Seocho 2013west0260 (2013.06.04)

The method of calculating the amount of capital gains tax reduction is wrong when calculating the amount of capital gains accrued for five years from the date of acquisition of newly-built house

In accordance with Article 99-3(1) of the Act on Special Cases concerning Taxation, it would result in allowing to arbitrarily change the formula of calculation without any legal basis when determining the amount of capital gains from a transfer within five years from the date of acquisition of the newly-built house of this case, and thus, it is not permissible against the strict interpretation of the no taxation without law and tax laws.

Article 99-3 of the Restriction of Special Taxation Act

Seoul Administrative Court 2013Gudan17834

NewA

head of Sung Dong Tax Office

October 31, 2013

November 14, 2013

1. The disposition of imposition by the Defendant on June 24, 2013, which the Plaintiff rendered to the Plaintiff on June 24, 2013, is revoked.

2. The costs of lawsuit are assessed against the defendant

Cheong-gu Office

The same shall apply to the order.

1. Details of disposition;

"A. The plaintiff is the owner of OO-gu O-dong O-dong O-dong 552 BB apartment 2 and 508 (hereinafter "the old house of this case"). On March 27, 2002, the plaintiff acquired O-dong 549 CCC 101 and 604 (hereinafter "the newly-built house of this case") through the housing reconstruction project, but transferred it to OOO on June 30, 2006, and reported that the transfer income tax shall be reduced or exempted in full including the transfer income of the old house of this case by applying the special provisions on the transfer income tax for the acquisitor of newly-built house of this case under Article 9-3 of the Restriction of Special Taxation Act (hereinafter "the Special Cases concerning Taxation") on May 31, 2007."

C. Although the newly-built house of this case was divided into the building and the land attached thereto, the Plaintiff asserts that it was unlawful for the Defendant to calculate the amount of tax by aggregating it. The Plaintiff filed an objection on August 6, 2012, and filed a tax appeal on December 5, 2012, respectively. On June 4, 2013, the Tax Tribunal: (a) in calculating the amount of capital gains, there is no reason to distinguish land and buildings; (b) in calculating the amount of capital gains, the transfer income from the acquisition date of the previous house of this case is not subject to reduction or exemption; (c) the amount of capital gains from the acquisition date of the new house of this case to the date prior to the acquisition date of the newly-built house of this case was determined to revise the tax base and tax amount by reflecting the gains on transfer; and (d) the Defendant, on June 24, 2013, issued a notice of correction and decision of COOOO (hereinafter in this case’s disposition); (c) without any grounds for recognition

2. Whether the disposition is lawful;

A. The plaintiff's assertion

Article 100(2) of the Income Tax Act provides that capital gains from the transfer of land and buildings shall be calculated by dividing them into gains from the transfer of land and buildings where land and buildings are transferred at the same time. Since the instant newly-built house consists of land consisting of land and buildings attached thereto, and each date of acquisition differs, the amount of each capital gains from land and buildings and the amount of tax reduced or exempted shall be calculated by dividing the amount of each capital gains from the transfer of land and buildings. In dividing the capital gains from the acquisition date of the old house where there was no newly-built house in this case, if capital gains from the acquisition date of

B. Determination on the method of calculating capital gains

Pursuant to Article 100(1) of the Income Tax Act, when calculating gains on transfer, the Plaintiff asserts that the transfer value is based on the actual transaction value, the acquisition value shall be based on the actual transaction value, and when calculating the transfer value according to the standard market price, the acquisition value shall also be based on the standard market price. According to paragraph (2), in applying paragraph (1), where the transfer value or acquisition value is calculated based on the actual transaction value, and where the land and buildings are concurrently acquired or transferred, it shall be divided and entered, but where the distinction between the land and the buildings is unclear, it shall be calculated in accordance with the Presidential Decree in consideration of the standard market price at the time of acquisition or transfer. In addition, Article 166 of the Enforcement Decree of the same Act provides for the formula for calculating gains on transfer under the above Article 166 of the Enforcement Decree of the same Act where a member of a maintenance and improvement project association that implements a housing redevelopment project or a housing reconstruction project transfers his/her existing building and appurtenant land to the relevant

Therefore, if the transfer value and acquisition value under the language and text of Article 100 (1) of the Income Tax Act are calculated based on the standard market price, not on the basis of the actual transaction price, the relevant provision cannot be deemed as being applied if it is calculated based on the standard market price. As long as the existing building and its appurtenant land are deemed as a single unit in calculating gains on transfer of the status of association members for maintenance and improvement projects such as housing reconstruction projects, in applying the special provisions on taxation for a person acquiring a newly-built house and its appurtenant land, there is no ground to regard the transfer of a newly-built house and its appurtenant land as a case where the land and its appurtenant land are transferred together under Article 100 (2) of the Income Tax Act.

Article 9-3(1) of the Enforcement Decree of the Act on Special Cases concerning Taxation provides that any income accruing from the transfer of a newly-built house within five years from the date of its acquisition shall be exempted from the transfer income tax, and that any transfer of a newly-built house after five years from the date of its acquisition shall be deducted from the amount of income subject to the transfer income tax. Thus, where a newly-built house is transferred within five years from the date of its acquisition, the transfer income amount cannot be calculated by deducting the transfer income amount applicable to the transfer of a newly-built house after five years from the date of its acquisition (see Supreme Court Decision 2010Du3725, Jun. 28, 2012). Meanwhile, Article 99-3(4) of the Act on Special Cases concerning Taxation provides that the calculation of transfer income amount arising for five years from the date of its acquisition or from the date of its acquisition shall be determined by Presidential Decree. Article 99-3(2) and Article 40(1) of the Enforcement Decree of the said Act provides that any transfer income amount arising within five years from the date of acquisition or transfer of a newly-built house.

A claim shall be accepted on the basis of the reasons therefor.