The term "real estate prescribed by Presidential Decree" in Article 96 (1) 6-2 of the Act means the real estate falling under any of subparagraphs 1 through 3 from among the following subparagraphs, but the house falling under subparagraph 4 shall be excluded. In such cases, in applying the provisions of subparagraph 4, in cases of multi-family houses deemed as detached houses under the provisions of Article 155 (15), the portion partitioned so that one household may reside independently shall be the standard:

1. Case of the designated area under the provisions of paragraph (1) 1 and 3: Houses (including the land annexed thereto);

2. Case of the designated area under the provisions of paragraph (1) 2: Real estate other than subparagraph 1;

3. Case of the designated area under the provisions of paragraph (1) 4: Real estate of subparagraphs 1 and 2; and

4. Any of the following housing (excluding officetels under subparagraph 10 (b) of attached Table 1 of the Enforcement Decree of the Building Act; hereafter the same shall apply in this Article): Provided, That housing located in an area designated and publicly notified as a rearrangement zone under the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (including a project site of a reconstruction association which has obtained authorization for establishment under the Housing Construction Promotion Act before amendment by Act No. 6916 of the Housing Act) shall be excluded:

(a) An apartment under the provisions of attached Table 1 of the Enforcement Decree of the Building Act whose exclusive area is not more than 60 square meters and the standard market price under Article 99 of the Act at the time of transfer shall not exceed 40 million won

(b) A tenement house or multi-household house under the provisions of attached Table 1 of the Enforcement Decree of the Building Act, the exclusive area of which is not more than 85 square meters and the standard market price under Article 99 of the Act at the time of transfer

(c) Single houses under the provisions of attached Table 1 of the Enforcement Decree of the Building Act whose site area is not more than 170 square meters, and the total area of house (including the portion deemed a house under the provisions of the main sentence of Article 154 (3) and the area of underground room exclusively used for residence; hereafter in this Article the same shall apply) is not more than 85 square meters, and the standard market price under Article 99 of the Act at the time of transfer

(4) The Minister of Finance and Economy shall, when he designates an area under paragraph (1), publish such designation without delay and notify the Commissioner of the National Tax Service of the details of such designation.

(5) Where notification has been received pursuant to paragraph (4), measures shall be taken to make the details thereof available for public perusal.

(6) The designation of the designated area shall take effect from the date of public announcement of the designation under the provisions of paragraph (4).

(7) Where the Minister of Finance and Economy requests the cancellation of designation of the Minister of Construction and Transportation (including cases where the head of a related central administrative agency requests the cancellation of designation through the Minister of Construction and Transportation) on the grounds that the causes for such designation are deemed to exist as the stabilization of real estate prices in the relevant area after the designation under paragraph

(8) The provisions of paragraphs (2) and (4) through (6) shall apply mutatis mutandis to a cancellation of designation under the provisions of paragraph (7).

(9) The designated area under the provisions of paragraph (1) shall be designated by the administrative district of the Special Metropolitan City, Metropolitan City, Do, or Si/Gun/Gu: Provided, That with respect to the area referred to in paragraph (1) 3 and 4 and the permission area under the provisions of Article 117 of the National Land Planning and Utilization Act, only the relevant area may be designated

(10) With respect to some administrative districts falling under the administrative districts, which have been or are scheduled to be designated as the designated area, notwithstanding the provisions of paragraph (9), they may be excluded from the relevant designated area after deliberation by the Deliberation Committee on Real Estate Price Stabilization in consideration

(11) The statistics of the national consumer price inflation rate, the inflation rate of house trade price, the inflation rate of national house trade price, the inflation rate, and the inflation rate of national land price under paragraph (1) shall be based on the statistics approved by the Commissioner of the National Statistical Office with respect to the compilation of statistics pursuant to Article 8 of the Statistics Act. In such cases, if there is only the statistics of the inflation rate of apartment house trade price under the provisions of attached Table 1 of the Enforcement Decree of the Building Act, such statistics shall

(12) In applying the provisions of paragraph (1), where the number corresponding to 130/100 of the inflation rate of the national consumer price as provided for in subparagraph 1 through 3 of the same paragraph, the number corresponding to 130/100 of the inflation rate of the national house trade price, or the number corresponding to 130/100 of the inflation rate of the national land price is less than 5/1,000 respectively, it shall be made 5/1,00, and where the number corresponding to the inflation rate of national consumer price as provided for in subparagraph 4 of the same

former Restriction of Special Taxation Act (amended by Act No. 7839 of Dec. 31, 2005)

Article 85 (Special Taxation for Transfer Income Tax on Real Estate for Public Works in Designated Area)

Where a resident acquires real estate in the designated area under Article 96 (1) 6-2 of the Income Tax Act within the designated area under each of the following subparagraphs (referring to the date on which the head of the relevant administrative agency publicly announces it in the Official Gazette or the official bulletin; where the date of public announcement is within 2 years retroactively from the date on which the public announcement is made, referring to the date on which 2 years retroactively from the date on which the public announcement is made, and where the date of announcement arrives after the designation of the designated area under Article 96 (1) 6-2 of the Income Tax Act, referring to the date on which the designated area is made) before December 31, 2006, and transfers the relevant real estate (including the case of expropriation; hereafter in this Article the same shall apply) to the relevant project operator under the Act on Acquisition of and Compensation for Land, etc. for Public Works or other Acts, notwithstanding the provisions of Articles 96 (1) 6-2 and 97 (1) 1 (a) (proviso) of the Income Tax Act, the transfer value and acquisition value under the same Act may be based on the standard market price:

