Seoul High Court Decision 2013Du2143 ( December 11, 2013)

In the formula of Article 40 (1) of the Enforcement Decree of the Restriction of Special Taxation Act, the standard market price at the time of the division's acquisition of the previous house shall be the standard market price

In the formula of Article 40 (1) of the Decree, the standard market price at the time of the acquisition of a molecule shall be the standard market price at the time of new construction of the key house, and the standard market price at the time of the division shall be considered as the standard market

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

2014Guhap51178 Revocation of Disposition of Imposing capital gains tax

Ma-○

○ Head of tax office

September 4, 2017

November 6, 2014

1. The Defendant’s disposition of imposition of capital gains tax of KRW 000 on May 15, 2012 against the Plaintiff on May 15, 2012 is revoked.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. On November 12, 1999, the Plaintiff acquired ○○○○○○-dong, ○○○○-dong, Adong Adong, ○○-dong, ○○-dong, ○○○-dong, ○○○-dong, ○○○○○○ (hereinafter “instant old house”). On October 26, 2002, the Plaintiff sold ○○○-dong, ○○○○-dong, ○○○○○-dong, BB apartment ○○○ (hereinafter “instant newly-built house”).

B. On March 31, 2006, the Plaintiff transferred the newly-built house of this case, and calculated capital gains tax amount as KRW 00,000 in accordance with Article 99-3(1) of the former Restriction of Special Taxation Act (amended by Act No. 8146, Dec. 30, 2006; hereinafter “former Restriction of Special Taxation Act”), and reported capital gains tax to the Defendant as zero won.

C. On May 15, 2012, the Defendant: (a) calculated the amount of capital gains tax calculated on the income accrued from the old house from the date of acquisition of the newly-built house of this case to the date of acquisition of the newly-built house of this case as follows; (b) calculated the amount of capital gains tax calculated on the income accrued from the date of acquisition of the previous house of this case as KRW 00 million to the date of acquisition of the newly-built house of this case; (c) added the amount of capital gains tax exempted from KRW 600,000,000 to KRW 60,000,000 to the date of acquisition of the newly-built house of this case pursuant to Article 40(1) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 21307, Feb. 4, 200; hereinafter the same shall apply) and Article 166(2) of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 222000,000,000.

【Calculation Form】

(1) Transfer income accruing after the acquisition of a newly-built house = Total transfer income amount ¡¿ (A)

Si Standard Market - (Standard Market Price at the time of approval for use inspection - Standard Market Price at the time of transfer - Standard Market Price at the time of acquisition of old house

[0,000,000 won (A) = 000,000,000 won 】 (000,000,000 won - 00,000,000 won) / (00,000,000 won - 00,0000,000)]

(2) Transfer income tax to be reduced or exempted after the acquisition of newly-built house = Total calculated tax amount ¡¿ A/ (tax base of transfer income - Basic deduction of transfer income

[0,000,000 won = 000,000,000 won ¡¿ (00,000,000 won) / (00,000,000 won)]

D. On August 6, 2012, the Plaintiff appealed and filed an appeal with the Tax Tribunal on April 12, 2013, but was dismissed on December 11, 2013.

[Reasons for Recognition] Facts without dispute, Gap evidence 1, Gap evidence 2-1, 2, Gap evidence 3-6, Eul evidence 1 and 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Although the “income accruing from the transfer within 5 years from the acquisition date of a newly-built house” under Article 99-3(1) of the former Restriction of Special Taxation Act should be interpreted as the entire gains from the transfer of a newly-built house, the transfer income tax on the income from the acquisition date of the previous house in this case until the acquisition date of the newly-built house in this case shall not be exempted.

2) On March 31, 2006, the Plaintiff disposed of the newly-built house of this case, and submitted a report of tax base of transfer income tax and an invoice of dispatch on May 31, 2006. The Plaintiff’s disposition of this case was unlawful as a disposition contrary to the non-taxable practice for more than six years since it did not raise any specific objection.

