[1] Meaning of the main sentence of Article 99-3(1) of the former Restriction of Special Taxation Act / In the case of “transfer within five years from the date of acquisition of a newly-built house,” the scope of the reduced tax amount

[2] The case holding that in a case where Party A filed a claim for correction of transfer income tax on the transfer of a newly-built house within five years after acquiring the newly-built house as a member of the housing association for which Party A’s reconstruction was conducted, and thereafter filed a claim for correction of transfer income tax pursuant to the former part of Article 99-3(1) of the Restriction of Special Taxation Act, and the tax authority did not reduce or exempt transfer income tax on the transfer income from the date of acquisition of a newly-built house until the date of acquisition of the newly-built house, but rendered a disposition of refusal of part

[1] Article 9-3(1)1, 2, and (4) of the former Restriction of Special Taxation Act (Amended by Act No. 6762, Dec. 11, 2002); Articles 40(1), and 99-3(2) of the former Enforcement Decree of the Restriction of Special Taxation Act (Amended by Presidential Decree No. 22037, Feb. 18, 2010); / [2] Article 99-3(1)1, 2, and (4) of the former Restriction of Special Taxation Act (Amended by Act No. 6762, Dec. 11, 2002); Articles 40(1) and 99-3(2) of the former Enforcement Decree of the Restriction of Special Taxation Act (Amended by Presidential Decree No. 22037, Feb. 18, 2010)

Plaintiff (Attorney Han-soo et al., Counsel for the plaintiff-appellant)

Sung-dong Head of the tax office (Law Firm Dcaro temperature, Attorneys Seo-ho et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2012Nu8931 decided May 31, 2013

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. The main text of Article 99-3(1) of the former Restriction of Special Taxation Act (amended by Act No. 6762, Dec. 11, 2002; hereinafter the same) (hereinafter “Special Provision”) provides that “The amount of tax equivalent to 100/100 of the transfer income tax shall be reduced or exempted (hereinafter “ leaflet”) on the income accruing from the acquisition by a resident of a newly-built house falling under any of the following subparagraphs within five years from the acquisition date, and the transfer income accruing for five years from the acquisition date of the newly-built house shall be subtracted from the income amount subject to the transfer income tax (hereinafter “after-term period”). Article 9-3(1) of the former Restriction of Special Taxation Act (including any house acquired by a housing association under the Housing Construction Promotion Act or an redevelopment association under the Urban Redevelopment Act; hereinafter the same shall apply), and Article 99-3(2) of the Enforcement Decree of the same Act provides that “The standard market price of the newly-built house (including any house acquired by a member through the Housing Association under the Housing Construction Promotion Act or the Urban Redevelopment Association under the Urban Redevelopment Act)” 20.

2. On October 15, 199, the lower court acknowledged that: (a) the Plaintiff paid liquidation money as a member of the housing association and acquired the newly-built house of this case on December 14, 2004 when the Plaintiff acquired the old house of this case on October 15, 199; (b) the Plaintiff transferred the newly-built house of this case on December 14, 2007 and reported and paid transfer income tax thereon; (c) on June 11, 2010, the Plaintiff filed a request for correction on the premise that the transfer income tax on the newly-built house of this case is fully abated or exempted in accordance with the former part of the Special Provision; (c) the Defendant did not reduce or exempt transfer income tax on the transfer income from the date of acquisition of the old house of this case until the date of acquisition of the newly-built house of this case; and (d) on the ground that only the transfer income tax on the transfer income from the date of acquisition of the newly-built house of this case is abated or exempted, namely, the amount calculated by the Plaintiff’s request for correction.

Then, the lower court determined that, in the case of reconstruction and redevelopment, the transfer income tax on the transfer income from the date of acquisition of a newly-built house to the date of acquisition of a newly-built house is limited to the transfer income tax on the transfer income from the date of acquisition of a newly-built house, and the transfer income tax on the transfer income from the date of acquisition of a newly-built house to the date of acquisition of a newly-built house is not subject to such reduction or exemption. However, the instant formula is to calculate the “transfer income accrued for five years from the date of acquisition of a newly-built house” that is exempted pursuant to the latter part of the Special Provision, and there is no legal basis to apply mutatis mutandis to the calculation of the “transfer income tax” that is reduced or exempted pursuant to the former part of the Special Provision, and the instant formula is premised on the premise that the transfer income from the date of acquisition of a newly-built house is not at issue until the date of acquisition of a newly-built house, the instant formula is not applicable mutatis mutandis

3. A. The Special Provision stipulates differently from the former and latter parts on the basis of whether a newly-built house was transferred within five years from the date of acquisition, and the former and latter parts of the Special Provision do not expressly stipulate the starting date of capital gains subject to reduction or exemption. In addition, the Special Provision stipulates that capital gains before the date of acquisition of a newly-built house is subject to reduction or exemption, such as transfer of a newly-built house acquired through reconstruction and redevelopment, but the former and the former are merely entitled to full reduction or exemption of capital gains tax without separately preparing a formula of dividing the amount of tax to be reduced or exempted differently from the latter. In light of the language and structure of the Special Provision, the legislative intent of promoting the construction competition and real estate market by encouraging the new construction and sale of a newly-built house and transactions thereof, the Special Provision is understood as the entire amount of capital gains tax if a newly-built house is transferred within five years from the date of acquisition, but only the “transfer income accrued for five years from the date of acquisition of a newly-built house” requires a limited special taxation on the transfer date from the acquisition date of a newly-built house.

B. Examining the facts acknowledged by the court below in light of the aforementioned legal principles, since the transfer of a newly-built house of this case constitutes the reduction or exemption under the former part of the Special Provision, the disposition of this case which partially rejected the Plaintiff’s request for correction is unlawful. In so determining, the court below erred by misapprehending the legal principles on the scope and effect of the special taxation prescribed in the former part of the Special Provision, but the conclusion that the instant disposition is unlawful is justifiable. As long as the disposition of this case should be revoked in its entirety due to its illegality, the court below’s error does not affect the conclusion of the judgment. As such, the court below’s failure to revoke only the portion that the Plaintiff deducted the legitimate tax amount from the amount of tax reported by the Plaintiff among the disposition of this case is unlawful, without any further review, without merit.

4. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Chang-suk (Presiding Justice)