Article 163 (Necessary Expenses for Transferred Assets)

The actual transaction value incurred for acquisition under Article 97, Paragraph 1, Item 1, Subitem (a) of the Act shall be the sum of the following amounts. <Amended by Dec. 31, 1996, Dec. 31, 2005, Feb. 18, 2010, Feb. 2, 2012, Feb. 3, 2015, Feb. 3, 2017, Feb. 13, 2018, Feb. 11, 2020, Feb. 27, 2026> 1. The acquisition cost calculated by applying Articles 89, Paragraph 1 and Paragraph 3 (including the discount on present value under Article 89, Paragraph 2, Item 1 and the value-added tax paid or to be paid under Article 10, Paragraph 1 and Paragraph 6 of the Value-Added Tax Act, excluding the amount exceeding the fair market price due to an unfair transaction calculation) 2. The amount of legal costs, settlement costs, etc. directly incurred to secure ownership of assets involved in litigation for acquisition, excluding the amount recognized as necessary expenses in the calculation of each income amount for the year in which it was expended. 3. When applying Item 1, if the transaction value is determined by adding the interest equivalent to the acquisition cost according to the payment method agreed upon by the parties, the interest equivalent shall be included in the acquisition cost. However, the interest equivalent additionally incurred due to the delay in the payment date of the originally agreed transaction value shall not be included in the acquisition cost. 4. When applying Item 1, the value equivalent to the acquisition cost per share of stock received by a shareholder of a dissolved company from a surviving or newly established company after a merger (hereinafter referred to as "merging company" in this Item) shall be calculated by dividing the total amount incurred to acquire the shares of the merged company held by the shareholder at the time of merger (including the amount under Article 16, Paragraph 1, Item 5 of the Corporate Tax Act, and excluding the sum of money and other property values in the merger consideration under the same Item) by the number of shares received due to the merger. 5. When applying Item 1, the value equivalent to the acquisition cost per share of stock acquired by a shareholder of a splitting company or a counterparty company in a dissolved merged company due to a split or merged merger from a newly established splitting company or a counterparty company in a merged merger shall be calculated by dividing the total amount incurred to acquire the shares of the splitting company or the counterparty company in the dissolved merged company held by the shareholder at the time of splitting or merged merger (including the amount under Article 16, Paragraph 1, Item 6 of the Corporate Tax Act, and excluding the sum of money and other property values in the split consideration under the same Item) by the number of shares acquired due to the split.

"Capital expenditures, etc. as prescribed by Presidential Decree" in Article 97, Paragraph 1, Item 2 of the Act refers to the following, provided that the supporting documents under Article 160-2, Paragraph 2 of the Act are obtained and kept, or the actual expenditure is confirmed by financial transaction documents. <Amended by Dec. 29, 2000, Sep. 22, 2006, Feb. 29, 2008, Feb. 18, 2010, Feb. 3, 2015, Feb. 17, 2016, Feb. 13, 2018, Feb. 11, 2020, Dec. 30, 2025> 1. Capital expenditures calculated by applying the provisions of Article 67, Paragraph 2. 2. The amount of legal costs, settlement costs, etc. directly incurred to secure ownership in case of litigation after acquiring the transferred asset, excluding the amount recognized as necessary expenses in the calculation of each income amount for the year in which it was expended. 2-2. In cases where land, etc. is acquired by negotiated purchase or expropriation under the 「Act on Acquisition and Compensation for Land, etc. for Public Projects」 or other laws, the amount of legal costs, settlement costs, etc. directly incurred in relation to the increase in compensation, excluding the amount recognized as necessary expenses in the calculation of each income amount for the year in which it was expended. In this case, it shall be limited to the amount of increased compensation. 3. Expenses incurred for the change of use, improvement, or convenience of use of the transferred asset (including demolition costs when rebuilding a building due to unavoidable reasons such as disaster or aging). 3-2. Development charges under the 「Act on the Collection of Development Profits」 (in cases where the obligor of the development charge and the transferor are different, it refers to the amount of development charge effectively allocated to the transferor). 3-3. Reconstruction surcharges under the 「Act on the Collection of Reconstruction Excess Profits」 (in cases where the obligor of the reconstruction surcharge and the transferor are different, it refers to the amount of reconstruction surcharge effectively allocated to the transferor). 4. Costs equivalent to Items 1 through 3, Item 3-2, and Item 3-3 as prescribed by the Ordinance of the Ministry of Economy and Finance.

