Plaintiff

2. Head of Dong-si branch office

November 23, 2016

Suwon District Court Decision 2015Guhap3202 Decided June 29, 2016

1. Revocation of a judgment of the first instance;

2. The Defendant’s imposition of acquisition tax of KRW 6,465,60 (including additional taxes) and local education tax of KRW 646,560 (including additional taxes) shall be revoked on June 24, 2015.

3. All costs of the lawsuit shall be borne by the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On April 17, 2012 and April 24, 2012, the Plaintiff filed an acquisition tax return with the Defendant on the following two apartment units (hereinafter “instant apartment units”). In the report, the Plaintiff filed an application for reduction or exemption with the Plaintiff, either because the instant apartment units were amended by Act No. 11138, Dec. 31, 201; and accordingly, the Plaintiff issued acquisition tax receipts to the Plaintiff, respectively, on the grounds that “multi-family housing, the exclusive area of which is less than 60 square meters for lease by a rental business operator for the first time, purchased from the owner of a building for lease, falls under multi-family housing, the exclusive area of which is less than 60 square meters, for the purpose of lease, and the amount of tax imposed on the Plaintiff once the amount of tax is indicated as “0”.

(1) The acquisition tax is reported on October 15, 201 on March 17, 2012 (land 1 omitted) 13.17 square meters (land 3.07 square meters) on March 30, 2012. (2) "○○○○○○○○○ on April 25, 2012" on April 24, 2012 (2) "13.17 square meters (land 2 omitted) on April 24, 2012.

B. The apartment building of this case was originally built as Class 1 and 2 neighborhood living facilities. In other words, the Plaintiff acquired the alteration of the purpose of use of the building that was originally built as an apartment. In other words, the Plaintiff newly built the above “○○○○○○” building as the fourth underground floor and the first and second-class neighborhood living facilities on the tenth floor on the ground, and obtained approval for use on July 24, 2007. On July 13, 2011, the Plaintiff filed a report on alteration of the purpose of use to change the fourth and nine-story from that ground to “multi-family housing / apartment” (the report on alteration of the purpose of use was not made large-scale repair) on August 11, 201, the Plaintiff purchased the remaining part of the apartment building with the exception of eight-story from its owner on August 30, 201, and completed the process of changing the name of the owner on August 30, 2011, and completed the process of the Plaintiff’s alteration of use on the first-class 20.

C. However, on June 24, 2015, the Defendant issued the instant disposition imposing acquisition tax of KRW 6,465,60 (including additional taxes) and local education tax of KRW 646,560 (including additional taxes) on the ground that the Plaintiff’s acquisition of the instant apartment does not constitute “the first purchase from a building owner” under Article 31(1) of the former Restriction of Special Local Taxation Act and does not constitute “the first purchase from a building owner,” and thus, is not eligible for exemption from acquisition tax

[Grounds for Recognition: Evidence Nos. 1 through 11, Evidence Nos. 1 through 13, and the purport of the whole pleadings]

2. Whether the instant disposition is lawful

A. Summary of the defendant's assertion

In short, the grounds for disposition cited by the Defendant as to the disposition of this case refer not only to the owner of a building under Article 31(1) of the former Restriction of Special Local Taxation Act, but also to the case where the first sale of a newly constructed building is to be transferred to several buyers. However, the Plaintiff merely acquired by succession the building and changed the purpose of use not accompanied by construction, but also purchased the apartment of this case from E.S. K.WC, which purchased the apartment of this case. Thus, it is not subject to exemption from acquisition tax under the former Restriction of Special Local Taxation Act.

B. Determination

1) “Construction”, “owner” and “sale” under the former Restriction of Special Local Taxation Act and the Local Tax Act

A) In light of Article 31(1) of the former Restriction of Special Local Taxation Act stipulating the reduction of and exemption from acquisition tax on rental housing, etc., where a rental business operator “a building of a multi-family housing” and “the first sale of a multi-family housing from a “owner”, acquisition tax is exempted if the exclusive use area of the multi-family housing is less than 60m2, but there is no separate definition as to the legal concept of “construction”, “project owner”, and “sale”.

B) In the Local Tax Act, Article 6 subparag. 1 of the definitions of the Local Tax Act defines “acquisition” as “sale, exchange, construction, repair, etc.”, and Article 2 subparag. 5 provides that “construction” refers to construction under Article 2(1) subparag. 8 of the Building Act, and further, Article 2(1) subparag. 6 provides that “repair” refers to substantial repair, etc. under Article 2(1)9 of the Building Act. In short, there is no separate definition as to “owner” or “sale”. In other words, the definition of “construction” and “repair” are invoked, but there is no provision as to “owner” or “sale.”

2) Relationship between “construction” and “owner” under the Building Act

A) However, Article 2(1)8 of the Building Act provides that "construction" means new construction, extension, remodeling, or reconstruction of a building, or relocation of a building. Article 2(1)9 provides that "large-scale repair" means repairing, altering, or expanding the structure or external form of columns, beams, bearing walls, main stairs of a building, etc., as prescribed by Presidential Decree. "Change of the purpose of use" itself does not belong to "construction" or "large-scale repair." On the other hand, Article 12 of the Building Act provides that "owner" means a person who orders construction works on the construction, large-scale repair, alteration of the purpose of use, or large-scale repair of a building or by assigning a field manager to perform such construction work on his/her own, and that "the owner" means a person who performs construction works on the change of the purpose of use.

