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Tax Info at a Glance

home Tax Info at a Glance
Subject
TransferIncomeTax    Transferring a Church Property in a Redevelopment Area
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M**
Date
2023-09-06
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Hello?
There is a church (corporation's purpose) established in the 1970s, and this area is currently undergoing redevelopment.
The management decision was made in 2016, with completion expected in 2026, and it is currently in a state of occupancy by members of the congregation.
Currently, a potential buyer has appeared, and the church corporation is concerned about the transfer tax.
- There is an argument that since the church land has been used for more than 3 years for its original purpose, it is tax-exempt (the residence is subject to property tax as it is a house).
- There is also an argument that it may be subject to taxation because during the redevelopment period, religious activities were not conducted at the site, making it difficult to consider that it has been used for its original purpose for more than 3 consecutive years.
I would appreciate your advice on this matter.
Answer
Greetings!

Thank you for contacting Serim Tax Corporation. We appreciate your inquiry, and we would like to provide the following response to your question.

According to Article 13 of the National Tax Basic Act, if a church is recognized as a corporation, it is subject to corporate tax only on income-generating activities.
Transfers of real estate that have been used for more than 3 years for their original purpose are not considered income-generating activities under Article 4 of the Corporate Tax Act and Article 3 of the Enforcement Decree of the same law. However, when transferring occupancy rights after the commencement of redevelopment, it is considered a transfer of the right to acquire real estate, not the transfer of real estate previously used for its original purpose.

Since the right to acquire real estate is enumerated as an income-generating activity in Article 4(3)(6) of the Corporate Tax Act, the transfer of occupancy rights is considered an income-generating activity, and corporate tax is levied on any gains from such a transfer.

Please refer to the relevant regulations below for more information.

Thank you.
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