[1] In determining whether a residential building constitutes a transfer of one house for one household under the former Income Tax Act, whether a residential building falling under a " villa" under the former Local Tax Act shall be deemed a "house" under the former Income Tax Act (affirmative)

[2] Where a person who owned apartment 1 bonds and one farm house transfers apartment houses, the case holding that even though the administrative rules stipulate that buildings falling under “the villa” under the former Local Tax Act are not considered as “house” under the former Income Tax Act, and the above farm house does not constitute “the villa” under the former Income Tax Act, it does not constitute a transfer of one house for one household under the former Income Tax Act

[1] Article 112 of the former Local Tax Act (amended by Act No. 7837 of Dec. 31, 2005) provides that "the head of a villa" shall not be separately defined in the former Local Tax Act, and Article 112 of the former Local Tax Act (amended by Act No. 732 of Jan. 5, 2005) provides that "any building used for recreation, summering, amusement, etc. and its appurtenant land, not for permanent residence, shall be defined as "the head of a villa"; thus, acquisition tax and property tax are imposed on the head of a household. In determining whether the transfer of one house by one household under the former Local Tax Act constitutes "the head of a villa" under the former Local Tax Act, the provisions of the said Local Tax Act do not directly relate to "the house" under the former Local Tax Act in light of its legislative purpose, and it is reasonable to determine whether the building for the original purpose of use is a residential house, and it is reasonable to apply the former Local Tax Act special exception to "one house for one household" regardless of the purpose of tax exemption.

[2] The case holding that, in a case where an apartment house, which is one of its original purpose, is owned by 2 bonds of a building for residential purpose, is used for recreation, summering, or amusement, and the remaining one bond, which is the farm house, is used for the purpose of recreation, summering, or amusement, and is transferred by apartment, although the administrative rules stipulate that the building falling under the " villa" under the former Local Tax Act is not considered as a house under the former Income Tax Act, and the above farm house constitutes a villa, it does not constitute a transfer of one house for one household under the former Income Tax Act

[1] Articles 95(3) and 89 subparag. 3 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005), Article 160(1) of the Enforcement Decree of the Income Tax Act, Article 112 of the former Local Tax Act (amended by Act No. 7332 of Jan. 5, 2005), Article 84-3 of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 18669 of Jan. 5, 2005) / [2] Articles 95(3) and 89 subparag. 3 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005), Article 160(1) of the Enforcement Decree of the Income Tax Act, Article 160(1) of the former Local Tax Act (amended by Act No. 7332 of Jan. 5, 2005)

Plaintiff (Attorney Kim Dong-ap et al., Counsel for plaintiff-appellant)

Head of Yongsan Tax Office

May 31, 2007

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 107,754,590 on May 31, 2005 against the Plaintiff on May 13, 2005 (which appears to have been written in the complaint on June 13, 2005) is revoked.

1. Details of the disposition;

A. The Plaintiff acquired, around June 23, 1983, the Seongdong-dong 220-1 Han-dong, Seongdong-gu, Seoul (hereinafter “instant apartment”) and occupied for two or more years, and sold at KRW 800,000,000,000, around October 29, 2004.

B. After transferring the apartment of this case, the Plaintiff reported and paid the transfer income tax to the Plaintiff on the premise that there is no other house than the apartment of this case, the Plaintiff calculated the transfer margin as KRW 142,532,526 under Article 160 (1) of the Enforcement Decree of the same Act on the ground that the said transfer falls under the transfer of “one house for one household” which is a high-priced house under Articles 95(3) and 89 subparag. 3 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005; hereinafter the same shall apply) on the premise that there is no other house except the apartment of this case, and paid KRW 20,986,377 among them.

C. Meanwhile, around November 1, 1974, the Plaintiff acquired a forest land of 104,510 square meters (hereinafter “the instant forest land”) in the name of Geum-dong, Seonam-gu, Seonam-gu, Seonam-si, as a sale and purchase around July 14, 1976. Around July 14, 1976, the Plaintiff had been holding a house of 8.25 square meters underground, one story of 69.33 square meters on the above ground (hereinafter “instant village housing”), three livestock pens, and one affiliated company at the time of the said transfer.

D. On May 31, 2005, the Defendant deemed that the instant apartment was owned separately from the instant apartment, and thus, the transfer of the instant apartment does not constitute a transfer of one house for one household, and thus, calculated gains from transfer by deducting KRW 226,76,592 and necessary expenses, 3,093,302, the acquisition value of the instant apartment from KRW 800,000,00,000, the transfer value of the instant apartment from KRW 226,776,592, and KRW 3,093,30,106, which is the acquisition value, as gains from transfer. Accordingly, the Defendant issued the instant disposition to correct and notify the remainder of KRW 107,74,590, which is the tax amount determined by the report of KRW 128,740,968, which is the total determined tax amount.

