2017-Gu-3436 ( dated 28, 2017.09)

The term "period" in Article 66 (14) of the Enforcement Decree of the Restriction of Special Taxation Act means one year in the taxable period, and the Housing Construction and Sales Business Act is not an income.

In the event that income exceeding 37 million won is generated, the term "period excluded from the cultivated period" shall be deemed to be one year from January 1 to December 31 of the year in which the income is generated, and the Housing Construction and Sales Business Act does not fall under the income excluded from Article 66 (14) of the Enforcement Decree of the Restriction of Special Taxation Act.

Article 66 of the Enforcement Decree of the Restriction of Special Taxation Act (Reduction or Exemption of Transfer Income Tax for Self-Cultivating Farmland) Article 5 of the Income Tax Act

Daegu District Court-2017-Gu Partnership-24822

○ ○

○ Head of tax office

.05.10

8.06.21

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of capital gains tax of KRW 67,933,520 against the Plaintiff on May 1, 2017 is revoked.

1. Details of the disposition;

A. On June 3, 2005, the Plaintiff purchased 1,321 square meters (hereinafter “instant land”) prior to 000, Daegu ○○-dong, 000, and completed the registration of ownership transfer on the 13th of the same month.

B. On December 17, 2014, the Plaintiff concluded a sales contract with AA to sell the instant land in KRW 370 million, and completed the registration of ownership transfer for the instant land in the future of AA on January 21, 2015.

C. On February 28, 2015, the Plaintiff filed a preliminary return on capital gains tax applying the reduction rate of 100% on the ground of transfer of self-owned farmland to the Defendant for at least eight years.

D. Meanwhile, the Plaintiff engaged in the sales business of newly built houses, and generated business income of KRW 65,065,00 in 207, and KRW 61,381,419 in 2008, and filed a final return on the tax base of each income tax.

E. On May 1, 2017, the Defendant: (a) deemed that the instant land does not meet the requirements for reduction and exemption of self-farmland for at least eight years; (b) excluded the application of the said reduction and exemption provisions; and (c) subsequently, issued a correction and notification of KRW 67,93,52 of the transfer income tax for the year 2015 (hereinafter “instant disposition”).

F. On July 20, 2017, the Plaintiff appealed to the Tax Tribunal, but the Tax Tribunal rendered a decision to dismiss the said claim on September 28, 2017.

G. The statutes related to the instant disposition are as stated in the relevant statutes.

Facts that there is no dispute over recognition, Gap's evidence 1 through 4 (including a Serial number), Eul's evidence 1, and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Article 66(14) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 26959, Feb. 5, 2016; hereinafter referred to as the "former Restriction of Special Taxation Act") provides that "where ...... is a taxable period in which the total amount of gross wages exceeds 37 million won, the period" shall be excluded from the period cultivated by the relevant decedent or resident, and "the taxable period" and "the period" shall not be deemed the same period, and it conforms with the purpose of the law to realize the principle of free competition by protecting the relevant self-employed farmer.

Article 66 (14) of the former Enforcement Decree of the Restriction of Special Taxation Act is a provision for classifying those who want to be exempted from capital gains tax without real cultivation. Therefore, the standard of determining whether capital gains tax has been reduced or exempted is whether they have actually cultivated rather than income amount.

From 2007 to 2008, the Plaintiff actually carried on a new house construction sales business for about 11th day of the month. However, the instant disposition that did not recognize a period of self-determination for the entire taxable period of 2007 and 2008 on the sole basis of the income exceeding 37 million won is in violation of the principle of substantial taxation.

2) According to the contents and scale of the newly built house sales business run by the Plaintiff, it is sufficiently possible for the Plaintiff to establish a farmer on the instant land even if the Plaintiff runs the said business. Considering the purport that Article 66(14) of the former Enforcement Decree of the Restriction of Special Taxation Act excludes business income from real estate rental business, the instant disposition that the Plaintiff did not recognize the specificity of the nature of the newly built house sales business that the Plaintiff

3) Ultimately, the Plaintiff’s transfer of the instant land to another person while cutting down the instant land for at least eight (8) years from June 13, 2015 to January 21, 2015. As such, the Plaintiff’s transfer of the instant land constitutes the requirement for reduction of self-farmland for at least eight (8) years. Accordingly, the instant disposition is unlawful as it is erroneous for the interpretation of the requirements for reduction of self-farmland.

B. Determination

1) Interpretation of relevant provisions

The main sentence of Article 69(1) of the former Restriction of Special Taxation Act (amended by Act No. 13560, Dec. 15, 2015; hereinafter referred to as the "former Restriction of Special Taxation Act") provides that "the amount of tax equivalent to 100/100 of capital gains tax shall be reduced or exempted for the income accruing from the transfer of land prescribed by Presidential Decree among the land directly cultivated by a resident prescribed by Presidential Decree who resides in the seat of farmland for at least eight years prescribed by Presidential Decree, and Article 66(1) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "the resident prescribed by Presidential Decree who resides in the seat of farmland" shall be "the land prescribed by Presidential Decree", paragraph (4) provides that "the direct cultivation" in the manner prescribed by Presidential Decree, and paragraph (14) provides that "business income under Article 19(2) of the Income Tax Act (excluding income accruing from agriculture or forestry and side business income accruing from real estate rental) during the cultivation period and Article 20(2) provides that "the total amount of wages for at least 214.27 million won shall be transferred.14.

