Written Internet Visit Counseling Team 4-825 (2007.03.09)

Transfer

The time of acquisition of a reconstruction house acquired by succession to the status of occupant shall be the date of issuance of the certificate of use inspection of the house concerned, the date of actual use, and the date of approval for use.

Where one household which owns one house in Korea has come to possess two houses temporarily by acquiring a new house before transferring the house, if it transfers the previous house within one year from the acquisition date of the new house, it shall be deemed to be one house for one household and the provisions of Article 154 (1) of the Enforcement Decree of the Income Tax Act shall be applied, and if the newly acquired house is a reconstruction house acquired by succession to the status of being selected as a member of the reconstruction association from the members of the reconstruction association after the approval date of the reconstruction project implementation (transfer May 31, 2005) or the approval date of the management and disposal plan (after June 1, 2005), the acquisition date of the reconstruction house shall be the date of issuance of the certificate of use inspection (where it is actually used or approved for use before the inspection for use, the date of actual use or approval) pursuant to Article 162 (1) 4 of the Enforcement Decree of the Income Tax Act.

Article 89 of the Income Tax Act (Non-taxable Transfer Income)

1. A summary of the contents of inquiry;

○ Facts

- A Housing: Acquisition on December 22, 98

-B house: The right to move in under reconstruction which was approved for the reconstruction project on November 16, 2001 shall be purchased on April 19, 2002 and all family members move in on September 6, 2006 for the completed house on August 31, 2006.

- - Sale of A’s house on December 28, 2006

○ Contents of questioning

- Whether the transfer margin of A’s house is subject to non-taxation for one household.

2. Materials on the contents of questioning;

(a) relevant tax laws and regulations (law, Enforcement Decree, Enforcement Rule);

Article 89 of the Income Tax Act (Non-taxable Transfer Income)

(1) No income tax on capital gains (hereinafter referred to as "capital gains tax") shall be levied on the following incomes (hereinafter referred to as "capital gains tax"):

1. Income accruing from a disposition by an adjudication of bankruptcy ( December 22, 1994);

2. Income accruing from the exchange, separation, or integration of farmland falling under such cases as prescribed by the Presidential Decree (amended on December 22, 1994); and

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 the land on which the building is built by the ratio prescribed by the Presidential Decree by the area of the area on which the building is fixed (hereafter in this Article, referred to as the "land annexed to the house"); and

4. ( Deleted, December 31, 2005)

2. The outlines

Article 154 of the Enforcement Decree of the Income Tax Act: Scope of one house for one household

(1) The term "one house for one household prescribed by Presidential Decree" in Article 89 (1) 3 of the Act means the case where one household comprised by a resident and his spouse together with the family members living together with him at the same address or same place of residence (hereinafter referred to as "one household") in Korea as of the transfer date, and where the relevant house is held for not less than three years (in the case of a house located in a district designated and publicly notified as a prearranged area for housing site development under Article 3 of the Housing Site Development Promotion Act, the relevant house shall be held for not less than three years and the period of residence is not less than two years during the relevant period of possession): Provided, That where one household has one house in Korea as of the transfer date and falls under any of the following subparagraphs, its retention period and period of residence shall not be restricted (amended on December 31, 2005):

(hereinafter omitted)

○ Article 155 of the Enforcement Decree of the Income Tax Act 【Special Cases concerning One House for One Household】

(1) Where one household having one house in the Republic of Korea comes to temporarily possess two houses by acquiring another house (including the case where it acquires by constructing by itself) before transferring the relevant house, if it transfers the previous house within one year (including the case where unable to transfer within one year, and which falls under the causes as determined by the Ordinance of the Ministry of Finance and Economy) from the date of acquiring another house, it shall be regarded as one house for one household, and the provisions of Article 154 (1) shall be applicable. In this case, where a part of previous house and appurtenant lands is purchased by consultation or expropriated under Article 154 (1) 2 (a), and where it transfers the relevant remaining house and appurtenant lands within two years from the date of such transfer or expropriation, the transfer of relevant remaining house and appurtenant lands shall be deemed to be included in the transfer or expropriation of the previous house and appurtenant lands (the latter part of December 30, 202).

- - This arbitio -

○ Article 98 of the Income Tax Act 【Transfer or Acquisition Date】

In calculating gains on transfer of assets, the time of acquisition and transfer shall be determined by the Presidential Decree.