3) The Defendant rendered the instant disposition by applying Article 40(1) of the former Enforcement Decree of the Restriction of Special Taxation Act. Although the above provision stipulates that both a mother and a molecule shall substitute for the “standard market price at the time of acquisition”, the standard market price at the time of arbitrary division at the time of acquisition, and the standard market price at the time of acquisition at the time of molecule’s acquisition, which differs from the standard market price at the time of acquisition by the molecule

B. Relevant statutes

Attached Form 3 is as listed in the "relevant Acts and subordinate statutes".

C. Determination on the first argument

1) Where a cooperative member implementing a housing redevelopment project or a housing reconstruction project provides a former house (including land annexed thereto) to the relevant cooperative and transfers a newly-built house (including land annexed thereto) acquired in accordance with the management and disposal plan, he/she shall pay transfer income tax on the transfer margin from the date of acquisition of the newly-built house to the date of acquisition of the newly-built house, as well as on the transfer margin from the date of acquisition of the newly-built house to the date of acquisition of the newly-built house (Article 100 of the Income Tax Act and Article 166 of the Enforcement Decree of the Income Tax Act): Provided, That Article 99-3(1) of the Restriction of Special Taxation Act provides that the resident shall reduce or exempt the tax amount equivalent to 10/100 of transfer income tax on the income accruing from the transfer of the newly-built house located in an area other than the area where a rapid increase or a possibility of a rapid increase in real estate price

In light of the principle of no taxation without law, or the requirements for tax exemption or tax exemption, the interpretation of tax laws shall be interpreted in accordance with the text of the law, unless there are special circumstances. It is not permitted to expand or analogically interpret without reasonable grounds, and in particular, it is also consistent with the principle of fair taxation to strictly interpret the provision that is clearly considered as a preferential provision among the requirements for tax exemption or exemption (see Supreme Court Decision 2006Du8969, Feb. 15, 2008).

2) We examine the following: ① The first sentence of Article 99-3(1) of the Restriction of Special Taxation Act clearly provides that the amount deducted from the taxable amount is the transfer income accrued for five years from the acquisition date of the relevant newly-built house; ② The transfer income from the acquisition date of the existing house to the acquisition date of the newly-built house is difficult to interpret the said provision as the transfer income tax subject to the application of the said provision; ② the first sentence of Article 99-3(1) of the Restriction of Special Taxation Act provides for the special taxation on the transfer income accruing from the acquisition date of the newly-built house within five years from the acquisition date; ② It conforms to the principle of no taxation without the law to strictly interpret that the transfer income tax is exempted only for the transfer income accruing from the acquisition date of the relevant newly-built house from the acquisition date of the newly-built house to the transfer date of the newly-built house; ③ The legislative intent of the above provision is not particularly intended to grant additional benefits to the redevelopment and reconstruction association members; thus, it is reasonable to view that the amount of transfer income from the existing house is not subject to the transfer income tax of the newly-built house within five years.

D. Judgment on the second argument

1) Article 18(3) of the Framework Act on National Taxes provides that after a construction of tax-related Acts or practices in tax administration has been generally accepted by taxpayers, any act or computation according to such construction or practices shall be deemed lawful, and no tax shall be imposed retroactively by a new construction or practice. Here, “the principle of prohibition of retroactive taxation by a new construction or practice” applies only to the cases where there are special circumstances deemed that the protection of taxpayers’ trust is consistent with the concept of justice, even if the principle of legality is sacrificeed by a new construction or practice. As such, the burden of proving the existence of “the construction or practice of tax-related Acts commonly accepted by taxpayers” under the above provision is the taxpayer (see, e.g., Supreme Court Decisions 2005Du2858, Jun. 29, 2006; 91Nu13670, Sept. 8, 1992).

