The purpose and purpose of Article 40-2 of the former Restriction of Special Local Taxation Act / The meaning of “house” subject to reduction or exemption of acquisition tax under Article 40-2 of the former Restriction of Special Local Taxation Act (i.e., a building for human residence)

The purpose and purpose of introducing Article 40-2 (hereinafter “instant reduction provision”) of the former Restriction of Special Local Taxation Act (amended by Act No. 11487, Oct. 2, 2012) is to alleviate a taxpayer’s sudden increase in tax burden and promote housing transaction by increasing the acquisition tax and registration tax base as the individual housing price and apartment price under the “Act on Public Notice of Values and Appraisal of Real Estate” are the current base price of housing due to the reorganization of real estate tax system in 2005. Therefore, the term “house” subject to reduction and exemption of acquisition tax under the instant reduction and exemption provision should be deemed to refer to a building for human residence. Thus, if a newly acquired building cannot be deemed as a “house” which is a residential building because it has lost its function as a residential building, it cannot be deemed as a “house” which is a residential building, as it does not constitute reduction and exemption of acquisition tax under the instant reduction and exemption provision.

In addition, the exemption clause of this case applies only to cases where a person becomes a single house holder or becomes a person who owns two houses temporarily due to the acquisition of a new house, and thus, it does not constitute reduction or exemption of acquisition tax under the exemption clause of this case where a person becomes a person who owns three or more houses due to the acquisition of a new house.

Subparagraph 1 (see current Article 40-2 (1) and (2) of Article 40-2 of the former Restriction of Special Local Taxation Act (Amended by Act No. 11487, Oct. 2, 2012); Article 17-2 of the Enforcement Decree of the Restriction of Special Local Taxation Act (see current Article 40-2 (1) and (2));

Supreme Court Decision 2013Du10403 Decided October 17, 2013 (Gong2013Ha, 2089) Supreme Court Decision 2013Du24747 Decided March 27, 2014

Plaintiff

The head of Gangseo-gu Seoul Metropolitan Government (Bae & Yang LLC, Attorneys Gangnam-soo et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2014Nu49639 decided March 6, 2015

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

The grounds of appeal are examined.

1. Article 40-2 of the former Restriction of Special Local Taxation Act (amended by Act No. 11487, Oct. 2, 2012) stipulates that acquisition tax shall be reduced by 50/10 where a house, the tax base of acquisition tax under the Local Tax Act does not exceed KRW 900,000,000, falls under any of the following subparagraphs on the grounds of a commercial transaction by December 31, 2012, and stipulates that acquisition tax shall be reduced by 50/10, and that “where a person becomes one house ( Subparagraph 1)” and “where a person becomes two houses temporarily prescribed by Presidential Decree” (hereinafter “instant reduction provision”).

Article 17-2 of the Enforcement Decree of the Restriction of Special Local Taxation Act provides that “Where a person becomes two houses temporarily prescribed by Presidential Decree” in Article 40-2 subparag. 2 of the Act means where a person acquires another house due to the relocation of a director, workplace, school attendance of the person concerned or his/her family, medical treatment for a disease, or other reasons, but fails to dispose of the previous house.”

2. citing the reasoning of the judgment of the court of first instance, the court below acknowledged the following facts: (a) the Plaintiff, holding only one apartment loan located in Gangnam-gu Seoul Metropolitan Government ( Address 2 omitted) on August 2, 2012 with the Nonparty; (b) the Plaintiff acquired 1/2 shares of the housing located in September 6, 2012 ( Address 3 omitted); and (c) the Plaintiff, deeming that the Plaintiff himself/herself is a temporary owner of two houses (hereinafter “each of the instant houses”); and (b) reported and paid the acquisition tax and local education tax on the 1/2 shares of each of the instant houses by deeming that he/she is a temporary owner of two houses; and (c) on the ground that the Plaintiff is only a holder of four houses and does not constitute a temporary owner of two houses, the Defendant imposed the acquisition tax and local education tax on the said house on November 10, 2012 on the ground that he/she is not a temporary owner of two houses.

