If a land transaction permission zone is designated, the starting point for exclusion from capital gains tax shall be the starting point.

Where the designation of a land transaction permission area is cancelled, a final return on tax base under Article 110 (1) of the same Act shall be filed from May 1 to May 31 of the following year in which the land transaction contract becomes final and conclusive, and the exclusion period for imposition of capital gains tax shall run from the next day.

2018Guhap12157 Revocation of Disposition of Imposing capital gains tax

The AA

BB Director of the Tax Office

2018.06.21

2018.07.12

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 463,093,120 (including additional tax) for the Plaintiff on December 7, 2015 shall be revoked.

Details of the disposition

A. On August 4, 1997, the Plaintiff acquired each of 826 square meters per ○○○○○○○○, 869-1 large 826 square meters per annum on the grounds of inheritance, and 868-1 square meters per 508 square meters per annum on the grounds of sale and purchase on September 4, 1997 (hereinafter “the instant land”). The instant land is located within the land transaction permission zone.

B. On February 16, 2006, the Plaintiff entered into a sales contract to sell the instant land in KRW 1,231,000,000 with CCC Development Co., Ltd. and DDD (the combination of each of the above companies hereinafter referred to as "CC Development"), and received KRW 1,231,00,000 from CCC Development, and completed a trust registration on February 22, 2006 with respect to the instant land in the future.

(C) The designation of the land transaction permission zone was revoked on January 30, 2009. The Defendant decided and notified the Plaintiff on December 7, 2015, on the ground that the Plaintiff did not report the transfer income tax within two months from the last day of the month in which the date of permission for land transaction or the date of cancellation falls (hereinafter “instant disposition”). The Plaintiff filed an objection against the Defendant on March 7, 2016, but the objection was dismissed on April 22, 2016, and the Defendant filed an appeal with the Tax Tribunal on July 19, 2016, but was dismissed on December 28, 2016.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) On February 16, 2006, the Plaintiff entered into a sale and purchase contract for the instant land with the CCC Development, received the purchase price on the same day, and completed a trust registration in the name of EEE Trust on February 22, 2006, using the fact that it is unnecessary to attach land transaction permission when registering a trust. In this case, the payment is settled, and the transfer income tax liability becomes final and conclusive on February 22, 2006 upon completion of the trust registration. Accordingly, the exclusion period of imposition of the transfer income tax of this case is expired on May 31, 2014, which was the following day from June 1, 2007 to June 31, 2014, which was the date when the final return period of the transfer income tax for the transfer income tax for the year 2006 expires, and the instant disposition was thereafter made on December 7, 2015.

2) In light of the fact that the Plaintiff returned 400,000,000 won out of the sales price of this case 1,231,00,000,000 won to the CCC development, the actual transfer value is 831,00,000 won, but the instant disposition that presumed 1,231,00,000 won as the transfer value is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) Determination on the Do and argument for exclusion period of imposition

A) Relevant legal principles

In principle, the exclusion period of imposition of capital gains tax on the transfer of assets shall commence from June 1 of the year following the date of transfer of assets, which is the day following the end of the deadline for the final return on the tax base. However, if a land transaction contract within a land transaction permission area is invalid due to the lack of permission, even if the purchase price was first paid and the transferor keeps it in custody, it cannot be deemed that there was any income from the transfer of assets subject to capital gains tax or from the transfer of assets. Thus, in such a case, the transferor is not a resident with the transfer income amount for the corresponding year under Article 110 (1) of the former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009; hereinafter the same shall apply) and there is no obligation to make a final return on the tax base, and the transferor becomes an income from the transfer of assets only when the land transaction contract becomes final and conclusive due to the cancellation of designation of the land transaction permission area. Thus, the transferor shall exclude the period from the final return on tax base of capital gains tax base from May 31 through 7, etc.

B) Specific determination

(1) In light of the aforementioned legal principles, since a sale contract for the instant land located within the land transaction permission zone was concluded on February 16, 2006, and the designation of the land transaction permission zone was cancelled on January 30, 2009 after the payment was made, the Plaintiff shall file a final return on the tax base under Article 110 (1) of the former Income Tax Act from May 1, 2010 to May 31, 2010, the year following the year in which the date of cancellation falls, and the period for exclusion of capital gains tax shall begin to run from June 1, 2010 on the following day.

(2) Article 110(1) of the former Income Tax Act provides that where land located within a land transaction permission zone is transferred, a final return shall be filed from May 1 to May 31 of the year following the year in which the date of permission for land transaction contract falls. This is the case where a land transaction permission is granted after the settlement of the purchase price, and the deadline for payment is determined based on the date of settlement of the purchase price, a transaction permission is not filed on the grounds that the transaction contract becomes null and void before the transaction contract is granted before the expiration of the statutory period for imposition. As such, there may be a problem where the tax authority loses the right to impose the land when the land transaction permission is granted at the time when the statutory period for imposition expires, and there is no reason to deem that the designation of the land transaction permission is cancelled as different from the case where the land transaction permission is granted.

(3) The Plaintiff’s instant sales contract was concluded for the purpose of excluding or avoiding land transaction permission. Since it is conclusive and void, there is no room to apply Article 110(1) of the former Income Tax Act, which provides for the period for filing a return under the premise that land transaction permission is granted. As such, the Plaintiff asserted that the period for filing a return should be determined on the basis of the date of settlement of price or the date the registration of trust was completed in the EEE Trust’s name, and based on the reasoning, the Supreme Court Decision 2010Du23644 Decided July 21, 201. However, the above decision merely stated that the sale contract was concluded for the purpose of excluding or avoiding land transaction permission, and thus, it still remains for the purpose of excluding or removing land transaction registration for the purpose of excluding or removing land transaction permission, and it is difficult to conclude the sale contract without completing the registration of transfer to a third party. ② Even if the sale contract was concluded for the purpose of excluding or removing the ownership transfer registration under the name of the trust.

(4) Therefore, the exclusion period of imposition of the transfer income tax of this case shall begin on June 1, 2010, which is the day following the day of the final return period of the transfer income tax of this case, and the disposition of this case was made on December 7, 2015, which is seven years before the exclusion period of imposition expires, and therefore, the plaintiff's allegation of this part is without merit.

2) Determination on the assertion of actual transfer value

A) Relevant legal principles

In a lawsuit seeking the revocation of a tax imposition disposition, the burden of proving the facts of taxation requirements is on the taxable person. However, in the event that the facts can be inferred in light of the empirical rule in the course of a specific lawsuit, the other party cannot be readily concluded to be illegal disposition that lacks the taxation requirements, unless it proves that the other party is inappropriate to apply the empirical rule, etc. (see, e.g., Supreme Court Decision 2010Du23378, Aug. 17, 2012).

B) Specific determination

According to the reasoning of the above disposition, Gap evidence Nos. 5 and Eul evidence Nos. 2, respectively, the sales contract was prepared between the plaintiff and CCC Development with the purchase price of KRW 1,231,00,000 with respect to the land of this case. Since CCC development transferred the above KRW 1,231,00,000 to the account under the plaintiff's name on February 16, 2006, the disposition of this case, which presumed the above KRW 1,231,00,000 with the transfer price, shall be presumed legitimate. Thus, it shall be proved that the plaintiff's actual transfer price differs. According to the evidence No. 5, the plaintiff's actual transfer price of the land of this case shall be proved to be different. According to the plaintiff's evidence No. 5, the plaintiff's withdrawal of the purchase price of this case from the account under the plaintiff's name of February 16, 2006 to the plaintiff's name of KRW 4,00,000,30.

3. Conclusion

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