Whether it constitutes a newly-built house eligible for abatement or exemption of capital gains tax

If there is a fact that the remaining housing is sold to the general public within the acquisition period after the supply by members, it can be seen as a newly-built house eligible for reduction of capital gains tax.

Transfer income tax reduction or exemption for purchasers of Newly-built houses under Article 99 of the Restriction of Special Taxation Act

1. The Defendant’s disposition of imposition of capital gains tax of KRW 91,255,460 against the Plaintiff on November 11, 2005 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. Nonparty 11’s ○○○○○○○○ Cooperative (hereinafter “Nonindicted Cooperative”) was established on September 24, 2001 and concluded a contract for the construction of housing units on May 11, 2002 (the first approval date is January 8, 2002) in Seoul 00 414-12, and 8’s 17,108’s 8-7m2, with the approval of the housing construction project on June 20, 2002, the construction started on June 20, 200 and 8’s 4’○○○○○○○○○ 159 dong 159 on the above site. During that process, the remainder of the above apartment units supplied to the members of the association and the payment of the down payment was made with the non-party 6,002 on July 18, 2008.

B. After acquiring the status as a member of the non-party association, the Plaintiff purchased the above ○○○○○○○ apartment house 1107 m2, 07 m2, 007 m2 (exclusive use area of 84.94m2, hereinafter referred to as “the instant house”) from the non-party association and transferred the instant house to the non-party 00 on November 27, 2004 for 495,000,000 and on June 1, 2004, the Plaintiff applied for reduction or exemption of the transfer income tax under the premise that the instant house was acquired from the non-party association as 9-3(1)1 of the former Restriction of Special Taxation Act (amended by Act No. 6762, Dec. 11, 2002; hereinafter referred to as the “former Act”), Article 99-3(1)9 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 3090, Mar. 29, 2009).

C. On November 11, 2005, the defendant issued a corrective disposition imposing capital gains tax of KRW 91,255,460 on the plaintiff on the ground that the approval for use of the housing of this case falls under the "newly-built house constructed by himself" under Article 99-3 (1) 2 of the former Act and the new house acquisition period (from May 23, 2001 to June 30, 2003; hereinafter the "acquisition period") under Article 99-3 (1) 1 of the former Act was completed on October 28, 2003.

D. On February 2, 2006, the defendant filed a request for examination with the Commissioner of the National Tax Service on June 2, 2006, but was dismissed on July 25, 2006.

(Ground for recognition: Facts without dispute, Gap 1 through 12, Gap 14, 15, Eul 1 through 3 (including each number), and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

Although the non-party association entered into a sales contract with the general public for the remaining houses remaining after supplying the housing to the association members within the acquisition period and received the down payment, even if the approval for use of the housing in this case was made after the acquisition period, 100/100 of the transfer income tax should be reduced because the housing in this case constitutes a newly-built house acquired from the housing construction business operator (hereinafter "acquisition house") under Article 99-3 (1) 1 of the former Act, although the housing in this case constitutes a newly-built house under the premise that the housing in this case constitutes a newly-built house constructed by the "self-built house" under Article 99-3 (1) 2 of the former Act (hereinafter "construction house"), it was approved for use after the acquisition period of the housing in this case, and it did not meet the requirements for reduction or exemption under the above provision, it should be revoked in an unlawful manner.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Whether this case's housing constitutes "acquisition housing"

(A) Article 99-3 (1) of the former Act provides that a newly-built house eligible for reduction or exemption of capital gains tax shall be a newly-built house (No. 1) and a house acquired by a person who first concludes a sales contract with a housing construction business operator during the acquisition period and pays the down payment, including a house as prescribed by the Presidential Decree, which is acquired through a housing association, etc. within the overall house. Construction house shall include a newly-built house whose approval or inspection for use has been obtained within the acquisition period, and also includes a house acquired by a member as prescribed by the Presidential Decree through a housing association, etc. within the overall house. Article 99-3 (3) of the former Enforcement Decree provides that "house as prescribed by the Presidential Decree" under Article 99-3 (1) 1 of the former Act shall be a remaining house remaining after a newly-built house is supplied by a housing association, etc. with a housing association, etc. and a person who has received the down payment within the remaining acquisition period after obtaining the approval for use from a housing association member, etc.

