Cho Jae-2014-1394 ( December 11, 2014)

The instant house constitutes a high-class house excluded from capital gains tax exemption, and the high-class house should be determined based on the actual transaction price at the time of transfer.

Since the instant house constitutes a high-class house, it is reasonable to view that the instant house is excluded from the reduction or exemption of capital gains tax pursuant to the proviso to Article 99-3 (1) of the former Restriction of Special Taxation Act, and whether it constitutes a high-class house should be determined based on the actual transaction

Article 99-3 of the Restriction of Special Taxation Act (Special Taxation for Capital Gains Tax for Purchasers of Newly-Built Houses)

2015-Gu -701 Revocation of disposition of refusal to correct capital gains tax

AA

o Head of the tax office

oly 2, 2015

oly 2016.17

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The defendant's disposition rejecting a request for correction of capital gains tax against the plaintiff on September 23, 2013 shall be revoked.

1. Details of the disposition;

A. On November 12, 2002, the Plaintiff newly constructed a multi-family house with 114.50 square meters (multi-family house), 113.33 square meters (multi-family house), 132.74 square meters (multi-family house), 132.74 square meters (multi-family house), 493.31 square meters (hereinafter referred to as “the instant house”) on the ground of OO-dong OO-dong O-dong, 224.7 square meters (hereinafter referred to as “the instant land”) on the ground of Suwon-si, Suwon-si, 2002, and obtained approval for use from the competent authority.

B. On December 28, 2010, the Plaintiff transferred the instant land and housing to BB at the purchase price OO won (hereinafter “instant transfer”). At the time of acquisition and at the time of the instant transfer, the standard market price of the instant housing exceeds KRW 40,000,000, both at the time of the instant transfer.

C. On January 25, 2011, the Plaintiff applied Article 99-3 of the Restriction of Special Taxation Act to the Defendant for reduction or exemption of capital gains tax, but paid KRW 5,784,00 for capital gains tax for the year 2010, around April 2013, after receiving a notice of revised return from the Defendant.

D. On July 26, 2013, the Plaintiff filed a claim for correction by asserting that the transfer of the instant house to the Defendant would be subject to reduction or exemption pursuant to Article 99-3 of the Restriction of Special Taxation Act. However, on September 23, 2013, the Defendant issued a notification of refusal of the Plaintiff’s request for correction (hereinafter “instant disposition”) on the ground that the instant house constitutes a high-class house.

[Ground of recognition] Evidence Nos. 1 through 3, 8, Eul evidence Nos. 1 and 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition is unlawful for the following reasons.

1) According to the interpretation of the relevant provisions of the Income Tax Act, if a multi-family house is transferred, whether it is deemed a multi-family house or not shall be determined by the taxpayer’s choice, and accordingly, the size and value of the house shall be examined and the determination of the high-class house shall be made. However, if a multi-family house is transferred by a single sale unit, it is erroneous to consider it as a multi-family house without any room for any other choice

2) Even though the tax authority had shown the attitude that when a resident who owns several houses including a multi-family house transfers a multi-family house, the owner may choose whether the house is deemed a multi-family house or not, the Defendant’s disposition of this case is undermining the Plaintiff’s trust.

3) Under the Enforcement Decree of the Income Tax Act, the actual transaction price at the time of transfer, which is the standard for determining high-class houses, should be determined according to the transaction price at the time of acquisition notwithstanding the language of the expression.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) Article 99-3(1) of the former Restriction of Special Taxation Act (amended by Act No. 6762 of Dec. 11, 2002; hereinafter referred to as the "former Restriction of Special Taxation Act") provides that the tax amount equivalent to 100/100 of the transfer income tax on the income accruing from the acquisition of a newly-built house by a resident and transfer it within five years from the date of its acquisition shall be reduced or exempted, and the proviso provides that the same shall not apply to the case where the newly-built house is a declass house that is excluded from the object of non-taxation of transfer income tax pursuant

Meanwhile, Article 89 subparag. 3 of the former Income Tax Act (amended by Act No. 6781 of Dec. 18, 2002; hereinafter “former Income Tax Act”) provides that one house for one household (excluding high-class houses the total floor area, value, facilities, etc. of which exceed the standards prescribed by the Presidential Decree) as prescribed by the Presidential Decree and a certain land appurtenant thereto shall not be subject to capital gains tax. The former Enforcement Decree of Income Tax Act (amended by the Presidential Decree No. 17825 of Dec. 30, 2002) upon delegation provides that the concept of one house for one household under Article 154(1) of the former Enforcement Decree of Income Tax Act (amended by the Presidential Decree No. 17825 of Dec. 30, 2002) provides that in applying the provisions of Article 155(1) through (5) of the same Act, where a multi-family house is sold to one person at a unit without selling it by a household, it shall be deemed a detached house, and Article 1564(500 million won).

