Land incorporated into a general residential area among urban areas under the National Land Planning Act;

Although non-use land was designated as an urban area under the National Land Planning and Utilization Act, there is no evidence to acknowledge that the use as a general residential area has been specially limited circumstances beyond the ordinary limit according to its original purpose due to changes in urban planning, etc.

Article 104-3 of the Income Tax Act, Article 168-14 of the Enforcement Decree of the Income Tax Act

2016Gudan179 Revocation of Disposition of Imposing capital gains tax

AA

BB Director of the Tax Office

on October 1, 2016

October 12, 2016

1. The plaintiff's claim is dismissed.

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

The Defendant’s notification of correction of KRW 20,448,100 of capital gains tax against the Plaintiff on August 13, 2015 is revoked (the purport of the claim is stated as the disposition imposing capital gains tax on August 1, 2015, but it is evident that the Plaintiff claims the cancellation of the said notification in light of the content of the cause of the claim).

1. Details of the disposition;

A. On March 25, 1972, the Plaintiff acquired 48-17 paddy-dong 48-17 m2,901 m2. Of the above land before subdivision, the Plaintiff was designated as an urban area (general residential area) under the National Land Planning and Utilization Act (hereinafter “National Land Planning Act”) on November 21, 1996, and was designated as an urban area (class 2 general residential area) under the same Act on July 1, 2003 (hereinafter “the instant land portion”), and the rest of 1,472.37 m2. Since the said land before subdivision was designated as a road. The said land before subdivision was divided into 48-17 m2,979 m2, 48-138 m2, 495 m2, 48-1395 m2, 1996.

B. On November 28, 2014, the Plaintiff transferred each land above EE Development Co., Ltd. (hereinafter “instant transferred land”) to KRW 320 million. Of the instant transferred land, the instant part of the transferred land constitutes non-business land under the main sentence of Article 104-3(1)1(b) of the Income Tax Act, and reported and paid KRW 76,421,450, capital gains tax for the transfer income tax for the year 2014, by excluding the special long-term holding deduction.

C. Since then, the Plaintiff asserted that the part of the instant land does not constitute non-business land, and claimed that KRW 76,421,454 should be corrected to KRW 55,973,349 and the difference of KRW 20,448,100 should be refunded by additionally deducting KRW 53,810,80,000. The Defendant refunded this on May 29, 2015.

D. However, on August 13, 2015, the Defendant notified the Plaintiff of the correction of KRW 20,448,100 for the transfer income tax of August 13, 2014 (hereinafter “instant disposition”).

E. On October 26, 2015, the Plaintiff filed an appeal on the instant disposition, but on October 26, 2015

12.22. The dismissal was made.

[Reasons for Recognition] Facts without dispute, Gap 1 to 5 evidence, Eul 1 and 2 evidence (including each number), the purport of the whole pleadings

2. Determination on the legitimacy of the disposition

A. The plaintiff's assertion

The Plaintiff acquired the instant transferred land before and after the time of transfer, and continuously cultivated crops until the time of transfer. In the middle, the instant transferred land was included in a general residential area among urban areas under the National Land Planning Act, and part of the transferred land was determined as urban planning facilities. Thus, it is impossible for the instant transferred land to be developed independently and used for residential purposes as well as for farmland incorporated into an urban area. The administrative authorities did not commence any project for 20 years after the designation of a residential area. Therefore, considering the purport of Article 104-3(1) of the Income Tax Act, such as the suppression of real estate speculation demand, the stabilization of real estate market, and the thorough redemption of speculative profits, the instant transfer land constitutes an unlawful land for any inevitable reason as stipulated in Article 168-14(1)4 of the Enforcement Decree of the Income Tax Act, since it falls under an inevitable reason as stipulated in Article 83-5(1)12 of the Enforcement Rule of the Income Tax Act, and its disposal cannot be seen as being unlawful for any reason other than the relevant urban planning project.

B. Relevant statutes

former Income Tax Act (Amended by Act No. 12852, Dec. 23, 2014; hereinafter referred to as the "former Act")

(1) The term "land for non-business use" in Articles 96 (2) 8 and 104 (1) 8 means the land falling under any of the following subparagraphs for the period prescribed by Presidential Decree among the period during which the relevant land is owned:

1. A paddy field, dry field, or orchard (hereafter referred to as "farmland" in this Article), which falls under any of the following items:

