Seoul High Court 2011Nu23155 ( December 13, 2011)

Cho High Court Decision 2010Du2975 ( November 17, 2010)

The provisions for the calculation of the number of houses for three houses for one household shall not apply to the calculation of the number of houses for special long-term holding deduction.

Where a household owns a house that does not exceed 300 million won based on the standard market price in an area other than the Seoul Metropolitan area and a Metropolitan City, the provisions that are not included in the calculation of the number of houses shall not be deemed to be a provision concerning the cases where the long-term holding special deduction rate is deemed to be one house for one household to which the

Article 95 of the Income Tax Act, Article 159-2 of the Enforcement Decree of the Income Tax Act

Article 167-3 of the Enforcement Decree of the Income Tax Act

2011Du32874 The revocation of Disposition Rejecting an application for capital gains tax rectification

XX Kim

Head of Seocho Tax Office

Seoul High Court Decision 2011Nu23155 Decided December 13, 2011

April 26, 2012

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

The grounds of appeal are examined.

1. Article 95 (1) and (2) of the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009; hereinafter the same shall apply) provides that the amount calculated by multiplying the gains from transfer of the relevant asset by the deduction rate by holding period shall be the special long-term holding deduction amount, and where the holding period is not less than 3 years, the deduction rate of 30/100 shall be applied to "in the case of assets falling under one house for one household (including land annexed thereto) prescribed by Presidential Decree" and the deduction rate of 80/10 shall be applied to "in the case of assets falling under one house for one household (including land annexed thereto) prescribed by Presidential Decree". Article 159-2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 2034, Feb. 18, 2010; hereinafter the same shall apply) shall be determined as "house for one household" under the provisions of Article 159-15 (2) of the former Income Tax Act as at the date of transfer prescribed by Presidential Decree.

Meanwhile, Article 104 (1) of the former Income Tax Act provides for the transfer income tax rate for the resident's transferred assets, and provides for 2-3 houses falling under three or more houses for one household as prescribed by the Presidential Decree, 60/100 of the transfer income tax base. The term "houses falling under three or more houses for one household as prescribed by the Presidential Decree" under Article 104 (1) 2-3 of the former Income Tax Act refers to houses owned by one household having three or more houses in Korea (not including in calculating the number of houses falling under subparagraph 1), and at the same time, "houses located in the Seoul Metropolitan area and areas other than Metropolitan Cities under subparagraph 1 of Article 2 of the Seoul Metropolitan Area Readjustment Planning Act, and the total sum of standard market prices of the relevant houses and land appurtenant thereto, excluding houses at the time of transfer or other houses."

2. In this case, Article 167-3 (1) 1 of the former Enforcement Decree of the Income Tax Act, which asserts that the plaintiff should apply the special deduction rate of 80/100 above, is the basis for applying the special deduction rate of 80/10, and is the basis for "where deemed as one house for one household" under Article 159-2 of the former Enforcement Decree of the Income Tax Act, is the basis for "where deemed as one house for one household by other regulations," and Article 167-3 (1) 2-3 of the former Enforcement Decree of the Income Tax Act, which is the provision on the transfer income tax rate of "housing falling under three or more houses for one household", is related to Article 104 (1) 2-3 of the former Income Tax Act, which is the provision on the said special deduction rate of "one household" and cannot be said to be the provision concerning "where deemed as one

Therefore, if the transferor's house falls under Article 167-3 (1) 1 of the former Enforcement Decree of the Income Tax Act, it shall not be deemed as three or more houses for one household, and it shall be exempted from the application of the above 60/100 heavy tax rate, and it shall not be deemed as one house for one household to which the above long-term holding special deduction rate applies, on the ground that the above provision is applicable.

3. The lower court’s determination that the deduction rate of 30/100 for the transfer of the instant housing should be applied pursuant to the main sentence of Article 95(2) of the former Income Tax Act, and that the instant rejection disposition based on such premise is justifiable is justifiable. In so doing, contrary to what is alleged in the grounds of appeal, there were no errors by misapprehending the legal principles on the interpretation of the above laws and the Enforcement Decree, or the tax-related provisions.

4. Therefore, the appeal is dismissed and all costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.