○ Enforcement Decree of the Income Tax Act 【Time of Transfer or Acquisition】

(1) The time of acquisition and transfer under Article 98 of the Act shall be the date of liquidation (excluding any capital gains tax and additional tax of the capital gains tax if an agreement is made by the transferee to bear the capital gains tax and additional tax of the capital gains tax on the transfer of the relevant asset), except in the following cases:

1. Where the date of the settlement of price is not clear, the date of registration, receipt of registration, or transfer of a holder entered in the register, registry, list, etc. (the date of December 31, 201);

2. Where registration of transfer of ownership (including registration and statements of change of name) has been made before the price is settled, the date of receipt of the registration entered in the register, register, list, etc.;

3. In cases of a long-term installment plan as prescribed by the Ordinance of the Ministry of Finance and Economy, the date of receipt, delivery, or the date of use and profit-making (including the date of registration and transfer of ownership), whichever comes first.

4. Date of issuance of the certificate of usage inspection for a building constructed by himself: Provided, That where use or use has been actually used or approved before the usage inspection, the date of actual use or use approval, and where a building is constructed without obtaining construction permission, it shall be the date of actual use

5. For assets acquired by inheritance or donation, the date on which such inheritance commences or donation is received;

6. Where acquiring the ownership of real estate under Article 245 (1) of the Civil Act, the date on which an occupation of the relevant real estate commences ( February 19, 2005).

(2) Where assets are transferred or acquired, and the object is not completed or finalized by the date of liquidation of the price of the assets, the date on which the object is completed or finalized shall be deemed the date of such transfer or acquisition.

- - This arbitio -

(b) Established related to rules (established rules, interpretation cases, review, and adjudication).

○ document 5 Team-135, 2007.010

【Reasoning】

(1) Housing A (general housing intended for sale)

- An apartment of 34 square meters in Seoul ○○○-gu ○○-dong X located

- Purchase on February 15, 2001 and resides up to now.

(2) The reconstruction project is completed apartment (the location of ○○-gu ○○-dong)

- At the time of the purchase of this house, the former owner purchased the vacant houses in the state of moving after being relocated to re-building, and thereafter the reconstruction project is carried out, and the present re-building is completed and all tenants reside.

-the relevant principal dates;

* June 27, 2003: The approval date of rebuilding project plan (the title date of the building ledger shall be recorded in the rebuilding project permit date).

* The date of the sales contract, November 7, 2003

* On December 3, 2003: The date of application for the transfer of ownership after the payment of balance.

* In February 13, 2004: the date of destruction (closed date) of the purchased house

* The completion date of the reconstruction project (the date of commencement of occupancy) : the completion date of the reconstruction project.

(1) Whether capital gains tax is not levied on the transfer of a house A before March 30, 2007, under the possession of two houses as above.

【Correspondence】

Where one household having one house in Korea has come to possess two houses temporarily by acquiring another house before transferring the house, if it transfers the previous house within one year from the date of acquiring the other house, it shall be deemed to be one house for one household and the provisions of Article 154 (1) of the Enforcement Decree of the Income Tax Act shall be applied;

Here, the "other house" is a reconstruction house acquired by succession to the status of a member of a reconstruction association as a tenant after the date of authorization for the implementation of a reconstruction project under the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (before May 31, 2005) or after the date of authorization for a management and disposal plan (after June 1, 2005), the time of acquisition of the reconstruction house becomes the date of issuance of the certificate of completion of use inspection (the date of actual use or approval for use where it is actually used or approved before the inspection) in accordance with Article 162 (1) 4 of the Enforcement Decree

○ document 5 Team-193, December 12, 2006

【Reasoning】

- Succession to and acquisition of association member's relocation rights before December 31, 2005 of the administrative disposition plan.

- When a reconstruction apartment is transferred after completion, the time of acquisition should be considered at the time of the decision of non-taxation of one house for one household.

【Correspondence】

Where a member of a rearrangement project that implements a housing reconstruction project after the date of authorization for the implementation of the reconstruction project under the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (before May 30, 2005) or the date of authorization for the management and disposal plan (after May 31, 2005), acquires the status of being selected as the occupant of the relevant member (hereinafter referred to as "right to occupy") by succession, it shall be deemed the right to acquire real estate regardless of the destruction or loss of the existing building and shall be determined on the basis of calculating the ownership period of the reconstructed (including appurtenant land). The initial date of holding the reconstructed house shall be the date of issuing the certificate of usage inspection of the relevant reconstruction apartment (the date of actual