Board of Audit and Inspection (Law No. 112, 2012)

Since most of the proceeds of sale are actually acquired by paying and acquiring ownership, it constitutes unregistered transfer assets.

In light of the fact that the registration of ownership preservation has been completed in the future of the implementer after the approval for use, and the economic ability to pay the outstanding balance of the sale price is deemed sufficient, but the overdue interest is not paid until the outstanding balance is paid, it can be deemed that the apartment was actually acquired by paying almost all the sale price at the time of transfer.

Article 104 of the Income Tax Act

2011Guhap13577 Revocation of Disposition of Imposing capital gains tax

Park XX

Head of Sungnam Tax Office

April 13, 2012

May 11, 2012

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 000 for the year 2008 against the Plaintiff on January 5, 201 is revoked.

1. Details of the disposition;

A. On June 5, 2003, Nonparty KimA entered into an apartment supply contract with the Plaintiff that the Plaintiff purchased a down payment of KRW 000,000,00 from the educational foundation XXdong, Seoul Special Metropolitan City University (hereinafter “instant apartment”) (i.e., KRW 000 + an intermediate payment of KRW 000 + the remainder payment of KRW 000 + the remainder payment of KRW 000), and paid the down payment. On the same day, Nonparty KimA transferred the right to sell the instant apartment to the Plaintiff (=the down payment of KRW 000 + the down payment of KRW 000 + the premium of KRW 000).

B. After acquiring the right to sell the instant apartment from December 19, 2003 to July 20, 2006, the Plaintiff paid the intermediate payment to the relevant educational foundation XX university at six times. On June 4, 2007, the Plaintiff paid KRW 000 out of the remainder of the purchase price and did not pay only the remainder of KRW 000 out of the total purchase price. On January 21, 2008, the Plaintiff transferred the right to sell the instant apartment to Nonparty B for KRW 000 (hereinafter “transfer”).

C. Since then, the Plaintiff asserted that part of the purchase price of the apartment of this case was unpaid, the transfer price of this case constitutes a transfer of the sale right, not real estate, and filed a final return on the tax base of capital gains tax by applying the transfer income tax rate on May 31, 2009, and paid KRW 000 won.

D. However, the Defendant calculated capital gains tax on the apartment of this case by applying 70% of the capital gains tax on unregistered transfer assets, on the ground that the transfer of this case constitutes transfer of unregistered transfer assets under Article 104(3) of the former Income Tax Act (wholly amended by Act No. 9270, Dec. 26, 2008; hereinafter the same) by deeming that the Plaintiff had already acquired the apartment of this case by paying most of the sales price at the time of the transfer of this case, and then corrected and notified 00 capital gains tax on January 5, 201 after calculating the transfer income tax amount by applying 70% of the capital gains tax on unregistered transfer assets.

E. The Plaintiff dissatisfied with the instant disposition and filed a request for review with the Board of Audit and Inspection, but the said request was dismissed on August 29, 2011.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 3, Eul evidence No. 13 (including provisional number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Since the Plaintiff’s transfer of ownership without paying part of the purchase price of the apartment in this case, it does not constitute an unregistered transfer asset under Article 104(3) of the former Income Tax Act. Nevertheless, the Defendant arbitrarily interpreted that the Plaintiff acquired the apartment in this case without clear grounds and applied the transfer income tax rate of the M&A to the Plaintiff. This is illegal as it goes against the principle of clarity of taxation requirements and unfairly infringes the taxpayer’s right to choose the tax rate.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Unregistered transferred assets under Article 104 (3) of the former Income Tax Act refers to a variety of assets that a person who acquired assets under Article 94 (1) 1 and 2 of the Income Tax Act transfers without registering the acquisition of such assets. According to Article 104 (1) 3 of the same Act, the heavy tax rate corresponding to 70/100 of the transfer income tax base shall apply to unregistered transferred assets. The purport of the imposition of transfer income tax on unregistered transferred assets is to restrain and prevent such transfer without registering the acquisition at the time of transfer by the person who acquired the assets without registering the acquisition thereof (see Supreme Court Decision 2004Du9494, Oct. 28, 2005).

Furthermore, under Article 88 (1) of the former Income Tax Act, the transfer of assets means that assets are actually transferred for price due to sale, exchange, investment in kind in a corporation, etc., regardless of the registration or enrollment of the assets in question. In light of the purport of the above provision, the acquisition or transfer of the assets is reasonable in cases where not only the payment of the price for the assets in question, regardless of the registration or enrollment of the assets in question, but also the payment of the price for the assets in advance remains, and there are circumstances where it is reasonable to deem that the price for the assets in question was almost paid under the social norms (see, e.g., Supreme Court Decision 92Nu8934, Apr. 27, 1993);

(2) On June 4, 2007, the Plaintiff’s remaining overdue interest of 00 won out of the total sale price of the apartment complex of 00 won was deemed to have been paid in full. The following circumstances, which were acknowledged as follows: ① approval for use was granted from the Mayor of Seoul Special Metropolitan City on January 22, 2007; ② registration for ownership transfer was completed on March 2, 2007 under the name of the Educational Foundation, the developer of the construction project; ② the Plaintiff could not complete the registration for ownership transfer of the apartment of 00 won immediately after the remainder of the sale price of 00 won out of the outstanding purchase price of 00,000 won out of the outstanding purchase price of the apartment of 100,000,000 won out of the outstanding purchase price of 10,000,000 won out of the outstanding purchase price of 20,000 won out of the outstanding purchase price of the apartment of 20,000,000 won.

(3) Therefore, the instant disposition that the Defendant deemed the transfer of the instant apartment as an unregistered transfer asset under Article 104(3) of the former Income Tax Act and applied the heavy taxation rate of 70% on the transfer income is lawful.

3. Conclusion

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