In the case of borrowing in advance construction funds included in the tax base of acquisition tax under the former Local Tax Act before actually using a specific loan, whether such interest is excluded from the tax base of acquisition tax (negative)

The interest on construction funds included in the tax base of acquisition tax under the former Local Tax Act (amended by Act No. 9924, Jan. 1, 2010; hereinafter the same shall apply) is not necessarily identical to the interest on construction funds subject to non-deductible expenses under the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter “Corporate Tax Act”), but in the case of funds directly borrowed for the purpose of acquiring certain assets through construction, etc. (hereinafter “specific loans”), the interest is common in that the expenses incurred in acquiring the assets are capital expenditures constituting the cost of the assets. Therefore, it is reasonable to calculate the amount of the construction funds by the same method. Accordingly, the interest on construction funds included in the tax base of acquisition tax under the former Local Tax Act, like the interest on construction funds, should be calculated by deducting the interest on a temporary deposit from the interest accrued from the date of borrowing a specific loan to the date of acquisition of the assets, and even if the funds were actually used prior to the acquisition of the assets, it does not constitute the interest on the relevant assets.

Article 111(7) of the former Local Tax Act (Amended by Act No. 9924, Jan. 1, 2010; see current Article 10(7)); Article 82-3(1) of the former Enforcement Decree of the Local Tax Act (Amended by Presidential Decree No. 21975, Jan. 1, 2010; see current Article 18(1)); Article 28(1)3 of the former Corporate Tax Act (Amended by Act No. 10423, Dec. 30, 2010); Article 52(1) and (2) of the former Enforcement Decree of the Corporate Tax Act (Amended by Presidential Decree No. 22577, Dec. 30, 2010);

Supreme Court Decision 2009Du17179 Decided April 29, 2010

The administrator or representative director of the Debtor Rehabilitation and Leisure Industry Co., Ltd. (Law Firm Square Law, Attorneys Ba-man et al., Counsel for the plaintiff-appellant)

1. The term "landmark" means the landmark, landmark, landmark, landmark, landmark, and landmark.

Busan High Court (Chowon) Decision 2011Nu1033 decided January 24, 2013

The part of the judgment below against the defendant is reversed, and that part of the case is remanded to Busan High Court. The plaintiff's appeal is dismissed.

The grounds of appeal are examined.

1. As to the Plaintiff’s grounds of appeal Nos. 1 and 2 and Defendant’s grounds of appeal

A. The main text of Article 82-3(1) of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 21975, Jan. 1, 2010; hereinafter the same shall apply) provides that “The acquisition price which becomes the tax base of acquisition tax shall include all the expenses paid or to be paid to the other party or a third party [including the subscription fees, overdue charges, interest on installment payments, and interest on the amount appropriated for construction funds (excluding value-added tax) for the acquisition thereof; hereinafter the same shall apply] under the provisions of Article 111(7) of the former Local Tax Act (amended by Act No. 9924, Jan. 1, 2010; hereinafter the same shall apply)” means the amount of interest on loans appropriated for construction funds under the provisions of Article 82-3(1) of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 21975, Dec. 30, 2010; hereinafter the same shall apply] to be included in deductible expenses.

The Corporate Tax Act provides that interest on construction funds shall not be included in deductible expenses is based on the principle of responding to profit-making expenses (see, e.g., Supreme Court Decision 95Nu3121, Aug. 11, 1995). However, the provision that the former Local Tax Act stipulates that interest on construction funds shall be included in the tax base for acquisition tax is an amount indirectly used for acquisition (see, e.g., Supreme Court Decision 2009Du17179, Apr. 29, 2010). In addition, construction funds shall be limited to the interest on fixed assets for business purposes, but construction funds included in the tax base for acquisition tax under the former Local Tax Act shall not be limited to the interest on construction funds. In light of this, it is reasonable that the interest on directly borrowed funds for the purpose of acquiring assets (hereinafter “specific loans”) is not necessarily consistent with the scope of interest on construction funds subject to non-taxation in deductible expenses under the Corporate Tax Act, but it is reasonable for the specific person to include the interest on construction funds in deductible expenses in the tax base in the same way as the acquisition tax is calculated.

