CONTENTS
- 1. Comprehensive Real Estate Holding Tax, What Are the Detailed Circumstances?
- - Comprehensive Real Estate Holding Tax, What Are the Relevant Statutes and Precedents?
- 2. Comprehensive Real Estate Holding Tax, What Was the Court's Determination?
- 3. Comprehensive Real Estate Holding Tax, Daeryun's Strategy
1. Comprehensive Real Estate Holding Tax, What Are the Detailed Circumstances?
The plaintiff in this case, A, is the representative of a company engaged in manufacturing and sales. After purchasing the OO Apartment, A registered the apartment as the head office of the corporation and used it as an office.
In the meantime, the Samsung Tax Office imposed approximately 27 million won in comprehensive real estate holding tax and approximately 5.5 million won in special tax for rural development.
In response, A argued that, because the apartment was used as an office and its water and gas consumption was almost nonexistent, it did not constitute housing and was therefore not subject to the comprehensive real estate holding tax. A accordingly filed a lawsuit seeking revocation of the imposition of the comprehensive real estate holding tax and related taxes against the head of the Samsung Tax Office.
Comprehensive Real Estate Holding Tax, What Are the Relevant Statutes and Precedents?
The comprehensive real estate holding tax is a system under which the National Tax Service separately imposes a national tax, applying progressive tax rates, on owners of land and housing exceeding certain thresholds, apart from the comprehensive land tax imposed by local governments.
According to Article 1 of the Comprehensive Real Estate Holding Tax Act, the purpose of this Act is to impose the comprehensive real estate holding tax on holders of high-value real estate, thereby enhancing the equity of the tax burden on the holding of real estate and promoting the price stability of real estate, so as to ensure the balanced development of local finances and the sound development of the national economy.
The term “housing” as provided under the Comprehensive Real Estate Holding Tax Act means all or part of a building structured so that its occupants can lead an independent residential life over a long period, together with its appurtenant land. (Article 2 of the Housing Act)
■ Relevant Precedent
In light of the purpose of the Comprehensive Real Estate Holding Tax Act, which finds the capacity to bear the tax in the holding of high-value real estate, even if a building is temporarily used for a purpose other than residence, where its structure, function, facilities, and the like are originally residential and remain in a condition suitable for residential use, and where the residential function is maintained and managed as is so that the owner or a third party may use it as housing at any time, it is reasonable to regard it as housing.
- Supreme Court, concerning the imposition of capital gains tax, April 28, 2005, 2004 Du 14960
2. Comprehensive Real Estate Holding Tax, What Was the Court's Determination?
The Administrative Court that heard the litigation concerning the comprehensive real estate holding tax did not accept A's argument.
The court found that, although the apartment owned by A was being used for a purpose other than residence, because its residential function was maintained as is, it constituted housing subject to the comprehensive real estate holding tax.
While acknowledging that A did not actually use the apartment for residential purposes, the court found that the apartment's structure, function, facilities, and the like were originally designed for residential use, and that, as of the tax base date, it had a structure in which the members of a household could lead an independent residential life over a long period.
In addition, as to A's argument that ‘the water, gas, and electricity consumption of the apartment was almost nonexistent,’ the court ruled that this resulted merely from A's subjective intent regarding use, and that it could not be said that the residential function of the apartment had been significantly altered or lost.
Accordingly, the court determined that, because this apartment constituted housing subject to the comprehensive real estate holding tax, the Samsung Tax Office's imposition of the comprehensive real estate holding tax was lawful.
3. Comprehensive Real Estate Holding Tax, Daeryun's Strategy
We have analyzed the Administrative Court's ruling that, with respect to the comprehensive real estate holding tax, an apartment used for office purposes is subject to the comprehensive real estate holding tax if it maintains its residential function.
As in the case above, when you object to a tax-related disposition, you may file a 🔗tax lawsuit.
Because this involves a legal issue arising in the course of securing tax revenue, it is important to establish the best litigation strategy based on an accurate understanding of, and extensive experience with, tax statutes and precedents.
For clients preparing for tax litigation, the attorneys of the 🔗Tax Group and the 🔗Administrative Group of Daeryun Law Firm LLP work to protect the rights and interests of clients.
If you need assistance in this regard, you are welcome to contact Daeryun Law Firm LLP at any time.
