Plaintiff (Law Firm Closts, Attorneys Park Ha-young et al., Counsel for the plaintiff-appellant)

Head of Central Tax Office

May 14, 2019

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of capital gains tax of KRW 25,625,310, capital gains tax of KRW 57,932,949, and capital gains tax of KRW 228,619,941 for the year 2010 for the Plaintiff on June 2, 2016 is revoked, respectively.

1. Details of the disposition;

A. A. Around August 1997, the Plaintiff acquired 26784 square meters (number 1 omitted) prior to ○○ Dong-dong (number 1 omitted), 26784 square meters prior to the said (number 2 omitted), 815 square meters prior to the said (number 2 omitted) (hereinafter “○○ Dong-dong (number 2 omitted), 1243 square meters (hereinafter “○○ Dong-dong (number 3 omitted), the same (number 3 omitted), the same (number 4 omitted), the same (number 4 omitted), the orchard of 60 square meters, the same (number 5 omitted), and 290 square meters in the name of the Nonparty, who was the Plaintiff’s driver, who was the Plaintiff. The Plaintiff merged ○○ Dong-dong (number 4 omitted) and 600 square meters in the name of 290 square meters in the same (number 4 omitted) with the land number of 500 square meters and 404 square meters in the same place (hereinafter “O-dong 4940.

B. Each of the following lands divided from the land of ○○○-dong (Land Number 1 omitted), ○○-dong (Land Number 3 omitted), and (Land Number 4 omitted) each land was expropriated in the Yanan-si in the following order (hereinafter “instant land”).

(1) ○○ Dong (3 omitted): Land on June 21, 2010

B. 2090 shares of 3590 shares among the land ○○ Dong (number 6 omitted), 197 square meters and 00 Dong (number 4 omitted): Expropriation on April 5, 201

Man-dong (number 7 omitted) 18354 square meters, 21121/21/210 of 1834 square meters : Acceptance on May 12, 2014

C. With respect to the expropriation of the instant land in the name of the Nonparty, the Plaintiff filed and paid each transfer income tax of KRW 59,262,974, KRW 127,271,070, and KRW 525,207,973, which reverts to the year 2014, respectively, in the name of the Nonparty. The specific details are as indicated in the “tax amount reported and paid in the name of the Nonparty” (the unit of the amount is KRW 2,00, the same).

C. On December 31, 2015, the Plaintiff filed a revised return on capital gains tax for the year 2010, after the due date for the transfer income tax for the year 2014, and after the due date for the revised return on capital gains tax for the year 2011, and calculated penalty tax by applying 20% of the general non-reported additional tax rate to the amount obtained by deducting the amount of tax paid in the name of the non-party, etc. from the calculated tax amount. In the case of capital gains tax for the year 2011, the Plaintiff reported and paid capital gains tax by transferring the name of the non-party, Songpa-dong, Songpa-gu, Seoul ( Address and number omitted) (hereinafter referred to as “the name, address and number omitted”), including the portion expropriated on April 5, 201. After the due date and the revised return on capital gains tax for the year 2010, 2010, 29, 34, 234, 2011, 2334, 2015.

D. On June 2, 2016, the Defendant imposed an amount equivalent to 40% of the total amount of tax calculated without deducting the amount of tax paid under the name of the Nonparty to the Plaintiff as additional tax for improper non-declaration (in 2010, reverted to year 2014) or for unjust underreporting (in 2011), and additionally imposed capital gains tax of KRW 25,625,310 that reverts to year 201, KRW 62,903,120 that reverted to year 201, KRW 287,89,450 that reverted to year 201. In the case of capital gains tax attributed to year 201, the Defendant added capital gains tax of KRW 287,89,450 that reverts to year 201. Specific details are as indicated in the “Defendant’s capital gains tax decision”.

E. The Plaintiff filed an appeal with the Tax Tribunal regarding the said disposition of capital gains tax, but was dismissed on October 11, 2017. The Defendant corrected the imposition of capital gains tax for the year 201 as KRW 65,320,101 and corrected the disposition of imposition for the capital gains tax for the year 201 by reducing the difference of KRW 4,625,434 ( KRW 69,945,535 - KRW 65,320,101) (hereinafter referred to as the “instant disposition”).

[Ground of Recognition] Facts without dispute, Gap evidence 1, 3 through 5, Gap evidence 6-1 through 6, Gap evidence 7-1, 2, Eul evidence 1-1 through 3, Eul evidence 3, 4, Eul evidence 6-1, 6-2, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) In the event that the Plaintiff reported and paid the transfer income tax in the name of the Nonparty with respect to the expropriation of the instant land and again reported and paid the transfer income tax under the name of the Plaintiff, there was no act constituting “Fraud or other unlawful act” that constitutes the requirements for imposition of the illegal and unreported additional tax or the illegal and underreported additional tax, and thus, the general non-reported

In applying the Do governor-free or under-reported penalty tax, the calculated tax amount shall be calculated by multiplying the amount obtained by deducting the tax amount reported and paid under the name of the non-party by the additional tax rate.

