The propriety of the disposition taken by a corporation operating real estate sales business on the omission of the corporate tax on capital gains, such as land

As long as Article 55-2(6) of the former Corporate Tax Act does not infringe property rights without infringing upon the appropriateness of the means of legitimacy, minimum infringement and balance of legal interests, it cannot be deemed that the above provision is unlawful on the ground that the above provision violates the Constitution and the disposition of this case cannot be deemed unlawful.

Special Taxation for the transfer income tax on land, etc. under Article 55-2 of the Corporate Tax Act

2015Guhap21382 Revocation of Disposition of Imposing corporate tax, etc.

주식회사 경남##

a) the Director of the Tax Office

March 20, 2018

April 10, 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 imposing corporate tax of KRW 934,871,340 for the year 2013 imposed on the Plaintiff on September 2, 2014 exceeds KRW 520,638,778 (the Plaintiff sought revocation of imposing corporate tax of KRW 934,871,343 on September 15, 2014 from the purport of the claim; however, according to the evidence evidence No. 1, the date of disposition is September 2, 2014 and the amount is KRW 934,871,340).

1. Details of the disposition;

A. On March 31, 2014, the Plaintiff, a company engaged in real estate leasing, selling, etc., declared KRW 177,352,971 as corporate tax for the year 2013 portion of March 21, 2014. However, bB regional tax office conducted a corporate tax investigation on the Plaintiff from May 29, 2014 to July 25, 2014, it deemed that the Plaintiff did not report corporate tax on capital gains, such as land prescribed in Article 55-2 of the former Corporate Tax Act (Amended by Act No. 12166, Jan. 1, 2014; hereinafter referred to as the “former Corporate Tax Act”).

From January 1, 2013 to December 31, 2013, the Plaintiff sold a total of 41,872 square meters of forest land, such as 358-3 land owned by the Plaintiff (hereinafter “instant land”). This constitutes a transfer of “non-business land” under Article 55-2(1)3 of the former Corporate Tax Act.

Therefore, the Plaintiff did not report the amount of KRW 893,331,432, which is the amount calculated by applying 30% of the tax rate to KRW 2,977,771,442 on the transfer income of the instant land calculated pursuant to Article 55-2 (6) of the former Corporate Tax Act, as corporate tax.

B. On September 2, 2014, the Defendant notified the regional tax office of the foregoing taxation data, issued a disposition imposing additional tax amounting to KRW 934,871,340 of the corporate tax for the year 2013 [=893,331,432 + KRW 41,539,911 (additional tax), and below KRW 10] on the Plaintiff (hereinafter “instant disposition”).

C. On November 18, 2014, the Plaintiff filed a request for a tax trial on the instant disposition, but received a decision of dismissal on February 27, 2015 (the foregoing decision was notified on March 3, 2015) and filed the instant lawsuit on May 29, 2015.

D. On January 12, 2016, the Plaintiff applied for an adjudication on the constitutionality of laws under Article 55-2(6) of the former Corporate Tax Act, which prescribed the standards for calculating the amount of corporate tax in this court, but was dismissed on April 20, 2016. On May 9, 2016, the Plaintiff filed an adjudication on constitutional complaint with the Constitutional Court on the said provisions, but on November 30, 2017, received a decision that the said provision does not contravene the Constitution (Supreme Court Order 2016Hun-Ba182 Decided November 30, 2017).

Facts that there is no dispute with recognition, Gap evidence 1 through 3, Eul evidence 1 through 3 (including paper numbers)

each entry, the purport of the whole pleading

2. Relevant statutes;

It is as shown in the attached Form.

3. The plaintiff's assertion and judgment

A. The plaintiff's assertion

1) Since the Plaintiff is running real estate sales business, the instant land sold by the Plaintiff cannot be deemed land for non-business use under Article 55-2(1)3 of the former Corporate Tax Act. Therefore, when calculating the lawful corporate tax amount under the premise that the instant land does not constitute land for non-business use, the portion exceeding KRW 520,638,778 of the instant disposition should be revoked in an unlawful manner.

2) Article 55-2(6) of the former Corporate Tax Act provides that “The amount obtained by subtracting the book value at the time of transfer from the transfer amount of land shall be deemed as transfer income of land.” The expenses paid in the course of sale and purchase of sales allowances, etc. paid to business members are not deducted. This is contrary to the principle of substantial and equal taxation, which infringes on the property right guaranteed by the Constitution and goes against the principle of substantial and equal taxation. Therefore, the instant disposition that calculated

3) Even if the foregoing illegal cause is not recognized, there is a legal dispute over whether the Plaintiff is liable to pay corporate tax on the instant land, and thus, the Plaintiff’s failure to pay corporate tax should be exempted from additional tax pursuant to Article 48(1) of the former Framework Act on National Taxes (amended by Act No. 12848, Dec. 23, 2014; hereinafter “former Framework Act on National Taxes”).

B. Determination

1) Whether the land of this case constitutes non-business land

Considering the following circumstances, this case’s land is deemed as land for non-business use under Article 55-2(1)3 of the former Corporate Tax Act. Thus, this part of the Plaintiff’s assertion is rejected.

A) Article 55-2(2)2 of the former Corporate Tax Act sets the forest land as land for non-business use in principle, and sets the grounds for exception in each item, and Article 92-6(4)1 through 7 of the former Enforcement Decree of Corporate Tax Act (amended by Presidential Decree No. 26068, Feb. 3, 2015; hereinafter “former Enforcement Decree of Corporate Tax Act”) enacted upon delegation of the aforementioned provision sets the specific scope of the grounds for exception. The instant land does not fall under any of the grounds for exception.

B) The purpose of imposing corporate tax on the transfer of land for non-business is to restrain a corporation’s demand for real estate speculation and recover speculative profits. In the case of forest land, there are many cases where real estate speculation is subject to the application of real estate speculation, and thus, in principle, the land for non-business as prescribed by Article 5-2(2)2 of the Corporate Tax Act is determined as land for non-business. Therefore, in light of the legislative intent, each item of the above provision, which provides the grounds for exception, should be deemed as a limited and hot provision, and thus, it cannot be deemed as land for non-business, and this does not change because the

2) Whether Article 55-2(6) of the former Corporate Tax Act violates the Constitution

However, as long as Article 55-2(6) of the former Corporate Tax Act does not infringe the Plaintiff’s property right by maintaining the legitimacy of the purpose, the suitability of means, the minimum infringement of the means, and the balance of legal interests and interests, and it cannot be deemed that the said provision is unreasonably discriminated against the corporation and the non-business land and the business land, the Plaintiff’s assertion that the instant disposition is unlawful is also rejected.

3) Whether the imposition of additional tax is legitimate

On the other hand, in a case where there is a reasonable ground that a taxpayer cannot be held liable for the failure of knowledge of his/her obligation due to a conflict of opinion in the interpretation of tax law beyond the scope of simple site or misunderstanding, or where there is a justifiable reason that makes it difficult to criticize the fact that he/she neglected his/her obligation, such as when it is difficult to expect the party to perform the obligation, etc., an additional tax is exempted pursuant to Article 48(1) of the former Framework Act on National Taxes (see, e.g., Supreme Court Decision 2017Du36885, Jul. 11, 2017). As to the fact that the liability for corporate tax payment on the instant land is recognized, the Plaintiff’s assertion that an additional tax should be exempted due to justifiable

4. Conclusion

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