B) Therefore, it may be problematic whether the “project owner” under Article 31(1) of the former Restriction of Special Local Taxation Act includes a person who has changed the use that does not involve any construction or large-scale repair under the said Building Act, but it is reasonable to regard it as included in the following point.

First, in terms of the ordinary meaning of terms, construction and large-scale repair are related to the structure or form of a building, and the purpose of use is mainly related to the use of the building, and therefore, it is clearly divided and regulated by the Building Act. However, in light of the actual regulatory provisions of the Building Act, among the types of construction, "new construction" and "extension" are newly constructed, or their building area and total floor area are increased. However, reconstruction and reconstruction are re-construction equal to or below the scale of the previous building, and large-scale repair are also repair, alteration and enlargement of some major structure or external form of the previous building, and there is no change in the scale of the building. Therefore, it is different in the contents of construction, but there is no difference in the scale of the building.

Second, Article 11 and Article 14 of the Building Act stipulate a building permit and building report concerning construction and large-scale repair, and the alteration of use is subject to separate permission and report under Article 19, but this is based on the necessity of special regulations with regard to the alteration of use, and Articles 11 and 14 of the Building Act concerning the building permit and building report shall apply mutatis mutandis to other general matters. In that it is different from the previous one from the new one, the alteration of use is only relative difference even if there is a difference between the new construction, extension, remodeling, reconstruction or large-scale repair.

Third, the legislative purpose of the former Restriction of Special Local Taxation Act stipulating the reduction and exemption of acquisition tax on rental housing, etc. is to promote the construction of rental housing and the stabilization of residential life through the reduction and exemption of local taxes on construction rental business operators and purchase rental business operators. The supply of rental housing also constitutes a new supply of rental housing, as in the case of new construction, extension, remodeling, reconstruction, and large-scale repair, even though the use of rental housing is changed. In this regard, it is difficult to view the concept of “owner” under the former Restriction of Special Local Taxation Act differently from the concept of “owner” under the Building Act, without any separate provision.

Fourth, interpreting that the “project owner” under Article 31(1) of the former Restriction of Special Local Taxation Act does not include a person who performs construction work differently from the definition under the Building Act, thereby reducing or interpreting the above “project owner” provision. As a result, in order to make such a reduction interpretation possible with respect to tax laws and regulations, the reasonable grounds for such reduction or interpretation are clearly acknowledged. However, in light of the relative difference between the reconstruction, reconstruction, and large-scale repair and the change of the purpose of use as seen above and the homogeneity between the legislative intent and the relationship between the two, there is no reasonable ground. If a person who performs remodeling, reconstruction, and large-scale repair does not have any doubt in the relation falling under the “project owner” under the said provision of the Restriction of Special Local Taxation Act, it cannot be viewed that the change of use is the “project owner”.

Fifth, in the case of a construction rental business operator under the provisions of the former Restriction of Special Local Taxation Act, it is a multi-family housing that provides that the object of acquisition tax exemption shall be "construction" and the alteration of use may be at issue different levels from the scope of "project owner". However, it is only a matter of whether there is a reasonable ground to expand and interpret the scope of "construction", and it does not serve as a ground to reduce and interpret the scope of "project owner".

3) The meaning of "first sale in lots"

A) Meanwhile, the above provision of the former Restriction of Special Local Taxation Act or the Local Tax Act does not provide for a separate provision concerning the “sale”, and in this regard, the Defendant asserts that the “first sale” under Articles 2 and 3 of the Act on Sale of Buildings and the former Restriction of Special Local Taxation Act refers to the first sale of newly built houses.

B) However, the Building Act’s purpose is to contribute to the promotion of public welfare by setting the standards and purposes of the site, structure, and facilities of a building and improving the safety, function, environment, and aesthetic view of the building. However, the Act on the Sale of Building Units can be seen as a provision on the general public. However, the Act on the Sale of Building Units provides for the sale of a building, which requires the protection of a purchaser by securing transparency in the process of sale of a building and securing the safety of transaction, in particular, Article 3(1) of the Building Act provides for the sale of a building constructed with a building permit granted under Article 11(1) of the Building Act before the approval for use is issued, but Article 3(2)1 of the same Act provides that housing and welfare facilities under the Housing Act are excluded from its subject, so it does not necessarily require the premise of its application in interpreting the “first sale” under the above provision of the Act

C) From this point of view, the phrase “the first sale” under the above provision refers to a case in which the owner directly purchases a house from the owner, and the subsequent succession acquisition is not included therein, and it cannot be deemed that it necessarily refers to a case in which the newly built house was first sold, as claimed by the Defendant.

4) Sub-determination

Ultimately, the Plaintiff’s acquisition of the apartment of this case directly purchased from E.S. K.WC, the owner of the instant apartment building, constitutes a case where the Plaintiff directly purchased the apartment of this case from the “owner” under Article 31(1) of the former Restriction of Special Local Taxation Act, and thus, is exempted from acquisition tax. Accordingly, the instant disposition that excluded the application thereof cannot be exempt from the illegality.

3. Conclusion

Thus, the plaintiff's claim seeking the cancellation of the disposition of this case shall be accepted for the reasons, and since the judgment of the court of first instance differs from this conclusion, the plaintiff's appeal shall be accepted and the judgment of the court of first instance shall be revoked, and the disposition of this case shall be revoked as per Disposition.

Judges Cho Jong-tae (Presiding Judge)