Article 18(1) of the Framework Act on National Taxes provides that the transfer income tax belonging to 2010 includes the additional tax due due to the exclusion of 3,119,103 won. The transfer income tax belonging to 2014 includes the amount of tax due due to the mistake of the limit of tax reduction (200 million won for 5 years) due to the expropriation. The addition of the additional tax on the total amount of tax due to this reason violates Article 18(1) of the Framework Act on National Taxes.

(b) Related Acts and subordinate statutes: To be listed in attached Form;

C. Whether the additional tax rate for negligent tax returns applied to the instant disposition is legitimate

(1) If a taxpayer commits a fraudulent or other unlawful act to evade a national tax or receive a refund or deduction, and thereby there is a tax base without filing a tax return, the tax authority imposes an amount equivalent to 40/100 of the amount calculated by multiplying the calculated tax by the ratio of the amount equivalent to the unreported tax base to the tax base. In this case, the term “Fraud or other unlawful act” refers to a deceptive scheme or other active act that makes it impossible or considerably difficult to impose and collect taxes, and it does not constitute mere failure to file a tax return under the tax law or filing a false tax return without attaching circumstances showing the intention of active concealment. In addition, even if a taxpayer gets income through a disguised title, if it is not related to a tax evasion, it does not constitute “Fraud or other unlawful act” under Article 26-2(1)1 of the former Framework Act on National Taxes, but if it is considerably impossible to impose and keep a false tax return or false tax return, such as a false tax evasion rate, decentralization of revenues, tax exemption, special exemption, and payment of taxes, and if it is made or false tax payment under the name of insolvent.

In full view of the following facts and all other circumstances acknowledged by the facts and the purport of the evidence No. 3, No. 5-1 through 10, No. 5-10, and No. 7, the Defendant’s decision on capital gains tax belonging to the year 2010, No. 2011, and No. 2014 on the Plaintiff is lawful to apply the rate of unfair non-declaration of tax or the rate of unfair underreporting of tax by deeming the Plaintiff’s act of non-declaration of tax return to be caused by “Fraud or other unlawful act”. Accordingly, the Plaintiff’s assertion to this purport is rejected.

① It is difficult to believe the Plaintiff’s assertion as to the circumstances leading to title trust. The Plaintiff asserted to the effect that, on the grounds that the Plaintiff acquired the instant land under the name of the Plaintiff, the Plaintiff, an executive officer of a financial company, provided the Plaintiff’s debt security to the Plaintiff’s husband. However, there is no evidence to acknowledge it.

Rather, at the time of acquiring the instant land, the Plaintiff, in addition to a part of the Gindong Officetel, owned several real estate, such as 22986m2, 22986m2 in Dong-si, Gangwon-do ( Address 1 omitted), ( Address 2 omitted), 941m2, 941m2, and 941m2 in its own name. On December 2000 after acquiring the instant land, the Plaintiff acquired the land under the name of Jung-gu, Seoul ( Address 4 omitted), and on June 200, it was not possible to understand the reasons why the said real estate could have been acquired under the name of the Plaintiff, unlike the instant land. In addition, the Plaintiff had acquired a large number of real estate under the name of the Nonparty’s wife around 202, and had been expropriated at the same time as the instant land. In addition, the Nonparty’s possession of the instant land to the Nonparty, a large number of real estate held in the instant case may have a tax burden.

② Following title trust under the name of Nonparty, the Plaintiff gained a result of partly avoiding capital gains tax on the instant land expropriation. In other words, in the case of capital gains tax for actual 201, the Plaintiff paid the capital gains tax on the land expropriated on April 5, 2011 among the instant land under the name of the Plaintiff and the Nonparty, thereby resulting in the Plaintiff’s double application of the basic deduction, etc., thereby evading the tax amount of at least KRW 14,932,718.

③ The Plaintiff: (a) reported the transfer income tax under the name of the Nonparty after the land was expropriated; and (b) paid the transfer income tax under the name of the Nonparty to the Nonparty as if the Nonparty were the actual owner of the instant land; (c) thereby, it is reasonable to deem that the tax authority made it impossible or considerably difficult for the Plaintiff to impose and collect the transfer income tax on the Plaintiff who is the actual owner by providing the tax authority with the cause of

④ Although the transfer income tax for the year 2010 and the transfer income tax for the year 2014, which the Plaintiff reported and paid under the name of the Nonparty, appears to have been similar to the tax amount imposed even if the Plaintiff reported and paid under the name of the Nonparty, in the case of the transfer income tax for the year 2010 and the transfer income tax for the year 2014, it is difficult to conclude that there was no tax avoidance purpose in the act of reporting and paying the transfer income tax for the year 2010 and 2014 under the name of the Nonparty in light of the fact that the intention of tax avoidance was peeped in the title trust itself, and the act of reporting

D. Whether the tax amount reported and paid under the name of the Nonparty should be deducted

(1) Article 47-2(3) and Article 47-3(3) of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 201) provide that an amount of income for which no return has been filed shall be deducted from the calculated tax when applying the income tax withheld. In addition, Article 47-2(5) of the former Framework Act on National Taxes (amended by Act No. 12848, Dec. 23, 2014) provides that an amount of tax payable shall be deducted from the calculated tax for interim prepayment, the amount of tax withheld after deducting the same from the calculated tax for interim prepayment, the amount of tax withheld, the amount of tax withheld, and the amount of tax occasionally imposed, and the amount of tax to be deducted from the calculated tax for interim prepayment under the delegation of the aforementioned Act under Article 27(1)1 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 25751, Nov. 19, 2014).

