CONTENTS
- 1. Comprehensive Real Estate Holding Tax, the Detailed Circumstances
- - Comprehensive Real Estate Holding Tax, the Relevant Statutes
- 2. Comprehensive Real Estate Holding Tax, the Court's Determination
- - Comprehensive Real Estate Holding Tax, Regarding Whether There Was an Infringement of Property Rights
- - Comprehensive Real Estate Holding Tax, Regarding Whether the Principle of Equality Was Violated
- 3. Comprehensive Real Estate Holding Tax, Daeryun's Strategy
1. Comprehensive Real Estate Holding Tax, the Detailed Circumstances
A, who filed an administrative lawsuit concerning the comprehensive real estate holding tax, owned a one-half share of an apartment in Seoul (hereinafter the ‘First House’).
In the meantime, A inherited another apartment (hereinafter the ‘Second House’) from A's deceased mother and completed the registration of ownership transfer.
A subsequently sold the Second House, but because A owned both houses as of the assessment reference date for the comprehensive real estate holding tax, the tax office imposed approximately 8.7 million won in comprehensive real estate holding tax and special rural development tax.
A objected to this and filed for administrative adjudication (a request contesting an administrative action before an agency prior to court litigation, comparable to seeking administrative review) with the Tax Tribunal, but the claim was dismissed, after which A filed an administrative lawsuit seeking revocation of the imposition of the comprehensive real estate holding tax and related taxes .
A argued that “A had merely become an owner of two houses temporarily through inheritance, and that imposing the tax without the Comprehensive Real Estate Holding Tax Act and its Enforcement Decree reflecting this constitutes an unconstitutional measure that infringes on the right to equality and property rights guaranteed by the Constitution.”
Comprehensive Real Estate Holding Tax, the Relevant Statutes
🔗the comprehensive real estate holding tax refers to a system under which the National Tax Service separately imposes a national tax by applying a progressive tax rate to owners of land and houses exceeding certain thresholds, apart from the aggregate land tax levied by local governments.
Under Article 1 of the Comprehensive Real Estate Holding Tax Act, the Act explains that its purpose is to impose the comprehensive real estate holding tax on holders of high-value real estate in order to enhance equity in the tax burden on real estate holdings, and, by promoting price stability of real estate, to achieve the balanced development of local finances and the sound development of the national economy.
As of 2022, a person who has temporarily become an owner of two houses through relocation or inheritance may defer payment of the comprehensive real estate holding tax. In addition, a person who has unavoidably become an owner of two houses through relocation or inheritance is recognized as an owner of one house, and accordingly a temporary owner of two houses may also apply for deferral of payment of the tax upon meeting certain qualifications.
A temporary owner of two houses corresponds to a case in which a person purchased a house in order to relocate but has not yet disposed of the existing house. This also includes cases in which a person has inherited a house or holds a low-priced provincial house without speculative intent.
2. Comprehensive Real Estate Holding Tax, the Court's Determination
The administrative court that heard the lawsuit seeking revocation of the imposition of the comprehensive real estate holding tax dismissed A's claim. The legal grounds are as follows.
Comprehensive Real Estate Holding Tax, Regarding Whether There Was an Infringement of Property Rights
The court found that the imposition of the comprehensive real estate holding tax on A fell within the scope of the limitation on property rights permitted under the Constitution.
The court determined that “under the principle of no taxation without law, the tax statute clearly prescribes the requirements for taxation, and a tax imposed on this basis does not infringe on property rights.” It added that “the comprehensive real estate holding tax in this case was imposed for the public-interest purpose of stabilizing real estate prices and ensuring tax equity, and it does not infringe on the essence of property rights.”
Comprehensive Real Estate Holding Tax, Regarding Whether the Principle of Equality Was Violated
The court explained that “a tax statute reflects the taxpaying capacity of the people and policy objectives, so the legislature holds broad discretion in shaping it,” and that “taxing a person who has temporarily become an owner of two houses through inheritance in the same manner as a general owner of two houses is the result of the legislature's policy judgment.”
The court also determined that “because the Enforcement Decree of the Comprehensive Real Estate Holding Tax Act provides that, even where a person has become an owner of two houses through inheritance, the house is excluded from the count of houses upon meeting certain requirements, this does not constitute an infringement of the right to equality guaranteed by the Constitution.”
3. Comprehensive Real Estate Holding Tax, Daeryun's Strategy
In an administrative lawsuit seeking revocation of the disposition concerning the comprehensive real estate holding tax, we analyzed the administrative court's judgment, which held that the comprehensive real estate holding tax must be paid even where a person has temporarily become an owner of two houses through inheritance.
Tax-related disputes such as those concerning the comprehensive real estate holding tax can require detailed knowledge of tax law.
The 🔗Tax Group and 🔗Administrative Group of Daeryun Law Firm LLP comprise attorneys experienced in tax matters who work to protect the rights and interests of taxpayers.
If you need assistance with a related matter, you are welcome to contact Daeryun Law Firm LLP at any time.
