Article 168-3 of the Enforcement Decree of Income Tax Act

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

Cheong-gu Office

A request for correction of the tax base and amount of capital gains tax filed by the Defendant against the Plaintiff on May 19, 2015

The disposition shall be revoked.

A. On June 19, 2014, the Plaintiff acquired 4,572 square meters, and five parcels (hereinafter referred to as “instant land”) outside of OOO-type OO-type OO-type OO-type, O-type, O-type, O-type, O-type, O-type, and transferred 1,870,000,000 won in total to the non-party 1,870,000,000, as indicated below.

B. On July 31, 2014, the Plaintiff reported and paid KRW 420,289,174 of the transfer income tax for 20 years belonging to the transfer income tax for self-employed farmland for at least eight years prescribed in Article 69 of the Restriction of Special Taxation Act, considering that the instant land falls under the non-business land stipulated in Article 104-3(1) of the former Income Tax Act (wholly amended by Act No. 12852, Dec. 23, 2014; hereinafter “Income Tax Act”).

C. On April 21, 2015, the Plaintiff asserted that the instant land should not be subject to the special long-term holding deduction pursuant to the proviso to Article 104-3(1)1(a) of the Income Tax Act and Article 168-8(3)7 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 25522, Jul. 28, 2014; hereinafter “Enforcement Decree of the Income Tax Act”), and that if the special long-term holding deduction is applied, the Plaintiff requested for refund of KRW 192,191,750 of the capital gains tax reverted to the reduced amount of 2014 (hereinafter “instant request for correction”).

D. On May 19, 2015, the Defendant issued a notice of refusal to apply the special deduction for long-term possession (hereinafter “instant disposition”) to the effect that the instant land falls under the non-business land because it does not meet the “requirements for re-laws under Article 168-8(3)7(a) of the Enforcement Decree of the Income Tax Act that the Plaintiff is registered as a resident and actually resides” and thus, it cannot be applied to the special deduction for long-term possession (hereinafter “the instant disposition”).

E. The Plaintiff appealed and filed an appeal with the Tax Tribunal on July 17, 2015, but the said claim was dismissed on October 30, 2015.

F. Meanwhile, the status of prior entry of the resident registration of Nonparty BB, the spouse of the Plaintiff, is as listed below.

[Reasons for Recognition] Facts without dispute, Gap's statements in Gap's 1, 15 through 18 (including branch numbers in the case of additional numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The proviso to Article 104-3 (1) 1 (a) of the Income Tax Act provides that the cases prescribed by Presidential Decree as farmland that may be owned by the owner under the Farmland Act or other Acts shall be excluded from the land for non-business subject to the application of special long-term holding deduction. According to the delegation by the above Act, Article 168-8 (3) 7 of the Enforcement Decree of the Income Tax Act (hereinafter referred to as the "instant provision") provides that "where the owner is unable to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be re-."

2) Since 1980, the Plaintiff acquired and owned the instant land, and owned it, for a certain period, but directly cultivated the instant land while residing in the location of the instant land, together with BB, who is the spouse.

3) However, the Plaintiff: (a) on December 3, 2009, and (b) on November 26, 2009, the said BB got surgery due to the outbreak of spinal disks; (b) no longer possible to cultivate the instant land; and (c) accordingly, from around 2010, leased the instant land to Nonparty KimCC and cultivated it.

4) The Plaintiff, the owner of the instant land, is deemed to have resided in the O-O's O-O's O-O's O-O's name on the resident registration from July 23, 2010 to March 3, 2013, and thus, did not meet the requirements for re- village and self-development with respect to farmland excluded from non-business land pursuant to the main sentence of Article 104-3(1)1 of the Income Tax Act and Article 168-8(2) of the Enforcement Decree of the Income Tax Act.

5) However, the spouse BB sharing the same livelihood with the Plaintiff had resided in the land of this case for more than five years retroactively from the date on which the Plaintiff could not have been affected by disease, and even after the occurrence of the cause thereof, the spouse BB continued to reside in the land of

6) If so, the instant land does not constitute the land for non-business use by fulfilling the requirements for re- village of the issues of this case. Therefore, even though the instant land is subject to the special long-term holding deduction, the instant disposition rejecting the Plaintiff’s request for correction without considering it should be revoked as unlawful.

B. Defendant’s assertion

1) Under the premise that the instant issues clause is farmland re-established and re-developed for at least five consecutive years retroactively from the date of occurrence of the relevant cause, such as disease, the said clause requires that the Plaintiff’s resident registration shall continue to be re-established even if the owner does not do so even after the date of occurrence of the relevant cause. However, the Plaintiff’s resident registration was made as the OO-O-O-O-O-O- Daegu, Daegu, from December 9, 1988 to May 25, 2010, prior to the date of occurrence of the relevant cause (the date of December 3, 2009).