(B) At the time of legislation, Article 99-3 (1) of the former Act provides for an incentive to purchase a newly-built house for a limited period from May 23, 2001 to June 30, 2003 (acquisition period) or to reduce capital gains tax on a person acquiring a newly-built house who has obtained approval for use to promptly support the real estate competition that was delayed at the time of legislation, approval for use shall be obtained within the above acquisition period, and where a newly-built house has been completed by 100%, approval for use shall be granted within the above acquisition period, and where a transaction of a newly-built house is delayed due to a delay in the sale of a newly-built house, it is a provision prepared to promote more rapid transaction of a newly-built house by inducing the remainder within the above acquisition period to be completed, on the one hand, the newly-built house is acquired from the housing association, etc. to which the member belongs, and on the other hand, Article 99-3 (1) 1 of the former Act includes a house acquired through a housing association, etc., as prescribed by the Presidential Decree.

Therefore, the above provision of "acquisition house" or "construction house" does not necessarily have to be clearly distinguished from each other's concept, but each specific content is delegated to the Presidential Decree to be determined in accordance with the social and economic situation at that time in order to review the legislative purpose of supporting the deprived real estate competition. Accordingly, if the housing association, etc. sold the remaining house after the expiration of the acquisition period to persons other than the association members, if the use of the newly-built house was approved after the expiration of the acquisition period, it is more consistent with the above legislative purpose to allow the association members and non-members to be exempted from capital gains tax even if the use of the newly-built house was approved after the expiration of the acquisition period, and it is reasonable to view that there is a provision on the acquisition of a house for union members as stipulated in Article 99-3 (3) 2 of

(C) However, according to the above facts, the non-party union concluded a sales contract with the general public for the remaining house remaining after supplying to the members of the above ○○○○ apartment house within the acquisition period and received the down payment for the first time through the public announcement of sale to the general public. Thus, even if the approval for use of the house in this case was made after the acquisition period, barring any special circumstance, the plaintiff constitutes a person who acquired the "house acquired by a partner" as stipulated in Article 99-3 (1) 1 of the former Act and Article 99-3 (3) 2 of the former Enforcement Decree, and thus, the disposition of this case by the defendant on the premise that the plaintiff is an acquirer of

(2) Defendant’s assertion and judgment

(A) The Defendant first acquired the instant house and obtained approval for the use on October 28, 2003, which was after the acquisition period, without obtaining the approval for the use as of December 11, 2002, as of the enforcement date of the Restriction of Special Taxation Act (amended by Act No. 6762, Dec. 11, 2002). Thus, the instant house is not subject to the old Act pursuant to Article 29 of the Addenda of the new Act. Thus, the instant house is located within the area where the exclusion of reduction and exemption is made under the new Act, and thus, the instant disposition is lawful.

(1) According to Article 99-3(1) of the Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 17829, Dec. 30, 2002; hereinafter referred to as the “new Enforcement Decree”), Article 89 subparag. 3 of the Income Tax Act amended by Act No. 6781, Dec. 18, 2002; Article 156(1) of the Enforcement Decree of the Income Tax Act amended by Presidential Decree No. 17825, Dec. 30, 2002; Article 99-3(1) of the former Act and the provisions before each amendment thereof, the former Enforcement Decree of the Income Tax Act provides that the exclusive use area of a house shall be above a certain size and the actual transaction price at the time of transfer shall be more than 60 million won, and Article 99-3(1) of the former Act and subordinate statutes of the newly-built house shall be excluded from the newly-built house at the time of its transfer, including the newly-built house under the former Act.

② Among them, Article 29(1) of the Addenda of the former Act requires that the requirements of the application of the former Act be met prior to the enforcement of the new Act. The above Addenda provision is interpreted to include the contents of Article 99-3(1)1 and 2 of the former Act, which are acquired through a housing association, etc., which stated in the foregoing provision of the former Act, and which are acquired by members of a housing association, etc., prescribed by the Presidential Decree (subparagraph 1) through a housing association, etc., as prescribed by the Presidential Decree (subparagraph 2). However, the above case does not include "where a sales contract is concluded for the first time with a house constructor and a down payment is made" (subparagraph 1) or "where a newly-built house is constructed and its use is approved, etc." (subparagraph 2), it is reasonable to interpret that the remaining part of the requirements of Article 29(1) of the Enforcement Decree of the former Act stated in Article 99-3(1)1 and 2 of the former Act, and the date of application of the former Act and the down payment in Article 9(3).

