Cho Jae-2017-China-0459 ( April 20, 2017)

Article 66(14) of the Enforcement Decree of the Restriction of Special Taxation Act

When farmland is transferred after the enforcement date of Article 66 (14) of the Enforcement Decree of the Restriction of Special Taxation Act, if the previous business income is at least 37 million won, it shall be excluded from the period of self-election.

Article 66 (14) of the Restriction of Special Taxation Act

2017Gudan8075 Revocation of Disposition of Imposing capital gains tax

KimA

a) the Director of the Tax Office

03.07 03.07

on October 04, 2018

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of capital gains tax of KRW 196,410,820 (including additional tax) for the Plaintiff on October 4, 2016 shall be revoked.

1. Details of the disposition;

A. On April 30, 203, the Plaintiff acquired each of the instant lands at KRW 750,00,000 on November 1, 2015, and reported the transfer income tax on each of the instant lands to the Defendant on January 27, 2016 by applying the reduction and exemption of self-farmland for eight (8) years on each of the instant lands, as described below (b).

B. On October 4, 2016, the Defendant issued the instant disposition on the ground that it failed to meet the requirements for reduction and exemption of self-farmland for eight years from 2003 to 2007, from 2010 to 2012, such as having an annual gross income of at least KRW 37 million, and on the grounds that the Defendant did not meet the requirements for reduction and exemption of farmland for eight years, on the following grounds: (a) the Defendant issued the instant disposition; and (b) notified the Plaintiff of KRW 196,410,820, the difference of KRW 196,410,820.

C. The Plaintiff, who was dissatisfied with the instant disposition, filed an appeal with the Tax Tribunal on April 20, 2017, but was dismissed on April 24, 2017.

Facts that there is no dispute over recognition, Gap's evidence 1 through 5, Eul's evidence 1 and 2, and the purport of the whole pleading

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Despite the fact that eight years have already passed since the acquisition of the instant land at the time of the acquisition of the instant land, the instant disposition that excluded self-taxation reduction and exemption for eight years retroactively applying Article 66(14) of the Enforcement Decree of the Restriction of Special Taxation Act of February 21, 2014, which was unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) According to the main sentence of Article 69(1) of the former Restriction of Special Taxation Act (amended by Act No. 13560, Dec. 15, 2015) (amended by Act No. 13560), among the land cultivated directly by a resident prescribed by Presidential Decree who resides in a location of farmland for at least eight years.

③ As to the above requirements (land prescribed by Presidential Decree), Article 66(4) of the former Enforcement Decree of the Restriction of Special Taxation Act (wholly amended by Presidential Decree No. 26959, Feb. 5, 2016; hereinafter referred to as the "Enforcement Decree of this Act") requires "it shall not be subject to a certain exclusion as farmland cultivated by himself/herself for at least eight years from the time of acquisition to the time of transfer." The Enforcement Decree of this Act, during the period cultivated under paragraphs (4), (6), (11) and (12) of Article 19(2) of the Income Tax Act of the relevant decedent (including his/her spouse; hereinafter the same shall apply) or a resident, for business income under Article 45(2) of the Income Tax Act (excluding income generated from agriculture and forestry, income from a real estate leasing business under Article 9(2) of the Enforcement Decree of the Income Tax Act, and where the total amount of gross income under Article 20(2) of the Enforcement Decree of the same Act exceeds 37 million won, the period of inheritance or transfer of this Act.

2) Transfer income tax is a taxation requirement for transfer and is subject to transfer gains. Whether transfer assets meet the taxation requirements and requirements for reduction or exemption should be determined on the basis of the time of transfer (see, e.g., Supreme Court Decision 2002Du10780, Jun. 24, 2004). Tax laws and regulations should be strictly interpreted regardless of the taxation requirements or the requirement for reduction or exemption. As a result of the reduction or abolition of previous tax reduction or exemption on the transfer of farmland cultivated by oneself, it would be difficult to satisfy the expectation interest of the cultivator of the farmland at the time of the enforcement of the amended Act, unless there is a clear provision that the previous provisions are applied retroactively in the Addenda of the amended Act (generally, where special retroactive provisions are established for the benefit of the farmer of the farmland at the time of the amendment of the tax law, the previous provisions must be applied to the acquisition right or trust of the taxpayer at the time of the enforcement of this Act). It is not excluded from the application of the aforementioned new provisions as an interpretation of the Addenda, which is a transitional provision.

3) Therefore, it is lawful to apply the above provisions to the transfer of each land in this case since July 1, 2014, the enforcement date of Article 69(14) of the Enforcement Decree of this Act, and the Plaintiff’s assertion on this issue is without merit.

4) The Plaintiff should have satisfied the requirements for reduction and exemption of self-farmland for 8 years only for the remainder of the period excluding the relevant taxable period pursuant to Article 66(14) of the Enforcement Decree of the Restriction of Special Taxation Act, since there was no dispute between the parties or recognition by the evidence Nos. 5-1 through 11, the Plaintiff should have satisfied the requirements for reduction and exemption of self-farmland for 2003 to 207 and 2010 to 2012.

However, if the above taxable period is excluded, it is clear that the period of self-sufficiency (from April 30, 2003 to November 11, 2015) of the Plaintiff falls short of eight years even in the calculation, and thus, it did not meet the requirements for reduction and exemption of self-farmland for eight years.

5) Therefore, the instant disposition cannot be deemed unlawful on the ground that it did not reduce or exempt the tax amount under Article 69(1) of the Restriction of Special Taxation Act and Article 66(4) of the Enforcement Decree of the Restriction of Special Taxation Act.

3. Conclusion

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