Document-2015-Real Estate-196 (No. 17, 2015)

Transfer

The fact that a multi-family house has been leased at least five years shall be reported to the head of the competent tax office and the income accruing from the transfer of a rental house leased for at least ten years after commencing the lease before December 31, 200 shall be exempted from capital gains tax pursuant to the proviso to Article 97 (1) of the Restriction of Special Taxation

Article 97 of the Restriction of Special Taxation Act

1. Factual basis

- On 28, 1985.02.28, A shall acquire a Apy House (22.6 square meters) located in Seocho-gu Seoul Metropolitan Government Seocho-gu.

- With respect to the construction of multi-family and multi-family houses (the area per unit shall not exceed 13 and 1, and the area per unit shall not exceed 85 square meters and shall correspond to the national housing for each unit) on December 08, 1995;

- Commencement of lease No. 13 of multi-family house on December 30, 1995 (at present, continuous lease without a factory room);

- The registration of a housing rental business operator (the starting date of the business shall be December 30, 1995) in the Seocho Tax Office on December 30, 2006

- scheduled to transfer multi-family houses leased on 00.00. 2015 (which are currently registered as a housing rental business operator only at the current tax office in charge of the current tax office, but not at the Gu office as a housing rental business);

2. Contents of questioning;

Whether the transfer income tax on the income accrued from the lease of the above multi-family house newly built during the period from January 1, 1986 to December 31, 200 is fully exempted pursuant to the proviso of Article 97(1) of the Act on Special Cases concerning the Restriction on Taxation since the above multi-family house started to be leased before December 31, 200 and was leased for ten years (to whether the transfer income tax may not be exempted since the previous tax office is registered as a housing rental business operator only at the current tax office (to whether the previous tax office is registered as a housing rental business operator).

3. Related Acts and subordinate statutes.

Article 97 of the Act on Special Cases of Taxation for Long-Term Rental Houses 【Reduction or Exemption of Transfer Income Tax on Long-Term Rental Houses】

(1) Where a resident prescribed by Presidential Decree transfers a national housing falling under any of the following subparagraphs (including the land appurtenant thereto which is not more than twice the total floor area of the relevant building) after renting it for not less than five years after commencing the lease on or before December 31, 2000, the tax amount equivalent to 50/100 of the capital gains tax on the income accruing from the transfer of relevant house (hereinafter referred to as "rental house") shall be reduced or exempted: Provided, That in cases of a rental house (limited to a house which has not been occupied at the time of acquisition) leased for not less than five years after commencing the acquisition and lease from among the constructed rental housing under the Rental Housing Act, and a rental house leased for not less than ten years

1. Houses newly built between January 1, 1986 and December 31, 2000; and

2. Multi-unit houses newly built on or before December 31, 1985 that had not been occupied as of January 1, 1986.

(2) In applying Article 89 (1) 3 of the Income Tax Act, a rental house shall not be deemed a house owned by the relevant resident.

(3) Any person who intends to have capital gains tax reduced or exempted pursuant to paragraph (1) shall file a report on the rental of housing and apply for reduction or exemption, as prescribed by Presidential Decree.

(4) The calculation of the rental period for rental housing under paragraph (1) and other necessary matters shall be prescribed by Presidential Decree.

○ Article 97 of the Enforcement Decree of the Restriction of Special Taxation Act 【Capital Gains Tax Reduction or Exemption on Long-Term Rental Houses

(1) "Resident prescribed by Presidential Decree" in the main sentence of Article 97 (1) of the Act means a resident who leases at least five rental houses.

(2) Article 122 (4) and (5) of the Enforcement Decree of the Income Tax Act shall apply mutatis mutandis to the scope and necessary expenses to be regarded as a house where a building for other purposes is constructed, such as part of constructed rental housing or the same lot number and store.

(3) A resident who intends to report on the matters concerning the lease of housing under Article 97 (3) of the Act shall submit a report on the lease of housing prescribed by Ordinance of the Ministry of Strategy and Finance to the head of the competent tax office having jurisdiction over the location of the rental housing

(4) A person who intends to apply for abatement or exemption of the tax amount under Article 97 (3) of the Act shall submit, along with the tax base return for the taxable year whereto belongs the date of transferring the relevant rental house, an application for abatement or exemption prescribed by Ordinance of the Ministry

1. Rental business registration certificate under Article 6 of the Rental Housing Act; and

2. Copy of lease contract.

3. Copy of the resident registration certificate or resident registration certificate of the lessee.

4. Deleted;

5. Other documents prescribed by Ordinance of the Ministry of Strategy and Finance.

(5) The lease period for a rental house under the provisions of Article 97 (4) of the Act (hereafter in this Article, referred to as the “lease period”) shall be calculated according to the following subparagraphs:

1. The initial date in reckoning the house lease period shall be the day on which the house lease is commenced;

2. Deleted;

3. If an inheritor acquires and leases a house by inheritance, the house lease period by a decedent shall be added to the house lease period by a heir; and

3-2. and 3-2. Deleted;

4. The lease period for less than 5 houses shall not be regarded as the house lease period; and

5. In applying subparagraph 1 or 3, the period prescribed by Ordinance of the Ministry of Strategy and Finance shall be included in the house lease period.

