Article 104-3 (Scope of Land for Non-business)

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

The following facts are not disputed between the parties, or can be acknowledged in full view of the purport of the entire pleadings in each entry of Gap evidence 1 through Gap evidence 8-2, Eul evidence 1-1 through Eul evidence 3-3, Eul evidence 9, 10, and 11.

A. In around 1972, the Plaintiff newly constructed a 165 square meters of a factory without permission on the ground of 1037-3 square meters on the ○○-dong, Busan-dong, Busan-dong, 1037-3 (hereinafter “instant land”) and used the instant land as a factory site.

B. Around January 1985, the Plaintiff acquired the ownership of the instant land. On October 20, 2006, the Plaintiff transferred the instant land.

C. From 2002 to 2004, the property tax (the aggregate land tax) on the instant land was imposed with general aggregate taxation from 2002 to 2004, and was imposed with special aggregate taxation in 2005 and 2006.

D. On December 23, 2006, the Plaintiff calculated capital gains tax on the instant land as the standard market price and paid KRW 67,500,630,00 on the grounds that the instant land does not fall under non-business land pursuant to Article 104-31 of the Income Tax Act and Article 168-6 of the Enforcement Decree of the Income Tax Act, on the grounds that property tax was imposed as a separate aggregate taxable object in 2005 and 2006.

E. However, on April 3, 2007, the Defendant, on the ground that the instant land constitutes non-business land under Article 104-31 of the Income Tax Act and Article 168-6 of the Enforcement Decree of the Income Tax Act, issued a correction and notification of capital gains tax of KRW 786,180,120 (hereinafter “instant disposition”).

F. On July 2, 2007, the Plaintiff filed an appeal with the National Tax Tribunal, but was dismissed on November 16, 2007.

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The plaintiff's assertion

(A) According to Article 104-31 of the Income Tax Act, land, other than farmland, forest land, and stock farm land, the property tax of which is subject to separate aggregate or separate taxation under the Local Tax Act, does not constitute land for non-business use.

(B) However, the imposition of property tax under the Local Tax Act is based on Article 190 of the Local Tax Act as of June 1 of each year, based on the current status of use as of the tax base date, and is determined regardless of the current status of the entire holding period by adopting the taxation method by the point of time classified as general aggregate taxation, separate aggregate taxation, or separate taxation, and there is no land subject to general aggregate taxation

(C) Therefore, it is reasonable to determine whether land for non-business purposes constitutes land for non-business purposes other than farmland, forest land, and stock farm land pursuant to Article 168-6 of the Enforcement Decree of the Income Tax Act, which provides that land for non-business purposes shall be determined according to the standard of holding period, according to the details on which

(D) Since the instant land was subject to the property tax on the land subject to separate taxation in 2005 and 2 years in 2006 from October 20, 2006, which was the date of transfer, on October 20, 2006, the land of this case was not the land subject to non-business under the provisions of Article 168-6 1 (b) of the Enforcement Decree

(E) Nevertheless, the Defendant, as land annexed to an unauthorized factory, is subject to property tax under general aggregate taxation, but since it was newly established on January 5, 2005 pursuant to Article 131-2 of the Enforcement Decree of the Local Tax Act, the period of separate aggregate taxation is deemed from January 5, 2005 to October 20, 2006, which is the time of transfer of the instant land, and thus, the instant land was determined as non-business land on the ground that the period exceeding one year from the three years immediately preceding the transfer date falls under the non-business land.

(F) However, in order to view the pertinent land from January 5, 2005 when the relevant provisions were amended and enforced to October 20, 2006, which was the time of transfer of the instant land, the period of special aggregate taxation, unlike the Local Tax Act, there is a legal basis to determine whether it constitutes land subject to special aggregate taxation during the holding period, according to the current status of the entire period, unlike the Local Tax Act.

(G) Since the Defendant’s determination of land subject to special aggregate taxation without any legal basis is contrary to the application of the Act and the strict interpretation of the tax-related Acts, the instant disposition is unlawful.

(2) The defendant's assertion

The land of this case is land annexed to an unauthorized factory, which was subject to property tax due to general aggregate taxation before January 5, 2005. Since the land of this case was subject to special aggregate taxation from January 5, 2005, the period during which the land of this case was subject to special aggregate taxation was subject to separate aggregate taxation from January 5, 2005, when the relevant regulations were amended and enforced until October 20, 206, and thus, the land of this case constitutes land for non-business use since it was merely 10 months from January 5, 2005 to October 20, 206.

(b) Related statutes;

Article 96 (Value of Transfer)

Article 104-3 (Scope of Land for Non-business)

Article 168-6 (Standards for Period of Non-business Land)

Article 182 (Classification of Objects of Taxation)

Article 131-2 (Scope of Land Subject to Separate Taxation)

Article 234-15 (Tax Base)

Article 194-14 (Scope of Land Attached to Buildings)

C. Determination

The issue of this case is whether the land of this case constitutes a non-business land under the Income Tax Act, and, on the premise thereof, whether the period under each item of Article 168-6 (1) of the Enforcement Decree of the Income Tax Act can be interpreted as a taxable year for property tax

According to Article 96 (2) 8 of the former Income Tax Act (amended by Act No. 8144 of Dec. 30, 2006; hereinafter the same), in cases of non-business land, capital gains tax shall be paid at the actual transaction price. According to Article 104-3 (1) 4 (b) of the former Income Tax Act and Article 168-61 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 19890 of Feb. 28, 2007; hereinafter the same shall apply), in cases where the ownership period of land is five years or more, the period exceeding two years between the five years immediately preceding the date of transfer, and the period exceeding 1 year between the three years immediately preceding the date of transfer, which is not the separate aggregate of property tax under the provisions of the Local Tax Act or the land subject to separate taxation for 20/100 of the two years or more.

However, in light of the fact that the "period" under Article 104-3 (1) 4 (b) of the former Enforcement Decree of the Income Tax Act and Article 168-6 (1) of the former Enforcement Decree of the Income Tax Act is the "period of time" under Article 104-3 (1) 4 (b) of the former Income Tax Act and the "period of time" under Article 168-6 (1) of the former Enforcement Decree of the Income Tax Act, and the transfer income tax is imposed on the gains accruing during the period of possession, it shall be determined by considering not only the time of transfer but also the period used for the business during the period of possession, and it is possible to determine whether the land in this case

In addition, as seen earlier, the instant land was subject to aggregate taxation of property tax pursuant to the provisions of the former Local Tax Act (amended by Act No. 7332 of Jan. 5, 2005) and the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 188669 of Jan. 5, 2005) as land annexed to an unauthorized factory, pursuant to Article 234-15 of the former Local Tax Act and Article 194-14 of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 18869 of Jan. 5, 2005). Since the Local Tax Act and the Enforcement Decree were amended on Jan. 5, 2005, the period during which the instant land was subject to aggregate taxation of property tax under Article 131-2 (1) 1 of the Enforcement Decree of the Local Tax Act was about 10 months from Jan. 5, 2005 to Oct. 20, 206.

Therefore, since the land of this case constitutes a non-business land as the period of separate taxation of property tax during the 3 years immediately preceding October 2006, which is the transfer date, is not less than 2 years, it constitutes a non-business land. Thus, the disposition of this case calculated based on the actual transaction price is lawful.

3. Conclusion

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