2) In light of the fact that: (a) in order for a certain national tax administration practice to be constituted as a practice subject to Article 18(3) of the Framework Act on National Taxes, the status of taxation or non-taxation pursuant to such practice should continue over a long-term period; and (b) it cannot be readily concluded that the practice of national tax administration was clearly established as a practice subject to Article 18(3) of the Framework Act on National Taxes until the final judgment of the court is rendered; (c) as alleged by the Plaintiff, it is difficult to view that the Plaintiff’s transfer income prior to the acquisition date of a newly-built house was also deemed as a non-taxable practice solely on the ground that the Plaintiff disposed of the newly-built house and the Defendant did not raise any objection for 6

E. Judgment on the third argument

1) Article 99-3(1) of the former Restriction of Special Taxation Act provides that "where a newly-built house is transferred within five years from the date of its acquisition, the amount of tax shall be calculated by using "the method of reducing or exempting the amount of tax", while Article 99-3(1) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "if the newly-built house is transferred within five years from the date of its acquisition, the amount of transfer income shall be deducted." Therefore, where the newly-built house is transferred within five years from the date of its acquisition, the transfer income amount shall not be calculated by deducting the transfer income amount applicable to the transfer thereof after five years from the date of its acquisition (see, e.g., Supreme Court Decision 2010Du3725, Jun. 28, 2012)." In applying paragraph (1), Article 99-3(2) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "the transfer income amount accrued for five years from the date of its acquisition shall be calculated by applying mutatis mutandis the provisions of paragraph (1)."

Therefore, it is reasonable to view that the disposition of this case calculated pursuant to Article 40(1) of the former Enforcement Decree of the Restriction of Special Taxation Act with respect to the transfer income tax on the income from the acquisition date of the former house to the date of acquisition of the newly-built house of this case

A) The calculation formula under Article 40(1) of the former Enforcement Decree of the Restriction of Special Taxation Act is divided into the ratio of the capital gains amount calculated pursuant to Article 95(1) of the Income Tax Act (total income amount of transfer income - necessary expenses - special deduction for long-term holding) calculated from the date of acquisition to the date of acquisition, whichever is five years from the date of acquisition, to the date of acquisition subject to the special taxation for capital gains tax (see Supreme Court Decision 2012Du8588, Jan. 31, 2013). The said calculation formula is a provision for reduction or exemption of capital gains tax on real estate subject to restructuring, and real estate subject to restructuring is not an issue prior to the acquisition, because there is no actual transfer value on the date five years have passed since the date of acquisition. Therefore, it is reasonable to view that the above calculation formula was made without keeping in mind the capital gains tax before the date of acquisition of newly-built house subject to restructuring, and thus, it is inappropriate to apply the calculation formula to the transfer of newly-built house within five years from the acquisition date.

B) If the calculation formula under Article 40(1) of the Enforcement Decree is applied to the transfer of a newly-built house within five years from the date of its acquisition, the "standard market price at the time of acquisition of the newly-built house" should be applied to the "standard market price at the time of acquisition at the time of acquisition at the time of the division, even though the "standard market price at the time of acquisition at the time of acquisition at the time of the division," and the "standard market price at the time of acquisition at the time of acquisition at the time of acquisition at the time of the molecule's acquisition" respectively. This is not permissible because it is an arbitrary change of calculation formula without legal basis. In the case of calculation with the defendant, the old house in this case owned by the plaintiff and the newly-built house acquired after the reconstruction are treated as the same one as at the time of its acquisition at the time of the division's acquisition, and if the standard market price at the time of acquisition at the time of the division's acquisition at the time of the division's acquisition, it is unfair to calculate the amount of capital reduction or exemption.

(f) the scope of the cancelled tax amount;

1) Determination of the legality of a disposition in a lawsuit seeking revocation of a tax disposition is based on whether it exceeds a legitimate tax amount. The parties can submit objective tax bases and materials supporting such tax amount until the closing of arguments in the fact-finding court is closed. In the event that legitimate tax amount to be imposed lawfully is calculated based on such materials, only the portion exceeding the legitimate tax amount should be revoked. However, unless otherwise, the entire taxation disposition should be revoked (see Supreme Court Decision 94Nu13527, Apr. 28, 1995).

2) Article 99-3(4) of the former Restriction of Special Taxation Act delegates the calculation of the transfer income amount generated for five years from the date of acquisition of newly-built house to other necessary matters by the Presidential Decree. However, the transfer income amount to be reduced or exempted cannot be calculated as the method of calculating the transfer income amount is not prescribed under the same Enforcement Decree. Thus, the Plaintiff’s legitimate transfer income

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.