[Reasons for Recognition] Gap's evidence Nos. 3, 4, 12, Eul's evidence No. 1-3, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The housing of this case was used as a villa by Nonparty 1 for the purpose of using the Plaintiff’s father as a villa, and Nonparty 1 was used as a villa by Nonparty 1, his mother after Nonparty 1 died of around 1992, and Nonparty 2 took a rest, etc., so this constitutes a villa, and thus, the instant disposition was unlawful even though it constitutes a villa.

B. Relevant provisions

(1) The former Income Tax Act, which had been enforced at the time of the transfer of apartment of this case, did not have a separate provision on a villa. However, Articles 112, 112-2, 188, and 234-16 of the former Local Tax Act (amended by Act No. 732 of Jan. 5, 2005; hereinafter the same) provide for the imposition of acquisition tax, property tax, and aggregate land tax on a villa. Of them, the provisions on the definition of a villa are as follows.

【former Local Tax Act】

Article 12 (Tax Rates)

(1) The standard rate of acquisition tax shall be 20/1,000 of the value of acquired article or the annual installment amount.

(2) Acquisition tax rates in cases of acquiring real estate, etc. falling under any of the following subparagraphs (including cases of acquiring a portion of a villa, etc. by dividing it) shall be 500/100 of the tax rates listed in paragraph (1). In such cases, the same shall apply not only to cases where golf courses are registered (including cases where facilities are extended and changes of such facilities are registered; hereafter the same shall apply in this paragraph) but to cases where golf courses are used as de facto golf courses without registration, and where the boundary of land attached to any villa or high-class recreation center is unclear, land equivalent to ten times the floor area of the building shall be deemed land annexed thereto:

1. Villas: Residential buildings used for recreation, summering, amusement, etc. not used for permanent residence, and land annexed thereto (excluding houses in agricultural and fishing villages and land annexed thereto located in Eup or Myeon under Article 3 (3) and (4) of the Local Autonomy Act and meet the scope and standards prescribed by the Presidential Decree). In this case, the scope of and applicable standards for villas shall be determined by the Presidential Decree;

[Enforcement Decree of the former Local Tax Act (amended by Presidential Decree No. 18669 of Jan. 5, 2005)]

Article 84-3 (Standards for Applying Scope of Villas, etc.)

(1) The term "rural or fishing village and land annexed thereto falling within a scope and standard prescribed by Presidential Decree" in the former part of Article 112 (2) 1 of the Act means rural or fishing village and land annexed thereto, which meet the following requirements:

1. The lot area shall be not more than 660§³ and the total floor area of a building shall not exceed 150§³;

2. The statutory standard price of the building shall be within twenty five million won;

3. It shall not be located in any of the following areas:

(a) Gun areas and the metropolitan area under subparagraph 1 of Article 2 of the Seoul Metropolitan Area Readjustment Planning Act which belong to the Metropolitan City: Provided, That the border area under subparagraph 1 of Article 2 of the Border Area Support Act, and the areas as determined by the Ordinance of the Ministry of Government Administration and Home Affairs from among the nature preservation area under

(b) Urban areas and permitted areas under Articles 6 and 117 of the National Land Planning and Utilization Act;

(c) Areas designated by the Minister of Finance and Economy under Article 96 (1) 6-2 of the Income Tax Act; and

(d) Areas prescribed by the provisions of Article 99-4 (1) 1 (d) of the Restriction of Special Taxation Act.

(2) Article 104-3(1)6 of the Income Tax Act, amended by Act No. 7837 of Dec. 31, 2005, stipulated a villa and its appurtenant land as one of the non-business land. The details are as follows.

Article 104-3 (Scope of Land for Non-business)

(1) The term "land for non-business use" in Articles 96 (2) 8 and 104 (1) 2-7 means the land falling under any of the following subparagraphs (hereafter referred to as "land for non-business use" in this Article) during the period prescribed by Presidential Decree during which the relevant land is owned:

6. Residential buildings used not for permanent residence but for recreation, summering, amusement, etc. (hereafter in this subparagraph, referred to as the “ villa”) and lands attached thereto: Provided, That agricultural and fishing villages and lands attached thereto located in Eup or Myeon provided for in Article 3 (3) and (4) of the Local Autonomy Act and meeting the scope and standards prescribed by the Presidential Decree are excluded, and when the boundary of land attached to a villa is unclear, land ten times the floor area of the building shall be deemed the land attached thereto;

(3) Articles 95(3) and 89 subparag. 3 of the former Income Tax Act, which had been enforced at the time of the transfer of the instant apartment, subject to non-taxation on income from the transfer of one house for one household as prescribed by the Presidential Decree. However, in the case of expensive houses whose transfer value exceeds the standard prescribed by the Presidential Decree, the method of calculating gains from transfer was separately prescribed. However, in determining whether the apartment houses for the said one household fall under one house, no provision was provided as to whether they constitute a villa. However, the following established rules were prescribed as to the apartment houses.

