Article 89 of the Income Tax Act

2. Litigation costs shall be borne by the plaintiff.

A. On October 10, 1997, the plaintiff acquired and held ○○-dong ○○○-dong ○○ apartment house (hereinafter "the apartment house in this case") in ○○○-dong ○○-dong ○○ apartment house (hereinafter "the apartment house in this case") and transferred the apartment house in this case to ○○○○ on March 23, 2004, by offering the apartment house to the housing reconstruction association located ○○ Dong ○○-dong ○○ Dong ○○dong ○dong ○○ apartment house and selling it in the same ○-○○ Dong ○○ Dong ○○○ apartment house (hereinafter "the apartment of this case") to the plaintiff on December 30, 2002. < Amended by Act No. 7269, Mar. 23, 2004>

B. Meanwhile, on June 12, 2003, prior to the transfer of the instant apartment, the Plaintiff acquired and possessed ○○○○○-dong ○○○○-dong, ○○○○-dong, ○○○-dong, ○○○-dong (hereinafter referred to as “second apartment”).

C. The Plaintiff, as an employee of ○○○○○ Company, left the Republic of Korea on May 31, 1994 and worked for the said company’s subsidiary (○○○○○○ Construction Company) until December 29, 198. On March 5, 1999, the Plaintiff joined the said company and thereafter joined the said company’s subsidiary (○○○○○○○○ Company) until now.

D. On December 27, 1994, the plaintiff's wife Red ○ gave birth to her first maternal ○○, finished a postnatal care in Korea, and left Indonesia on June 6, 1996 with her new ○○○, and is living in Indonesia with the plaintiff (the plaintiff and Red ○○ entered the Republic of Korea once a year thereafter to 15 days on an average). Meanwhile, on the other hand, on June 2, 1997, Red ○ gave birth to ○○○ on the spot of Indonesia.

E. The Plaintiff deemed that the transfer of the apartment of this case constitutes two houses immigration and temporary immigration, and submitted a written report on capital gains tax (4,691,470 won) only for the portion of 600 million won falling under the expensive house. However, on September 16, 2004, the Defendant issued a disposition of this case with the purport that “the Plaintiff acquired and possessed the second apartment on June 12, 2003, the transfer of the apartment of this case, which was the transfer of the apartment of this case, and the non-taxation provision on one house per one household does not apply because it did not meet the residential requirements for two or more years on the apartment of this case.”

[Ground for Recognition: Facts without dispute, Gap 1 through 13 evidence, each entry of Eul 1 through 4, purport of the whole pleadings]

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) The Plaintiff acquired the instant apartment on October 10, 1997 and dispatched the instant apartment to Indonesia by all the household members were living in the area of Indonesia, without being subject to the restriction on the period of one house possession and residence period for one household at the time of the transfer of the instant apartment, but this is one house for one household at the time of the transfer of the instant apartment, but it is two houses for one household temporarily since it was transferred the instant apartment within one year after the acquisition of another apartment. Therefore, the special

(2) The apartment of this case is a reconstruction apartment with an exclusive area of 98.47 square meters, which does not fall under a high-priced house at the time of its transfer, and the acquisition date is December 30, 2002, and thus, it constitutes a newly-built house or newly-built house acquired from a housing construction businessman under Article 99-3(1) of the former Restriction of Special Taxation Act (hereinafter “former Act”), and is subject to reduction by 100% of

B. Relevant statutes

○ Tax liability under Article 1 of the Income Tax Act

(1) Any individual falling under any of the following subparagraphs shall be liable to pay the income tax on his income under this Act:

1. Any individual who has a domicile in Korea or has a domicile in Korea for not less than one year (hereinafter referred to as "resident");

2. Any person who is not a resident (hereinafter referred to as "non-resident") and has income from domestic sources;

Article 89: Non-taxable Transfer Income

(1) No capital gains tax (hereinafter referred to as "capital gains tax") shall be levied on the following incomes:

3. Income accruing from transfer of such one house for one household as prescribed by the Presidential Decree (excluding expensive houses whose prices exceed the standard prescribed by the Presidential Decree) and the appurtenant land within the area calculated by multiplying the area of the land on which the building is built by the ratio as determined by region under the Presidential Decree (hereafter in this Article, referred to as the “land annexed to the house”);

○ Article 94 Scope of Transfer Income

(1) Transfer income shall be the following incomes generated in the relevant year:

1. Income accruing from transfer of land (referring to a lot of land subject to registration of land category in the cadastral record under the Cadastral Act) or buildings (including the facilities and structures annexed to such buildings);

