Whether Article 29(1) of the former Addenda to the Restriction of Special Taxation Act (amended by December 11, 2002) includes the case where a house other than a newly-built house subject to capital gains tax reduction or exemption under Article 99-3(1) of the former Restriction of Special Taxation Act is transferred after the enforcement of the said Act (negative)

Article 29(1) of the Addenda to the Restriction of Special Taxation Act (amended by Act No. 7003 of Dec. 30, 2003), Article 99-3(1) and (2) of the former Restriction of Special Taxation Act (amended by Act No. 7003 of Dec. 30, 2003)

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Domin, Attorneys Park Jae-soo et al., Counsel for plaintiff-appellant)

Plaintiff (Attorney Go Young-young et al., Counsel for the plaintiff-appellant)

head of Dongjak-gu Tax Office

Seoul High Court Decision 2006Nu25652 decided May 30, 2007

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

The grounds of appeal are examined.

Article 9-3 (1) of the former Restriction of Special Taxation Act (amended by Act No. 6762 of Dec. 11, 2002; hereinafter “former Act”) provides that a resident shall acquire a newly-built house (No. 1) and his own house (No. 2) and transfer it within five years from the date of its acquisition, the tax amount equivalent to 100/100 of the transfer income tax shall be reduced or exempted; however, Article 6762 of the former Enforcement Decree of the Restriction of Special Taxation Act (hereinafter “new Act”) provides that the tax reduction or exemption shall be applied to the income accruing from the transfer of the newly-built house (including the newly-built house subject to Article 9-3 of the former Enforcement Decree of the Restriction of Special Taxation Act, which is located in an area other than that prescribed by the Presidential Decree, for the first time after its enforcement, taking into account the national consumer inflation rate and the national house increase or decrease; Article 9-3 (1) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 17829, Dec. 30, 19).

Since capital gains tax is subject to taxation on transfer as a requirement for transfer and transfer margin, whether transferred assets meet the requirements for taxation and exemption or reduction shall be determined on the basis of the time of transfer (see Supreme Court Decision 2002Du10780, Jun. 24, 2004) and so long as there is no clear provision that the previous provision is retroactively applied under the Addenda to the amended Act, the scope of the previous provision shall not be extended and interpreted without permission in interpreting the relevant transitional provision (see Supreme Court Decision 95Nu825, Aug. 22, 1995, etc.) and each of the above provisions, it is difficult to view Article 29(1) of the Addenda to the new Act as including the case where a house, which is not a newly-built house subject to exemption or reduction of capital gains tax under Article 99-3(1) of the former Act, is transferred after the enforcement of the new Act.

In the same purport, the court below is just in holding that the transfer of this case is not subject to non-taxation on the ground that Article 99-3 (1) of the former Act is not applicable to the case where the newly-built house of this case is transferred after the enforcement of the new Act, which is another house owned by the plaintiff, other than the newly-built house of this case, even though the newly-built house of this case in the holding of the court below constitutes a newly-built house under Article 99-3 (1) of the former Act, since it is not subject to the application of Article 99-3 (1) of the former Act, it is not subject to non-taxation

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.

Justices Kim Young-ran (Presiding Justice)