The scope of farmland under Article 168-8 of the Enforcement Decree of the Income Tax Act

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The Defendant’s imposition disposition of capital gains tax of KRW 513,166,367 against the Plaintiff on June 30, 2016 exceeds KRW 275,445,528 shall be revoked.

A. On June 23, 1999, the Plaintiff purchased 1,101 square meters of Bright, “Bright,” “B right,” “B right,” “B right,” “B right,” “B right,” and cultivated the instant land.

B. On January 15, 2016, the Plaintiff: (a) sold the instant land to the 1,225,000,000 knife General Construction Co., Ltd. (hereinafter “Manife General Construction”); (b) but (c) concluded a sales contract with the terms that the down payment of KRW 100,000,000 on the contractual date and the remainder of KRW 1,125,000,000 on April 29, 2016 (hereinafter “instant contract”).

C. According to the instant contract, the Plaintiff received the remainder of 1,125,000,000 won from the knife comprehensive construction on January 15, 2016, and the remainder of 1,125,000,000 won on April 29, 2016, and completed the registration of ownership transfer on the instant land to the knife comprehensive construction on April 29, 2016.

D. Meanwhile, around May 2016, the Plaintiff calculated and reported the transfer income tax from selling the instant land to the Defendant as KRW 275,445,528.

E. On June 30, 2016, the Defendant, on the following grounds, deemed that the instant land constituted “non-business land” under Article 104-3(1)1(a) of the former Income Tax Act (amended by Act No. 14389, Dec. 20, 2016; hereinafter “former Income Tax Act”), and rendered a disposition imposing capital gains tax on the instant land by applying an aggravated tax rate pursuant to Article 104(1)8 of the former Income Tax Act (hereinafter “instant disposition”).

1) According to Article 104-3(1)1(a) of the former Income Tax Act and Article 168-6 subparag. 1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 27829, Feb. 3, 2017; hereinafter “former Enforcement Decree of the Income Tax Act”), it is stipulated that ① a period exceeding two years in the five-year period immediately before the date of the transfer of farmland, or ② a period exceeding one year in the three-year period immediately before the date of the transfer of farmland, or ③ a period exceeding one year in the three-year period immediately before the date of the transfer of farmland, or a period exceeding forty percent in the possession period of farmland

2) Meanwhile, according to the proviso of Article 168-8(2) of the former Enforcement Decree of the Income Tax Act, and Article 66(14) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 27848, Feb. 7, 2017; hereinafter “former Enforcement Decree of the Restriction of Special Taxation Act”), for the taxable period in which the total amount of business income and earned income of farmland owners exceeds 37,00,000 won, the farmland owner is deemed to have not cultivated the farmland directly.

3) However, since the Plaintiff’s business income and earned income from 2005 to 2015 KRW 41,00,000 to KRW 83,00,000, the Plaintiff cannot be deemed to have cultivated the instant land directly during the above period. Therefore, the Plaintiff falls under Article 104-3(1)1(a) of the former Income Tax Act and subparagraph 1(i) of Article 168-6 of the former Enforcement Decree of the Income Tax Act (which falls under both (i) and (iii) of the same Act, and the instant land should be deemed as non-business land.

F. On January 16, 2017, the Plaintiff filed a request for a tax trial on the instant disposition, but was dismissed by the Tax Tribunal on April 24, 2017.

Facts without any dispute, Gap's 1 through 4 (including virtual numbers), Eul's 1, the purport of the whole pleadings, and the purport of the whole pleadings.

2. Relevant statutes;

It is as shown in the attached Form.

3. The plaintiff's assertion and judgment

A. The plaintiff's assertion

1) The proviso to Article 168-8(2) of the former Enforcement Decree of the Income Tax Act, stating that the total amount of business income and earned income is at least KRW 37,00,000, was not considered a self-employed period, was newly established as of February 17, 2016. However, the Plaintiff had already entered into the instant contract on January 15, 2016, and thus, applying the said provision to the Plaintiff is not allowed in accordance with the principle of non-payment of tax statutes, and thus, the instant disposition is unlawful.