[Reday 46014-1549, June 25, 1997]

- In determining one house for one household which is exempt from capital gains tax under the current Income Tax Act, the house portion shall be determined according to the actual use at the time of transfer, and if the actual use is unclear, it shall be determined according to the registration on the public account book.

- A building imposed as a villa pursuant to the provisions of the Local Tax Act is not deemed a house, or where it is used for regular residence, it is deemed a house regardless of whether a local tax is levied.

(4) On the other hand, the Housing Act has the following definitions as to housing.

Article 2 (Definitions) The definitions of terms used in this Act shall be as follows:

1. The term “housing” means all or part of the building with the structure wherein the household members may carry on an independent residential life for a long time as well as the land attached thereto, and it shall be classified into detached housing and collective housing;

C. Facts of recognition

(1) In fact, the housing of this case was newly built by Nonparty 1, his father, together with the stable and annexed company, around July 14, 1976. The annexed companies used as a warehouse are located in a place where the entrance door of the housing of this case is not 20 meters, and one stable is located next thereto, and the entrance door of the housing of this case and the stable are facing each other. The remaining two houses of this case are located a considerable distance from the housing of this case. The housing of this case consist of two rooms, living rooms, bathing rooms, boiler rooms, and boiler rooms.

(2) The instant forest land adjoins the packaging road, and the access road was installed on the packaging road to the instant mountain site. At the entrance of the access road, the term “(title omitted) farm” was inscribed, and around that, the steel structure was installed, stating the phrase “from March 1, 1984 to the construction of the relevant tree facilities, and made efforts to repair the relevant tree facilities for the future while acquiring and leaving the miscellaneous land in the interest of Niju on November 15, 1974.” The instant forest land adjacent to the said forest land was used for cultivating crops, such as flowers, if the land is excluded from the mountainous district, and there was no facility or amusement facility for relaxation.”

(3) After the construction of the housing dispute in this case, Nonparty 1 created a pond in the vicinity of the housing dispute in question, tending a large number of ornamental trees and flowerss to a place where a person can serve as a rest at the place where he had a manager at the forest and field, and raising the manager at the above three livestock penss, and raising crops at the forest and field, and taking a rest at the above (title omitted) farm, or directly carrying out the work of raising the burden and growing crops. However, since the death of Nonparty 1, the Plaintiff was suspended and the livestock shed was not used. The Plaintiff did not actively endeavor to build a farm as Nonparty 1 while residing in the forest of this case and did not actively endeavor to preserve the facilities, such as the housing dispute in this case. The Plaintiff’s mother, who is Nonparty 20, did not live in the housing dispute in Seoul, and both Nonparty 1 and Nonparty 2, who is the Plaintiff’s mother, did not live in the housing dispute in this case.

(4) From October 2003, Nonparty 3, who had been in charge of the management of the said “(name omitted) farm, was living in a vinyl house located far away from 50 meters from the instant mountain village house, and cultivated flowers and vegetables in the forest of this case. Nonparty 3 had three children. However, there were only one room and one main room in residential facilities located in a vinyl house, and there were no other toilets and three main rooms. Thus, Nonparty 3 and his family members used the instant mountain village house when taking a bath. Nonparty 3 and their family members used the instant mountain village house, by setting a rapid line outside the instant mountain village house, and opened the clothes which completed washing. Nonparty 3’s children opened a computer connected to the instant mountain village and the Internet, and used the computer.

(5) Meanwhile, Nonparty 4, who served as a driver in the company related to the Plaintiff, filed a move-in report on the instant dispute house from May 10, 2004 to October 18, 2005, and resided in the instant dispute house during some of the periods, and Nonparty 5, who is a public official in charge of the Yongsan Tax Office, visited the instant dispute house at the time of visiting the instant dispute house to conduct on-site investigation.

(6) The Plaintiff has not paid the acquisition tax, property tax and aggregate land tax corresponding to the villa for the instant dispute housing and forest land.

