Whether the non-taxation provisions on one house for one household apply

Where a nonresident who had one house in Korea and moved abroad owns one house at the time of transfer of the first purchased house after he acquired another house, he shall be subject to non-taxation of capital gains tax.

Article 89 of the Income Tax Act

The defendant's appeal is dismissed.

Expenses for appeal shall be borne by the defendant.

1. Purport of claim

The defendant's rejection disposition against the plaintiff on 05.01. 2004 against the plaintiff shall be revoked as to the claim for correction of the reduction of capital gains tax of 91,351,180 won belonging to the year 203.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Circumstances of dispositions;

A. The Plaintiff, as a domestic resident on October 20, 1985, resided in ○○○○○○-dong 19 ○○○ apartment 84 dong 210 (hereinafter “instant apartment”) from February 23, 1986 to February 22, 1991, and acquired 19 ○○ apartment 120 dong 104 as a non-resident on October 20, 1993.

B. On December 1, 2003, the Plaintiff transferred ○ apartment 120 dong 104, which was additionally acquired on December 1, 2003, and again reported and paid capital gains tax of KRW 91,351,180 to the Defendant upon transferring the instant apartment on the 17th of the same month. However, on March 2, 2004, the Plaintiff filed a claim for reduction or correction of capital gains tax on the ground that the transfer of the instant apartment constitutes one house for one household subject to non-taxation.

C. On the ground that the transfer of the apartment of this case after the disposal of the house additionally purchased by the plaintiff who owned one house as a resident moved to a foreign country and became a non-resident until December 1, 2003, on the ground that the transfer of the apartment of this case after the disposal of the house additionally purchased does not constitute "the case where all households depart from Korea due to emigration under the Emigration Act", and thus, the above request for reduction correction was subject to capital gains tax, and thus, the defendant did not notify whether it was corrected until May 1, 2004, which is the deadline under Article 45-2(3) of the Framework Act on National Taxes.

D. Meanwhile, under General Rule 89-12 of the Income Tax Act, the National Tax Service established the standard that “if a resident who only owns only one house in Korea leaves Korea and has become a nonresident due to the departure of all the household as a foreign resident, etc., he/she shall be exempted from taxation on one house for one household without restriction on the retention period.” However, if a resident who has owned one house fails to purchase a house in Korea after becoming a nonresident, he/she maintains a non-taxation practice regardless of the period of transfer to the above one house, regardless of the short and short-term period.

[Reasons for Recognition] Facts that Gap evidence Nos. 1, 3, and 4-1, 2.3 does not dispute

2. Whether the disposition is lawful;

A. Key issue

The key issue of this case is whether a non-taxation provision on the transfer income tax of one household applies to the initial house transferred later after the non-resident who owned one house in Korea and moved abroad, additionally acquired two houses and subsequently disposed of them first.

(b) Related statutes;

Income Tax Act (amended by Act No. 7120 of January 29, 2004 and enforced January 30, 2005)

○ Article 1 Tax Liability

(1) Any individual falling under any of the following subparagraphs shall be liable to pay the income tax on his income under this Act:

1. Any individual who has a domicile in Korea or has a domicile in Korea for not less than one year (hereinafter referred to as "resident");

2. Any person who is not a resident (hereinafter referred to as "non-resident") and has income from domestic sources;

○ Method of taxation on non-residents Article 121

(1) The income tax taxable on a nonresident shall be calculated by distinguishing the case where it is assessed by adding up the incomes accruing from domestic sources and the case where it is assessed separately.

(2) With respect to nonresidents holding the domestic business place as prescribed in Article 120 and those having incomes as prescribed in subparagraph 3 of Article 119, the income tax shall be assessed by adding up the incomes (excluding the incomes withheld at source under Article 156 (1)) as prescribed in subparagraphs 1 through 7 and 11 through 13 of Article 119, and with respect to those having the incomes as prescribed in subparagraphs 8 through 10 of Article 119, by the same method as residents, respectively.

○ Article 119 Domestic Source Income of Nonresident

Domestic source income of a nonresident shall be classified as follows:

8. Retirement benefits received in return for labor offered domestically, as prescribed by the Presidential Decree;

9. Transfer incomes as prescribed in Article 94 (excluding the incomes under paragraph (1) 3 of the same Article), which are prescribed by the Presidential Decree: Provided, That it shall be limited to the case where the assets earning such incomes are located in Korea;

10. Forest incomes as prescribed in Article 23 (1): Provided, That it shall be limited to the case where the assets earning such incomes are located in Korea;

○ Scope of transfer income under Article 94 of the Income Tax Act

(1) Transfer income shall be the following incomes generated in the relevant year:

