District Court-2015-Gu Group-521 (No. 2016.01.20)

Where a registration of transfer of ownership is made before the price is settled, the time of transfer of assets.

The date of transfer shall be the date the price of the relevant assets is settled, and where the registration for transfer of ownership is made before the price is settled, the date of receipt of the registration recorded in the register shall be deemed the

2016Nu36842 Revocation of Disposition of Imposing capital gains tax

AA

BB Director of the Tax Office

Suwon District Court Decision 2015Gudan521 Decided January 20, 2016

December 14, 2016

January 18, 2017

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The imposition of capital gains tax of KRW 357,426,30 (including additional tax) for the Plaintiff on September 24, 2013 by the Defendant shall be revoked.

1. Disposition of this case

A. On December 2, 1986, the Plaintiff purchased 00,000 square meters of 00,000 square meters of 00,000 square meters of 00,000 on December 2, 200, and completed the registration for transfer of ownership. On August 4, 2006, the Plaintiff made a registration conversion and land category change with 183-6 0,000 square meters of 183-6 warehouse sites, 183-8 0,000 square meters of 183-9 forest land, 183-9 0,000 square meters of 183-9 forest land. In addition, on December 3, 2005, the Plaintiff purchased 00 square meters of 279-13,000 square meters of 0 square meters of 00,000 on August 18, 2006 (hereinafter referred to as “the instant land”).

B. After that, on September 21, 2006, the Minister of Construction and Transportation designated and publicly announced the BB internationalization planned district and housing site development planned district in accordance with the Special Act on Support for BB City, etc. according to the US Armed Forces Base and the Housing Site Development Promotion Act, and the land in this case was included therein.

C. Therefore, the Korea Land and Housing Corporation shall, while implementing a development project in accordance with the designation of the said district, pay to the Plaintiff a total of KRW 5,276,165,50 on June 3, 201 and October 5, 201, a total of KRW 5,276,165,50 on the instant land. Meanwhile, the Korea Land and Housing Corporation completed the registration of ownership transfer in its name as of July 6, 201 on the ground of expropriation (the date of commencement of expropriation is January 9, 2013).

1) Although the Plaintiff indicated the date of disposition as of April 16, 2014, it was the date of correction after the initial disposition was made on September 24, 2013, and it is evident that the Plaintiff also seeks the revocation of the remaining tax amount on the premise of the initial disposition and the correction of reduction. Therefore, it is deemed to seek the revocation of the initial disposition on the date of disposition.

D. Accordingly, on September 30, 201, the Plaintiff reported and paid the transfer income tax of KRW 168,766,260 as follows. However, the Defendant imposed the transfer income tax of KRW 1,039,758,90 on the Plaintiff for the year 201 by denying necessary expenses on September 24, 2013. Accordingly, the Plaintiff filed an objection with the Director of theCC Regional Tax Office on December 23, 2013 and rendered a re-audit decision. As such, the Defendant recognized the amount of KRW 2,228,649,00 among necessary expenses claimed by the Plaintiff, and rendered a disposition of KRW 357,426,30 (526,192,563 -168,766,260) as of the date of the initial reduction of the transfer value and the transfer value of the said tax amount as of KRW 2014 as of December 23, 2013.

E. After that, the Plaintiff filed an appeal with the Tax Tribunal on August 18, 2014 regarding the instant disposition, but was dismissed on December 8, 2014.

[Reasons for Recognition: Evidence Nos. 1, 4, 5, 6, 16, 1, 2 (including each number)]

2. Whether the instant disposition is lawful

A. Whether the standard market price is applied

1) First, the Plaintiff asserts that the right to the instant land was already restricted due to the designation of the prearranged area for housing site development on September 21, 2006 as to the instant land, and that the time of the Plaintiff’s transfer of the instant land should be deemed the date of designation of the said district and the standard market price should be applied with the transfer value pursuant to Article 85 of the former Restriction of Special Taxation Act (amended by Act No. 8146, Dec. 30, 2006; the same applies

2) However, under the principle of no taxation without law, the interpretation of a tax law shall be interpreted in accordance with the text of the law, barring any special circumstance, and shall not be extensively interpreted or analogically interpreted without reasonable grounds. In particular, the strict interpretation of a tax law that can be clearly viewed as a preferential provision accords with the principle of tax equality (see, e.g., Supreme Court Decisions 2013Du2921, Jun. 27, 2013; 2008Du11372, Aug. 20, 209).

