Whether the real estate received in lieu of payment can be seen as brokerage fees

The income falling under any of the income stipulated by the Income Tax Act shall not be attributable to the form, name, and appearance of a contract entered into between the parties, but be assessed according to its substance, and shall be determined according to social norms by taking into account the substance of the taxpayer's vocational activities, the period, frequency, mode, mode, and other factors of the contract.

Article 21 of the Income Tax Act

Global Income Detailed and Revocation of Disposition

Park Ga

Head of Jeju Tax Office

November 7, 2018

December 12, 2018

1. Details of the disposition;

A. A. Around October 2008, the representative director of the BB industry development corporation (hereinafter referred to as the "bb industry development") purchased a total of 15,47.7 square meters (3,200 square meters) from hh development corporation (hereinafter referred to as the "hh development") and planned to conduct a real estate development project (hereinafter referred to as the "development project in this case") with the content of selling buildings in approximately 700 square meters from hh development in order to purchase each of the above land from hh development to 33.0 billion won (hereinafter referred to as the "the first sale contract"), and the remaining payment was made on hh development on 3.3 billion won on hh development, and the remaining payment was made on h.36.3 billion won on h.

B. On March 3, 2009, Isc, acting on behalf of Kimd, prepared a loan certificate to pay to the Plaintiff KRW 400 million (hereinafter “the instant amount”) by April 15, 2009, and stated that “in principle, it shall be paid simultaneously with the payment of the balance of Hh Development.”

C. Since then, BB industry development and KimD withdraw from the business of this case due to financial shortage, etc., and Kime, around March 10, 2009, was to acquire all the shares of BB industry development and Kimdd concerning the business of this case and to promote the business. Accordingly, the first sales contract was terminated on April 16, 2009, and Kime purchased from Hh Development on May 11, 2009 the aggregate of 12,803 m2 m2, which was divided from each of the above lands and completed the registration of transfer of ownership in its name (hereinafter referred to as "the second sales contract").

D. Meanwhile, on the other hand, Kime concluded a secondary sales contract as above and agreed to pay the instant amount to the Plaintiff on behalf of Lee C and Kimdd, and on October 20, 2010, signed a notarial deed with the purport that the Plaintiff would pay KRW 400 million to the Plaintiff by December 20, 2010. On August 2, 2013, the Plaintiff completed the registration of the establishment of a neighboring mortgage with the maximum amount of claims KRW 300,00,000,000,000,000,000,000,000,000,000,000,000,000,000 won.

E. On November 18, 2013, the Plaintiff and Kime drafted the following agreements (hereinafter referred to as “instant agreement”).

In addition, on November 21, 2013, when entering into a contract to sell the instant land with the purchase price of KRW 410 million, the Plaintiff and Kime sold the instant land to Kimnnnn on May 7, 2015, the Plaintiff offset the down payment of KRW 300 million out of the key amount of the instant contract, and the Plaintiff paid KRW 117 million,00,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000, as stated in the instant agreement. The Plaintiff sold the instant land to Kim nnn, on the same day, paid KRW 117,00,000,000 to the obligor of Kim e, which was created on the instant land.

F. Around October 2016, the Defendant confirmed the Plaintiff’s omission of global income tax in 2013, and received the instant dispute interest amount from Kime in terms of consulting expenses from Kime in around 2013, and deemed it as constituting other income under Article 21(1) of the Income Tax Act (an intermediary fee for property rights under subparagraph 16), and determined and notified the Plaintiff of KRW 186,828,410 of global income tax on the instant issue amount as of November 17, 2016 (hereinafter “instant disposition”).

G. The Plaintiff, who was dissatisfied with the instant disposition, filed an appeal with the Tax Tribunal on February 7, 2017, but was dismissed on April 20, 2017.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 4, 6, 8 through 12, Eul evidence Nos. 1 through 5 and 7 (including each number in case of additional evidence) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) In around 2008, the Plaintiff spent approximately KRW 230 million for operating expenses and all other expenses for the instant business. When the instant business failed to proceed properly, the Plaintiff received the instant amount of money under the name of compensation for damages for the said expenditure ( KRW 230 million) and the preservation of future investment profits ( KRW 170 million), and received reimbursement from Kime for the transfer of the instant land. Accordingly, the instant amount of money does not constitute other income under the Income Tax Act.

2) The right to collateral security was established on the instant land as a debtor, but the Plaintiff paid KRW 110 million on the part of the Plaintiff and repaid the debt. Accordingly, the amount of the Plaintiff’s income is KRW 300 million calculated by subtracting the said KRW 110 million from the purchase price of KRW 410 million, not from KRW 400 million.

B. Relevant statutes

▣ 소득세법(2016. 12. 20. 법률 제14389호로 개정되기 전의 것)

Article 21 (Other Incomes)

(1) Other income shall include interest income, dividend income, business income, labor income, annuity income, retirement income and income other than those prescribed in the following subparagraphs:

16. A brokerage fee on a property right;

C. Determination

1) As to the nature of the key money of this case

A) Whether a certain income constitutes an income under the Income Tax Act is not attributable to the form, name, and appearance of a contract entered into between the parties, but should be assessed according to the substance thereof, and then determined according to social norms by taking into account the substance of the relevant taxpayer’s vocational activities, the period, frequency, mode, other party, etc. as a party to the contract (see, e.g., Supreme Court Decision 2007Du4506, Jun. 12, 2008).

B) In light of the following circumstances, as a result of the fact-finding inquiry about the Hh development of this Court, the Plaintiff appears to have received the key money of this case under the pretext of one response fee, etc. concerning the development of BB industry and the purchase of real estate by Kime for the progress of the project of this case, and the testimony of the witness Lee c alone cannot be said to be the monetary amount under the pretext of compensation for the expenses incurred by the Plaintiff or compensation for investment profits, as alleged by the Plaintiff. The above assertion by the Plaintiff is without merit.