1. The date of designating the scheduled housing site development area under Article 3 of the Housing Site Development Promotion Act;

2. The date designated as the industrial complex under Article 7-3 of the Industrial Sites and Development Act;

3. The date on which the multi-regional development area is designated under Article 4 of the Balanced Regional Development and Support for Local Small

4. Date of announcement of a compensation plan under Article 15 of the Act on the Acquisition of Land, etc. for Public Works and the Compensation Therefor (referring to the United States Armed Forces stationed in the Republic of Korea under the Mutual Defense Treaty between the Republic of Korea and the United States

5. In cases of the immovables transferred under other Acts than subparagraphs 1 through 4, the planned area and area, designation of the development area, public announcement of a compensation plan and other similar days as prescribed by the Presidential Decree for the project area to which the immovables belong under the relevant Acts.

The Addenda

Article 12 (Application of Special Cases of Transfer Income Tax on Real Estate for Public Works in Designated Area)

The amended provisions of Article 85 shall apply from the time when the deadline for the final return on capital gains arrives after this Act enters into force.

Basic Act

○ Request for correction, etc. under Article 45-2

(1) In any of the following cases, a person who has filed the tax base return within the statutory due date of return, may request the head of the competent tax office to determine or correct the tax base and amount of the national tax (where any determination or correction is made pursuant to the tax-related Acts, referring to the tax base and amount of tax after such determination or correction is made) of which the initial return

1. Where the tax base and tax amount entered in the tax base return (referred to the tax base and tax amount after such decision or correction is made, if such decision or correction is made under the provisions of each tax-related Act), exceed those to be returned under the tax-related Acts;

2. Where the deficit amount or refundable tax amount entered in the return of tax base (referred to the deficit amount or refundable tax amount after such decision or correction is made, in case where such decision or correction is made pursuant to the provisions of each tax-related Act), is short of the deficit amount or refundable

§ 51. Appropriation and refund of the national tax refund

(1) If there is any amount paid in error or tax amount to be refunded under the tax-related Acts (where there is any amount of tax to be deducted from the amount of tax refundable under the tax-related Acts, referring to the remaining amount after deduction), among those paid by a taxpayer as national taxes, additional dues or disposition fees for arrears, the head of a tax office shall immediately determine such excess amount paid in error or tax amount to be refunded. In such cases, any claim for

D. Determination

Article 45-2 (1) 1 of the Framework Act on National Taxes provides that a request for correction may be made when the tax base and tax amount entered in the tax base return exceeds those to be reported under the tax-related Acts. Articles 96 (1) 6-2 and 97 (1) 1 of the former Income Tax Act provide that the transfer value and acquisition value shall be calculated based on the actual transaction value in the case of real estate prescribed by the Presidential Decree among real estate located in the designated area. Article 85 of the former Restriction of Special Taxation Act provides for the special provisions of this case: Provided, That Article 96 (1) 6 and Article 97 (1) 6 (a) (proviso) of the former Income Tax Act provides that where the transfer value and acquisition value are reported based on the actual transaction value, transfer margin shall not be calculated based on the standard market price. Article 7322, Article 12 of the Addenda of the same Act provides that the special provisions of this case shall apply from the final return date of income tax base after its enforcement.

As seen earlier, the Plaintiff’s preliminary return on capital gains tax calculated based on the actual transaction price higher than the standard market price with respect to the instant land as the instant land falls under the designated area and filed a return pursuant to Article 96(1)6-2 of the former Income Tax Act. Since the final return on capital gains tax base for the instant land has arrived after January 1, 2005, the date of final return on capital gains tax base for the instant land ( May 31, 2005) after the enforcement of the Special Provision, the special provisions of this case may be applied to the transfer of the instant land. Furthermore, unlike the scheduled return, the Plaintiff did not make a final return on capital gains tax by the standard market price, even if it was possible to calculate the transfer value and acquisition value by the standard market price rather than the final return on capital gains tax base, the tax base and tax amount initially scheduled by the Plaintiff does not exceed the tax base and tax amount to be reported under the tax law.

The defendant argues that the transfer value and acquisition value of the land of this case are not subject to the special provisions of this case, as long as the plaintiff made only a preliminary return and did not make a final return, the transfer value and acquisition value of the land of this case can be based on the standard market price. However, as long as Article 85 of the former Restriction of Special Taxation Act provides that the transfer value and acquisition value may be based on the standard market price, whether to report the transfer income tax calculated on the basis of the standard market price or whether to report the transfer income tax calculated on the basis of the actual transaction value should be left to the plaintiff's choice or not can not be claimed for reduction of the transfer income tax already reported on the basis of the standard market price before the final return due date after the actual transaction price is reported, and it shall not be the purport that the plaintiff's claim for reduction of the transfer income tax calculated on the basis of the standard market price before the final return date is filed, and it shall not be accepted so long as the plaintiff did not know that the transfer of the land of this case can be reported

3. Conclusion

Therefore, the disposition of this case rejecting the plaintiff's request for correction even though the grounds for filing a request for correction under Article 45-2 (1) 1 of the Framework Act on National Taxes exist, shall be revoked as illegal. Thus, the plaintiff's request of this case shall be accepted for the reasons, and it shall be