In a case where Party A, who owned the first house, acquired and possessed the second house, married with Party B, who owned another house; thereafter, Party A, upon the sale of the first house, reported and paid capital gains tax by applying the heavy taxation rate stipulated in Article 104(1)2-3 of the former Income Tax Act, and claimed for reduction and correction, but the tax authority rejected the request, the case holding that Party A’s transfer of the first house cannot be subject to the heavy taxation rate for three houses for one household.

The case holding that Article 104 (1) 2-3 of the former Income Tax Act provides for the imposition of capital gains tax on the purport that “A” who owns a house for speculation purposes owns a house for the purpose of stabilizing the housing price and stabilizing the residential life, and thereafter, when the first house was sold, “A” under Article 104 (1) 2-3 of the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009; hereinafter “former Income Tax Act”) applied a heavy taxation rate on the transfer of a house corresponding to three or more houses for one household, and subsequently, the transfer tax was reported and paid, but the transfer tax rate should be general tax rate, and the tax authority rejected the request for reduction and exemption, the lower court’s determination is difficult to be deemed as holding a house for speculation purposes, and thus, it cannot be deemed that the lower court’s imposition of capital gains tax on the third or more houses for one household constitutes a non-taxable or non-taxable one of the three houses, and thus, it cannot be applied otherwise to the requirement for exemption or exemption.

Article 104(1)2-3 (see current Article 104(4)1) of the former Income Tax Act (Amended by Act No. 9897, Dec. 31, 2009); Article 167-3(9) of the Enforcement Decree of the Income Tax Act

Plaintiff (Law Firm Sejong, Attorney Lee Young-soo, Counsel for the plaintiff-appellant)

The Director of Gangnam District Office

Seoul High Court Decision 2008Nu20743 decided June 9, 2009

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

The grounds of appeal are examined.

1. The court below, citing the reasoning of the judgment of the court of first instance, cited the following: ① the Plaintiff acquired and possessed the instant house No. 1 on August 4, 2001 and the instant house No. 2 on June 4, 2003; ② on February 4, 2005, the Nonparty, a person holding another house, married on February 4, 2005; ② thereafter, upon the sale on December 13, 2005 in the process of voluntary auction at Seoul Central District Court, the Plaintiff claimed for a reduction of the transfer income tax rate of 60% for the transfer of “three or more houses for one household” as stipulated in Article 104(1)2-3 of the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009; hereinafter the same) and the Defendant claimed for a reduction of the transfer income tax rate of 30% for the transfer of the instant house.

Then, the court below held that the disposition of this case was lawful on the ground that the transfer of the house of this case and the house of this case did not violate Article 36 (1) of the Constitution of the Republic of Korea, which provides for the right of equality, on the ground that the transfer of the house of this case and the house of this case cannot be deemed legitimate on the ground that the reason that the transfer income tax may be imposed more than three owners of one household due to marriage under the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19254 of Dec. 31, 2005) did not stipulate any special provision that it is possible to avoid transfer income tax with respect to the holder of three or more houses for one household by marriage, on the ground that the transfer of the house of this case and the house of this case cannot be deemed as being in violation of Article 11 (b) of the Constitution of the Republic of Korea, which provides for the right of equality, even if some multi-households are imposed more on capital gains tax.

2. However, it is difficult to accept the above determination by the court below for the following reasons.

① Article 104(1)2-3 of the former Income Tax Act is a provision that imposes heavy taxation on capital gains tax in order to restrain ownership of housing for speculative purposes to stabilize housing price and stabilize residential life. It is difficult to deem that ownership of housing for speculative purposes is difficult if three or more houses are held by marriage; ② it is not immediately exempt from capital gains tax due to the exclusion of the application of heavy taxation on three or more houses for one household, but it is subject to general tax rate as it is subject to the application of non-taxation or reduction, and thus, it is not the preferential taxation. ③ In this case, the Plaintiff, a holder of two houses, married to another owner of three houses and transferred the instant house only ten months after he/she becomes three houses for one household. As such, applying the heavy taxation on three houses for one household to whom three houses or more were temporarily owned by marriage, which infringes on the freedom of marriage guaranteed by the Constitution, and thus it is difficult to apply the amended Enforcement Decree of the Income Tax Act to transfer the relevant house within 135 years from the date of marriage under Article 28-1 of the amended Enforcement Decree.

Nevertheless, the lower court determined otherwise, that the instant disposition was lawful by deeming the transfer of the instant housing No. 1 to be subject to the heavy tax rate of three houses for one household. In so doing, the lower court erred by misapprehending the legal doctrine on the application of heavy tax rate of three houses for one household in cases where three or more houses were held by one household due to marriage.

3. 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 Park Poe-young (Presiding Justice)