8 Whether farmland is subject to reduction or exemption for self-defense

Where farmland does not fall under farmland according to the terms and conditions of a sales contract according to the circumstances of a seller, it shall not be determined whether capital gains tax is reduced or exempted on the basis of whether farmland is farmland as of the date of a sales contract.

Article 69 of the Restriction of Special Taxation Act (Reduction or Exemption of Transfer Income Tax for Self-Cultivating Farmland)

Article 66 of the Enforcement Decree of the Restriction of Special Taxation Act: Reduction or exemption of transfer income tax for self-Cultivating farmland

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of KRW 11,544,340 for the transfer income tax of 2003 as of July 16, 2004 and KRW 3,411,860 for the transfer income tax of 204 as of August 10, 2004 shall be revoked.

1. Disposition of levying transfer income tax of this case

A. The Plaintiff: (a) transferred on December 22, 2003 to ○○○○○○○○ ○○○○ ○○○○ ○○○ ○○○ ○○ ○○ ○○ ○○ ○ ○7 mal. 964m2 (hereinafter referred to as “one land for dispute”); and (b) reported the transfer income tax reduction or exemption to ○○ ○○ ○ ○ ○ ○ ○ ○ ○ ○ ○○ ○ ○ ○○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 1,07mal. 40m2 (hereinafter referred to as “one land for dispute”); and (c) reported the transfer income tax reduction or exemption to ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ on the ground that it transferred on April 26, 2004 the issues 1 and 2 land transfer for more than eight years under Article 69 of the Restriction

B. As to this, the Defendant issued the instant disposition to the Plaintiff on the ground that the Plaintiff’s instant 1 and 2 land obtained a construction permit on January 30, 2003, on the 14 October 2003, 203, on the 2nd issue, respectively, a factory building cannot be deemed as farmland subject to abatement or exemption of capital gains tax as of the 1 and 2nd transfer date, on the ground that the Plaintiff’s 1,544,340 capital gains tax for the transfer of the instant 1 land in July 16, 2004, as to the transfer of the 1st issue, did not constitute farmland subject to abatement or exemption of capital gains tax for the year 203, 3,411,860 capital gains tax for the transfer of the 2nd issue on August 10, 204, respectively.

[Reasons for Recognition] Facts without dispute, Gap evidence 1-1, 2, Eul evidence 1-3, Eul evidence 11 and 12, the purport of the whole pleadings

2. Whether the instant disposition is lawful

(a) Related Acts and subordinate statutes;

Restriction of Special Taxation Act (amended by Act No. 7322 of Dec. 31, 2004)

Article 69 (Abatement or Exemption of Transfer Income Tax for Self-Cultivating Farmland)

(1) With respect to any income accruing from a transfer of land prescribed by the Presidential Decree, of which the resident prescribed by the Presidential Decree, residing in the location of the farmland, has been directly replaced for not less than eight years [not later than December 31, 2005, in case where the farmland in the agricultural promotion area under Article 32 of the Farmland Act is transferred to the Korea Agricultural and Rural Infrastructure Corporation under the Korea Agricultural and Rural Infrastructure Corporation and Farmland Management Fund Act (hereafter in this Article, referred to as the "Korea Agricultural and Rural Infrastructure Corporation") or to such corporation as prescribed by the Presidential Decree, whose main business is the agriculture (hereafter in this Article, referred to as the "agricultural corporation"), not later than five years, and not later than three years, in case where the farmland eligible for subsidies for management transfer direct payments prescribed by the Presidential Decree is transferred to the Korea Agricultural and Rural Infrastructure Corporation or agricultural corporations] and which is prescribed by the Presidential Decree, the tax amount equivalent to 100/100 of the transfer income tax on the income accruing

Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 18704 of Feb. 19, 2005)

Article 66 (Abatement or Exemption of Transfer Income Tax for Self-Cultivating Farmland)

(4) For the purpose of the main sentence of Article 69 (1) of the Act, the term “land as prescribed by the Presidential Decree” means the farmland, which is subject to the payment of management transfer subsidy under paragraph (3), has been cultivated by himself for not less than 8 years (in case of transfer to the Korea Agricultural and Rural Infrastructure Corporation or the corporation under paragraph (2), 5 years; in case of transfer to the Korea Agricultural and Rural Infrastructure Corporation or the corporation under paragraph (2), 3 years) from the time of acquisition until the time of transfer, excluding the farmland falling under any of the following subparagraphs. In this case, in calculating the period of farmland cultivated, the period acquired

(5) The farmland subject to paragraph (4) shall be based on the farmland as of the date of transfer under Article 162 of the Enforcement Decree of the Income Tax Act: Provided, That where a purchaser changes the form and quality of farmland and starts construction in accordance with the terms and conditions of a sales contract prior to the date of transfer, it shall be based on farmland as of the date of a sales contract where construction has been commenced, etc., and where the relevant farmland becomes a reserved land for replotting other than farmland before the date of a replotting disposition and it becomes impossible to cultivate by undertaking

B. Parties’ assertion

The defendant asserted that the disposition of this case is lawful as it is in accordance with the relevant Acts and subordinate statutes. The plaintiff asserted that the ○○, the purchaser of which signed a sales contract on the condition that ○○, who was represented by the plaintiff obtained factory permission on the first and second land between ○○ and received the down payment, agreed to newly construct a factory on the above land with the plaintiff’s consent. Accordingly, the ○○, the purchaser of which was the contract under the sales contract (Evidence A No. 2-1 to 4, No. 13, No. 14) and the transfer contract on June 25, 2003 (Case No. 1 to No. 2-2, Oct. 10, 203) as of October 25, 2003 (Case No. 1 to No. 2) and the 1 to 2-2 land were still used as farmland, and all the commencement of a building made after the date of conclusion of the sales contract, constitutes farmland subject to reduction or exemption by the capital gains tax for at least eight years under the Restriction Act.

C. Determination

(1) Article 66(5) of the Enforcement Decree of the Restriction of Special Taxation Act provides that the determination of farmland subject to capital gains tax reduction shall be based on farmland as of the date of transfer (the main sentence). However, where a purchaser has changed the form and quality of farmland or started construction in accordance with the terms and conditions of a sales contract prior to the date of transfer, the determination of capital gains tax shall be based on whether farmland is farmland as of the date of the sales contract (the proviso), and the purport of the proviso of the above provision is that the determination of capital gains tax shall be made on the basis of whether farmland is farmland as of the date of the sales contract (the proviso), although the purchaser has sold farmland for at least eight years, but the purchaser has failed to be determined as farmland as of the date of transfer due to changes in the form

(2) The Plaintiff asserts that the capital gains tax reduction or exemption should be determined on the basis of whether farmland is farmland as of the date of the sales contract under the proviso to the above provision. Therefore, we examine whether the commencement of construction works, etc. was conducted by a purchaser or a purchaser.

(3) In light of the Plaintiff’s 2, 3, 1 through 3, 6 through 9, 10, 16-1 and 2, and the Plaintiff’s 2, 300,000 won for 2,000 won for 2,000 won for 2,000 won for 2,000 won for 2,000 won for 3,000,000 won for 2,000 won for 2,000 won for 3,000,000 won for 4,000,000 won for 2,000,000 won for 2,000 won for 2,000,000 won for 2,000 won for 3,00,000 won for 2,000 won for 3,000 won for 2,000 won for 2,000 won for 3,000 won for 2,000 won for 3.

(4) If so, it is impossible to determine whether capital gains tax has been reduced or exempted on the basis of whether farmland is farmland as of the date of sales contract under the proviso of the above provision, so this case is lawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed for reasons.

October 11, 2006