1. Income accruing from transfer of land (referring to a lot of land subject to registration of land category in the cadastral record under the Cadastral Act) or buildings (including the facilities and structures annexed to such buildings);

○ Article 89 of the Income Tax Act

No income tax on transfer income (hereinafter referred to as “transfer income tax”) shall be levied on the following incomes:

1. Income accruing from a disposition by an adjudication of bankruptcy;

2. Income accruing from the exchange, separation, or integration of farmland falling under such cases as prescribed by the Presidential Decree;

3. Income accruing from a transfer of 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 on which the building is built by the distribution rate as prescribed by the Presidential Decree by area;

Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18401 of May 25, 2004)

○ Scope of one house for one household under Article 154

(1) The term “one house for one household prescribed by the Presidential Decree” in subparagraph 3 of Article 89 of the Act means the case where a household comprised by a resident and his spouse together with the family members living together with him at the same address or same residence (hereinafter referred to as “one household”) in Korea as of the date of transfer, and where the relevant house is held for not less than three years (in the case of a house located in the area designated and publicly announced as a prearranged area for housing site development under Article 3 of the Seoul Special Metropolitan City, Metropolitan City, Si, and Si, and Si, and Do, and Si, mountain village, mountain village, mountain village, and middle Dong new urban area, the retention period of the relevant house is not less than three years and the residing period is not less than two years during the retention period): Provided, That where one household possesses one house in Korea as of the transfer date and falls under any of the following subparagraphs, it shall not

1. Where a constructed house for lease under the Rental Housing Act is acquired and transferred, if the dwelling period from the date of leasing the relevant constructed house for lease to the date of transferring the relevant house is five years or longer;

2. The case falling under one of the following subparagraphs. In this case, the remaining house and its appurtenant land which are transferred within two years from the relevant transfer date or expropriation date shall be deemed to be included in the cases of items (a) and (b):

(a) Where all or part of a house and its appurtenant land are purchased by consultation and expropriated under the Act on the Acquisition of Land, etc. for Public Works and the Compensation Therefor and expropriated under other Acts;

(b) and (b) Deleted;

(c) Emigration or other cases prescribed by the Ordinance of the Ministry of Finance and Economy;

Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19463 of April 28, 2006)

○ 154 Scope of one house for one household

(1) The term “one house for one household as prescribed by the Presidential Decree” in Article 89 (1) 3 of the Act means the case where a household comprised by a resident and his spouse together with the family members living together with the same address or same place of residence (hereinafter referred to as “one household”) in Korea as of the date of transfer, and where the relevant house is held for not less than three years (in the case of a house located in a subdivision, day, mountain village, mountain village, mountain village, and mountain village designated and publicly notified as a planned area for housing site development under Article 3 of the Housing Site Development Promotion Act, the relevant house is held for not less than three years and the period of residence is not less than two years during the period of possession): Provided, That where one household has one house in Korea as of the date of transfer and falls under any of the following subparagraphs, such period of possession and residence shall not be restricted:

1. Where a constructed house for lease under the Rental Housing Act is acquired and transferred, if the dwelling period from the date of leasing the relevant constructed house for lease to the date of transferring the relevant house is five years or longer;

2. The case falling under any of the following items. In such cases, the remaining house and its appurtenant land which are transferred within two years from the relevant transfer date or expropriation date shall be deemed to be included in the cases of item (a):

(b) Where all members of a household depart from the country due to emigration under the Emigration Act: Provided, That it is limited to the transfer made within two years from the date of departure;

Article 3 (General Application of Transfer Income Tax) The amended provisions concerning transfer income tax in this Decree shall apply from the first transfer after this Decree enters into force.

Enforcement Rule of the Income Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 383 of June 3, 2004)

○ Scope of one house for one household under Article 71

(1) The confirmation of retention period prescribed in the main sentence of Article 154 (1) of the Decree shall be made by a certified copy of the relevant house or a certified copy of land/building ledger.

(2) The term “overseas emigration and other cases prescribed by the Ordinance of the Ministry of Finance and Economy” in Article 154 (1) 2 (c) of the Decree means the case where the relevant house falls short of the retention period and residence period on the grounds falling under any of the following subparagraphs:

1. Where all members of a household depart the country for emigration under the Emigration Act;

2. Where all members of a household depart from the Republic of Korea due to such conditions as study or work needing continuous overseas residence for not less than one year;

Enforcement Rule of the Income Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 512 of July 5, 2006)

○ 71 Scope of the first house for each household

(1) The confirmation of retention period prescribed in the main sentence of Article 154 (1) of the Decree shall be made by a certified copy of the relevant house or a certified copy of land/building

(2) and (2) Deleted.

