In a case where Party A, who owned a house, acquired an inheritance share in the inherited house due to the death of his father, acquired a new house, became two houses temporarily after acquiring the new house, and reported and paid acquisition tax, etc. pursuant to Article 40-2 of the former Restriction of Special Local Taxation Act, and the competent administrative agency acquired a new house and owned three houses, and thus, imposed acquisition tax, etc. on Party A on the ground that Article 40-2 of the former Restriction of Special Local Taxation Act is not applicable, the court affirmed the judgment below that Article 40-2 of the former Restriction of Special Local Taxation Act does not apply to the case where Party A did not own a house except co-ownership share in the house when applying Article 40-2 of the former Restriction of Special Local Taxation Act.

Article 40-2 subparagraph 2 of the former Restriction of Special Local Taxation Act (Amended by Act No. 11487, Oct. 2, 2012); Article 17-2 of the Enforcement Decree of the Restriction of Special Local Taxation Act

Plaintiff (Attorney Lee Sang-chul et al., Counsel for plaintiff-appellant)

The head of Gangdong-gu Seoul Metropolitan Government

Seoul High Court Decision 2013Nu16007 decided October 31, 2013

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. The main sentence of Article 40-2 of the former Restriction of Special Local Taxation Act (amended by Act No. 11487, Oct. 2, 2012) provides that “where a house, the value of which as at the time of acquisition under Article 10 of the Local Tax Act due to floating transactions, does not exceed KRW 900 million, falls under any of the following subparagraphs, acquisition tax shall be reduced by 50/100 calculated by applying the tax rate under Article 11(1)7 (b) of the same Act,” and subparagraph 2 provides that “where a house becomes two houses temporarily as prescribed by Presidential Decree” (hereinafter “instant reduction provision”). Article 17-2 of the Enforcement Decree of the Restriction of Special Local Taxation Act provides that “where a house becomes two houses temporarily as prescribed by Presidential Decree” in Article 40-2 subparag. 2 of the Act refers to cases where a director, a place of work, a family member, a person himself/herself or his/her family member, or any other reason he/she fails to acquire any other house”:

2. The lower court: (a) premised on the premise that the number of houses held except co-ownership shares in the instant tax reduction and exemption provisions cannot be calculated when applying the instant tax reduction and exemption provisions; and (b) determined that the instant tax reduction and exemption provisions do not apply to the acquisition of the instant house, inasmuch as the Plaintiff acquired the instant house again under the former house and the status of holding two-thirds of shares in the instant inherited house, and thereby holding more than two houses.

Furthermore, the lower court rejected the Plaintiff’s assertion that the term “house” as referred to in the instant reduction and exemption provision violates the principle of clarity in the tax law, on the ground that it is sufficiently possible to interpret that the instant reduction and exemption provision does not exclude inherited share in calculating the number of houses owned in the application of the instant reduction and exemption provision, on the grounds that it is sufficiently possible to interpret that the instant reduction and exemption provision violates the principle of clarity in the tax law, in addition to the purport of the instant reduction and exemption provision and the text, contents, and structure of the relevant provision.

3. Examining in light of the relevant legal principles, the above determination by the court below is just, and contrary to the allegations in the grounds of appeal, there is no error of law by misapprehending the legal principles on the clarity principle of tax law.

4. In addition, there is a difference in the tax-bearing capacity of acquisition tax between the heir who succeeds to a part of the house owned by the decedent and the heir who does not inherit at all the house owned by the decedent, which is owned by the decedent. Therefore, the scope of the instant tax reduction provision may vary depending on whether the heir jointly succeeds to a house owned by the decedent or the heir solely succeeds to a house owned by one of the heirs, the instant tax reduction provision cannot be deemed to violate the principle of tax fairness. Accordingly, the allegation in the grounds of appeal against this cannot be accepted.

5. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Chang-suk (Presiding Justice)