Since it is apparent that the capital gains tax returned and paid by the Plaintiff under the name of the Nonparty, the trustee, does not fall under the “income tax withheld” under the Income Tax Act, the tax amount returned and paid under the name of the Nonparty may not be deducted when applying the unjust non-reported or unjust under-reported additional tax on the capital gains tax accrued in 2010 and 2011, and when applying the unjust non-reported additional tax under the former Framework Act on National Taxes (amended by Act No. 12848, Dec. 23, 2014), the transfer income tax amount reported and paid under the name of the Nonparty does not fall under the pre-paid tax amount under Article 47-2 (5) of the same Act. Therefore, in applying the unjust non-reported additional tax on the capital gains tax accrued in 2014, the tax amount returned and paid under the name of the Nonparty may not be deducted.

Article 22(1) of the Civil Procedure Act provides that the Defendant shall apply the additional tax without deducting the transfer income tax reported and paid under the name of the Nonparty, the trustee, in rendering the disposition of this case. Thus, in applying the additional tax, there is no ground to deduct the transfer income tax reported and paid under the name of the Nonparty when applying the additional tax. Thus, the Plaintiff’s assertion to

(e) Whether Article 18(1) of the Framework Act on National Taxes is violated;

Article 18 (1) of the Framework Act on National Taxes provides that when interpreting and applying tax-related Acts, property rights of taxpayers shall not be unfairly infringed in light of the equity of taxation and the basic purpose of the relevant provisions.

However, as seen earlier, in the case of capital gains tax for the year 2010 and 2014, the Plaintiff reported and paid the capital gains tax for the expropriation of the instant land held in title by a third party in the name of the trustee, thereby making it impossible or remarkably difficult for the tax authority to impose and collect capital gains tax on the Plaintiff, who is the actual owner, and the purpose of tax avoidance has been changed, and thus, it is deemed as a non-report by the “Fraud or other unlawful act”. As such, in imposing capital gains tax on the Plaintiff, it cannot be deemed that the instant disposition imposing an unfair non-reported penalty tax pursuant to the relevant Acts and subordinate statutes violates the taxation equity or unfairly infringing the taxpayer’s property right.

On the contrary, the Plaintiff’s assertion to the effect that in the case of capital gains tax attributed to year 2010, the deduction amount of capital gains tax for which the return or payment was made under the Nonparty’s name was practically under-reported as much as the relevant amount because it was not subject to the application of KRW 3,119,103. In the case of capital gains tax corresponding to year 2014, the Plaintiff’s assertion to the effect that penalty tax should be imposed only on each under-reported and excessive amount, as the Plaintiff’s excessive return was dismissed with the limit of reduction or exemption due to expropriation.

3. Conclusion

Thus, the plaintiff's claim is dismissed as it is without merit.

(attached Form omitted)

For the remaining judge

Note 1) On April 7, 2010, it was divided from ○○-dong (Land Number 2 omitted) land.

2) The remaining 1500 shares were accepted on April 25, 2012.

3) On April 7, 2010, 2010, 21121 square meters was divided from the land of ○○dong, ○○-dong (number 1 omitted), and on December 26, 2012, 2012, 2767 square meters was again divided and became 18354 square meters prior to ○○-dong (number 7 omitted) (number 7 omitted).

Note 4) 220/2121 shares were accepted on April 25, 2012; 3526.89/21 of shares were accepted on March 19, 2013; and remaining 5464.9/21 of shares were accepted on April 28, 2016.

5) Some of the real estate held by the Plaintiff in title trust with the Nonparty was accepted in the year 2012 and 2013, and the Plaintiff reported and paid the transfer income tax under the name of the Nonparty. The Defendant imposed the transfer income tax for the year 2012 and 2013 on the Plaintiff. The Plaintiff filed an appeal against each disposition of transfer income tax for the said disposition along with the instant disposition. The disposition of imposition of transfer income tax for the year 2012 and 2013 was revoked, and the appeal for the instant disposition was dismissed.

Note 6) Where separate payments are made, capital gains tax for the instant officetel 35,53,100 (No. 7) and capital gains tax for the instant officetel 127,271,070 among the instant land, the total of KRW 162,854,170, and the total of KRW 177,756,888, as seen in the foregoing 1. D., as seen in the foregoing 1.4.

7) In the case of the transfer income tax for the year 2010, the amount of the tax additionally paid to the Plaintiff was not deducted from the amount of the preliminary return that was applied when the return and payment was made in the name of the Nonparty. In the case of the transfer income tax for the year 2014, the amount of the tax was erroneously paid at the time when the return and payment was made in the name of the Nonparty, and the omission of the amount of tax was caused by the error