In applying reduction and exemption to newly-built house, the Act prior to the amendment (Act No. 14.8.14) shall apply.

The requirements for special cases should be located in an area outside the Seoul Metropolitan area with a national housing scale below the national housing scale, and first of all, the issue of the plaintiff is 44 square meters in order to examine the plaintiff's other arguments in excess of the national housing scale.

Transfer income tax on the acquisitor of Newly-built houses under Article 99-3 of the Restriction of Special Taxation Act;

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of capital gains tax of KRW 11,281,290 against the Plaintiff on February 1, 2006 shall be revoked.

1. Details of the disposition;

A. On February 17, 1997, the Plaintiff acquired ○○○-gu, Seoul ○○○-dong 74-99 ○○○-dong 3 Dong 504 (hereinafter “instant house”) and transferred it to Kim○-○ on August 10, 2005.

B. The plaintiff, as ○○ Electronic Member, was staying in China since May 29, 199 in accordance with a personnel order in a foreign country (China). Since February 26, 1997, the plaintiff was staying in China together with family members and returned to Korea on August 6, 2005.

C. On February 26, 2001, the Plaintiff, who was staying in China, entered into a housing sale contract with ○○○○○-○ Housing Redevelopment Association (hereinafter “instant additional purchase house”) with the content of purchasing 100 ○○○dong 200 Dong 2008 Dong 201 (hereinafter “the instant additional purchase house”), and paid 50,000,000 won as the down payment on the day of the completion of the construction. After completing the registration of ownership transfer under the Plaintiff’s name on January 11, 2002, the Plaintiff owned it until the time of transfer of the instant house.

D. In making a preliminary return of capital gains tax after the transfer of the instant house, the Plaintiff declared that the transfer of the instant house constitutes one house for one household as stipulated in Article 89(1)3 of the Income Tax Act, and thus, falls under the subject of non-taxation. However, the Defendant issued the instant disposition imposing capital gains tax of KRW 11,281,297 on the transfer margin of KRW 71,705,000, which is the standard market price at the time of the transfer of the instant house, after deducting KRW 26,500,000, which is the standard market price at the time of acquisition from KRW 99,000,000, which is the standard market price at the time of the transfer of the instant house, on the ground that the said transfer does not fall

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The instant additional purchase house constitutes a newly-built house under Article 99-3 (1) 1 of the former Act on Special Cases concerning Tax Restriction (amended by Act No. 6762 of Dec. 11, 2002), and Article 99-3 (2) of the same Act provides that in applying Article 89 (1) 3 of the Income Tax Act, a newly-built house subject to Article 99-3 (1) of the same Act shall not be deemed a house owned by the relevant resident, so in determining whether the transfer of the instant house is one house for one household, the instant additional purchase house shall be excluded from the house owned by the relevant resident, and therefore, the Plaintiff constitutes a case where one house exists in the Republic of Korea as of the transfer date of the instant house.

Furthermore, since the Plaintiff did not reside in the instant house for more than two years but all of the households have left Korea due to the circumstances in which they need continuous overseas residence for more than one year, it is not subject to restrictions on the period of residence pursuant to Article 154(1)2(c) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19254, Dec. 31, 2005; hereinafter the same shall apply) and Article 71(2)2 of the Enforcement Rule of the same Act. Therefore, the instant disposition imposing capital gains tax is unlawful even though the transfer of the instant house constitutes one house for one household under Article 89(1)3 of the Income Tax Act and is subject to non-taxation.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

First, the Plaintiff is premised on Article 99-3 (2) and (1) 1 of the former Restriction of Special Taxation Act (amended by Act No. 6762 of Dec. 11, 2002) applicable to the transfer of this case. Thus, the Plaintiff’s assertion is relevant.

In light of the above, the new house in the area where the increase in real estate prices as prescribed by the Presidential Decree was excluded from the special taxation due to the amendment by Act No. 6762 on December 11, 2002. Article 29 of the Addenda to the above amended Act provides that the previous provision on the reduction or exemption of transfer income tax shall apply to the transfer of newly-built house in accordance with Article 99-3(1) of the former Act, where the new house is transferred after the enforcement of the Act, after entering into a sales contract and paying the down payment in accordance with Article 99-3(1)1 of the former Act. However, this provision appears to be applicable to the transfer of the newly-built house after the enforcement date of the Act on the Restriction of Special Taxation, since it appears to be a transitional provision on the transfer of the newly-built house which is not the newly-built house in question, and it is difficult to conclude that the above transitional provision on the transfer of another-built house is applicable to the transfer of the newly-built house in question after the enforcement date of the Act.