2) The latter part of item (a) of the main issue clause of this case is about the owner's re- village after the occurrence of the pertinent cause, and it is interpreted that the owner's family members meet the requirements for re-villages after the occurrence of the pertinent cause, and it is not interpreted that the requirements for re-villages of the owner have been met for 5 years or longer prior to the date of occurrence of the pertinent cause, as alleged by the plaintiff. Thus, the land of this case did not meet the requirements for re-villages of the main issue clause of this case.

3) In addition, the Plaintiff asserts that the instant land was leased to Nonparty KimO, thereby satisfying the requirements under Article 168-8 (3) 7 (b) of the Enforcement Decree of the Income Tax Act, but the Plaintiff did not prepare a written lease agreement on the instant land in accordance with Article 24 of the Farmland Act, and obtain confirmation from the head of Si/Gu/Eup/Myeon, and there was no fact that the said land was leased in the farmland ledger, and the said requirements were not satisfied.

C. Relevant statutes

It is as shown in the attached Form.

D. Determination

1) Relevant legal principles

Under the principle of no taxation without law, the interpretation of tax laws and regulations shall be interpreted in accordance with the text of the law, barring any special circumstance, and shall not be extensively interpreted or analogically interpreted without reasonable grounds. In particular, the strict interpretation of the provisions that can be clearly viewed as preferential provisions among the requirements for tax reduction and exemption accords with the principle of fair taxation (see, e.g., Supreme Court Decision 2008Du11372, Aug. 20, 2009). In addition, the provision of the taxation requirements and exceptional non-taxation or tax exemption requirements on the said requirements in the tax law is within the legislative discretion of the legislator unless the provision is significantly unreasonable (see, e.g., Supreme Court Decision 9Du7265, May 29, 2001).

2) Interpretation of the requirements for re- village in the issues of the instant case

In full view of the following circumstances, it is reasonable to interpret that the rehabilitation relationship between a family member and a family member who is deemed to have been the owner of a family member under the latter part of item (a) of the main issue of this case means only after the occurrence of the relevant cause, such as a disease, etc., and does not apply to the owner’s re-village for not less than five years retroactively from the date of the occurrence of the cause. In other words, the owner is required to meet the requirements for re-resident and self-resident for not less than five years retroactively from the date of the occurrence of the cause, and it is not deemed that the owner satisfies the requirements for re-resident

A) Pursuant to the aforementioned legal doctrine, non-taxation or exemption provisions, such as the instant issues clause, should be strictly interpreted in accordance with the legal text, and it is not permissible to interpret the trend or extend interpretation without reasonable grounds.

B) The provision that considers the re-village of the same family in the latter part of the main clause of the instant case as the owner's re-villages is a provision that supplements the requirement that the owner should re-enters even after the occurrence of the relevant cause under the former part of item (a), i.e., the owner should continue to re-enters even after the occurrence of the cause, but it is natural and reasonable to interpret that even if the family living together at the time of the occurrence of the cause continues to re-enters the same after the occurrence of the cause, it would be deemed that the said requirement (the requirements of re-resident after the occurrence of the cause, such as disease

C) According to Article 104-3(1)1 (a) of the Income Tax Act and Article 168-8(2) of the Enforcement Decree following the delegation thereof, farmland which becomes non-business land refers to farmland excluding farmland registered as residents in the location of the farmland and the farmland the owner of which is self-employed. However, as an exception, the proviso to item (a) of the same Act and Article 168-8(2) of the Enforcement Decree thereof stipulate cases where it is impossible for the owner to do so due to inevitable reasons, such as diseases, etc. as an exceptional reason. Therefore, considering the system and legislative intent of the aforementioned statutory provisions, the key provision of the instant case is construed as a provision relaxing the requirements for re-resident’s relationship after the occurrence of the cause, such as illness (the re-resident’s village is considered as the re-resident of the same family

D) Meanwhile, the key issue clause of this case is that "the owner of the land (including the person who was engaged in farming while living together with the owner among the family members under the provisions of Article 154 (6))" is stipulated in items (a) and (b) above. However, it is reasonable to interpret that the provisions of the former sentence and the following items are not applicable to the owner under the provisions of items (a) separately, and that the provisions of item (a) are also applicable mutatis mutandis to the concept of the owner under the provisions of item (a). Furthermore, it is clearly contrary to the principle of extended interpretation and prohibition of analogical interpretation, and the provisions of the Income Tax Act that require the owner's re-domination and self-reliance requirements. Therefore, it is reasonable to interpret that the provisions that include the owner of the family members living together under the above item (a

3) As to the instant case

According to the above legal principles, the Plaintiff cannot be deemed to have re-established for more than five years retroactively from the date of occurrence of the disease, on the grounds that the Plaintiff’s spouse BB, who was living together with the Plaintiff at the time of occurrence of the Plaintiff’s disease, and thereafter, continued to have been re-established at the location of the instant land. Thus, the instant land did not meet the requirements

Therefore, the disposition of this case is legitimate, and the plaintiff's assertion disputing this is without merit.

3. Conclusion

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