○ Article 119 Domestic Source Income of Nonresident

Domestic source income of a nonresident shall be classified as follows:

9. Transfer incomes as prescribed in Article 94 (excluding the incomes under paragraph (1) 3 of the same Article), which are prescribed by the Presidential Decree: Provided, That it shall be limited to the case where the assets earning such incomes are located in Korea;

○ Method of taxation on non-residents Article 121

(2) With respect to nonresidents holding the domestic business place as prescribed in Article 120 and those having incomes as prescribed in subparagraph 3 of Article 119, the income tax shall be assessed by adding up the incomes (excluding the incomes withheld at source under Article 156 (1)) as prescribed in subparagraphs 1 through 7 and 11 through 13 of Article 119, and with respect to those having the incomes as prescribed in subparagraphs 8 through 10 of Article 119, by the same method as residents, respectively.

Article 154 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19327 of Feb. 9, 2006) Scope of one house for one household

(1) The term “one house for one household prescribed by the Presidential Decree” in Article 89 (1) 3 of the Act means the case where a household comprised by a resident and his spouse together with the family members living together with him at the same address or same place of residence (hereinafter referred to as “one household”) in the Republic of Korea as of the date of transfer, where the relevant house is held for not less than three years (in the case of a house located in a separate urban area from among those designated and publicly notified as a planned area for housing site development under Article 3 of the Housing Site Development Promotion Act, the relevant house shall be held for not less than three years and the period of residence is not less than two years during the relevant retention period): Provided, That in case where one household has one house in the Republic of Korea as of the date of transfer and falls under any of the following subparagraphs, its retention period and period of residence shall not be restricted:

2. The case falling under any of the following items. In such cases, the remaining house and its appurtenant land which are transferred within two years from the relevant transfer date or expropriation date shall be deemed to be included in the cases of item (a):

(c) Emigration or other cases prescribed by the Ordinance of the Ministry of Finance and Economy;

○ Determination of the address and residence under Article 2 of the Enforcement Decree of the Income Tax Act

(1) The address under Article 1 of the Act shall be judged by the objective facts of living relationship, such as the existence of a family living together in Korea and of the property located in Korea.

(2) The term "place of abode" in Article 1 of the Act means the place where a person has resided for a long time besides his/her address, and in which no close general living relationship is formed as the address.

(4) Where a person residing or working overseas falls under any of the following subparagraphs, he/she shall be deemed to have no address in Korea:

1. When a person has an occupation which usually requires him to continually dwell abroad for 1 year or longer; and

2. When a person with a foreign nationality or citizenship under the foreign laws, who has no family living together with him in Korea, and is not deemed to return home again and mainly dwell in Korea in view of his occupation and property status.

○ Special Cases Concerning “One House for One Household” in Article 155:

(1) Where one household which has one house in the Republic of Korea comes to possess two houses temporarily by acquiring another house (including the case where it acquires by constructing by itself) before transferring the relevant house, if it transfers the previous house within one year (including the case where unable to transfer within one year, and which falls under the causes as determined by the Ordinance of the Ministry of Finance and Economy) from the date of acquiring another house, it shall be regarded as one house for one household, and the provisions of Article 154 (1) shall be applicable. In this case, where a part of previous house and appurtenant land is purchased by consultation or expropriated under Article 154 (1) 2 (a), and where the relevant remaining house and appurtenant land are transferred within two years from the date of such transfer or expropriation, the transfer of relevant remaining house and appurtenant land shall be deemed to be included in the transfer or expropriation

○ The scope of one house per one household under Article 71 of the former Enforcement Rule of the Income Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 503 of April 10, 2006)

(2) The term “overseas emigration and other cases prescribed by the Ordinance of the Ministry of Finance and Economy” in Article 154 (1) 2 (c) of the Decree means the case where the relevant house falls short of the retention period and residence period on the grounds falling under any of the following subparagraphs:

1. Where all members of a household depart the country for emigration under the Emigration Act;

2. Where all members of a household depart from Korea due to such conditions as study or work needing continuous overseas residence for not less than one year; and

○ In the case of non-taxation that has not been held for more than three years due to the General Rules of the Income Tax Act 89-12 immigration

(1) Where a resident who has owned only one house in the Republic of Korea transfers one house in the Republic of Korea in the status of becoming a nonresident as he/she leaves the Republic of Korea due to foreign immigration, etc., he/she shall be exempted from taxation for one house for one household without any limit

○ Special taxation for transfer income tax on a person acquiring newly-built house under Article 99-3 of the Restriction of Special Taxation Act

