208 U.S. High Court Decision 20028 ( October 28, 2008)

Where designated as a designated area after the transfer contract, taxation shall be based on the actual transaction price.

Even if the location of the apartment was designated as the designated area after the conclusion of the sale contract, the disposition of this case based on the actual transaction price is not subject to retroactive taxation.

The contents of the decision shall be the same as attached.

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the plaintiff.

The imposition of capital gains tax of KRW 85,135,420 on the Plaintiff on January 18, 2008 shall be revoked.

1. Circumstances of the disposition;

A. On June 16, 1987, the Plaintiff acquired ○○-gu ○○○○○-dong 1396 Hyundai Apartment 12 Dong 704 (hereinafter “instant apartment”).

B. On May 18, 2003, the Plaintiff entered into a sales contract for the instant apartment in KRW 380,000,000 with the provisional food sales price. On May 29, 2003, the Plaintiff was designated as an area where the Gu should report the transfer value of the housing at the actual transaction price for the housing at two cities located in the city where the instant apartment is located (hereinafter referred to as “designated area”). On July 31, 2003, the Plaintiff received the balance of the sales price from the provisional food sales price. The Plaintiff did not report or pay the transfer income tax for the transfer of the instant apartment to the Defendant.

C. On January 18, 2008, the Defendant calculated gains from transfer using the transfer price of the apartment of this case as KRW 380,00,000,000, which is the actual transaction price, and the acquisition price as KRW 124,564,960, which is the conversion price, and accordingly, issued the instant disposition imposing capital gains tax of KRW 85,135,420.

[Recognition] Facts without dispute, Gap 1 to 5 evidence, Eul 1 evidence (including paper numbers), the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

Since the location of the apartment of this case was not designated as the designated area at the time of concluding a sales contract, the transfer value of the apartment of this case ought to be calculated based on the standard market price. The Defendant’s disposition of this case, which calculated the transfer value of the apartment of this case on the basis of the balance payment date, was unlawful since it violated the principle of retroactive

(b) Related statutes;

C. Determination

(1) According to Article 162(1) of the Enforcement Decree of the Income Tax Act, the time when assets are transferred by delegation under Article 98 of the Income Tax Act shall, in principle, be the date when assets are settled. Meanwhile, according to Article 96(1) main sentence and proviso of the Income Tax Act, the transfer value of real estate shall be based on the standard market price at the time of the transfer and the transfer value of real estate located in the designated area shall

According to the above provisions, the transfer time of the apartment of this case is not May 18, 2003, the date of concluding the sale contract, but July 31, 2003, when the remainder is settled. However, since the area where the apartment of this case is located was designated as the designated area on May 29, 2003, the transfer price of the apartment of this case shall be based on the actual transaction price.

(2) The purport of Article 18(2) of the Framework Act on National Taxes, which provides for the prohibition of retroactive taxation, is that the relevant statute cannot be applied only to the facts of taxation requirements completed prior to the occurrence of the legal effect.

Since the transfer date of the apartment of this case was July 31, 2003, the area where the apartment of this case was located was designated as the designated area on May 29, 2003, the transfer of the apartment of this case or the establishment of the transfer income tax was not achieved. In addition, the income tax law, etc. applied at the time of the disposition of this case was already in progress at the time of the transfer of the apartment of this case (not only at the time of the contract but also at the time of the contract). Accordingly, even if the location of the apartment of this case was designated as the designated area after the conclusion of the purchase and sale contract of the apartment of this case, the disposition of this case was conducted by the defendant based on the actual transaction price of the apartment of this case, which was located at the district at the time of the transfer

(3) According to the income tax law that was enforced at the time of the conclusion of the sales contract for the apartment of this case, the location of the apartment of this case may be designated as the designated area until the date of transfer (the time of settlement of the remaining amount), and in such case, the transfer value of the apartment of this case was likely to be calculated as the actual transaction price. Therefore, even if the Plaintiff trusted that the transfer value of the apartment of this case would be calculated as the standard market price at the time of concluding the sales contract for the apartment of this case, such trusted interests of the Plaintiff would not be worth protecting or larger. Meanwhile, in the area where the market price sharply rise in the short-term due to speculative transactions or illegal transactions, as the standard market price is not sufficiently reflected in the actual market price, it is to prevent any side effect that may undermine the equity of taxation, as the market price is not sufficiently reflected in the actual market price. The public interest in preventing speculative transactions and illegal transactions and equity in taxation, which is to be achieved

(4) Therefore, the instant disposition is lawful, and the Plaintiff’s assertion is without merit.

3. Conclusion

The plaintiff's claim of this case is dismissed as it is without merit.