2) Since the proviso of Article 168-8(2) of the former Enforcement Decree of the Income Tax Act provides for determination of the self-employed period not delegated by the former Income Tax Act, the said Enforcement Decree is null and void as it goes beyond the limits of delegation, and therefore, the instant disposition based on the said Enforcement Decree is also

B. Whether the principle of non-payment of tax statutes is violated

1) The principle of non-payment of tax-related Acts and subordinate statutes means that the pertinent tax-related Acts and subordinate statutes cannot be applied only to the facts that were completed prior to the entry into force of the relevant tax-related Acts and subordinate statutes, but it does not limit the application of the relevant Acts and subordinate statutes to the facts that were subsequently incurred. Thus, insofar as the new legislation provides that only the facts that were completed after the enforcement of the tax-related Acts and subordinate statutes apply to the facts that were already completed, it cannot be seen as a retroactive legislation (see, e.g., Supreme Court Decision 93Nu207

In addition, even if a sales contract for land was concluded prior to the enforcement of the amended Act, if the payment of remaining purchase and sale and the transfer of ownership have been completed after the enforcement of the amended Act, it is apparent that the timing of establishing the liability to pay capital gains tax is the balance payment date, and thus, the amended Act, which was enforced at the time of the establishment of the liability to pay capital gains tax, shall be applied to the imposition of such transfer income tax (see, e.g., Supreme Court Decision

2) In light of the above legal principles, in light of the following circumstances, the instant disposition, which took place on the instant land as land for non-business use, should be deemed lawful after calculating the Plaintiff’s self-determination period by applying the proviso of Article 168-8(2) of the former Enforcement Decree of the Income Tax Act.

A) The time when the Plaintiff’s liability to pay capital gains tax on the instant land was established is April 29, 2016, when the Plaintiff received sales remaining amount from the construction of knives comprehensive knives, and the proviso to Article 168-8(2) of the former Enforcement Decree of the Income Tax Act was newly established by Presidential Decree No. 26982, Feb. 17, 2016, and its enforcement date pursuant to the Addenda to the said Enforcement Decree. As such, the above provision, which was enforced at the time when the liability to pay capital gains tax on the instant land

B) As to this, the Plaintiff asserts that the application of the foregoing provision is not permissible in accordance with the principle of non-payment of tax laws and regulations, since the Plaintiff was in the status of entering into the instant contract before the enactment

However, in principle, the principle of non-payment of tax laws cannot be applied to the facts that already completed tax requirements. The time when the Plaintiff’s obligation to pay capital gains tax was established is as seen earlier on April 29, 2016, which was paid the remainder of the land of this case. Thus, it cannot be deemed that the fact of taxation of capital gains tax was completed at the time of the establishment of the above provision. Thus, applying the above provision to the Plaintiff cannot be deemed as being prohibited pursuant to the principle of non-payment of tax statutes.

C. Whether the proviso of Article 168-8 (2) of the former Enforcement Decree of the Income Tax Act is invalid

1) In a case where a subordinate statute delegates a specific matter to a subordinate statute, determination of whether the subordinate statute complies with the limits of delegation ought to be made by comprehensively examining the legislative purpose and content of the pertinent provision, structure of the provision, and relationship with other provisions. Whether the delegation provision itself has clearly made the limits of delegation by using terms with which the meaning can be accurately known, and whether the delegation provision exceeds the limits of its literal meaning, or whether it has been made by expanding or reducing the scope of the terms used in the delegation provision beyond the bounds of its meaning, and whether it has been a new legislation beyond the stage of embodying the delegation contents by expanding or reducing the scope of the terms used in the delegation provision (see, e.g., Supreme Court Decision 2009Du17797, Apr. 29, 2010).

2) For the purpose of Article 104-3 (3) of the former Income Tax Act, the provisions of Article 104-3 (1) of the former Income Tax Act provides that "the necessary matters concerning the scope, etc. of farmland, forest land, and stock farms shall be prescribed by Presidential Decree", and Article 104-3 (1) 1 (a) of the former Income Tax Act provides that "the farmland which is not cultivated by oneself shall be deemed land for non-business use for a certain period, as prescribed by Presidential Decree." Therefore, it is clear in the language that the former Income Tax Act delegates details concerning the detailed calculation of the self-employed period or the scope of farmland which is not cultivated by himself/herself to the Presidential Decree. Accordingly, the proviso of Article 168-8 (2) of the former Enforcement Decree of the Income Tax Act provides

Therefore, we cannot accept this part of the plaintiff's assertion.

4. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.