3) However, Article 85 of the former Restriction of Special Taxation Act (amended by Presidential Decree No. 25193, Feb. 21, 2014) provides for the special taxation of capital gains tax on real estate for public works in a designated area. Article 85 of the former Restriction of Special Taxation Act provides that the transfer value and acquisition value under the Income Tax Act may be based on the standard market price in cases where the land is transferred to the relevant business operator (including cases of expropriation) under the Act on Acquisition of and Compensation for Land, etc. for Public Works or other Acts and subordinate statutes before December 31, 2006. Meanwhile, Article 98 of the Income Tax Act and Article 162 (1) 7 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 25193, Feb. 21, 2014) provide that the transfer date of the land in this case is the earlier of the date of settlement of the price, the date of commencement of expropriation or the date of receipt of ownership transfer registration after October 5, 2017.201.

4) Therefore, even if the Plaintiff’s transfer of the instant land was based on expropriation, there is no room to apply Article 85 of the former Restriction of Special Taxation Act, and the Plaintiff’s assertion contrary thereto is not acceptable.

B. Whether the business income constitutes business income

1) In addition, the Plaintiff purchased the instant land to carry on a real estate development project that sells the previous house in lots, but completed a new construction project after obtaining a building permit by changing its business purpose into a logistics warehouse construction and rent during the course of the project implementation, and completed the business registration for the real estate rental business. However, the Plaintiff’s disposition of this case by the Defendant imposing the transfer income tax is unlawful since the instant land cannot engage in any development activity on the wind designated as a planned area for housing site development, as seen above. The Plaintiff, other than the instant land, was also unable to carry on the project while purchasing the land in BB 00,000 23,704 square meters for the purpose of selling or selling a detached house in lots. Thus, the Plaintiff’s receipt of land compensation following the transfer of the instant land is not by the transfer of assets subject to the transfer income tax, but by the transfer of assets subject to the transfer income tax, and the Defendant’s disposition against which the transfer income tax was imposed is unlawful.

2) In light of the transferor’s acquisition and holding status of real estate, whether the transfer of real estate income is business income or capital gains under the Income Tax Act, and whether the transfer is for profit-making purposes and whether the transfer is continued and repeated to the extent that it can be seen as business activities, in light of the transferor’s acquisition and holding status of real estate, creation, size and frequency of the transfer, mode, other party, etc., the determination must be made in accordance with ordinary social norms. In addition, the determination must be based on not only on the transfer of real estate, but also on all the circumstances surrounding the transfer of real estate owned by the transferor throughout the entire period of the transfer of real estate (see, e.g., Supreme Court Decisions 2014Du5385, Jul. 24, 2014; 208Du21768, Jul. 22,

3) However, even if it is based on the statements in Gap evidence Nos. 4 through 15 (including paper numbers) and Eul evidence Nos. 4 through 6, the plaintiff was engaged in a business for a certain portion of the land after the plaintiff acquired the land with purposes of real estate development and real estate lease. However, as the plaintiff did not actually proceed to lease or sell the land according to its business purposes, the compensation was received as a result of the transfer of the land in this case's expropriation. The transfer of the land in this case was not for the purpose of profit, and the compensation was not for the transfer of the land in this case's transfer of the property in this case's transfer of the land in this case's transfer of the land in this case's transfer of the land in this case's transfer of the land in this case's transfer of the land in this case's report and payment of the transfer income tax as well as for other small-scale transfer of the land in this case's transfer of the real estate before and after the transfer of the land in this case's transfer of the land in this case's. Accordingly, it cannot be accepted the plaintiff's transfer of real estate for profit.

3. Conclusion

Therefore, the disposition of this case where the transfer income tax is imposed on the transfer of the land of this case by applying the actual transaction price is legitimate, and the plaintiff's claim seeking its revocation shall be dismissed as it is without merit. Since the judgment of the court of first instance is justifiable with this conclusion, the plaintiff's appeal is dismissed, and it is so decided as per Disposition.