However, Articles 99-3(2) and 99-3(1)1 of the Restriction of Special Taxation Act (hereinafter “the Restriction of Special Taxation Act”) provide that housing shall be subject to the first purchase contract with a housing association, etc. during the period from May 23, 2001 to June 30, 2003, and on the contrary, the instant additional purchase housing shall not be subject to the exclusion of the special taxation, since the sales contract was concluded on February 26, 2001 and the down payment was made and the down payment was made, and Article 99-3(1) of the Restriction of Special Taxation Act and Article 99-3(1) of the Enforcement Decree of the same Act are also housing located in Seoul Special Metropolitan City except for the subject of the special taxation. Thus, as long as the instant transfer is based on the premise that the Restriction of Special Taxation Act applies, the instant additional purchase housing shall not be subject to the exclusion of the owned housing in applying

Although Article 99-3 (2) and (1) 1 of the former Restriction of Special Taxation Act is deemed to apply to the case where a house owned by another person is transferred under the possession of a newly-built house as in this case by selecting Article 29 of the Addenda of Act No. 6762 of December 11, 2002, since Article 99-3 (2) and (1) 1 of the same Act also are subject to the first purchase contract with the housing association during the period from May 23, 2001 to June 30, 203, the said provision cannot be deemed to apply to the case where the additional house is purchased under the ownership of another house as in this case, and the said additional house is purchased under Article 99-3 (2) and (1) 1 of the same Act for the first time with the housing association during the period from February 26, 2001 to June 30, 2003.

As above, in applying Article 89 subparagraph 3 of the Income Tax Act, so long as it cannot be deemed that the instant additional purchase house is excluded from the Plaintiff’s house, the instant disposition is legitimate, provided that the transfer of the instant house does not constitute the transfer of one house for one household, and as such, the Plaintiff’s assertion that the transfer of the instant house constitutes a case where the transfer of the instant house is not subject to a restriction on the residence period under Article 71 (2) 2(c) of the former Enforcement Decree of the Income Tax Act and Article 71 (2) 2 of the Enforcement Rule

3. Conclusion

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

Related statutes

○ Article 89 of the Income Tax Act

(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 154-1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19254 of Dec. 31, 2005) Scope of the first house

(1) The term “one house for one household as prescribed by the Presidential Decree” in subparagraph 3 of Article 89 of the Act means the case where a household comprised by a resident and his spouse together with the family members living together with the same address or same residence (hereinafter referred to as “one household”) in Korea as of the date of transfer, and where the relevant house has been held for three years or more (in the case of a house located in the Seoul Special Metropolitan City, Metropolitan City, Si, and Si, and Si, and Do newly 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 has been held for three years or more and the residing period is two years or more during the retention period): Provided, That where one household possesses one house in Korea as of the transfer date and falls under any of the following subparagraphs, its retention period and residing period shall not be restricted:

2. The case falling under one of the following subparagraphs. In this case, 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 items (a) and (b):

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

Article 71-1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 476 of Dec. 31, 2005)

(2) The term “overseas emigration and other cases prescribed by the Ordinance of the Ministry of Finance and Economy” in Article 154 (1) 1 (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:

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

○ Special taxation for transfer income tax on an acquirer of a newly-built house under Article 99-3 of the former Restriction of Special Taxation Act (amended by Act No. 7839 of Dec. 31, 2005)

(1) With respect to the income accruing from a transfer within 5 years from the acquisition date of a newly-built house (including the land attached to a house, which is less than twice the total floor area of the relevant building; hereafter in this Article the same shall apply) falling under any of the following subparagraphs located in an area other than the area as determined by the Presidential Decree, in which a resident (excluding a housing construction business operator) makes or is likely to make a rapid increase in real estate prices in view of a national consumer price inflation rate and a rising rate of national house trade prices, the tax amount equivalent to 100/100 of transfer income tax on the income accruing from such transfer shall be reduced or exempted,

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

A newly-built house (including a house acquired through a housing association under the Housing Act or a maintenance and improvement project association under the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents, which is prescribed by the Presidential Decree) acquired by a person who first concludes a sales contract and pays a down payment within the period from May 23, 2001 to June 30, 2003 (hereafter in this Article, referred to as the “newly-built house acquisition period”): Provided, That a house that has been occupied as of the date

(2) In applying subparagraph 3 of Article 89 of the Income Tax Act, a newly-built house subjected to paragraph (1) shall not be considered a house owned by the relevant resident.