B. The lower court: (1) borrowed 5 billion won for the purpose of constructing the instant golf course on October 17, 2005 (hereinafter “the instant specific loan”) from November 3, 2005; (2) on January 24, 2006, the Defendant issued an implementation plan for urban planning facilities for the instant golf course (hereinafter “the instant public notice”); (3) on September 6, 2007, the Do governor around 2007, the Plaintiff received conditional registration acceptance notice on September 6, 2007; and (4) on September 24, 2006, the Defendant imposed acquisition tax on KRW 5 billion for the purpose of constructing the instant golf course (hereinafter “the instant specific loan”); and (3) on September 24, 2006, the Defendant imposed acquisition tax on KRW 5 billion on the instant golf course as the total amount of acquisition tax calculated on KRW 36,56,57,946,64,67,79,64,79,67, etc.

Furthermore, the lower court, on the premise that in the case of a specific loan, the amount obtained by subtracting interest income accrued during the same period from all interest expenses incurred during the period of capitalization as construction funds should be included in the tax base of acquisition tax. On the ground that the period of capitalization of interest on the specific loan of this case was commenced on January 24, 2006, which was the date of the public notice of this case, and terminated on September 6, 2007, which was the date of notification of conditional acceptance of registration of this case, at the latest, at the latest, at the time when the interest on the specific loan of this case was omitted from the tax base of acquisition tax (i.e., KRW 5,820,746,746,924,99 - 1,067,178,523 won - 1,067,121,242,243 won which was already included in the tax base of acquisition tax, determined that the interest on the specific loan of this case was unlawful (i.e.

C. In the case of a specific loan, the lower court’s determination of the interest rate on the construction fund by deducting the interest income accrued during the same period from all the interest expenses incurred during the period of capitalization is justifiable in accordance with the aforementioned legal doctrine. Therefore, the Defendant’s ground of appeal Nos. 1 and 2, and the Defendant’s ground of appeal No. 2, that the interest accrued before the specific loan was actually used in the construction fund, should be excluded from the construction fund interest to be included in the tax base for acquisition tax, are not calculated as the interest interest rate to be included in the tax base for acquisition tax by deducting the interest income accrued from the interest on the specific loan.

However, in light of the legal principles as seen earlier, the interest interest rate on the construction fund starts from the time when the interest rate on the specific loan was incurred, and even according to the facts acknowledged by the court below, the interest interest on the specific loan of this case was incurred from November 3, 2005. Thus, the interest rate on the construction fund to be included in the tax base for acquisition tax should be calculated from November 3, 2005, which is the date when the interest on the specific loan of this case occurred, unless there are special circumstances. Nevertheless, the court below concluded that the capitalization of interest on the specific loan of this case was commenced from January 24, 2006, solely based on the reasons stated in its reasoning. Thus, the court below erred by misapprehending the legal principles on the time when the construction fund of this case was converted into capital, which is stipulated in Article 82-3 (1) of the former Enforcement Decree of the Local Tax Act, which affected the conclusion of the judgment. The defendant's ground of appeal pointing

However, according to the records, the tax authority made an authoritative interpretation that does not include the interest accrued before January 23, 2006 in the tax base of acquisition tax in the case of disposal of non-business expenses other than the asset account of the corporation among the interest accrued from the construction funds appropriated for the construction funds by the corporation. On January 23, 2006, the former authoritative interpretation that was included in the tax base of acquisition tax regardless of the corporation’s accounting method, and that only the interest accrued after January 23, 2006 should be included in the tax base of acquisition tax. Accordingly, the court below held that the interest accrued before January 24, 2006 should not be included in the tax base of acquisition tax, and held that the interest accrued before January 23, 2006 should be included in the tax base of acquisition tax. Thus, there is no room to interpret the former Local Tax Act’s taxation practice or non-taxation practice under Article 1 of the Local Tax Act.

2. On the third ground for appeal by the plaintiff

On the grounds indicated in its reasoning, the lower court determined that the amount paid before September 6, 2007, the acquisition date of the instant golf course, among the expenses for the instant golf course, should be included in the tax base for acquisition tax on the instant golf course, on the grounds that: (a) the amount paid before September 6, 2007, the acquisition date of the instant golf course, among the expenses for salaries, bonuses, insurance premiums, welfare expenses, travel expenses, travel expenses, vehicle maintenance

Examining the reasoning of the lower judgment in light of the evidence duly admitted, the lower court did not err in its judgment by misapprehending the burden of proof of expenses included in the tax base for acquisition tax and the legal doctrine on the equal taxation, or by exceeding the bounds of the principle of free evaluation of evidence in violation of logical

3. Conclusion

Therefore, the part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. The Plaintiff’s appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Shin Young-chul (Presiding Justice)