Law "Temporary Ownership of Two Houses Due to Reconstruction... Comprehensive Real Estate Tax Surcharge Is Justified"

The court ruled that it was justified to apply the comprehensive real estate holding tax (종합부동산세) surtax rate to union members who temporarily became 'two-homeowners' due to apartment reconstruction.

Seoul Administrative Court, Seocho-gu, Seoul. Photo by Hyunmin Kim kimhyun81@

According to the legal community on the 14th, the Seoul Administrative Court Administrative Division 2 (Presiding Judge Shin Myung-hee) recently ruled against plaintiff A and about 80 other members of a reconstruction union of an apartment in Seoul in a lawsuit filed against 13 tax office chiefs seeking cancellation of the imposition of the comprehensive real estate holding tax and other taxes.

Previously, the reconstruction union allowed members to choose to be allocated either one large house or two houses including a small house under 60㎡, and A and others chose two houses. At that time, small houses were considered exempt from aggregation under a special law for private rental housing if certain conditions were met, thus regarded as one household with one house.

However, in November 2021, A and others were imposed taxes averaging about 200 million KRW. After the aggregation exemption system was abolished in August 2020, tax authorities imposed a total comprehensive real estate holding tax of 3.058 billion KRW and a special rural tax of 611 million KRW based on the official prices of two houses. The comprehensive real estate holding tax law enacted in 2019 stipulated that 'three-homeowners or two-homeowners in regulated areas such as Seoul' are subject to surtax rates, and the apartment in question was located in a regulated area.

A and others filed an administrative lawsuit. They argued, "Taxation can be differentiated based on acquisition circumstances, holding period, and tax payment ability, but a high progressive tax rate was indiscriminately applied solely because the property is in a regulated area," claiming that this violated the principle of proportionality and infringed on property rights.

They also claimed, "It is unfair to impose taxes differently from other union members who received one large house under essentially the same circumstances. They emphasized that during the three-year resale restriction period, the house could not be sold, so they should not be classified as two-homeowners.

The first trial court rejected all these claims. The court stated, "At that time, the comprehensive real estate holding tax law aimed to enhance tax fairness and increase tax rates to alleviate wealth concentration, thereby improving economic efficiency," and "The criterion of owning two or more houses in regulated areas was introduced to suppress speculative housing ownership, and its legislative purpose is justified."

The court pointed out, "Choosing to be allocated two houses was the plaintiff's decision. Treating this as one house would excessively favor them and could violate the principle of tax equality," and "Since resale of houses other than the small house was possible, it cannot be said that the method to become a one-householder was blocked."

Furthermore, the court added, "It cannot be said that the plaintiffs had no speculative intent in owning two houses including a small house," and "It cannot be considered that their economic substance is the same as those who chose one house."

A and others appealed the first trial court's decision.

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