③ However, as seen earlier, the non-party association concluded a sales contract with the general buyers other than the association members for the remaining house before the enforcement of the new law and received the down payment during the acquisition period. Thus, even if the approval for use was made after the acquisition period, the former provisions shall be applied pursuant to the first sentence of Article 29(1) of the former Act. Meanwhile, under Article 89 subparag. 3 of the former Income Tax Act (amended by Act No. 6781 of Dec. 18, 2002), Article 156 subparag. 2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17751 of Oct. 1, 2002), Article 9 subparag. 3 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17751 of Oct. 3, 2002), the exclusive use area of the house in this case shall be more than 165m20,000 won at the time of transfer, as seen earlier, it does not fall under Article 9 subparag. 9 of the former Enforcement Decree of the Housing Act.

(B) Next, it is argued that only if a member acquires a house by participating in the general sale of a house, it constitutes an acquirer of a house "acquisition" under Article 99-3 (1) 1 of the former Act. Thus, it is reasonable to deny the requirements for taxation, non-taxation, or tax reduction or exemption, and the interpretation of tax laws and regulations should be interpreted in accordance with the provisions of the law, barring special circumstances, and it is not allowed to expand the interpretation or analogical interpretation without reasonable grounds. Therefore, the above argument by the defendant is contrary to the principle of no taxation

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.

Relevant statutes

In the Restriction of Special Taxation Act (amended by Act No. 6762 of Dec. 11, 2002)

Article 99 Reduction of and exemption from transfer income tax for the acquisitor of newly-built house

(1) With respect to the income accruing from the transfer of a newly-built house (including the land less than twice the total floor area of the building appurtenant thereto; hereafter in this Article, the same shall apply) falling under any of the following subparagraphs by a resident (excluding a housing construction business operator) 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 have elapsed 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 a newly-built house is a declass house which is excluded from the object of non-taxation

1. A house which is constructed by himself (including any house acquired by a member of a housing association under the Housing Construction Promotion Act, or an redevelopment cooperative under the Urban Redevelopment Act) and for which the approval for use or inspection for use (including the approval for temporary use) has been obtained during the period from May 22, 1998 to June 30, 199 (it shall be from May 22, 1998 to December 31, 199 in the case of national housing; hereafter in this Article, referred to as the “new house acquisition period”); and

2. A house acquired from a housing developer by a person who first concludes a sales contract and pays a down payment within the newly-built house acquisition period (including a house as prescribed by the Presidential Decree, which is acquired through a housing association under the Housing Construction Promotion Act, or an redevelopment association under the Urban Redevelopment Act): Provided, That a house that has been occupied by another person as of the date of a sales contract,

Article 99 (Special Taxation for Transfer Income Tax on Purchasers of Newly-Built Houses)

(1) With respect to the income accruing from transfer of a newly-built house (including the land attached to the same house, which is less than twice the total floor area of the building concerned; hereafter in this Article the same shall apply) falling under any of the following subparagraphs by a resident (excluding a housing construction business operator) 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 the relevant newly-built house is transferred after the lapse of 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 to

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. Where a newly-built house (including a house acquired by a housing association under the Housing Construction Promotion Act or a member as prescribed by the Presidential Decree through an redevelopment association under the Urban Redevelopment Act);

A newly-built house that has obtained approval or inspection for use (including approval for temporary use) within the newly-built house acquisition period

director Restriction of Special Taxation Act (amended by Act No. 6762 of Dec. 11, 2002)

Transfer income tax on the acquisitor of a newly-built house under Article 99-3:

(1) With respect to the income accruing from the transfer of a newly-built house (including the land attached to the same house, which is less than twice the total floor area of 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 prescribed 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 taking into account the national consumer price inflation rate and the inflation rate of national house trade prices, within five years from the date of its acquisition, the tax amount equivalent to 100/100 of transfer income tax shall be abated or exempted, and where the relevant newly-built house is transferred after five years from its acquisition date, the transfer income accruing for five years from its acquisition date shall be subtracted from its income amount subject to

