[1] The purpose and the scope of application of Article 85 of the former Restriction of Special Taxation Act, which is a special provision on capital gains tax on real estate for public works within the speculative designated area

[2] The case holding that the transfer income tax under Article 85 of the former Restriction of Special Taxation Act is not subject to special taxation since the acquisition of land in the relevant area before the designation as an speculation designated area was made after the second anniversary retroactively from the public interest project approval date

[1] The purpose of Article 85 of the former Restriction of Special Taxation Act (amended by Act No. 7839 of Dec. 31, 2005), which is a special provision for taxation of capital gains tax on real estate for public projects in an speculative designated area, is to relieve taxpayers' tax burden and facilitate implementation of public projects at the same time by allowing the transfer value and acquisition value to be based on the standard market price, not the actual transaction value, in the case of real estate in an speculative designated area, which is transferred or expropriated for public interest. However, in light of the legislative purpose, form, and content of the above provision, the acquisition of real estate after the project plan or designation as an speculative designated area is highly likely to cause speculative demand. In light of the legislative purpose, form, and content of the above provision, the acquisition prior to the date specified in the comprehensive title, which is one of the requirements for taxation of capital gains tax under the above provision, requires the acquisition prior to the date specified in each subparagraph 1 of the above subparagraphs, and the date specified in each subparagraph.

[2] The case holding that the transfer income tax under Article 85 of the former Restriction of Special Taxation Act (amended by Act No. 7839 of Dec. 31, 2005) is not subject to special taxation since the land was acquired in the pertinent area before it was designated as an speculation designated area, since it was acquired after two years retroactively from the public interest project approval date

[1] Article 85 of the former Restriction of Special Taxation Act (amended by Act No. 7839 of Dec. 31, 2005) / [2] Article 85 of the former Restriction of Special Taxation Act (amended by Act No. 7839 of Dec. 31, 2005) (amended by Act No. 7839 of Dec. 31, 2005)

Plaintiff

The Director of the National Tax Service

Daejeon High Court Decision 2006Nu864 decided October 19, 2006

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

1. Article 85 of the former Restriction of Special Taxation Act (amended by Act No. 7839, Dec. 31, 2005; hereinafter “former Special Taxation Act”) provides for a resident’s transfer of real estate within the designated area under Article 96(1)6-2 of the former Income Tax Act (hereinafter “State-designated area”) to the relevant business operator on or before the date stipulated in each subparagraph of Article 85 of the former Special Taxation Act (amended by Act No. 7837, Dec. 31, 2005; hereinafter the same shall apply) to the acquisition of real estate within the designated area under each subparagraph of Article 96(1)6-2 of the same Act (hereinafter “State-designated area”) to the extent that the transfer of such real estate to the relevant business operator (including expropriation) is prohibited by the Act on the Acquisition of Land, etc. for Public Works and the Compensation Therefor, and the purport of the former Special Taxation Act provides for the date of expropriation within the designated area’s scope of the acquisition price and the date of such transfer price within the designated one year retroactive.

In light of the legislative purpose of the provision on special taxation of capital gains tax on real estate for public works within the speculative designated area, the form of the above provision, and the legal text, it is reasonable to interpret that the acquisition prior to the date specified in the above subparagraph of Article 85, which is one of the requirements for the application of special taxation of capital gains tax under Article 85 of the former Act, is subject to the acquisition prior to the date specified in the above subparagraph 1 and each date specified in the above subparagraph 1.

In the same purport, the court below held that the Plaintiff’s land acquisition date ( February 11, 2003) of this case constitutes a case where the designation date (the date of notification) of a prospective project area for the land of this case is less than five years retroactively from the public announcement date of the project approval, even if it is earlier than May 29, 2003, which is the date of the designation of an area designated as an area designated as an speculative area, and thus, the land of this case is acquired on or after August 11, 2002, which was later than the second anniversary from the public announcement date of the project approval, so long as it is acquired on or after August 11, 2002, after August 11, 2002, the date of the public announcement of the project approval, it is proper to determine that the land of this case does not fall under the subject of the special taxation of capital gains tax under the above provision, and it does not violate the principle of proportionality or the principle of equality under the Constitution.

2. In addition, in light of the records, there is no evidence to acknowledge that the court below made a statement that the transfer income tax should be levied on the plaintiff according to the standard market price when the party related to the Korea Rail Network Authority, who is a project operator, would respond to a negotiation on the land of this case, and even if such fact is acknowledged, there is no evidence to deem that the defendant, who is the tax authority, ordered any public opinion that is trusted to the plaintiff, and rejected the plaintiff's assertion that the disposition of this case is unlawful in violation of the principle of trust and good faith, and there is no violation of the rules of evidence or

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Ji-hyung (Presiding Justice)