(1) With respect to the income accruing from transfer of a newly-built house (including land attached to a house, the total floor area of which is less than twice the total floor area of the relevant building; hereafter the same shall apply in this Article) falling under any of the following subparagraphs by a resident (excluding a housing construction business operator) within five years from the date of acquisition, the tax amount equivalent to 100/100 of the transfer income tax shall be reduced or exempted, and where the relevant newly-built house is transferred after five years have elapsed from the date of acquisition thereof, the transfer income accruing for five years from the date of acquisition thereof shall be subtracted from the income amount subject to the transfer income tax: Provided, That this shall not apply to cases where the relevant newly-built house falls under the declass house that is excluded from the object of non-taxation of the transfer income tax

1. In cases of newly-built house acquired from a housing developer:

A newly-built house acquired by a person who first concludes a sales contract and pays a down payment with a housing constructor during the period from May 23, 2001 to June 30, 2003 (hereafter in this Article, referred to as the “newly-built house”) (including such a house as prescribed by the Presidential Decree, which is acquired through a housing association under the Housing Construction Promotion Act or an redevelopment association under the Urban Redevelopment Act): Provided, That a house that has been occupied by another person as of the date of a sales contract,

2. Cases of newly-built house (including a house acquired by a housing association under the Housing Construction Promotion Act or an association member under the Urban Redevelopment Act) constructed by himself; and

A newly-built house that has obtained approval or inspection for use (including approval for temporary use) within the newly-built house acquisition period

C. Determination

(1) Determination on the first argument

Article 89 subparagraph 3 of the Income Tax Act provides that "one house for one household as prescribed by the Presidential Decree" shall be non-taxable, and Article 154 (1) of the former Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 19327, Feb. 9, 2006; hereinafter referred to as the "former Enforcement Decree") provides that "one house for one household as prescribed by the Presidential Decree" in subparagraph 3 of Article 89 of the Act means one house for three years or more in Korea as of the date of transfer (in case of a house located in Seoul Special Metropolitan City, Metropolitan City, or Si/Gun, it means that the period of possession of the house is three years or more in Korea and the period of residence is one year or more during the period of possession, and it is reasonable to determine that the house is not subject to restrictions on the period of possession and residence which meet the requirements for non-taxation under subparagraph 2 (c) of the former Enforcement Decree of the Income Tax Act and that the former Enforcement Rule of the Income Tax Act provides for "one house continuously owned by a household or other reasons prescribed by the Ordinance before its transfer."

Therefore, the key issue of the instant case is whether the Plaintiff’s apartment house at the time of acquisition of the instant apartment house (the instant apartment house was reconstructed and sold in lots, so it is reasonable to see the base point of time as October 10, 1997, the acquisition date of the instant apartment house) falls under a resident. In this regard, Article 1(1)1 of the Income Tax Act defines the concept of a resident as “an individual who has a domicile in Korea or a domicile in Korea for not less than one year.” Article 2(1) of the Enforcement Decree of the Income Tax Act provides that the determination of address shall be based on objective facts of his living relationship, such as the existence of a family living together in Korea and assets located in Korea, and Article 2(4) of the Enforcement Decree of the Income Tax Act provides that the determination of address shall be based on the objective facts of his living relationship

In the case of this case, as seen earlier, the plaintiff left Indonesia on May 31, 1994 for long-term overseas service, and his wife and first wife left Indonesia on June 6, 1996 and continued to reside in Indonesia until now after all members of the household left Korea, and Paragraph 4 of the Enforcement Decree of the Income Tax Act provides that when the person has an occupation ordinarily required to reside abroad for not less than one year, he shall be deemed to have no address in Korea. In full view of all the whole circumstances shown in the argument of this case, it is reasonable to deem that the plaintiff was a non-resident by leaving Korea due to the circumstances of service in need of continuous overseas residence for not less than one year at the time of the acquisition of the apartment of this case, and the statement of evidence No. 12 alone is insufficient to reverse the fact of recognition.

Therefore, this part of the argument that the plaintiff is a resident at the time of the acquisition of the apartment of this case is without merit.

(2) Judgment on the second argument

Article 99-3 (1) of the former Act provides that "A resident shall acquire a newly-built house falling under any of the following subparagraphs from the date of its acquisition, and the applicable requirements of the above Article are clear by the law that only the resident shall apply to the resident. As seen earlier, as long as the plaintiff is a non-resident, the plaintiff is not subject to the special case of non-taxation under the above Article, so this part of the plaintiff's assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.