[Based on recognition] Gap evidence 3, 4, 5, 7, 10, 13-2, Gap evidence 16, Eul evidence 17 through 21, Eul evidence 3-1 through 9, Eul evidence 11-2, witness 3, non-party 5's testimony, the result of the on-site inspection by this court, the purport of the whole pleadings

[Evidence Evidence] 6, 14, and 15 Evidence A, part of Evidence A No. 21, witness Non-party 3's testimony

(d) Markets:

According to the provisions of the Local Tax Act that the building subject to separate taxation shall not be deemed a house. If the housing in this case constitutes a villa under the Local Tax Act, this does not constitute a house. Article 112(2)1 of the former Local Tax Act provides that “A building used for recreation, summering, or amusement and not for permanent residence, and land annexed thereto (excluding rural and fishing villages and land annexed thereto)” as a villa. Thus, if the Plaintiff used the housing in this case for permanent residence and for recreation, summering, or amusement without using it for permanent residence, the transfer of the apartment in this case constitutes the transfer of one house per one household. Accordingly, if Nonparty 1, his father, was to construct the housing in this case and to build the housing in the vicinity of the housing in this case, and to establish the housing in this case, the mother of the Plaintiff cannot be seen to have used the housing in this case as a place where the Plaintiff was permanently residing in the forest and fishing village.”

However, as seen earlier, the reason why the provisions of the Local Tax Act govern acquisition tax, property tax, etc. for a villa is limited to the use of a building for the purpose of rest, summering, amusement, etc. without using it for permanent residence, and it appears that there is a tax-free capacity to acquire and possess such property, and that it is not directly related to whether a villa belongs to a house under the Income Tax Act. In this case, if a taxpayer who owns a house owns a building for the original purpose of use, other than the relevant house, owns a building for one household under the Income Tax Act, the legislative purpose of the Income Tax Act, which is the relevant Act, should be respected. In light of the legislative purpose of the Income Tax Act as to the calculation of transfer margin for a high-priced house which is one house for one household, the reason why the Income Tax Act does not impose income tax on the income accruing from the transfer of a house for one household, or the taxation of transfer margin for a house which is one house for one household, which is the basis of the residential purpose of the Income Tax Act, and thus, it is doubtful that it does not constitute a temporary housing transfer for the purpose of one residential purpose.

On the other hand, the "house" under the Income Tax Act shall be determined by whether the actual purpose of use is a building actually used for a residence, and even if it is used for a non-residential purpose, its structure, function, or facility is in the original residential condition and its residential function is maintained and managed as it is, so at any time, it shall be deemed as a house (see Supreme Court Decision 2004Du14960, Apr. 28, 2005). As seen earlier, the plaintiff, non-party 1, and non-party 2 did not reside in the housing of this case, or created a pond around the housing of this case, etc., and it is difficult to see that the apartment of this case was in the state of residence of this case and its function as a house of this case at any time by the reason that the non-party 3 was under the residential condition of the housing of this case, and it is difficult to see that the apartment of this case was under the residential condition of the housing of this case, and that the non-party 4 housing of this case was under the residential construction of this case.

Furthermore, in respect of the non-taxation practices of the established rules and tax offices prior to the establishment of a new house (in the tax office including the defendant, it seems that the person who has used a house for regular residence in accordance with the above established rules has been treated as one house for one household if he uses another house as a separate house) where one house for one household is excluded from a separate house, it should be determined objectively and reasonably by taking into account whether the taxpayer has paid the acquisition tax or property tax corresponding to the separate house for the building in question, whether the building falls under a separate house if the purpose of use of the building is at least a structure that makes it possible to carry on an independent residential life for a long time, and whether the building is equipped with facilities such as the purpose, circumstance, form of use, recreation, etc. of the building in question.

On the same premise, the housing site of this case is a house under the Housing Act where the housing site of this case can be used for the original residential purpose; the Plaintiff did not have paid the acquisition tax, property tax, and aggregate land tax corresponding to the villa with respect to the housing site of this case; the housing site of this case was constructed adjacent to the housing site of this case; Nonparty 1, who newly constructed the housing site of this case, raised the burden, etc. at the housing site of this case; cultivated agricultural products at the housing site; and Nonparty 2, the mother of this case after the death of the Plaintiff, cannot be seen as using the housing site of this case for the purpose of recreation, etc.; the Plaintiff’s assertion that the housing site of this case was used for 28 years after the new construction of the housing site of this case; and Nonparty 3 or manager of the housing site of this case did not recognize the whole housing site of this case as non-party 4 as evidence of this case; and thus, the Plaintiff’s assertion that the housing site of this case had not been used for the purpose of this case.

Therefore, the instant disposition is lawful, provided that the transfer of apartment house in this case does not constitute a transfer of one house for one household.

3. Conclusion

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

Judges Kim Jong-chul