Seoul High Court Decision 76 (No. 21, 2014)

Non-taxation of capital gains tax shall not apply to domestic housing disposal after two years have elapsed since the departure of the non-resident.

Before Article 154(1) of the Enforcement Decree of the Income Tax Act was amended on February 9, 2006, if a person who was a non-resident disposes of a domestic house after 2008, the capital gains tax is levied.

Article 154 of the Enforcement Decree of the Income Tax Act / [Scope of One House for One Household]

Seoul Administrative Court 2015-Gu Group-2980 ( October 03, 2016)

Maximum*

*The Director of the Tax Office

on 13, 2016

on 03 October 2016

U.S. P. P. P. P.T.

2015-Gu short-2980 Revocation of disposition of refusal to correct capital gains tax

Maximum*

*The Director of the Tax Office

on 13, 2016

on 03 October 2016

1. The plaintiff's claim is dismissed.

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

The defendant's refusal to correct the transfer income tax against the plaintiff on May 18, 2013 shall be revoked.

1. Details of the disposition;

A. On December 9, 1997, the Plaintiff acquired the Seocho-gu Seoul * Apartment 1,506 (hereinafter the instant house) and moved to the United States on December 4, 2001. On February 4, 2009, the Plaintiff transferred the instant house and filed a report on capital gains tax of 82,732,986, and received a refund of KRW 68,459,340 through the Board of Audit and Inspection’s request.

B. On March 17, 2013, the Plaintiff asserted that the instant real estate constitutes one house for one household, and thus, the transfer income tax should not be imposed. However, the Defendant issued a request for correction to the Defendant, who rejected the request (hereinafter “instant disposition”) on May 18, 2013.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The proviso of Article 154(1)2(b) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19327, Feb. 9, 2006; hereinafter the same) applies to non-residents who do not meet the retention period and residence period of one household. Since the Plaintiff satisfied the retention period and residence period, capital gains tax should not be imposed pursuant to the main sentence rather than the proviso of Article 154(1) of the Enforcement Decree of the Income Tax Act.

2) The proviso of Article 154(1)2 (b) of the Enforcement Decree of the amended Income Tax Act and Article 30(2) of the Addenda thereto, which served as the basis of the instant disposition, are contrary to Article 13(2) of the Constitution prohibiting property right deprivation and taxation by retroactive legislation, and Article 18(2) of the Framework Act on National Taxes, violates the freedom to move overseas residents, unfairly discriminates against the freedom to move overseas residents, and violates the principle of excessive prohibition under the Constitution

B. Determination

1) Relevant statutes

Article 154 (1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19327 of Feb. 9, 2006; hereinafter the same shall apply)

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

The main text: The term "one house for one household prescribed by Presidential Decree" in Article 89 (1) 3 of the Act means that a household comprised by a resident and his/her spouse together with the family members living together with the same address or same place of residence (hereinafter referred to as "one household") in Korea as of the date of transfer has one house as of the date of holding, and the relevant house has been held for not less than three years (in cases of a house located in the Seoul Special Metropolitan City, a Metropolitan City, a Si, and a Si, and a Do newly designated and publicly announced 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 not less than three years and the period of residence is not less than two years during the retention period

proviso: Provided, That in cases where one household possesses one house in Korea as of the date of transfer and falls under any of the following subparagraphs, it shall not be subject to restrictions on the period of possession and period of residence:

2. Cases prescribed by the Ordinance of the Ministry of Finance and Economy;

Main sentence: The same as the unit;

The proviso: Provided, That in cases where one household possesses one house in Korea as of the date of transfer and falls under any of the following subparagraphs, it shall not be subject to restrictions on the period of possession and residence:

2. Emigration under the Emigration Act;

All members of a household have left Korea: Provided, That it shall be limited to the transfer within two years from the date of departure.

(c) A household under such circumstances as school attendance or work needing continuous overseas residence for at least one year;

All the departures shall be made: Provided, That it shall be limited to the transfer within two years from the date of departure, in cases where one house is held as of the date of departure.

Article 154 (1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 154 (2) provides that capital gains tax shall not be levied in cases where a resident has been delegated by Article 89 (2) of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1568, Jan. 2, 200) which provides for a resident's transfer income tax, and the main sentence is three years or more in cases where the resident has only one house for one household and has

However, examining Article 154 (1) of the Enforcement Decree of the amended Income Tax Act, the main text is the same as the Enforcement Decree of the Income Tax Act before the amendment, and the proviso subparagraph 2 (b) and (c) is amended that no capital gains tax is levied on a certain non-resident without complying with the retention period and residence period for the non-resident. The purpose of the proviso is to resolve any unreasonable cause for which capital gains tax is not imposed even if a domestic house owned for a long time after the non-resident became a non-resident is transferred. Meanwhile, Article 30 (2) of the Addenda (2) of the Enforcement Decree of the Income Tax Act (amended by February 9, 2006) of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 154 (1) 2 (c) of the Income Tax Act), which provides that "if a house is transferred by December 31, 2007 to transfer the house by December 31, 2007, notwithstanding the previous provision, the person who has already resided at the time of the amendment shall be transferred by December 31.

2) Grounds for the Defendant’s disposition of the instant case

Meanwhile, whether transferred assets constitute one house for one household shall be determined at the time of transfer, and even if a resident becomes a non-resident after meeting the requirements of one house for one household as a resident, it shall not be determined at the time when the resident becomes a non-resident (Supreme Court Decision 93Nu11425 delivered on December 28, 1993). In applying Article 154(1) of the Enforcement Decree of the amended Income Tax Act, which was enforced at the time of the Plaintiff’s transfer of the instant house (amended by February 4, 2009), the Defendant transferred the instant house on February 4, 2009, which was more than two years after the Plaintiff left the Republic of Korea, and thus, it does not constitute Article 154(1)2 (b) or (c) of the amended Enforcement Decree of the Income Tax Act, and Article 30(2) of the Addenda of the Income Tax Act does not constitute the instant disposition.

3) Judgment on the plaintiff's first argument

The fact that the Plaintiff was a non-resident at the time of transfer of the instant real estate does not dispute between the parties.

However, when examining the system of the Income Tax Act, the resident and the non-resident are separated and defined in Articles 88 through 118-8, and the transfer income tax of the non-resident is prescribed in Article 119 and the main text of Article 154(1) of the amended Enforcement Decree of the Income Tax Act is not the non-resident under the Income Tax Act, but the non-resident. Therefore, the argument that the transfer income tax should be exempted pursuant to the main sentence of Article 154(1) of the amended Enforcement Decree of the Income Tax Act cannot be accepted.

4) Judgment on the second argument by the Plaintiff

Article 18 (2) of the Framework Act on National Taxes provides that income, profits, property, act or transaction in which a taxpayer is liable to pay national taxes shall not be retroactively imposed by new tax-related Acts after its establishment, and Article 18 (3) of the same Act provides that after the interpretation of tax-related Acts or the practices in tax administration are generally accepted by taxpayers, any act or computation according to such interpretation or practices shall be deemed lawful and tax shall not be imposed retroactively by the new

On the last day of February 2009, the Plaintiff’s obligation to pay capital gains tax on the transfer of the instant house was established. The Defendant examined whether the Plaintiff constitutes one house for one household under Article 154(1) of the Enforcement Decree of the amended Income Tax Act, which was enforced at that time, and thereafter, transferred the instant disposition. It cannot be deemed that the Plaintiff was retroactively taxed under a new tax law after its establishment, or that it was taxed by a new interpretation or practice. Therefore, the Plaintiff’s assertion is without merit.

3. Conclusion

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