Addenda (No. 6501, August 14, 2001)

Article 1 (Enforcement Date) This Act shall enter into force on the date of its promulgation.

(1) The amended provisions of Articles 94 (1) 3, 56, 78 (1) 11 and 14, and 99-3 (1) of the Income Tax Act among the amended provisions of Articles 55 (4), 55-2 (3), 55-2 (4) shall apply to the first transfer after the enforcement of this Act. Article 13 (Transition Measures on Reduction and Exemption of Transfer Income Tax for the Purchasers of Newly-Built Houses)

Addenda (No. 6762, Dec. 11, 2002)

Article 1 (Enforcement Date) This Act shall enter into force on January 1, 2003.

Article 2 (General Application Examples)

(2) The amended provisions of this Act concerning capital gains tax shall apply to the first transfer after the enforcement of this Act.

Article 29 (Transition Measures for Special Taxation of Transfer Income Tax on Purchasers of Newly-Built Houses)

(1) In case where a newly-built house, which had been approved for use or inspection (including a provisional use approval), was entered into a sales contract with a housing constructor in accordance with the previous provisions of Article 99 (1) or 99-3 (1) before this Act enters into force, is transferred after this Act enters into force, the previous provisions shall apply to the calculation of the income amount subject to the abatement or exemption of transfer income tax and the object of taxation of transfer income tax, notwithstanding the amended provisions of Article 99 (1) or 99-3 (1). In this case, the declass standard of a newly-built house at the time of

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

(1) The term "area prescribed by Presidential Decree" in the main sentence of Article 99-3 (1) of the Act means the powder, mountain village, square village, mountain village, and middle-dong new urban area designated and publicly notified as a planned area for housing site development under Article 3 of the Housing Site Development Promotion Act.

○ Special taxation for transfer income tax on an acquirer of a newly-built house under Article 99-3 of the former Restriction of Special Taxation Act (amended by Act No. 6762 of Dec. 11, 2002)

(1) Where a resident (excluding a housing construction business operator) acquires a newly-built house falling under any of the following subparagraphs (including any income accruing from the transfer of such newly-built house within five years from the date of its acquisition; hereafter in this Article, the same shall apply), and transfers it within five years from the date of its acquisition, the tax amount equivalent to 100/100 of the transfer income tax shall be reduced or exempted, and where such newly-built house is transferred after five years from the date of its acquisition, the transfer income accruing for five years from the date of its acquisition shall be subtracted from his income amount subject to the transfer income tax: Provided, That this shall not apply where the relevant newly-built house falls under the declass house that is excluded from the object of non-taxation of transfer income tax under subparagraph 3 of Article 89 of the Income Tax Act:

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 houses as determined by the Presidential Decree, which are acquired through a housing association under the Housing Construction Promotion Act or an redevelopment association under the Urban Redevelopment Act): Provided, That a house which has been occupied as of the date of a sales contract, or has

(2) In applying subparagraph 3 of Article 89 of the Income Tax Act, a newly-built house subjected to paragraph (1) shall not be considered a house owned by the relevant resident.

○ Reduction or exemption of transfer income tax on the acquisitor of newly-built house located in a region other than Seoul Metropolitan Area under Article 99-3 of the former Restriction of Special Taxation Act (amended by Act No. 6501 of Aug. 14, 201)

(1) Where a resident (excluding a housing construction business operator) acquires a newly-built house (limited to national housing and its appurtenant land, including any appurtenant land not exceeding twice the total floor area of the relevant building; hereafter the same shall apply in this Article) falling under any of the following subparagraphs located outside the Seoul Metropolitan area as prescribed by the Presidential Decree, and transfers it within 5 years from the date of its acquisition, the tax amount equivalent to 100/100 of the transfer income tax shall be reduced or exempted, and where he transfers it after the lapse of 5 years from the date of acquisition of the relevant newly-built house

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 November 1, 2000 to December 31, 2001 (hereafter in this Article, referred to as the “newly-built house”) (including such houses as determined by the Presidential Decree, which are acquired through a housing association under the Housing Construction Promotion Act or an redevelopment association under the Urban Redevelopment Act): Provided, That a house which has been occupied by another person as of the date of a sales contract, or which has

(2) In applying subparagraph 3 of Article 89 of the Income Tax Act, a newly-built house subjected to paragraph (1) shall not be considered a house owned by the relevant resident.