Adjustment of Balance Payment Date for 3 Houses in 6 Days... Court Rules Imposing Tens of Millions KRW Capital Gains Tax Is Unfair

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[Asia Economy Reporter Kim Daehyun] A court ruling has found it unfair to impose a capital gains tax surcharge rate on someone who temporarily owned three houses after advancing the payment date.

On the 19th, according to the court, Judge Choi Seonjae of the Seoul Administrative Court, Administrative Division 12, recently ruled in favor of Plaintiff A in the first trial of a lawsuit against the Seoul Gangseo Tax Office head seeking cancellation of the capital gains tax imposition.

On December 12, 2019, A sold an apartment in Yeongdeungpo-gu, Seoul, where he had lived for over 10 years, for 1.56 billion KRW and paid about 1.2 million KRW in capital gains tax. However, the following year, the tax authorities notified A that since he owned three houses as a single household in a regulated area, the long-term holding special deduction was excluded, and a surcharge tax rate was applied, revising the capital gains tax to 36,787,400 KRW and demanding payment.

A argued, "I advanced the payment date of the apartment in Yeongdeungpo-gu to pay the balance for the new house," and "Although I formally qualified as a single household owning three houses as of the transfer date, there were special circumstances that made it unavoidable to temporarily own three houses for six days in social convention."

It was investigated that during the sale and acquisition process, the payment date was initially set three months later, but due to circumstances of the seller of the replacement house, the payment date was set to December 6 of that year, and in the process of requesting the buyers of this house to pay the balance earlier to match the replacement house’s payment date, the final payment date was advanced.

The first trial court ruled in favor of A, stating, "There was no speculative intent, and the period between acquiring the replacement house and transferring this house was only six days."

Judge Choi first stated, "There is no law excluding the three houses owned by the plaintiff at the time of transfer from the count of houses," and "This corresponds to the transfer of houses exceeding three houses per single household." he judged.

However, "In the process of selling this house and acquiring the replacement house, the plaintiff coordinated schedules with the sellers and buyers of each house and held ownership of both houses simultaneously for only six days to carry out minor interior work," he explained.

Judge Choi added, "Considering the reality of housing transactions, this is a common occurrence and clearly temporary," and “the long-term holding special deduction should also apply.”

Since the tax authorities did not appeal, the first trial ruling was finalized as is.

This content was produced with the assistance of AI translation services.