Furthermore, the lower court: (a) premised on the premise that the term “house” stipulated in the instant reduction or exemption provision, such as property tax, should be deemed “a building with a structure wherein members of a household can carry on an independent residential life for a long time;” (b) determined that the sales contract for each of the instant houses was concluded on July 16, 2012; (c) the Plaintiff, et al., obtained a construction permit for constructing a new apartment house on the grounds of the Seoul Northern-gu ( Address 2 omitted); (d) the Plaintiff, etc., filed a report on the removal of the building of each of the instant houses on September 7, 2012, and filed a commencement report on the commencement of construction on September 12, 2012; and (d) the Plaintiff, etc. was removed on September 7, 2012 at the time of the acquisition of the instant housing, and the said housing was removed on the ground that the said housing was removed on September 16, 2012 and the said housing was removed on the ground that the Plaintiff’s residential facilities were removed or removed on February 19, 20.

3. However, we cannot agree with the judgment of the court below for the following reasons.

A. The Local Tax Act or the Restriction of Special Local Taxation Act does not provide for a separate definition as to “house,” and the Local Tax Act provides that “house,” with respect to acquisition tax, shall be determined as “house,” or “house,” under Article 2 subparag. 1 of the Housing Act (Article 104 subparag. 3),” and the concept thereof is inconsistent with “building,” under the Local Tax Act or the Restriction of Special Local Taxation Act, so the scope of the building included in “house,” if the term “house,” other than “building,” is used under the respective provisions of the Local Tax Act or the Restriction of Special Local Taxation Act, should be interpreted differently in accordance with the purport and purpose of each provision (see Supreme Court Decision 2013Du13945, Nov. 28, 2013, etc.).

Meanwhile, the purpose of introducing the instant tax reduction provision and exemption provision is to relieve taxpayers’ sudden increase in tax burden and promote housing transactions by increasing the tax base for acquisition tax and registration tax (see, e.g., Supreme Court Decision 2013Du10403, Oct. 17, 2013). Therefore, “house” subject to tax reduction and exemption under the instant tax reduction and exemption provision should be deemed to refer to a human residential building (see Supreme Court Decision 2013Du24747, Mar. 27, 2014). Thus, if a newly acquired building loses its function as a residential building and thus cannot be deemed as a “house,” which is a residential building, as it is no longer possible to use it for normal residential life, due to its loss of its function as a residential building (see, e.g., Supreme Court Decision 2013Du24747, Mar. 27, 2014).

In addition, the exemption clause of this case is applicable only to a case where a person becomes a single house holder or becomes a person who owns two houses temporarily due to the acquisition of a new house. Thus, if a person becomes a three or more houses due to the acquisition of a new house, it does not constitute an exemption from acquisition tax under the exemption clause of this case.

B. As decided by the court below, if each of the houses of this case was to be removed at the time of acquisition and constitutes a building which cannot be used for normal residential life due to considerable loss of function as a residential purpose, the plaintiff is merely a building that is not subject to acquisition tax reduction and exemption and its site, and it cannot be subject to acquisition tax reduction and exemption pursuant to the provisions of this case. The plaintiff is a three-house owner due to acquisition of 1/2 shares in the housing located at the above ( Address 3 omitted) and thus, it does not constitute acquisition tax reduction and exemption pursuant to the provisions of this case.

Nevertheless, the lower court determined otherwise that the Plaintiff’s acquisition of 1/2 shares in the housing located in the above ( Address 3 omitted) constitutes the reduction or exemption of acquisition tax pursuant to the instant reduction or exemption provision. In so doing, the lower court erred by misapprehending the legal doctrine on the subject of the instant reduction or exemption provision and the scope of application, etc. The allegation contained in the grounds of appeal on this point is with merit.

4. Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Yong-deok (Presiding Justice)