Necessary expenses for transfer income of assets abroad;

The exchange marginal profits of the transfer proceeds shall be excluded from the transfer margin following the transfer of the instant housing (see Supreme Court Decision 2013Du22819, Jul. 24, 2014).

Article 97 of the Income Tax Act

2012Gudan2957 Revocation of Disposition of Imposing capital gains tax

SAA

D director of the tax office (the Head of the EE Tax Office before the modification)

October 8, 2014

November 19, 2014

1. The Defendant’s disposition of imposition of OOO (including additional taxes) of capital gains tax for the year 2010 imposed on the Plaintiff on February 1, 2012 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. On September 13, 2007, the Government of the Republic of Korea acquired housing located in Singapore (10 OB SINGPRE, hereinafter referred to as “the instant housing”) from OOB Singapore (SGD, hereinafter referred to as “OGD”) and transferred it to USOO on November 15, 2010. The detailed details of the acquisition and transfer value are as follows.

O Acquisition Value = OOOO Won (OO$) remitted in Korea + Local loans (based on fiscal exchange rate US$$ US$100/$100 at the time of acquisition)

O Transfer Value = OOOOO Won remitted to the Republic of Korea + OOOO$ + Other expenses OOO$ (OOOO Won/$ at the time of transfer) of the principal and interest on the local loan.

B. On June 2, 2011, the Plaintiff reported and paid to the Defendant the transfer income tax OOO of the transfer income tax for the year 2010, calculated by deeming the amount of the acquisition value and transfer value of the instant house excluding the amount of overseas loans (hereinafter “the instant loan”).

C. Accordingly, on February 1, 2012, the Defendant issued a correction and notification to the Plaintiff on February 1, 2012, regarding the acquisition value and transfer value of the instant housing as the total purchase value, including bank loans, converted by applying the basic exchange rate at the time of purchase and sale, and calculated transfer income tax and deducted the amount already paid (hereinafter “instant disposition”).

[Ground of recognition] Unsatisfy, Gap 1 to 14 each entry

2. Summary of the parties’ assertion

A. The plaintiff's assertion: The loan in this case is a loan to be raised on the local level, and is repaid simultaneously with the acquisition and transfer of a house, regardless of the fluctuation in exchange rate, no transfer margin may accrue due to its nature. The "foreign currency conversion of the gains from transfer" under Article 118-4 (2) of the Income Tax Act is not based on the elements that cannot bring gains from transfer, and thus, the gain from exchange rate assessment of the loan in this case, which is not reverted to the plaintiff,

Therefore, the loan of this case used to acquire the housing of this case and used to transfer it, must be excluded from the calculation of transfer margin of the above housing, and the disposition of this case based on a different premise is unlawful against the principle of substantial taxation.

B. Defendant’s assertion: In calculating gains on transfer of assets abroad, the acquisition and transfer value should be based on the actual transaction value, and the borrowings should be included as a matter of course. Under the Enforcement Decree of the Act, it shall be calculated in Korean currency converted at the fiscal exchange rate at the time of sale and purchase. The Defendant’s disposition is lawful.

3. Whether the instant disposition is lawful

(a) Related Acts and subordinate statutes: It shall be as shown in Appendix;

B. Determination

1) Article 118-2 of the former Income Tax Act (amended by Act No. 10408, Dec. 27, 2010; hereinafter “Income Tax Act”) provides that capital gains from the transfer of assets located abroad of a certain resident (hereinafter “overseas assets”) shall be subject to capital gains tax, and Articles 118-3, 118-4, and 118-8 provide that gains from the transfer of overseas assets shall, in principle, be calculated by deducting necessary expenses such as acquisition value, capital expenditure, and transfer expenses from the actual transaction value at the time of the transfer of the assets. Meanwhile, in calculating capital gains from the foreign currency conversion method of gains from transfer under delegation of Article 118-4(2) of the Income Tax Act, it shall be calculated based on the basic exchange rate or exchange rate under the Foreign Exchange Transactions Act as of the date of receipt or disbursement of necessary expenses in the calculation of capital gains from transfer under Article 118-4(2) of the Income Tax Act, which reflects gains from the transfer of assets in foreign currency due to offset profits from the transfer of assets.

2) Ultimately, the exchange marginal profit (the same amount as exchange marginal profit from the repayment of the loan of this case) corresponding to the loan of this case is not actually acquired by the Plaintiff, and should be excluded from the transfer marginal profit, but it is unlawful to impose the transfer income tax by deeming that the exchange marginal profit which the Plaintiff did not actually acquire is included in the transfer marginal profit.

4. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.