According to the above provisions’ form, language, content, legislative purport, and the principle of equity, etc., the term “taxable period” under Article 66(14) of the former Enforcement Decree of the Restriction of Special Taxation Act refers to “one year from January 1 to December 31 as stipulated in Article 5(1) of the Income Tax Act,” and such interpretation does not violate the principle of substantial taxation or violates the principle of tax equality.

① In light of the principle of no taxation without law, or the requirements for tax exemption or tax exemption, the interpretation of tax laws shall be interpreted in accordance with the text of the law, barring any special circumstances, and it shall not be permitted to expand or analogically interpret without reasonable grounds. In particular, it accords with the principle of fair taxation to strictly interpret that the provisions that clearly indicate preferential provisions among the requirements for tax exemption or exemption conform

② Since the former Restriction of Special Taxation Act or its Enforcement Decree provides for special cases concerning reduction and exemption of capital gains tax, etc. on the premise of the Income Tax Act, it is reasonable to interpret the phrase as the definition of the Income Tax Act, unless otherwise provided for in the above Acts and subordinate statutes.Article 5(1) of the Income Tax Act provides that "the taxable period of the income tax shall be one year from January 1 to December 31 under the title "taxable period". Thus, there is no provision defining "taxable period" in the former Restriction of Special Taxation Act or the Enforcement Decree thereof other than the definition provision above. Therefore, the term "taxable period" under Article 66(14) of the former Enforcement Decree of the Restriction of Special Taxation Act should be interpreted as "one year from January 1 to December 31 of the corresponding year."

③ Under Article 66(14) of the former Enforcement Decree of the Restriction of Special Taxation Act, the term "period" is used. In this context, in light of the ordinary meaning of the structure and text of the above provision and the general examples of use, it is reasonable to interpret that "the preceding taxable period" is referred to as "the preceding taxable period". Therefore, if income exceeding 37 million won accrues pursuant to Article 66(14) of the Enforcement Decree of the same Act, the term "the period excluded from the cultivated period" shall be deemed as one year from January 1 to December 31 of the year in which the pertinent income accrues.

④ Article 66(14) of the former Enforcement Decree of the Restriction of Special Taxation Act is not based on the exclusion from actual farming, but on the basis of whether there is a taxable period above a certain amount of salary. This is to supplement the method of calculating a period of self-sufficiency when capital gains tax is reduced or exempted for self-owned farmland in 8 years, and it is inevitable for a person with a job to cultivate crops which are living things to have a large amount of effort, time, and labor force. It seems that it is difficult for a person with a job to have a total amount of 37 million won or more to put into such efforts, etc. in reality. Even if it is possible, it seems to reflect the situation that it is not easy for a person with a job to have a total amount of 37 million won or more to put into the above efforts. Therefore, it seems that the special taxation of capital gains tax is not imposed on such a person, and thus, it appears that the whole year in which income exceeding 37

(5) It does not seem that there are any special circumstances to deem that an administrative agency’s discretion in administrative legislation regarding the establishment of a certain standard within the scope of delegation by the mother law has discretion in administrative legislation, and that the establishment of a standard to exclude income of at least 37 million won per year and income generated from real estate rental business, etc. does not include a newly built house sales business in itself nor include it merely an unreasonable or arbitrary standard.

6. Article 66(14) of the former Enforcement Decree of the Restriction of Special Taxation Act lists real estate rental business, etc. on the other hand, while the said provision does not stipulate a new house construction business. The exclusion of income generated from real estate rental business is due to the administrative legislative determination that the efforts, time, labor force, etc. to be put in are less than those of other businesses. Therefore, it is difficult to view that the reduction and exemption of real estate rental business, which is not stipulated in the said provision, can be applied by treating the real estate rental business as the same as the real estate rental business, and it may result in the marizing of the principle of no taxation without the law. Therefore, even if the exemption of reduction and exemption under Article 69(1) of the former Restriction of Special Taxation Act from the perspective of the real estate rental

2) Specific determination

From June 13, 2005 to January 21, 2015, the Plaintiff applied for reduction of or exemption from capital gains tax for a period of nine years and seven months from January 21, 2015, while 65,065,00 won in the year 207, and 61,381,419 won in the year 2008, and the Plaintiff filed a final return on the tax base of each income tax.

In addition to the interpretation of the above statutes, when determining whether to grant reduction or exemption under Article 69(1) of the former Restriction of Special Taxation Act to the Plaintiff, the period from January 1, 2007 and December 31, 2008, respectively, which is, the two-year period from January 1 to December 31, 2008, should be excluded from the period cultivated by the Plaintiff under Article 66(14) of the former Enforcement Decree of the Restriction of Special Taxation Act.

Ultimately, the Plaintiff’s self-fluence of the instant land is merely seven years and seven months if the Plaintiff excluded all of the aforementioned two years from the period of nine years and seven months from June 13, 2005 to January 21, 2015, and it does not constitute the requirements for reduction and exemption for the Plaintiff’s self-fluence of farmland for not less than eight years under the above law.

Therefore, the instant disposition that did not apply the reduction or exemption under Article 69(1) of the former Restriction of Special Taxation Act to the Plaintiff is lawful.

3. Conclusion

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