Open Decision Ledger · Tax & international taxation
Market price as the acquisition cost of a foreign asset in transfer income tax
Supreme Court, Oct. 26, 2023, 2020Du48215 (judgment)
Case name: 양도소득세등부과처분취소[국외자산의 양도소득세 계산 시 공제할 취득가액이 문제된 사건]
Official text on the National Law Information Center
Question
Is the market price in the proviso to Article 118-4(1)(i) of the former Income Tax Act confined to the amounts listed in Article 178-3(1) of the former Enforcement Decree, and may a foreign government's assessed value made in connection with property tax count as that market price?
Holding
It is not confined to them. The items in Article 178-3(1) of the former Enforcement Decree illustrate representative cases of a market price reflecting conditions at the time the foreign asset was acquired. Market price in principle means the objective exchange value formed by normal transactions, and it also includes an amount appraised by an objective and rational method, so a foreign government's assessed value made in connection with property tax may count as market price if it reflects conditions at acquisition and was appraised objectively and rationally.
Summary of the holding, verbatim
구 소득세법 제118조의4 제1항 제1호 단서의 시가가 국외자산의 양도에 대한 과세와 관련하여 이루어진 외국정부의 평가가액 등 구 소득세법 시행령 제178조의3 제1항 각호에 따라 시가로 인정되는 가액으로 한정되는 것은 아니므로, 구 소득세법 시행령 제178조의3 제1항 각호는 국외자산 취득 당시의 현황을 반영한 시가로 볼 수 있는 대표적인 경우를 예시한 것으로 볼 수 있다.
Unofficial English translation
Since the fair market value under the proviso to Article 118-4 (1) 1 of the former Income Tax Act is not limited to the appraised value by a foreign government made in connection with the taxation of the transfer of a foreign asset or other values recognized as the fair market value under each subparagraph of Article 178-3 (1) of the former Enforcement Decree of the Income Tax Act, each subparagraph of Article 178-3 (1) of the former Enforcement Decree of the Income Tax Act may be regarded as exemplifying representative cases where a value may be regarded as the fair market value reflecting the status of a foreign asset at the time of its acquisition.
Disposition
Partly reversed and remanded Stated in the decision
원심판결 중 피고 영등포세무서장 패소 부분을 파기하고, 이 부분 사건을 서울고등법원에 환송한다. 원고의 상고를 기각한다.
Unofficial English translation
The judgment of the court below in the part finding against the defendant, Director of the Yeongdeungpo Tax Office, is reversed, and this part of the case is remanded to the Seoul High Court. The plaintiff's final appeal is dismissed.
Form of the test
Elements stated Stated in the decision
시가란 원칙적으로 정상적인 거래로 형성된 객관적 교환가치를 의미하지만 이는 객관적이고 합리적인 방법으로 평가된 가액도 포함하는 개념이므로
Unofficial English translation
the fair market value means, in principle, the objective exchange value formed through a normal transaction, but as it is a concept that also encompasses a value appraised by an objective and reasonable method,
Factors
- 구 소득세법 제118조의4 제1항 제1호 단서의 시가가 국외자산의 양도에 대한 과세와 관련하여 이루어진 외국정부의 평가가액 등 구 소득세법 시행령 제178조의3 제1항 각호에 따라 시가로 인정되는 가액으로 한정되는 것은 아니므로
- 국외자산 취득 당시의 현황을 반영한 시가로 볼 수 있는 대표적인 경우를 예시한 것으로 볼 수 있다
- 시가란 원칙적으로 정상적인 거래로 형성된 객관적 교환가치를 의미하지만 이는 객관적이고 합리적인 방법으로 평가된 가액도 포함하는 개념이므로
- 재산세 과세와 관련하여 이루어진 외국정부의 평가가액도 국외자산 취득 당시의 현황을 반영하여 객관적이고 합리적인 방법으로 평가된 것이라면 시가로 볼 수 있다
Unofficial English translation
• Since the fair market value under the proviso to Article 118-4 (1) 1 of the former Income Tax Act is not limited to the appraised value by a foreign government made in connection with the taxation of the transfer of a foreign asset or other values recognized as the fair market value under each subparagraph of Article 178-3 (1) of the former Enforcement Decree of the Income Tax Act,
• it may be regarded as exemplifying representative cases where a value may be regarded as the fair market value reflecting the status of a foreign asset at the time of its acquisition
• the fair market value means, in principle, the objective exchange value formed through a normal transaction, but as it is a concept that also encompasses a value appraised by an objective and reasonable method,
• the appraised value by a foreign government made in connection with the assessment of property tax may also be regarded as the fair market value if it has been appraised by an objective and reasonable method reflecting the status of the foreign asset at the time of its acquisition
Relation to precedent
Follows earlier decisions Stated in the decision
대법원 2001. 8. 21. 선고 2000두5098 판결
Unofficial English translation
Supreme Court Decision 2000Du5098 decided August 21, 2001
Decisions referred to
대법원 2001. 8. 21. 선고 2000두5098 판결(공2001하, 2482)
Burden of proof
Not addressed Not in the decision
Open question and revisit condition
If a foreign government's assessed value differs substantially from the true value at acquisition, what evidence allows a court to hold that it was not appraised objectively and rationally?
The remand judgment on the acquisition cost of the houses in California that were transferred on 21 July 2009 and 10 November 2009 will show how the objective and rational appraisal requirement is tested on the record. Any amendment to Article 118-4 of the Income Tax Act or Article 178-3 of its Enforcement Decree, or a later decision on the scope of market price for foreign assets, calls for this entry to be read again.
