National Tax Service Review and Transfer 2011-0033 (Law No. 12, 2011)

It is difficult to see cases of temporary possession of one house and one association member's relocation right.

Since an association member's relocation right converted from an apartment due to the possession of a house and apartment and the approval of the management and disposal plan of an apartment is acquired, it is difficult to regard cases where two houses are owned until the ownership of one house and one association member's relocation right is held as it falls under the case of holding two houses temporarily.

2011Guhap6265 Revocation of Disposition of Imposing capital gains tax

XX

Head of Central Tax Office

September 22, 2011

October 13, 2011

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s disposition of imposition of capital gains tax of KRW 33,891,510 against the Plaintiff on December 6, 2010 shall be revoked.

1. Details of the disposition;

A. On Oct. 7, 2003, the Plaintiff acquired and owned x 00 (hereinafter “the instant house”) a multi-household 000 located in XX Dong 000-0, and transferred it on Jun. 28, 2008 and thereafter reported and paid KRW 14,785,370, which is calculated by applying the general tax rate of 27%.

B. Meanwhile, the Plaintiff, while holding the instant house on June 29, 2004, acquired OO apartment 00,000 (hereinafter referred to as the “instant apartment”) in the possession of the instant house, but acquired and held the association member of the housing reconstruction project implemented under the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (hereinafter referred to as the “Urban Improvement Act”), which was approved on December 28, 2006, as a member of the housing reconstruction project implemented under the said Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (hereinafter referred to as the “O apartment’s relocation right”).

C. Accordingly, as the Plaintiff possessed the instant house and the instant association member’s relocation right and transferred the instant house, the Defendant: (a) deemed that the application of special cases concerning non-taxation for one house for one household is excluded pursuant to the main sentence of Article 89(2) of the former Income Tax Act (wholly amended by Act No. 9897, Dec. 31, 2009; hereinafter the same shall apply); and (b) on December 6, 2010, the Defendant notified the Plaintiff of KRW 33,819,510 of the transfer income tax for the year 2008 by applying the heavy tax rate of 50% to the holders of one house and one association member’s relocation right (hereinafter “two houses for convenience”) as stipulated in Article 104(1)2-6 of the former Income Tax Act (hereinafter “instant disposition”).

D. The Plaintiff dissatisfied with the instant disposition and filed a request for examination with the National Tax Service on February 7, 2011, but the said request was dismissed on May 12, 201.

[Ground of recognition] Facts without dispute, Gap evidence 1, 5, 7, Eul evidence 1, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) The Plaintiff temporarily acquired the association member's relocation right of this case before transferring the instant house, and became to possess one house and one association member's relocation right of this case. The Plaintiff acquired the association member's relocation right of this case after two years from the acquisition date of the association member's relocation right of this case, and transferred the instant house within two years from the completion date of the house acquired by the association member's relocation right of this case, and resided in the said house for not less than one year by all households. As such, the Plaintiff satisfies the requirements for the special case of non-taxation of one house for one household under the proviso of Article 89 (2)

2) Even if the Plaintiff’s holding two houses per household, the purport of the instant taxation among the transfer income tax is to absorb the benefits from speculation as taxes and block speculation in advance. As such, the Plaintiff, like the Plaintiff, owns two houses for one household in external form, such as the Plaintiff, but it is not only temporary, but also in a case where it is not different from the possession of one house in substance without any speculative purpose, the heavy tax rate on the owner of two houses should be excluded.

(b) Related statutes;

The entries in the attached Table shall be as follows.

C. Determination

1) As to the plaintiff's first argument

Article 89 (2) of the former Income Tax Act provides that Article 89 (1) 3 of the former Income Tax Act, which provides for special cases concerning non-taxation of one house for one household, shall not apply where one household owns a house and an association member's relocation right (the status of being selected as an occupant due to the approval of a management and disposal plan under Article 48 of the Act on the Maintenance of Urban Areas and Dwelling Conditions for Residents), and transfers the house: Provided, That where a house is acquired for residing during the implementation period of a housing reconstruction project or a housing redevelopment project under the Act on the Maintenance

Article 156-2 (4) of the former Enforcement Decree of the Income Tax Act provides that "where one household possessing one house comes to possess one house and one association member's relocation right temporarily by temporarily acquiring one house and one association member's relocation right before transferring the house, when two years have elapsed from the date of acquiring the association member's relocation right, the former house is transferred after the lapse of two years from the date of acquiring the association member's relocation right."

Therefore, in order for the Plaintiff to be subject to the application of the special exception for non-taxation of one house for one household under Article 156-2 (4) of the former Enforcement Decree of the Income Tax Act with respect to the transfer of the instant house, the Plaintiff satisfies the requirements of “where one household possessing one house temporarily acquires the association member’s relocation right before transferring the relevant house, and comes to possess one house and one association member’s relocation right temporarily.” However, as recognized earlier, the Plaintiff acquired the association member’s relocation right of this case converted from the instant apartment as the management and disposition plan for the instant apartment house was approved as the instant apartment house and the instant apartment were approved as the management and disposition plan for the housing reconstruction project for the instant apartment house was approved. As such, it falls under the case of possessing two houses before the ownership of one house and one association member’s relocation right, it is clear that the Plaintiff did not meet

In this regard, the plaintiff tried to acquire and hold only one house in which he actually resides with his family members, but during the process of the process, problems such as unstable residence due to reconstruction project and inconvenience of his children to attend school have occurred, and thus, it is inevitable to solve them. Thus, it is argued that the plaintiff actually owned one house and acquired the association member's relocation right in this case. However, Article 156-2 (4) of the former Enforcement Decree of the Income Tax Act applies only to the "one household possessing one house" as prescribed by the relevant law, barring any special circumstance. In light of the time when the plaintiff acquired the house in this case and the apartment in this case and the period of possession, etc., it is difficult to view that the only reason why the plaintiff acquired the house in this case and the apartment in this case and the apartment in this case

2) Judgment on the second argument by the Plaintiff

Article 104 (1) 2-6 of the former Income Tax Act provides that, in cases where one household possessing one house and one association member's relocation right respectively transfers the house, the tax rate of transfer income tax for the transfer of the house and one association member's relocation right shall be 50/100, whichever is the mid-term tax rate. As seen earlier, the transfer of the house in this case and the association member's relocation right in this case by the plaintiff possessing the house in this case constitutes the subject of heavy

In addition, in full view of the time when the Plaintiff acquired the instant house and the instant apartment, the period of possession, the developments leading up to the transfer of the instant apartment into the occupation rights of the instant association members, etc., the Plaintiff’s possession of one house and one association member’s relocation rights as above cannot be deemed to be substantially different from the possession of one house, and it is difficult to view otherwise even if the Plaintiff did not have speculative purpose

In addition, there is no data suggesting that the instant house at the time of transfer falls under any of the subparagraphs of Article 167-6 (3) of the former Enforcement Decree of the Income Tax Act which provides for the scope of houses exempt from heavy tax rates under Article 104 (1) 2-6 of the former Income Tax Act.

Therefore, the plaintiff's assertion that the above excessive tax rate should be excluded cannot be accepted.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.