① As to the nature of the key money of this case, in full view of the following circumstances: (a) on March 3, 2009, the loan certificate drawn up between the Plaintiff and Isc and Kimddd and the agreement of this case drawn up between the Plaintiff and Kime is written as a loan loan, and it cannot be determined merely by the name, and in principle, it shall not be paid at the same time with the balance payment for Hh Development in relation to the payment of the above loan certificate; and (b) the acquisition by Kim e, who purchased real estate solely from the development in consideration of the obligation to pay the instant money against the Plaintiff, the key money of this case can be deemed to have been paid in relation to the purchase of real estate from Hh Development.

② At around 2008, the Plaintiff asserted that KRW 230,000,000 was paid for the operating expenses of the instant business, etc., and did not provide any explanation on the details of the expenditure, and the documents on the evidence of expenditure are not submitted. However, there is no evidence on the payment of a considerable amount of money. Moreover, it seems that there is no evidence as above. Moreover, the Plaintiff did not have invested in the instant business, and the development of the current progress industry, the investors of BB industry development, and Kimd and Kim e were to bear the real estate purchase funds (bb industry development out of the contract amount of KRW 3.3 billion, KRW 2.2 billion, KRW 1.1 billion, KRW 1.1 billion, KRW 3.1 billion).

After all, Kime-e purchased real estate independently by bearing all of them.

③ However, the representative director c of BB industry development, which agreed to pay the instant amount to the Plaintiff, was present in this court as a witness, and “230 million won was the expenses submitted by the Plaintiff in relation to the instant business. The Plaintiff believed that the Plaintiff paid the said money.

The Plaintiff testified to the effect that the Plaintiff is an investor, and it is not clear how to make a profit distribution, and there is no agreement on how to make a profit distribution. Under the circumstances where the details or amount of money paid by the Plaintiff is not clear, it is difficult to obtain an empirical rule to simply pay the Plaintiff KRW 170 million as well as the compensation for damages equivalent to KRW 230 million arising from the Plaintiff’s assertion, as well as the compensation for its investment profit preservation. Rather, this is because thisc is the first ground for calculating KRW 170 million to the Plaintiff at KRW 40 million. The Plaintiff appears to have made a statement on May 11, 2009 (the time when the Plaintiff acquired real estate from Hh development by entering into the second sales contract, which was naturally consulted with the witness by preparing a plan for land division and sale, etc., and that it would be reasonable to pay the Plaintiff the money to the Plaintiff as the expense for the instant development, etc., regardless of whether it would be paid the Plaintiff’s fee for the instant real estate as the expense for H development.

④ 원고는 hh개발이 김ee에 대한 부동산 매도와 관련하여 주식회사 qq스타의 회장 함@@에게 그 알선 수수료 명목으로 2억 5,000만 원을 지급하였으므로, 원고가 이cc, 김ee 등으로부터 지급받기로 한 이 사건 쟁점 금원은 알선 수수료가 아니라 고 주장한다. 그러나 위 함@@은 매도인인 hh개발로부터 알선수수료 명목으로 2억5,000만 원을 지급받았다는 것이므로, 이를 이유로 원고가 매수인 측으로부터 알선 수수료 명목의 돈을 지급받지 않았을 것으로 볼 수는 없다.(이cc은 이 법정에서 'bb산업개발, 김dd, 김ee은 원래 위 함@@과 모르는 사이였고, 한@@에게 알선 수수료를 지급한 것이 없다. 증인이 지급하기로 한 수수료는 김ee이 2차 계약을 체결할때 지급하기로 약정하였다.'라고 증언하였는데, 이에 비추어 함@@은 매도인 hh개발측의 대리인으로, 원고는 매수인 bb산업개발 또는 김ee 측의 대리인 역할을 하였고, 결국 김ee이 hh개발과 제2차 매매계약을 체결하면서 원고에게 대한 알선 수수료 지급 의무를 지게 된 것으로 보인다.)

2) As to the amount of the Plaintiff’s income

Considering the above evidence and the overall purport of the arguments, the Plaintiff is recognized to have earned a total of KRW 400 million from Kime, and it is difficult to deem the Plaintiff’s income to be equivalent to KRW 300 million on the sole basis of the written evidence No. 10 of the evidence No. 10.10. The Plaintiff’s assertion on this part cannot be accepted.

① The Plaintiff had a notarial deed with the content that Kime shall pay KRW 400 million to the Plaintiff before the formation of the instant agreement with Kime, but thereafter, set up a collateral with the maximum debt amount of KRW 300 million on the instant land in order to secure claims against Kime. After that, the agreement of this case drawn up and sealed by the Plaintiff and Kime also stated that the Plaintiff had already received KRW 100 million out of the above KRW 400 million, and the Plaintiff set off only KRW 300 million out of the sales amount of the instant land against the key money even if the purchase amount of the instant land was KRW 410 million. In light of this, at the time of the sales contract for the instant land, the Plaintiff had already received KRW 100 million out of the key amount of KRW 400 million from Kime.

② In addition, around 2013, the officially announced land price of the instant land was KRW 271,860,000,000, and around 2015, the Plaintiff sold the instant land to Nonparty Kimn around 430,000,000. Ultimately, the Plaintiff appears to reflect the market price of the instant land between the Plaintiff and Kime at the time. As such, the Plaintiff’s acquisition of the instant land was deemed to have obtained income of KRW 300,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,00

3. Conclusion

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