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. Where a newly-built house (including a house acquired by a housing association under the Housing Construction Promotion Act or a member as prescribed by the Presidential Decree through an redevelopment association under the Urban Redevelopment Act);

A newly-built house that has obtained approval or inspection for use (including approval for temporary use) within the newly-built house acquisition period

Addenda

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

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

(1) Where a newly-built house, which was concluded with a housing constructor for the first time before this Act enters into force under the previous provisions of Article 9 (1) or 99-3 (1), has been paid a down payment, or which was approved for use or inspection for use (including approval for temporary use) has been granted 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

(2) Where a newly-built house under Article 99-3 (1) 2 commences its construction work for the relevant newly-built house before this Act enters into force, and has obtained the approval for use or inspection for use (including approval for temporary use) before June 30, 2003, the previous provisions shall, notwithstanding the amended provisions of Article 99-3 (1), be applied.

(1) The Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 16584, Oct. 30, 1999; Presidential Decree No. 17034, Dec. 29, 2000)

Article 99 Reduction of and exemption from transfer income tax for the acquisitor of newly-built house

(3) The term “houses as prescribed by the Presidential Decree” in Article 99 (1) 2 of the Act means the houses falling under one of the following subparagraphs:

1. A house remaining after a housing association under the Housing Construction Promotion Act or an redevelopment cooperative under the Urban Redevelopment Act (hereafter in this Article, referred to as the “housing association, etc.”) supplies to its members (hereafter in this Article, referred to as the “ residual house”) and acquired by a person who concludes a sales contract directly with a housing association, etc. and pays the down payment within the newly-built house acquisition period under Article 99 (1) 1 of the Act

2. A house acquired by a member of a housing association, etc. and subject to an approval for use or inspection for use at the expiration of the newly-built house acquisition period: Provided, That it shall be limited to the case where a housing association, etc. has received the down payment by directly concluding a sales contract for the remaining house (based on the sales contract concluded for the first time

(4) A person who intends to apply for abatement or exemption of transfer income tax under Article 99 (3) of the Act shall submit, along with the final return on tax base for the taxable year whereto belongs the transfer date of relevant real estate, an application for abatement or exemption of transfer income tax as prescribed by the Ordinance of the Ministry of Finance and Economy, to the chief of the district tax

1. For houses under Article 99 (1) 1 of the Act:

(a) An evidential document attesting the date of approval or inspection for use (including the date of a provisional use approval); and

(b) Building management ledger;

2. For houses under paragraph (3) 2:

(a) Document attesting the fact that a housing association, etc. receives the down payment by directly concluding a sales contract for the remaining house within the newly-built house acquisition period with a person other than its member;

(b) Documents under subparagraph 1;

3. For other houses:

(a) A housing sales contract where acquisition is made;

(b) An evidential document attesting the fact of paying the down payment.

(1) Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 17458 of Dec. 31, 2001)

Article 99 (Special Taxation for Transfer Income Tax on Purchasers of Newly-Built Houses)

(1) Deleted.

(3) The term “houses prescribed by the Presidential Decree” in Article 99-3 (1) 1 of the Act means the houses falling under any of the following subparagraphs:

1. A house remaining after a housing association under the Housing Construction Promotion Act or an redevelopment cooperative under the Urban Redevelopment Act (hereafter in this Article, referred to as the “housing association, etc.”) supplies to its members (hereafter in this Article, referred to as the “ residual house”), which is acquired by a person who concludes a direct sales contract and pays the down payment with a housing association, etc. within the new house acquisition period under Article 9-3 (1) 1 of the Act (hereafter in this Article

2. A house acquired by a member of a housing association, etc. and subject to an approval for use or inspection for use at the expiration of the newly-built house acquisition period: Provided, That it shall be limited to the case where a housing association, etc. has received the down payment by directly concluding a sales contract for the remaining house (based on the sales contract concluded for the first time

(c) Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 17458, Dec. 31, 2001; Presidential Decree No. 17829, Dec. 30, 2002)

Transfer income tax on the acquisitor of a newly-built house under Article 99-3:

(1) Deleted.