(b) Farmland located in an urban area (excluding an area prescribed by Presidential Decree; hereafter the same shall apply in this subparagraph) under the National Land Planning and Utilization Act among the Special Metropolitan City, Metropolitan Cities (excluding any Gun located in a Metropolitan City; hereafter the same shall apply in this paragraph), Special Self-Governing City (excluding an Eup/Myeon area in a Special Self-Governing City; hereafter the same shall apply in this paragraph), Special Self-Governing City (excluding an Eup/Myeon area in an administrative city established pursuant to Article 15 (2) of the Special Act on the Establishment of Jeju Special Self-Governing Province and the Development of Free International City; hereafter the same shall apply in this paragraph) and a Si area (excluding an Eup/Myeon area in a Si combined with rural communities under Article 3 (4) of the Local Autonomy Act; hereafter the same shall apply in this subparagraph): Provided, That farmland, the period prescribed by Presidential Decree of which has not elapsed since its owner resides in the area as farmland and cultivated by himself

(2) In applying paragraph (1), where the land falls under any subparagraph of paragraph (1) due to the prohibition of use of the land under Acts after acquisition or other inevitable reasons prescribed by Presidential Decree, such land may not be deemed the land for non-business use, as prescribed by Presidential Decree.

(3) In applying paragraphs (1) and (2), necessary matters concerning the scope of sites for farmland, forest and stock farms shall be prescribed by Presidential Decree.

Enforcement Decree of the Income Tax Act (hereinafter referred to as the "Enforcement Decree of the Act").

(1) Pursuant to Article 104-3 (2) of the Act, any land falling under any of the following subparagraphs shall be deemed land not falling under any subparagraph of Article 104-3 (1) of the Act during the period prescribed in the relevant subparagraph, and shall be determined whether it falls under the non-business land under the same paragraph (hereinafter referred to as "non-business land"):

4. Land falling under inevitable causes prescribed by Ordinance of the Ministry of Strategy and Finance in consideration of public interest, legal restrictions due to corporate restructuring or inevitable reasons, the current status, reasons for acquisition or utilization status, etc. of the land: Period prescribed by Ordinance of

Enforcement Rule of the former Income Tax Act (Amended by Ordinance of the Ministry of Strategy and Finance No. 479, Mar. 13, 2015; hereinafter referred to as the "Enforcement Rule of the former Act").

(1) Pursuant to Article 168-14 (1) 4 of the Decree, any land falling under any of the following subparagraphs shall be deemed land not falling under any subparagraph of Article 104-3 (1) of the Act and determined as to whether it falls under the non-business land under the same paragraph during the period prescribed in the relevant subparagraph.

12. After acquiring the relevant land, the land which is not used for the project due to the justifiable reasons other than the reasons of subparagraphs 1 through 11, such as changes in urban planning: Period wherein the relevant causes have occurred.

C. Articles 96(2)8 and 104(1)8 of the former Act stipulate that capital gains tax shall be imposed on the transfer of land for non-business use, and Article 95(2) of the former Act excludes special deduction for long-term holding. Meanwhile, Article 83-5(1) of the former Enforcement Rule delegated by Article 168-14(1)4 of the former Enforcement Decree of the Act provides that when determining whether the land for non-business use is land with heavy capital gains tax under each subparagraph of Article 83-5(1) of the former Enforcement Rule of the former Enforcement Rule, the period during which the relevant land is not deemed non-business use, and Article 104(2)12 of the former Enforcement Rule provides that "in the case of land not used for business due to justifiable reasons, such as alteration of urban planning,

In light of the language, purport, etc. of these provisions, “land not used for business due to justifiable grounds, such as modification of urban planning” under Article 83-5(1)12 of the Enforcement Rule of the Act refers to land, the use of which is specially restricted beyond the ordinary limit according to its original purpose by modification, etc. of urban planning (see, e.g., Supreme Court Decision 2010Du18543, Oct. 24, 2013). However, as the instant land was designated as an urban area (general residential area) under the National Land Planning Act, there is no evidence to acknowledge that the use of a general residential area as a general residential area goes beyond the ordinary limit according to its original purpose due to the alteration, etc. of urban planning, and there is no evidence to acknowledge that there was a special reason to recognize that the use of the land as a general residential area goes beyond the ordinary limit according to its original purpose (the circumstances alleged by the Plaintiff cannot be deemed as a special restriction exceeding the ordinary limit according to its original purpose.

However, considering that the legislative purpose of this case is to restrain speculative demand for land by classifying the land transferred by an individual as the land for non-business, which is not used for productive purpose according to the actual demand, without using the transfer income tax for non-business land as a means of property increase, and imposing the transfer income tax, it is difficult to view this case as an exception where it can not be used for productive purpose due to the actual demand for land due to public interest or inevitable reasons, or inevitable reasons for which an individual cannot be held responsible.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit.