Whether capital gains tax is reduced or exempted when approval for use has been granted after the new house acquisition period.

Since a person acquiring a newly-built house eligible for reduction or exemption falls under a person acquiring a newly-built house eligible for reduction or exemption under the Addenda of the new law, the above argument by the defendant on the premise that the plaintiff is not subject to the previous law under the Addenda of the new

Transfer income tax on the acquisitor of Newly-built houses under Article 99-3 of the Restriction of Special Taxation Act

1. The Defendant’s imposition of capital gains tax of KRW 64,582,160 against the Plaintiff on July 15, 2005 shall be revoked.

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

The same shall apply to the order.

1. Details of disposition;

A. The Plaintiff owned ○○○○○-dong ○○○-dong ○○ apartment ○○○○○○○○, ○○-dong ○○ apartment ○○○, and upon which the reconstruction project was implemented, the Plaintiff invested in the ○ apartment ○ apartment ○○ ○ apartment ○○ ○○ hereinafter referred to as the “instant association”). On September 25, 2001, the instant association commenced the apartment reconstruction work with the approval of the business plan stipulated in Article 33(1) of the former Housing Construction Promotion Act from the head of ○○○ ○○ ○○ ○○ ○○ ○ ○○ ○○ ○○ ○ ○ ○ ○ ○ ○ ○ ○

B. On May 29, 2002, the Plaintiff entered into a sales contract with the instant association to be supplied with the said ○○○○○○○○○○○○○○○○○○ apartment (hereinafter “instant apartment”) as a member of the association, and paid the down payment of KRW 11,973,200 on the same day.

C. From October 29, 2002 to March 31, 2002, the instant association entered into a general sale contract with respect to the remaining apartment units 67 households remaining after supplying the said apartment units to the association members and received the down payment. On December 29, 2004, the instant apartment was transferred to KRW 510,00,000, and on May 31, 2005, the Plaintiff applied for reduction of tax amount equivalent to 100/100 of the transfer income tax pursuant to Article 99-3 of the former Restriction of Special Taxation Act (amended by Act No. 6762, Dec. 11, 2002; hereinafter referred to as the “former Act”).

E. Accordingly, the Defendant issued the instant disposition against the Plaintiff on July 15, 2005 on the ground that the Plaintiff’s acquisition of the instant apartment as a member of the Housing Redevelopment Association was not the acquisition from the housing construction proprietor, and that the instant apartment was approved for use on December 29, 2004 after the new house acquisition period (from May 23, 2001 to June 30, 2003) elapsed, and thus, it does not constitute the subject of the special taxation for capital gains tax as stipulated in Article 99-3 of the former Act.

[Ground for Recognition: Facts without dispute, Gap 1, 2, 4 evidence, Eul 1, Eul 2-1, Eul 2-2, the purport of the whole pleadings]

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) Since the union concluded a sales contract and received the down payment within the new house acquisition period as stipulated in Article 99-3 (1) 1 of the former Act with respect to the general house remaining after supplying to its members, even if the approval for use of the house of this case was made on April 13, 2004 after the new house acquisition period, the plaintiff constitutes the acquirer of the newly-built house subject to reduction or exemption under Article 99-3 (1) 1 of the former Act and Article 99-3 (3) 2 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 17829 of Dec. 30, 2002; hereinafter referred to as the "former Enforcement Decree"). However, the defendant issued the disposition of this case on the ground that the house of this case is a newly-built house under Article 99-3 (1) 2 of the former Act after the new house acquisition period and does not meet the requirements for reduction or exemption under the above Act.

(2) On October 12, 2002, the plaintiff asked the National Tax Service on whether the apartment of this case is subject to the reduction or exemption under Article 99-3 of the former Act, and the National Tax Service clearly stated that the apartment of this case constitutes the reduction or exemption of the above law. As such, under the circumstances that the plaintiff received the above National Tax Service's response and trusted that the transfer income tax should not be imposed, the defendant's disposition of this case is against the principle of trust protection or the principle of gold-competing. Thus, the disposition of this case is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

If a member of a housing association acquires a house through the redevelopment association falls under a newly-built house built by himself, and if the house is transferred, the member of the housing association may be exempted from capital gains tax only when he has obtained approval for use or inspection for use from May 23, 2001 to June 30, 2003 under Article 99-3 (1) 2 of the former Act, and in the case of a newly-built house acquired from a housing developer, if he first concludes a sales contract and pays the down payment within the newly-built house acquisition period under Article 99-3 (1) 1 of the former Act, even if he has obtained the approval for use or inspection for use after the newly-built house acquisition period, even if

However, Article 99-3 (1) 1 of the former Act provides that a house acquired through a house and prescribed by the Presidential Decree constitutes a newly-built house under Article 99-3 (1) 1 of the former Act. Article 99-3 (3) 2 of the former Enforcement Decree setting the scope of the above house provides that if a housing association directly concludes a sales contract for the remaining house remaining after the sale to its members and received down payment within the newly-built house acquisition period with a person other than its members, the house acquired by a member of the housing association through the housing association under Article 99-3 (1) 1 of the former Act constitutes a house acquired through the housing association under the Housing Construction Promotion Act after the expiration of the newly-built house acquisition period, which is prescribed by the Presidential Decree. Thus, even if the housing association has concluded a sales contract with a person other than its members and received down payment within the newly-built house acquisition period, the house acquired is a newly-built house under Article 99-3 (1) 1 of the former Act and becomes a new house acquisition period or use inspection from its members.

In the case of this case, according to the above facts, the association of this case is a housing association under the Housing Construction Promotion Act, and the plaintiff acquired a newly-built house through a housing association as a member of the association of this case, and the association of this case received a down payment by concluding a sales contract with a person other than the association members for the remaining house remaining after selling it in lots to the association members of the newly-built house. Thus, even if the approval for use was obtained on December 29, 2004 after the newly-built house acquisition date, the above house constitutes a newly-built house under Article 99-3 (1) 1 of the former Enforcement Decree under Article 99-3 (3) 2 of the former Enforcement Decree, so long as the plaintiff transferred the apartment of this case within five years from the date of acquisition, the entire amount of capital gains tax shall be reduced

On the other hand, the defendant asserts that this case's house located in Seoul area under Article 99-3 (1) 1 of the Enforcement Decree of the new law as amended by Presidential Decree No. 17829 of December 302, 2002 (hereinafter referred to as the "new law") is not a newly-built house subject to capital gains tax reduction because the plaintiff obtained the approval of use on April 13, 2004 after the newly-built house acquisition date without obtaining the approval of use as of December 11, 2002 (hereinafter referred to as the "new law"), and therefore, it is not a newly-built house subject to capital gains tax reduction.

Article 9-3 (1) 1 of the former Act and Article 99-3 (1) of the Enforcement Decree of the new Act stipulate that a house located in a new urban area, including Seoul, where the real estate price increases or is likely to increase rapidly, shall be excluded from those subject to reduction or exemption of transfer margin: Provided, That as long as Article 29 (1) of the Addenda of the new Act enters into a sales contract for the first time with a housing constructor under Article 99-3 (1) of the former Act before the new Act enters into force, and the down payment is paid, or the new house is transferred after the new Act enters into force, the former Act shall be applied despite the provisions of Article 99-3 (1) 1 and 2 of the former Enforcement Decree of the new Act, since the above transitional provision on the requirements for application of the former Act constitutes a newly-built house subject to Article 99-3 (1) 1 and 2 of the former Act, it is not a case where the Plaintiff acquired the newly-built house and its newly-built house under Article 99 (2).3).

3. Conclusion

If so, the plaintiff's claim shall be accepted for the reasons of the judgment as per Disposition.

Related Acts and subordinate statutes

former Restriction of Special Taxation Act (amended by Act No. 6762 of Dec. 11, 2002)

Article 99-3 (Special Taxation for Transfer Income Tax on Purchasers of Newly-Built Houses)

(1) With respect to the income accruing from transfer of a newly-built house (including the land attached to a house, which is less than twice the total floor area of the relevant building; hereafter in this Article, the same shall apply) falling under any of the following subparagraphs by a resident (excluding a housing construction business operator) 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, and where the relevant newly-built house is transferred after five years have elapsed from the date of its acquisition, the transfer income accruing for five years from the date of its acquisition shall be subtracted from his income amount subject to the transfer income tax: Provided, That this shall not apply where the relevant newly-built house falls under the declass house that is excluded from the object of non-taxation of transfer income tax under subparagraph 3 of

1. In cases of newly-built house acquired from a housing developer:

A newly-built house acquired by a person who first concludes a sales contract and pays a down payment with a housing constructor during the period from May 23, 2001 to June 30, 2003 (hereafter in this Article, referred to as the “newly-built house”) (including such houses as determined by the Presidential Decree, which are acquired through a housing association under the Housing Construction Promotion Act or an redevelopment association under the Urban Redevelopment Act): Provided, That a house which has been occupied as of the date of a sales contract, or has

2. Where a newly-built house (including a house acquired by a housing association under the Housing Construction Promotion Act or a member as prescribed by the Presidential Decree through an redevelopment association under the Urban Redevelopment Act);

A newly-built house that has obtained approval or inspection for use (including approval for temporary use) within the newly-built house acquisition period

former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 17829 of Dec. 30, 2002)

Article 99-3 (Special Taxation for Transfer Income Tax on Purchasers of Newly-Built Houses)

1. A house remaining after a housing association under the Housing Construction Promotion Act or an redevelopment cooperative under the Urban Redevelopment Act (hereafter in this Article, referred to as the “housing association, etc.”) supplies to its members (hereafter in this Article, referred to as the “ residual house”), which is acquired by a person who directly concludes a sales contract with a housing association, etc. and pays the down payment within the newly-built house acquisition period under Article 99-3 (1) 1 of the Act (hereafter in this Article, referred

2. A house acquired by a member (referring to a member as of the date of authorization of management and disposal plans under Article 34 of the Urban Redevelopment Act, or the date of approval of a business plan under Article 33 of the Housing Construction Promotion Act; hereafter in this subparagraph, the same shall apply) from a housing association, etc., for which an approval for use or inspection for use is obtained after the new house acquisition period: Provided, That this shall be limited to cases where a housing association, etc. has directly concluded a sales contract with a person other than a member for a remaining house (based on

Restriction of Special Taxation Act (amended by Act No. 6762 of Dec. 11, 2002)

(1) With respect to the income accruing from the transfer of a newly-built house (including the land attached to the same house, which is less than twice the total floor area of relevant building; hereafter in this Article, the same shall apply) falling under any of the following subparagraphs, located in an area other than that prescribed by the Presidential Decree, where a resident (excluding a housing construction business operator) is likely to rapidly increase or rapidly increase the real estate price in view of the national consumer price inflation rate and the inflation rate of national house trade prices, within 5 years from the date of its acquisition, the tax amount equivalent to 100/100 of the transfer income tax shall be abated or exempted, and where the relevant newly-built house is transferred after 5 years have elapsed from the date of its acquisition, the transfer income accruing for 5 years from the date of acquisition shall be subtracted from his income amount subject to the transfer income tax under subparagraph 3 of Article 89 of the Income Tax Act:

1. In cases of newly-built house acquired from a housing developer:

A newly-built house acquired by a person who first concludes a sales contract and pays a down payment with a housing constructor during the period from May 23, 2001 to June 30, 2003 (hereafter in this Article, referred to as the “newly-built house acquisition period”): Provided, That a house that has been occupied as of the date of a sales contract under the Housing Construction Promotion Act or an redevelopment association under the Urban Redevelopment Act, and that has a fact falling under the causes prescribed by the Presidential Decree, shall be excluded from

2. Where a newly-built house (including a house acquired by a housing association under the Housing Construction Promotion Act or a member as prescribed by the Presidential Decree through an redevelopment association under the Urban Redevelopment Act);

A newly-built house that has obtained approval or inspection for use (including approval for temporary use) within the newly-built house acquisition period

Article 29 (Transition Measures concerning Special Taxation of Transfer Income Tax for Purchasers of Newly-Built Houses)

(1) In case where a newly-built house for which a sales contract was first concluded with a housing constructor under the previous provisions of Article 99 (1) or 99-3 (1) was made before this Act enters into force, or a newly-built house for which an approval for use or inspection for use (including a approval for temporary use) was made after this Act enters into force, the previous provisions shall, notwithstanding the amended provisions of Article 99 (1) or 99-3 (1), be applied (hereinafter omitted) with respect to the

(2) Where a newly-built house under Article 99-3 (1) 2 commences its construction work for the relevant newly-built house before this Act enters into force, and has obtained the approval for use or inspection for use (including the approval for temporary use) before June 30, 2003, the previous provisions shall, notwithstanding the amended provisions of Article 99-3 (1), be applied.