In determining whether a “one house for one household” is a non-taxable requirement for capital gains tax, if a resident has already divorced at the time of the transfer of a house and there is no legal spouse, whether the former spouse shall be deemed separate from the former spouse to constitute one household (affirmative in principle)

In full view of the language and structure of Article 89(1)3 of the former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009) and Article 154(1) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22034 of Feb. 18, 2010), the interpretation of tax laws and regulations must be interpreted as a legal text, barring any special circumstance, in determining whether a spouse constitutes “one house for one household” which is a non-taxation requirement of capital gains tax, the spouse constituting one household together with a resident refers to only the legal spouse. Thus, if a resident has already divorced at the time of the transfer of a house and has no legal spouse, the former spouse shall be separated from the former spouse unless there is any circumstance to deem the divorce null and void.

Article 89 (1) 3 of the former Income Tax Act (Amended by Act No. 9897, Dec. 31, 2009); Article 154 (1) of the former Enforcement Decree of the Income Tax Act (Amended by Presidential Decree No. 22034, Feb. 18, 2010)

Plaintiff (Law Firm Barun, Attorneys Gangwon-hun et al., Counsel for the plaintiff-appellant)

Head of the tax office;

Seoul High Court Decision 2015Nu55082 decided February 17, 2016

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Article 89(1)3 of the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009) provides that “one house for one household prescribed by the Presidential Decree (excluding expensive houses the value of which exceeds the standard prescribed by the Presidential Decree) and any income accruing from the transfer of land within a certain area attached thereto” as one of non-taxable capital gains. Article 154 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22034, Feb. 18, 2010; hereinafter the same) upon delegation, provides that “one house for one household” in Article 154 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22034, Feb. 18, 2010; hereinafter the same) refers to cases where one household comprised of a resident and his/her spouse together with the family members living at the same address or same place of residence has one house in Korea as of the date of transfer, and the period of possession is three years or more.”

In full view of the language and structure of these regulations, the principle of no taxation without the law, or the interpretation of tax laws and regulations should be interpreted in accordance with the statutory text, barring any special circumstance, barring any special circumstance, the spouse constituting one household together with the resident when determining whether he/she constitutes one house for one household, which is a non-taxation requirement of capital gains tax. Therefore, if a resident has already divorced at the time of the transfer of a house at the time of the transfer of the house and there is no legal spouse, the former spouse shall be separated from the former spouse, barring any circumstances that can be deemed null and void.

On the other hand, the intention of divorce in divorce refers to the intention to resolve the legal marital relationship. As long as a divorce is reported under an agreement between the parties intending to temporarily resolve the marital relationship under the law of the Republic of Korea, even if there is a different purpose in the divorce, the agreement cannot be deemed as having no intention of divorce between the parties, and such agreement does not become null and void (see Supreme Court Decision 93Meu171 delivered on June 11, 1993).

2. According to the reasoning of the judgment below, the plaintiff and the non-party were legally married on September 25, 1997, but they reported a divorce on January 11, 2008. The plaintiff acquired the apartment of this case on May 21, 2003 and transferred it to Seoul Special Metropolitan City on September 8, 2008 due to an agreement. The plaintiff and the non-party completed a marriage report again on January 2, 2009. The defendant has de facto maintained a marital relationship even after the plaintiff and the non-party divorced, and the non-party owned the apartment of ○○○○○○○○ △△△△△dong, Seoul Special Metropolitan City, owned the apartment of 7 bonds, and therefore, the transfer of the apartment of this case is "transfer of housing falling under three or more houses for one household," and on the ground that the tax rate of 60% and heavy tax rate should be applied.

Examining these facts in light of the aforementioned provisions and legal principles, as cited by the lower court, the divorce cannot be deemed null and void solely on the ground that the Plaintiff divorced for the purpose of evading capital gains tax or maintained a de facto marital relationship with the Nonparty even after divorce. Therefore, the Plaintiff constitutes one household separate from the Nonparty who was divorced at the time of the transfer of the instant apartment, and thus, the instant apartment constitutes one house for one household subject to non-taxation.

Nevertheless, solely based on its stated reasoning, the lower court determined that the Plaintiff constituted one household with the Nonparty. In so determining, the lower court erred by misapprehending the legal doctrine on the scope of the spouse who constitutes one household with the resident under Article 154(1) of the Enforcement Decree of the Income Tax Act, thereby adversely affecting the conclusion of the judgment

3. Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Cho Jae-chul (Presiding Justice)