2) In full view of the relevant provisions in advance of whether the instant house is subject to capital gains tax reduction and exemption under Article 99-3(1) of the former Restriction of Special Taxation Act, if the instant house is newly built and transferred to one person by one transaction unit without selling it by each household, whether it constitutes a high-class house under Article 89 subparag. 3 of the former Income Tax Act shall be determined by deeming it as a single house. Therefore, if the standard market price of such newly built house is at least 4,00 square meters and the total amount of actual transaction price at the time of transfer of the house and its appurtenant land exceeds 60 million won, the said house constitutes a high-class house under Article 89 subparag. 3 of the former Income Tax Act, and thus, is excluded from capital gains tax reduction and exemption under the proviso to Article 99-3(1) of the former Restriction of Special Taxation Act (see Supreme Court Decision 2010Du6878, Oct. 25, 201

As seen earlier, since the Plaintiff newly constructed the instant house, which is a multi-family house, and transferred it to one person without selling it by household, the issue of whether the instant house constitutes a high-class house under Article 89 subparag. 3 of the former Income Tax Act shall be determined by deeming it as a single house. Furthermore, as seen earlier, the instant house as at the time of acquisition and the transfer of this case exceeds 40 million won, and its standard market price at the time of the transfer exceeds 40 million won, and its total floor area exceeds 264 square meters, and the sum of the actual market price at the time of transfer of the instant house and its appurtenant land exceeds 60 million won, it is reasonable to deem that the instant house constitutes a high-class house excluded from the object of exemption from capital gains tax under Article 89 subparag. 3 of the former Enforcement Decree of the Income Tax Act by satisfying the high-class house standard under Article 156 subparag. 1(a) of the former Enforcement Decree of the Income Tax Act, and accordingly, the instant house is excluded from capital gains tax reduction or exemption pursuant to Article 99-3(1).

3) Whether the principles of trust protection are violated

The written statements of No. 5-1 and No. 2 are insufficient to acknowledge that the administrative agency, including the defendant, expressed the public opinion that is trusted to the plaintiff before the disposition of this case, and there is no other evidence to acknowledge it. Thus, the disposition of this case cannot be deemed to have infringed the plaintiff's trust (Article 167-3 (2) 1 of the Enforcement Decree of the Income Tax Act, which was amended by Presidential Decree No. 18173, Dec. 30, 2003; Article 167-3 (2) 1 of the Enforcement Decree of the Income Tax Act, which was amended by Presidential Decree No. 18173, as well as Article 1817 of the same Act,

4) Whether the meaning of "actual transaction price at the time of transfer" under the former Enforcement Decree of the Income Tax Act can be seen as "actual transaction price at the time of acquisition"

On the other hand, the interpretation of tax laws and regulations shall be interpreted in accordance with the law, barring any special circumstance, and it shall not be permitted to expand or analogically interpret it without reasonable grounds, and it is also consistent with the principle of fair taxation to strictly interpret that the provisions of tax reduction and exemption are clearly preferential provisions among the provisions of tax reduction and exemption.

Article 29 (1) of the Addenda of the former Restriction of Special Taxation Act (amended by Act No. 6762 of Dec. 11, 2002) provides that "in case where a newly-built house, which was newly built by a housing constructor, entered into a sales contract for the first time before the enforcement of the Act pursuant to Article 9 (1) or 99-3 (1), or which was approved for use or inspection for use (including approval for temporary use), is transferred after the enforcement of this Act, the previous provisions shall apply to the calculation of the income subject to capital gains tax reduction or exemption and taxable amount of capital gains tax, notwithstanding the provisions of Article 99 (1) or 99-3 (1). In this case, the provisions of the proviso of Article 99-3 (1) of the former Restriction of Special Taxation Act (amended by Act No. 6762 of Dec. 11, 2002) provide that "in case the relevant house falls under the high-class house under subparagraph 3 of Article 89 of the Income Tax Act."

However, according to the relevant provisions of the former Income Tax Act and the former Enforcement Decree of the Income Tax Act, which set the standards for high-class houses at the time of obtaining approval for the use of the instant house, the instant house is a multi-family house, and thus, should be deemed as a high-class house. “The standard market price of the relevant house is at least 4,000 square meters and the total floor area of the house is at least 264 square meters, and the total amount of the actual transaction price at the time of transfer of the relevant house and its appurtenant land exceeds 60 million won.”

Therefore, in full view of the relevant provisions, the former Restriction of Special Taxation Act does not directly stipulate the criteria for determining whether high-class houses are subject to the exclusion from capital gains tax exemption under Article 99-3(1), but stipulates that the standards of high-class houses built by themselves as of the date of obtaining approval for use, which were set forth in Article 89(3) of the former Income Tax Act at the time of obtaining approval for use. The former Enforcement Decree of the Income Tax Act, upon delegation from the former Income Tax Act, clearly stipulates that the instant houses should be determined based on the actual transaction price at the time of transfer, so it should be interpreted as the transaction price at the time of acquisition.

5) Therefore, the Defendant’s instant disposition is lawful.

3. Conclusion

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