Seoul Administrative Court 201Gudan30154 ( October 26, 2012)

Cho High Court Decision 201Do1622 (No. 08, 2011)

land is not directly cultivated because it does not reside in Korea, so it constitutes land for non-business use.

In light of the fact that land is not cultivated directly because it was not cultivated directly in the United States while residing in the United States, etc., it is difficult to deem that the Plaintiff directly cultivated the land, and there is no evidence to acknowledge that there is no possibility of realizing capital gains due to the fact that the claim for residual payments is impossible to recover.

2012Nu22579 Revocation of disposition of imposing capital gains tax, etc.

South AustriaA

Head of the Do Tax Office

Seoul Administrative Court Decision 2011Gudan30154 decided June 26, 2012

April 3, 2013

May 1, 2013

1. Of the instant lawsuit, the court shall dismiss a claim for exchange change (additional tax).

2. The plaintiff's appeal is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked. The defendant's disposition of imposition of capital gains tax of 000 won for the transfer income tax of 2007 October 1, 2010 and additional tax of 000 won for the transfer income tax of 2007 dated December 1, 2012 shall be revoked (the part of the additional tax was changed in exchange).

1. Details of the disposition;

A. On June 27, 2001, the Plaintiff acquired and retained 573 square meters (hereinafter referred to as the “instant land”) as a donation in Yangju-si, OOri 000,000, and on September 27, 2007, the Plaintiff transferred the instant land and filed a return on the tax base of capital gains tax with the transfer price of KRW 00,000, and the acquisition price of KRW 000,000. However, on October 1, 2010, the Defendant reported the transfer income tax to the Plaintiff as KRW 00,000, and notified the correction and notification (including additional tax of KRW 00,000) of capital gains tax for the year 207.

C. After that, the Defendant again imposed penalty tax (additional tax of 000 won and penalty tax of 000 won for unfaithful payment) on December 1, 2012, following the Defendant’s revision of reduction by reflecting some necessary expenses on the initial disposition and around November 8, 2012.

D. Accordingly, the Plaintiff sought revocation of the imposition of the principal tax of October 1, 2010 and the penalty tax of KRW 0000 as of December 1, 2012 (hereinafter referred to as the “instant disposition by adding both the principal tax and the penalty tax”) as stated in the purport of the claim.

[Based on Recognition] The non-contentious facts, Gap evidence 1, 17, and 20, and Eul evidence 1 through 17, and the purport of the whole pleadings

2. The plaintiff's assertion and facts of recognition

A. The plaintiff's assertion

The instant disposition is unlawful on the grounds delineated below, contrary to the principle of no taxation without law and good faith.

1) The Plaintiff purchased the instant land on October 31, 1983, but was scheduled to make a long-term business trip in the U.S., and was entrusted under the name of the Plaintiff’s headquarters in the name of the Plaintiff around 2001.

2) Since the Plaintiff cultivated the instant land directly, the instant land is not land for non-business use. Even if the Plaintiff did not cultivate the land directly, the instant land constitutes land not deemed land for non-business use as it has inevitable reasons due to the Plaintiff being traveling abroad for not less than three months, etc. Nevertheless, the Defendant deemed the instant land as land for non-business use and was subject to the transfer tax rate.

3) Since the Plaintiff’s transfer of the instant land to AA Construction, it was impossible to recover KRW 000 of the remaining price due to the business failure of the said company, etc., the said remaining price claim shall be deducted from the transfer value.

4) The payment notice of the initial disposition that the Defendant sent to the Plaintiff alone cannot sufficiently verify the grounds for calculating the penalty tax for failure to file a report and the penalty tax for failure to pay.

(b) Fact of recognition;

1) On October 31, 1983, South Korean WarP, a plaintiff's put forward, completed the registration of ownership transfer on the land of this case in its name.

2) As to the instant land, the registration of transfer of ownership in the name of the Plaintiff was completed on the ground of donation on June 27, 2001.

3) The plaintiff entered the Republic of Korea on November 13, 2002, and entered the Republic of Korea on November 26, 2002, and entered the Republic of Korea on October 1, 2006, and entered the Republic of Korea on September 21, 2007, and entered the Republic of Korea again on September 22, 2007 after departure on September 21, 2007.

3. Determination on the imposition of additional tax

Pursuant to Article 20(1) of the Administrative Litigation Act, an action for revocation must be instituted within 90 days from the date when the Plaintiff becomes aware of the disposition, etc., and the Defendant, as of December 1, 2012, entered the type, calculation basis, etc. in the notice of tax payment regarding additional tax during the initial disposition, and again made a disposition for additional tax imposition as of December 1, 2012, and the Plaintiff was served with the above notice of tax payment on the 10th of the same month, it is reasonable to deem that the Plaintiff was aware of the above disposition for additional tax imposition as of April 3, 2013. However, it is reasonable to deem that the Plaintiff sought revocation of the above disposition for additional tax imposition as of April 3, 2013 only after the fifth day after the lapse of the filing period, and ultimately, the part on the claim for revocation of additional tax in the instant lawsuit is unlawful since the Plaintiff’s amendment of the purport of the above disposition for additional tax imposition was made after the lapse of the filing period (b).

4. Determination of imposition of principal tax

A. Whether title trust is held

Article 14(1) of the former Framework Act on National Taxes (amended by Act No. 8830 of Dec. 31, 2007) specifies the principle of substantial taxation, and as above, the fact that only the ownership of income is nominal and that there is a person who actually obtains such income has the burden of proving that there is a separate person (see Supreme Court Decision 84Nu505, Dec. 11, 1984). However, the evidence submitted by the Plaintiff alone is insufficient to recognize that the Plaintiff entrusted the ownership of the land in this case to the Southern-doP as the actual owner of the land in this case, and there is no other evidence to acknowledge it. This part of the Plaintiff’s assertion is without merit.

(b) Whether it constitutes land for non-business use;

According to the above facts, in light of the fact that the plaintiff mainly resided in the United States and did not directly cultivate the land of this case while residing in the Republic of Korea, the land of this case is deemed harmful to non-business land (it cannot be deemed that the land of this case is not deemed non-business land due to any inevitable reason, such as the case where the plaintiff is traveling abroad for not less than three months, etc. as alleged by the plaintiff). Further, even though there are circumstances such as the plaintiff's cultivation of the land of this case, it is difficult to view that the plaintiff cultivated the land of this case directly by himself.

C. Whether the remaining price should be deducted from the transfer value

Of the sale price claims of a real estate seller, the objectively apparent part that the possibility of future income becomes impossible due to the buyer’s bankruptcy and that the buyer’s future income becomes impossible may not be included in the transfer price of real estate (see Supreme Court Decision 2002Du1953, Oct. 11, 2002). However, the evidence submitted by the Plaintiff alone is insufficient to deem that the transfer income becomes impossible due to the impossibility of recovery of KRW 000 of the remainder-price claim against AA Construction, as alleged by the Plaintiff, and there is no other evidence to prove otherwise. This part of the Plaintiff’s assertion is without merit.

5. Conclusion

Among the lawsuits in this case, the claim for exchange change (additional tax part) in this Court shall be dismissed, and the appeal filed by the plaintiff shall be dismissed.