C. Determination

(1) The former Income Tax Act (amended by Act No. 7120 of Jan. 29, 2004, and enforced January 30, 2005, hereinafter "the Income Tax Act") provides for the resident's liability to pay transfer income in Chapter 3 as to the income accruing from the transfer of one house for one household as prescribed by the Presidential Decree No. 89 subparagraph 3 of Article 89 and a land appurtenant thereto within a certain area as prescribed by the Presidential Decree. Article 154 (1) of the former Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 18401 of May 25, 2004, hereinafter "Enforcement Decree") delegated by the resident provides that the resident and his spouse shall have one house in Korea as of the date of transfer, and where one household (hereinafter "one household") composed of the family members living together with the same address or same place of residence as it has been located for at least three years, the period of possession shall be at least three years in the relevant house (where the period of possession is at least three years in Seoul Special Metropolitan City.

However, as above, Article 89 subparagraph 3 of the Income Tax Act provides for the Chapter on Liability for Tax Payment of Capital Gains of Residents, and comprehensively delegates the definition and scope of one house for one household which is the object of non-taxation of capital gains tax to Presidential Decree. Article 154 (1) of the Enforcement Decree provides that "resident" shall be a household comprised of "resident" with regard to the scope of one household, and the issue of imposing capital gains tax on one house for one household of "non-resident" shall be a matter of tax policy, unless otherwise specifically provided, in that it is a single house for one household, and its owner shall be a resident at the time of transfer of the house to be exempted from capital gains tax.

(2) However, Article 154 (1) (proviso) 2 (c) of the Enforcement Decree of the Income Tax Act provides that where one household possessing one house in Korea as of the date of transfer is not subject to the restriction on the period of possession and residence as of the date of transfer, one of them refers to a case prescribed by the Ordinance of the Ministry of Finance and Economy, and Article 71 (2) 1 of the former Enforcement Rule of the Income Tax Act (amended by the Ordinance of the Ministry of Finance and Economy No. 383 of June 3, 2004; hereinafter referred to as the "Enforcement Rule of the Income Tax Act") provides that "where all of the households depart from Korea for emigration under the Emigration," the main sentence of Article 154 (1) of the Enforcement Decree of the Income Tax Act provides that "a household possessing one house in Korea as of the date of transfer shall be subject to the restriction on the period of possession and residence of one house which constitutes a non-resident's status at the time of transfer, it shall not be interpreted as a case where the owner acquires a house in Korea for less than three years and transfers it.

Therefore, capital gains tax shall be exempted only if the requirements stipulated in the above Enforcement Decree are met, unless there are special circumstances. Thus, it is reasonable to view that this case applies to a case where a resident who owned one bond of this case, as in this case, purchased a house in the Republic of Korea after becoming a nonresident and additionally purchased a house in the Republic of Korea, and later transfers the first house during the possession of

(3) On this ground, the defendant asserts that the basic purpose of the above provision of the Enforcement Decree is to exempt a resident who owns one house from the transfer income of the house in question, if he emigrates to Korea, by taking into account the circumstances that the resident has no choice but to dispose of the house inevitably due to his emigration, and thus, granting non-taxation benefits to the non-resident who owns two houses as in this case is contrary to the above legislative purpose.

6. In light of the above legal principles, it is a matter of taxation policy to the effect that: (i) the principle of no taxation without the law, or the interpretation of tax laws and regulations is strictly interpreted as the law, barring any special circumstance; (ii) whether only one resident should be exempted from capital gains tax on one house for one household; and (iii) if the relevant Acts and subordinate statutes require at least one resident to acquire a house as a non-taxation requirement for one household; and (iv) if a resident transfers a house within the period of no taxation without the law, it does not impose any restriction on the transfer of the house for the first time after the acquisition of the house for the purpose of transferring the house to the Republic of Korea by the National Tax Service without the first time after the acquisition of the house for the purpose of non-taxation. Since the ownership of the house for the first time after the acquisition of the house for one household constitutes the basis for the residence of the public; and (v) the transfer of the house for the first time after the acquisition of the house for the purpose of non-taxation by the resident to transfer the house to the Republic of Korea, it cannot be deemed that the first ownership or transfer of the house for non-taxation.

(4) Ultimately, the Plaintiff’s refusal disposition in this case is unlawful on a different premise, since, in cases where a nonresident who had only one house in the Republic of Korea and moved overseas after the acquisition of an additional house, owns one house in the Republic of Korea at the time of transfer of the first purchased house after the acquisition of the house, it constitutes one house for one household under Article 154(1) of the Enforcement Decree because there is no legal basis to exclude

3. Conclusion

Therefore, the plaintiff's claim of this case seeking its revocation on the premise that the disposition of this case is unlawful shall be accepted as it is reasonable, and the judgment of the court of first instance with the same conclusion is just, and the defendant's appeal is dismissed as it is so decided as per Disposition.