(3) The term “houses prescribed by the Presidential Decree” in Article 99-3 (1) 1 of the Act means the houses falling under any of the following subparagraphs:

1. A house remaining after a housing association under the Housing Construction Promotion Act or an redevelopment cooperative under the Urban Redevelopment Act (hereafter in this Article, referred to as the “housing association, etc.”) supplies to its members (hereafter in this Article, referred to as the “ residual house”), which is acquired by a person who concludes a direct sales contract and pays the down payment with a housing association, etc. within the newly-built house acquisition period under Article 99-3 (1) 1 of the Act (hereafter in

2. A house acquired by a member (referring to a member as of the date of authorization of a management and disposal plan under Article 34 of the Urban Redevelopment Act, or the date of approval of a business plan under Article 33 of the Housing Construction Promotion Act; hereafter in this subparagraph, the same shall apply) from a housing association, etc., for which an approval for use or inspection for use is obtained at the expiration of the new house acquisition period: Provided, That it shall be limited to cases where a housing association, etc. has received the down payment by directly concluding a sales contract for the remaining

Addenda No. 17458, Dec. 31, 2001

Article 1 (Enforcement Date) This Decree shall enter into force on January 1, 2002.

Article 11 (Application Cases of Scope of Members Exempted from Transfer Income Tax) The amended provisions of Article 99-3 (3) 2 and (5) shall apply to the portion acquired for the first time after this Decree enters into force.

(1) Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 17829, Dec. 30, 2002)

Transfer income tax on the acquisitor of a newly-built house under Article 99-3 (Special Taxation for Transfer Income Tax)

(1) The term “area prescribed by the Presidential Decree” in the main sentence of Article 99-3 (1) of the Act means the powder, day, square village, mountain village, middle-dong and 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.

(1) Income Tax Act (amended by Act No. 6781 of Dec. 18, 2002)

Article 89 (hereinafter referred to as “transfer income tax”) shall not be levied on the following incomes:

3. Income accruing from a transfer of one house for one household prescribed by Presidential Decree (excluding high-class houses, the total floor area, value, facilities, etc. of which exceed the standards prescribed by Presidential Decree of residential buildings) and the appurtenant land within the area calculated by multiplying the area of land on which the building is built by the rash prescribed by Presidential Decree

(1) Income Tax Act (amended by Act No. 6781, Dec. 18, 2002)

Article 89 (hereinafter referred to as “transfer income tax”) shall not be levied on the following incomes:

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 fixed by the ratio as determined by region under the Presidential Decree

(1) The Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17751 of Oct. 1, 2002)

The term “high-class houses in excess of the standards as determined by the Presidential Decree” in Article 156 (3) of the Act on the Scope of High-class Housing means the houses falling under one of the following subparagraphs and the land annexed thereto:

2. An apartment house (including a multi-family house, but excluding the case deemed to be a detached house under the provisions of Article 155 (15)) whose exclusive area (including the area of an underground room exclusively used for residence) is not less than 165 square meters and whose actual transaction price at the time of transfer exceeds 60

(1) The Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17825 of Dec. 30, 2002)

The term “high-class houses in excess of the standards as determined by the Presidential Decree” in subparagraph 3 of Article 89 of the Act on the Scope of High-class Housing means the houses falling under one of the following subparagraphs and the land annexed thereto:

2. An apartment house (including a tenement house, but excluding the case deemed to be a detached house under the provisions of Article 155 (15)) whose exclusive area (including the area of an underground room exclusively used for residence) is not less than 149 square meters and whose actual transaction price at the time of transfer exceeds 600 million

A Addenda No. 17751, October 1, 2002

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

(1) The Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17825, Dec. 30, 2002)

Article 156 (Scope of expensive House) (1) The term “high-priced house the value of which exceeds the standard prescribed by the Presidential Decree” in subparagraph 3 of Article 89 of the Act means that the sum of the actual transaction values at the time of transfer of a house and its appurtenant land (where a part of a house is transferred, it refers to the amount calculated by dividing the sum of the actual transaction values by the ratio occupied