Cho High Court Decision 2016Da627 (O6. 17)

The burden of proof on the requirements for reduction or exemption of the capital gains tax for not less than 8 years lies on the taxpayer claiming exemption.

In the manner prescribed by Presidential Decree, direct cultivation means that a resident engages in the cultivation of crops or the growing of perennial plants on his/her own land at all times, or the cultivation or cultivation with his/her own labor at least half of the farming works, and the burden of proof for such reduction or exemption requirements is legitimate because the Plaintiff, who is the person liable to pay capital gains tax, has no other burden of proof.

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

2016Guhap494 Revocation of Disposition of Imposing capital gains tax

AA

BB Director of the Tax Office

June 28, 2017

August 9, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of capital gains tax of KRW 35,163,090 and local income tax of KRW 3,516,300 against the Plaintiff on November 4, 2015 shall be revoked.

1. Details of the disposition;

A. On April 11, 2002, the Plaintiff acquired the ownership of D3 Da3, 2383-1, 652 square meters (hereinafter “instant land”). On November 1, 2013, the Plaintiff completed the registration of ownership transfer for sale on October 31, 2013 to KimE.

B. On January 22, 2014, the Plaintiff filed a return on capital gains tax by applying the reduction or exemption of capital gains tax on the ground that the instant land constitutes land directly cultivated for at least eight years under Article 69 of the former Restriction of Special Taxation Act (amended by Act No. 13560, Dec. 15, 2015; hereinafter the same) to the Defendant.

C. On November 10, 2015, the Defendant issued an on-site investigation with respect to the Plaintiff, deeming that the Plaintiff did not directly cultivate the instant land for at least eight (8) years, and subsequently corrected and notified KRW 35,163,090 to the Plaintiff on November 10, 2015 (hereinafter “instant disposition”).

D. On June 17, 2016, the Tax Tribunal rendered a decision to dismiss the Plaintiff’s request on the grounds that the Plaintiff appealed and filed an appeal with the Tax Tribunal.

Facts without dispute over the basis of recognition, Gap evidence 7, Eul evidence 1 and 2, and the purport of the whole pleadings

2. Summary of the plaintiff's assertion

After acquiring the instant land, the Plaintiff did not grant capital gains tax reduction or exemption pursuant to the former Restriction of Special Taxation Act, but did not directly cultivate crops, such as vegetables, from the instant land for at least eight years. The instant disposition that corrected and notified the capital gains tax is unlawful.

3. Relevant statutes;

It is as shown in the attached Form.

4. Determination

Article 69 (1) of the former Restriction of Special Taxation Act provides that the tax amount equivalent to 100/100 of capital gains tax shall be reduced or exempted for income accruing from the transfer of land prescribed by Presidential Decree among the land that a resident prescribed by Presidential Decree residing in the seat of farmland has cultivated directly for at least eight years by means prescribed by Presidential Decree. Article 66 (13) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 26070, Feb. 3, 2015; hereinafter referred to as the "Enforcement Decree of the Restriction of Special Taxation Act") provides that "Direct farming means that a resident is engaged in cultivating crops or growing perennial plants on his/her own land at all times or by cultivating or cultivating 1/2 or more of them with his/her own labor. The burden of proof for such reduction requirements is against the Plaintiff who is a person liable to pay capital gains tax (see, e.g., Supreme Court Decision 2002Du7074, Nov. 22, 2002).

In full view of the following facts and circumstances acknowledged based on evidence evidence of the evidence Nos. 3 and 4 (including each number), the evidence submitted by the Plaintiff alone is insufficient to recognize that the Plaintiff was engaged in cultivating crops in the instant land for at least eight years or engaged in cultivating at least 1/2 of the farming work with the Plaintiff’s labor force, and there is no other evidence to acknowledge otherwise. Accordingly, the instant disposition is lawful, and the Plaintiff’s assertion is without merit.

(1) Article 69 of the former Restriction of Special Taxation Act is reasonable to interpret the language and text of the land directly cultivated by a resident of the farmland for at least eight years in order to protect and promote the development and encouragement of agriculture by reducing the tax burden. However, on the other hand, the relevant provision may be abused as a means of tax evasion.

② From October 1, 1994 to December 1, 2016, the Plaintiff operated a single set of “FF short-term bank” (the opening date of the FF short-term bank located 1973-19, 199 at the time of business registration). Meanwhile, the amount of income and amount of income (the global income tax return) reported by the Plaintiff as the above Han short-term business operator on October 1, 1994 is October 20, 203. The closing date is January 20, 2003. The opening date of the FF short-term bank located 38, H Dong-dong, H on December 20, 1996. The closing date is December 1, 2016.

③ As seen earlier, according to the details of global income tax return filed between 2002 and 2013, the Plaintiff’s annual sales size from KRW 71,611,00 to KRW 178,116,000, which was reported by the Plaintiff. In light of the Plaintiff’s business size, etc., it is difficult to deem that the Plaintiff continued to cultivate the instant land by continuously cultivating the instant land by using the temporary closure time, etc. of the said temporary shutdown point, or by inserting one-half or more self-help force from the instant land.

④ Although the Plaintiff asserted that the instant land was used as farmland on the ground of aerial photography, etc. from 2003 to 2013 regarding the instant land, it is insufficient to readily conclude that the said land was used as farmland for the said period solely based on the foregoing materials. Even if the instant land was used as farmland, such circumstance alone does not lead to the presumption that the Plaintiff used the instant land. Rather, there is no objective evidence, such as the Plaintiff’s sales performance of crops cultivated by the Plaintiff during the retention period or the materials purchased agricultural organizations and farming materials. According to the sales by traders issued by the Seoul Agricultural Cooperative Branch, the Plaintiff only purchased agricultural chemicals and fertilizers in total nine times in 209, 204, 2011, and 2012, and it is difficult to view each evidence submitted by the Plaintiff as evidence, in addition to the documents that can be issued by the Plaintiff, such as farmland ledger, membership certificate, etc., which are evidence submitted by the Plaintiff, even if not cultivated agricultural crops by its own labor force.

⑤ It is difficult to believe the content of each letter of confirmation submitted by the Plaintiff’s neighboring residents Park II and SongJ as it is, without specific reference, to the effect that it is reasonable to conclude that the Plaintiff’s performance of farming operations at any time and without any specific reference. Unless specific evidentiary materials related to the Plaintiff’s actual cultivation for at least eight years are supported.

5. Conclusion

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