(6) The head of a district tax office having jurisdiction over the place of tax payment in receipt of an application for reduction or exemption under Article 97 (3) of the Act shall verify a certified copy of register of rental housing or a certified copy of land or building register by sharing administrative information under Article 36 (1) of

○ Property 46014-30, October 12, 1999

【Rece.】

In case of reduction or exemption of transfer income tax on long-term rental houses under Article 97 of the Act on Special Cases of Taxation and Article 97 of the Enforcement Decree of the same Act, the starting date of the lease period of long-term rental houses can be based on the date of commencement of actual lease confirmed by the head

【Abstract of Pledges】

- his own without filing a rental house report by July 1998, within the time limit under article 97, paragraph 3 of the Enforcement Decree of the Restriction of Special Taxation Act, has been submitted to the Director of the Tax Office.

1. Whether a reduction by 100 percent may be granted where a transfer is made after lease to the head of the competent tax office, when an application for registration of a business operator has been filed for more than five years since more than three months have elapsed from the commencement date of lease (4, 1998);

2. Whether the initial date in reckoning the lease period falls under any of the dates in commencement of the lease ( April, 1998) and the filing date of an application for business registration ( July 199);

○ Property 46014-311, November 06, 2002

According to the provisions of the main sentence of Article 97 (1) of the current Act on Special Cases concerning Taxation, where a resident who has five or more national housing (including land appurtenant to not more than two times the total floor area of the building in question) falling under any of the subparagraphs of paragraph (1) of the same Article commences lease before December 31, 200 and transfers a multi-family house falling under subparagraph 1 (c) of attached Table 1 of the Enforcement Decree of the Building Act after lease for not less than five years but less than ten years, if he/she leases or transfers a multi-family house after lease, the part partitioned for one household to reside independently.

○ Document Internet Visit Counseling 4 Team-870, 06.04.07

【Rece.】

In case where a resident who leases not less than 5 houses which have been occupied as of January 1, 1986 or a newly built apartment house on or before December 31, 1985, transfers the relevant house after renting it for not less than 5 years, as a newly built national house during the period from January 1, 1986 to December 31, 200, or a newly built apartment house on or before December 31, 1985, the resident who leases not less than 5 houses which have been occupied as of January 1, 196, transfers the relevant house after leasing it for not less than 5 years, the tax amount equivalent to 50/100 (10/100 in cases of leases for not less than 10 years) of the transfer income tax on the income accruing from the transfer of relevant rental house under Article 97 of the Restriction of Special Taxation Act may be reduced or exempted (100/100 in cases of leases for 5 years or more) based on the date when the head of competent tax

【Fact-Finding】

- A multi-family house newly built in 1995 (No. 18, a household size 27.6m2) acquired in November 1999 and intended to register as a housing rental business operator under the Rental Housing Act, but in the case of a multi-family house under the Rental Housing Act, it was not registered as a rental business operator under the Rental Housing Act, and it was not submitted to the competent tax office having jurisdiction over the location of the house.

- At the time of the return of global income tax for the year 200, the rental income was continuously calculated and reported every year, and the rental business was registered in August 2005.

[Contents of Pledge]

- As above, I ask questions as to whether the capital gains tax reduction or exemption under Article 97 of the Act on Special Cases concerning the Restriction on Taxation may apply to the transfer of rental housing which has been de facto leased for more than five years.

○ document Internet Visit Counseling 5 Team-2876, November 02, 2007

When a resident leases more than 5 national housing falling under any subparagraph of Article 97 (1) of the Act on Special Cases concerning the Restriction of Taxation, he/she shall report the matters concerning the lease to the head of the competent tax office having jurisdiction over the location of the rental house within 3 months from the date of commencement of the lease pursuant to Article 97 (3) of the Enforcement Decree of the same Act, and "the date of commencement of lease" in 50/100 (100/100 in cases of lease for more than 10 years) of the transfer income tax on the current house means the date of commencement of lease of more than 5 houses. In such cases, a report on the lease of a house is not required to substitute for a business registration applied for to the head of the competent tax office having jurisdiction over the location

○ Property Tax Department-699, November 11, 2009

【Rece.】

In case where a resident who leases not less than 5 national housing newly built during the period from January 1, 1986 to December 31, 200 transfers the relevant house after a lease for not less than 5 years after commencing the lease on or before December 31, 2000, the tax amount equivalent to 50/100 (100/100 in case where the relevant rental house is leased for not less than 10 years) of the transfer income tax on the income accruing from the transfer of relevant rental house pursuant to the provisions of Article 97 of the Restriction of Special Taxation Act may be abated or exempted, and in the application of the provisions of subparagraph 3 of Article 89 of the Income Tax Act, the rental house shall not be deemed

【Abstract of Pledges】

- Whether the house is not a high-class house, the individual house is not more than 300 million won, the independent 11 household of the scale of the national housing, and the house with 11 bonds leased for not less than 10 years, is subject to reduction or exemption of capital gains