Since it constitutes two houses for one household temporarily, it is exempt from capital gains tax.

Where all members of a household have left Korea due to such conditions as study or work needing continuous overseas residence for not less than one year, a disposition rejecting a request for correction of non-taxation on capital gains tax is illegal.

Article 154 (1) of the former Enforcement Decree of the Income Tax Act

Article 155 (1) of the Enforcement Decree of the Income Tax Act

2011Gu 4933 Revocation of revocation of request for rectification of capital gains tax

United StatesA

○ Head of tax office

May 25, 2011

June 15, 201

1. The Defendant’s rejection of a request for correction of KRW 29,095,006 against the Plaintiff on September 2, 2009 is revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On October 20, 2002, the Plaintiff acquired and owned ○○○○○○○○-dong 337-1 ○○ apartment 203 dong 1105 (hereinafter “instant house”) and resided in Japan on October 29, 2004 for the Plaintiff’s spouse’s △ Securities (State) office.

B. On July 13, 2006, the Plaintiff acquired ○○○○○○○-dong 1306 △△△△ apartment 107 Do 204, Dec. 19, 2006, transferred the instant house on December 19, 2006, and paid KRW 29,095,006, when filing a preliminary return of capital gains tax on February 28, 2007.

B. Around July 2009, the Plaintiff filed a claim for correction to the Defendant for refund of the said transfer income tax on the grounds that the instant housing meets the requirements for non-taxation for one household. However, on September 2, 2009, the Defendant rendered the instant disposition rejecting the Plaintiff’s request for correction.

[Ground of recognition] A without dispute, entry of evidence No. 1, purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The plaintiff's assertion

Since the Plaintiff transferred the instant house within one year after the acquisition of the above △ apartment, pursuant to Article 155(1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19327, Feb. 9, 2006; hereinafter referred to as the “Enforcement Decree”), the main text and proviso of Article 154(1) of the Enforcement Decree shall be applied to two temporary houses for one household. According to the proviso of Article 154(1)2(c) of the Enforcement Decree, the transfer of the instant house constitutes a transfer of one house for one household regardless of the limit of the period of residence, and thus, the instant disposition reported differently is unlawful.

(2) The defendant's assertion

(A) In order to be subject to the proviso of Article 154(1) of the Enforcement Decree, the Plaintiff had one house in Korea at the time of transfer of the instant house. However, the proviso provisions cannot be applied because the Plaintiff had two houses at the time of transfer of the instant house.

(B) To be subject to the application of non-taxation provisions on two houses for one household temporarily under Article 155(1) of the Enforcement Decree, the Plaintiff must satisfy the requirements for the period of possession and residence of the transferred house. However, since the Plaintiff had never resided in the instant house, the transfer of the instant house does not apply to the temporary transfer of two houses for one household.

(C) The purport of the special application of the requirements for one house possession and residence requirements for one household under the proviso of Article 154(1) of the Enforcement Decree is to apply the non-taxation of one house for one household even if the period of residence does not meet the period of residence and possession, in cases where there occurs any inevitable cause that makes it impossible to reside any longer due to the departure of all the households due to the emigration under the Emigration or the need for continuous overseas residence for more than one year, or the absence of the period of residence and possession. However, pursuant to Article 3 of the Enforcement Decree, the Plaintiff cannot be subject to the special application of the requirements for possession and residence

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

In accordance with the facts established above, where one household having one house in Korea has come to temporarily possess two houses by acquiring another house before transferring the house (including the case in which it has acquired the house by its own construction), it is clear that it satisfies the requirements of Article 155(1) of the Enforcement Decree because it falls under the case of transferring the previous house within one year from the date of acquiring another house, and therefore, the provisions of Article 154(1) of the Enforcement Decree should be applied under the above provisions.

In addition, based on the facts recognized earlier, it is clear that the housing of this case falls short of the retention period and the period of residence due to the reason that all members of the household depart from the country due to the conditions of school attendance or work that require continuous overseas residence for at least one year, and it satisfies the requirements of Article 154(1)2(c) of the Enforcement Decree and Article 71(2)1 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, 200

The defendant asserts to the effect that the requirements for the period of possession and the period of residence under the main sentence of Article 154 (1) of the Enforcement Decree shall be satisfied to be non-taxable as a temporary one household under Article 155 (1) of the Enforcement Decree, and that the exceptional provisions for the period of possession and the period of residence under the proviso of Article 154 (1) of the Enforcement Decree

However, Article 155 (1) of the Enforcement Decree provides that "the provisions of Article 154 (1) shall apply," and does not exclude the application of the proviso, and all of the main text and proviso of Article 154 (1) of the Enforcement Decree requires "where one household possesses one house in Korea as of the date of transfer", and there is no question of law that only the proviso should be excluded from two houses temporarily for one household.

In addition, the purpose of the exception to the restriction on the retention period and residence period in the case of immigration, etc. is to guarantee the movement of residence to the people by transferring the residence abroad due to inevitable circumstances, and if it fails to meet the requirements for the retention period and residence period of one household, capital gains tax shall not be imposed on the transfer of the existing house, and the purpose of view the temporary one household two houses as one house for one household, is to ensure that it is not easy to acquire another house normally by transferring the existing house during the preparation period (one year). Therefore, it is to ensure that the transfer of the existing house is easy to facilitate the relocation of the residence for a certain period of time (one year). In a situation where the whole country of the existing house, such as the Plaintiff, departs from the country to acquire the new house for the replacement of the existing house, without being subject to the restriction of the residence period, to benefit from the exemption of capital gains tax, should be interpreted only after disposing of the existing house, or if it is possible to transfer the existing house within one year after the new house, it is not reasonable to interpret the requirements for the transfer period.

In addition, the defendant's assertion that domestic residents cannot be subject to the proviso of Article 154 (1) of the Enforcement Decree and special exception to the period of residence cannot be accepted as the allegation that there is no legal basis.

Therefore, the Defendant’s disposition that deemed that the transfer of the instant house does not constitute one house that is exempt from capital gains tax under the Income Tax Act is unlawful.

3. Conclusion

If so, the plaintiff's claim shall be accepted on the grounds of its reasoning, and it is so decided as per Disposition.