Plaintiff (Law Firm Lee Li-EL, Attorneys Lee Du-won, Counsel for the plaintiff-appellant)

Head of Seocho Tax Office

November 4, 2005

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 KRW 107,117,820 and KRW 53,738,966 for the Plaintiff on January 31, 2005 shall be revoked.

1. Details of the disposition;

A. The Plaintiff: (a) on October 6, 2000, acquired the instant housing of 92.84 square meters of the Seocho-gu Seoul Metropolitan Government (detailed number omitted); (b) on October 295,000,000 square meters of the instant housing (hereinafter “the instant housing”); (c) on June 10, 200, transferred the Seocho-gu Seoul Metropolitan Government (hereinafter “Seoul Seocho-gu”) in KRW 1002,00,000; and (d) acquired KRW 330,000,000 on December 14, 2001 and transferred the said housing to the Defendant for KRW 50,000,000 on June 13, 2003; (c) on the preliminary return of transfer income tax, the Plaintiff calculated the transfer value and acquisition value of each of the instant real estate as the standard market price, and reported and paid KRW 236,369,7969,79,699.

B. At the time of the Plaintiff’s transfer of each of the above houses, the Defendant owned 101, 102, 103, 201, 202, 202, 102, 101, 202 underground1, and 2 underground of Seongbuk-gu Seoul (hereinafter “the instant multi-family house”). In the event that the Plaintiff owns three or more houses, Article 96(1)7 of the Income Tax Act and Article 162-2(5) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18173 of December 30, 203; hereinafter “former Enforcement Decree of the Income Tax Act”) on the ground that the transfer margin of the instant house and the apartment house should be calculated based on the actual transaction price, the Defendant issued a notice of the instant disposition to the Plaintiff on January 10, 2005 on the ground that the transfer margin of the instant house and the apartment house should be calculated based on the actual transaction price.

[Grounds for recognition] Gap 1, 2, Eul 1-1, 2, Eul 2-1, 2, 3, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

In determining whether a household possessing three or more houses pursuant to Article 96 (1) 7 of the Income Tax Act and Article 162-2 (5) of the Enforcement Decree of the same Act transfers a house, the above multi-family house corresponding to the long-term rental house should be excluded, and in the case of the plaintiff, the above multi-family house does not fall under the case of the owner of three houses. However, the defendant's disposition of this case, which is calculated based on the actual transaction price on the ground that the above multi-family house is deemed a house and owned three or more houses, is unlawful as it violates the taxation requirement principle

(b) Related statutes;

Income Tax Act

Article 89 (Non-Taxable Transfer Income Tax) No income tax shall be levied on any of the following incomes (hereinafter referred to as “transfer income tax”):

3. Income accruing from a 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 land to which the building is built by the ratio as determined by region under the Presidential Decree

Article 96 (Transfer Price)

(1) The transfer value of assets referred to in Article 94 (1) 1 and 2 shall be the standard market value at the time of the transfer of the assets concerned: Provided, That where the assets concerned fall under any of the following subparagraphs, the actual transaction value between the transferor and transferee (hereinafter referred to as “actual transaction value”) shall apply:

7. Other cases prescribed by Presidential Decree in consideration of types, period of holding, number of possession, scale of transaction, transaction methods, etc. of the relevant assets.

Enforcement Decree of the Gu

Article 162-2 (Transfer Price)

(5) The term "cases prescribed by Presidential Decree" in Article 96 (1) 7 of the Act means cases where one household possessing three or more houses transfers the house (including land annexed thereto).

Restriction of Special Taxation

Article 97 (Capital Gains Tax Reduction or Exemption for Long-Term Rental Houses)

(1) In case where a resident as prescribed by the Presidential Decree transfers a national housing falling under any of the following subparagraphs (including the land not exceeding twice the total floor area of the relevant building) after renting it for not less than 5 years after commencing the lease on or before December 31, 2000, the tax amount equivalent to 50/100 of the transfer income tax on the income accruing from the transfer of relevant house (hereinafter referred to as the “rental house”) shall be abated or exempted: Provided, That in the case of a rental house from among constructed rental houses under the Rental Housing Act, a rental house leased for not less than 5 years from among the purchased rental houses under the same Act, and a rental house (limited to the house not occupied at the time of acquisition) leased for not less than 5 years after acquiring it and commencing the lease after January 1, 195 from among the purchased rental houses under the same Act, the tax amount equivalent to

1. Houses newly built during the period from January 1, 1986 to 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 subparagraph 3 of Article 89 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 the transfer income tax reduced or exempted under paragraph (1) shall make an application for reduction or exemption by reporting the matters concerning the lease of housing under the conditions as prescribed by the Presidential Decree.

(4) Calculation of the rental period for a rental house referred to in paragraph (1) and other necessary matters shall be determined by the Presidential Decree.

C. Determination

In light of the principle of no taxation without law, or the requirements for tax exemption or tax exemption, the interpretation of tax laws shall be interpreted in accordance with the text of the law, barring special circumstances, and it shall not be extensively interpreted or analogically interpreted without reasonable grounds. In particular, it accords with the principle of fair taxation to strictly interpret that the provision that is clearly considered as a preferential provision among the requirements for tax exemption or exemption accords

According to Article 96 (1) 7 of the Income Tax Act and Article 162-2 (5) of the former Enforcement Decree of the Income Tax Act, where one household which owns three or more houses transfers the house, the transfer value shall be based on the actual transaction value. Article 97 (2) of the Restriction of Special Taxation Act provides that only "where a household which is deemed subject to non-taxation pursuant to Article 89 (3) of the Income Tax Act determines whether it constitutes one house for one household which is deemed non-taxable pursuant to Article 89 (2) of the Income Tax Act shall not be deemed as a house owned by the relevant resident. Thus, the above provision shall not apply to a case where a household determines whether it constitutes three houses for one household which is subject to the calculation of gains from transfer based on the actual transaction value pursuant to Article 162-2 (5) of the former Enforcement Decree of the Income Tax Act, and there is no reasonable reason to expand or analogically apply the above provision, and there is no other legal basis to exclude rental houses from the

Therefore, since the Plaintiff owned three or more houses including the above multi-family house at the time of transfer of the instant house and apartment house, the transfer margin of the said house and apartment house should be calculated based on the actual transaction price pursuant to Article 96 (1) 7 of the Income Tax Act and Article 162-2 (5) of the former Enforcement Decree of the Income Tax Act. Thus, the instant disposition is lawful as it is in accordance with each of the above provisions, and it cannot be deemed that it violates the principle of taxation requirements, the principle of strict interpretation, and the principle of prohibition

3. Conclusion

Therefore, the plaintiff's claim seeking revocation on the premise that the disposition of this case is unlawful is dismissed as it is without merit. It is so decided as per Disposition.

Judges Kim Byung-soo