"As prescribed by Presidential Decree" in Article 97, Paragraph 1, Item 3 of the Act refers to the following, provided that the supporting documents under Article 160-2, Paragraph 2 of the Act are obtained and kept, or the actual expenditure is confirmed by financial transaction documents. <Amended by Apr. 1, 1998, Dec. 29, 2000, Feb. 19, 2005, Feb. 28, 2007, Feb. 29, 2008, Feb. 4, 2009, Feb. 18, 2010, Feb. 13, 2018, Dec. 30, 2025> 1. Expenses directly incurred to transfer assets under Article 94, Paragraph 1, Items of the Act, as follows: a. Securities transaction tax paid under the 「Securities Transaction Tax Act」. b. Expenses for preparing the income tax return for capital gains and expenses for preparing contracts. c. Notary fees, stamp duty, and brokerage fees. d. Eviction costs incurred by the transferor to fulfill the obligation of delivery under the sales contract. e. Expenses similar to those in subitems (a) through (d) as prescribed by the Ordinance of the Ministry of Economy and Finance. 2. Loss on sale incurred by transferring national housing bonds and land development bonds purchased in accordance with laws and regulations before maturity when acquiring assets under Article 94, Paragraph 1, Item 1. In this case, if transferred to a person other than a financial institution prescribed by the Ordinance of the Ministry of Economy and Finance (hereinafter referred to as "financial institution" in this Item), the loss on sale shall be limited to the loss that would have occurred if transferred to a financial institution on the same day.

Deleted <Feb. 21, 2014>

When applying Article 97, Paragraph 1, Item 1, Subitem (a) of the Act to assets acquired by inheritance or donation (including the portion equivalent to the debt amount of a burden-sharing donation under the latter part of Article 88, Item 1 of the Act, excluding donations under Articles 34 through 39, 39-2, 39-3, 40, 41-2 through 41-5, 42, 42-2, and 42-3 of the 「Inheritance and Gift Tax Act」), the value appraised according to Articles 60 through 66 of the 「Inheritance and Gift Tax Act」 as of the date of inheritance or donation (or the value decided or revised by the tax office director, etc. according to Article 76 of the same Act, if any) shall be regarded as the actual transaction value at the time of acquisition. However, if any of the following applies, the amount shall be calculated according to the classification of each item. <Newly added by Dec. 31, 1999, Dec. 29, 2000, Dec. 30, 2003, Feb. 19, 2005, Aug. 5, 2005, Dec. 31, 2005, Feb. 17, 2016, Aug. 31, 2016, Feb. 3, 2017, Feb. 11, 2020, Feb. 17, 2021> 1. For land inherited or donated before the individual public land price was announced on August 30, 1990, under the 「Act on Official Price of Real Estate」, the higher of the value appraised according to Articles 60 to 66 of the 「Inheritance and Gift Tax Act」 as of the date of inheritance or donation and the value under Article 164, Paragraph 4. 2. For buildings inherited or donated before the standard market price of buildings under Article 61, Paragraph 1, Items 2 through 4 of the 「Inheritance and Gift Tax Act」 was announced, the higher of the value appraised according to Articles 60 to 66 of the 「Inheritance and Gift Tax Act」 as of the date of inheritance or donation and the values under Article 164, Paragraphs 5 through 7.

"Method prescribed by Presidential Decree" in the main clause of Article 97, Paragraph 2, Item 2 of the Act refers to the methods in any of the following items. <Amended by Feb. 28, 2007, Feb. 22, 2008, Feb. 29, 2008, Feb. 18, 2010, Jul. 28, 2014, Aug. 11, 2016, Jan. 17, 2017, Dec. 30, 2025> 1. Deleted <Dec. 31, 2009> 2. A method by which a resident confirms the actual transaction price of real estate (hereinafter referred to as "actual transaction price" in this Item) under Article 3, Paragraph 1 of the 「Act on Reporting Real Estate Transactions, etc.」 at the time of acquiring real estate, according to the method prescribed by the Ordinance of the Ministry of Economy and Finance. However, this shall apply only if the actual transaction price is the same as the transfer price at the time of provisional or final reporting of the transferor's capital gains tax base.

When transferring shares acquired by exercising a stock option, the fair market value at the time of exercising the stock option shall be the acquisition cost under Article 97, Paragraph 1, Item 1 of the Act. <Newly added by Dec. 29, 2000>