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Lower-court contrast & scope of application
Lower-court reading vs. Supreme Court holding
Lower-court context: The Seoul High Court, in its judgment of 13 August 2020 (2019Nu56502), held that the deceased was a resident under the Inheritance and Gift Tax Act and so rejected the plaintiff's claim against the Seocho Tax Office on the inheritance tax assessment. On the transfer income tax, it took the premise that market price was limited to the amounts under Article 178-3(1) of the former Enforcement Decree, and since the California state value assessed for the 2008 property tax was not a value made in connection with taxation on the transfer of the foreign asset under item (i), it held the assessment by the Yeongdeungpo Tax Office unlawful.
Supreme Court standard: The Supreme Court held that the proviso's market price is not limited to the amounts under Article 178-3(1), which only illustrate representative cases, and that a foreign government's property tax assessment may still be market price if it reflects conditions at acquisition and was appraised objectively and rationally. The court below had misapprehended the scope of market price and failed to examine whether the acquisition cost fixed by the Yeongdeungpo Tax Office met that standard, and so its judgment on that part was reversed and remanded to the Seoul High Court. It found no error in the finding on residence under the Inheritance and Gift Tax Act and dismissed the plaintiff's appeal.
Distinguishing conditions
- A case in which the actual transaction price at the time of the foreign asset's acquisition can be confirmed, so that the proviso directing recourse to market price does not operate.
- An assessed value that does not reflect conditions at the time of acquisition, or that was not arrived at by an objective and rational method.
- An assessed value made in connection with taxation on the transfer of the foreign asset, which falls within item (i) of Article 178-3(1) itself rather than raising the illustrative question.
Record verification notes
Gather the property tax assessment record abroad, the date it was made, the valuation method used and the base figures, since the decision turns on whether it reflects conditions at acquisition and is objectively and rationally appraised. Set it against the actual transaction price, if any, and against any loan balance used in its place, as happened with one house here. Confirm the version applied: Article 118-4 of the Income Tax Act before the amendment by Act No. 9897 of 31 December 2009, and Article 178-3 of the Enforcement Decree before the amendment by Presidential Decree No. 22034 of 18 February 2010.
From the official text
Points at issue
구 소득세법 시행령 제178조의3 제1항 각호는 구 소득세법 제118조의4 제1항 제1호 단서의 시가로 볼 수 있는 경우를 예시한 것인지 여부(적극) / 재산세 과세와 관련하여 이루어진 외국정부의 평가가액이 국외자산 취득 당시의 현황을 반영하여 객관적이고 합리적인 방법으로 평가된 경우, 이를 시가로 볼 수 있는지 여부(적극)
Unofficial English translation
Whether each subparagraph of Article 178-3 (1) of the former Enforcement Decree of the Income Tax Act merely exemplifies cases where a value may be regarded as the fair market value under the proviso to Article 118-4 (1) 1 of the former Income Tax Act (affirmative) / Whether the appraised value by a foreign government made in connection with the assessment of property tax may be regarded as the fair market value where it is appraised by an objective and reasonable method reflecting the status of the foreign asset at the time of its acquisition (affirmative)
Summary of the holding
구 소득세법(2009. 12. 31. 법률 제9897호로 개정되기 전의 것, 이하 같다) 제118조의4, 구 소득세법 시행령(2010. 2. 18. 대통령령 제22034호로 개정되기 전의 것, 이하 같다) 제178조의3의 문언과 체계 및 그 전체 취지에 비추어 보면, 구 소득세법 제118조의4 제1항 제1호 단서의 시가가 국외자산의 양도에 대한 과세와 관련하여 이루어진 외국정부의 평가가액 등 구 소득세법 시행령 제178조의3 제1항 각호에 따라 시가로 인정되는 가액으로 한정되는 것은 아니므로, 구 소득세법 시행령 제178조의3 제1항 각호는 국외자산 취득 당시의 현황을 반영한 시가로 볼 수 있는 대표적인 경우를 예시한 것으로 볼 수 있다. 그리고 시가란 원칙적으로 정상적인 거래로 형성된 객관적 교환가치를 의미하지만 이는 객관적이고 합리적인 방법으로 평가된 가액도 포함하는 개념이므로, 재산세 과세와 관련하여 이루어진 외국정부의 평가가액도 국외자산 취득 당시의 현황을 반영하여 객관적이고 합리적인 방법으로 평가된 것이라면 시가로 볼 수 있다.
Order
원심판결 중 피고 영등포세무서장 패소 부분을 파기하고, 이 부분 사건을 서울고등법원에 환송한다. 원고의 상고를 기각한다. 상고비용 중 원고와 피고 서초세무서장 사이에 생긴 부분은 원고가 부담한다.
Unofficial English translation
The judgment of the court below in the part finding against the defendant, Director of the Yeongdeungpo Tax Office, is reversed, and this part of the case is remanded to the Seoul High Court. The plaintiff's final appeal is dismissed. Of the costs of the final appeal, the portion incurred between the plaintiff and the defendant, Director of the Seocho Tax Office, shall be borne by the plaintiff.
Provisions referred to
구 소득세법(2009. 12. 31. 법률 제9897호로 개정되기 전의 것) 제118조의4, 구 소득세법 시행령(2010. 2. 18. 대통령령 제22034호로 개정되기 전의 것) 제178조의3
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