Under Article 66(7) of the Enforcement Decree of the Restriction of Special Taxation Act, the standard market price applicable to the "standard market price on the date of incorporation into a residential area, etc. or of obtaining a designation as a planned land substitution" in the formula for calculating income eligible for abatement or exemption from capital gains tax for self-Cultivating farmland under Article 66(7) of the Enforcement Decree of the Restriction of Special Taxation Act (negative)

Article 66 (7) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 21214 of Dec. 31, 2008), which is the formula for calculating income eligible for reduction and exemption from capital gains tax on self-Cultivating farmland, x transfer income amount (hereinafter “transfer income amount”) 】 (Standard market price at the time of acquisition - standard market price at the time of transfer - standard market price at the time of transfer - standard market price at the time of transfer hereinafter “instant formula”) 】 (hereinafter “instant formula”), among “the increase in standard market price from the time of acquisition to the time of transfer,” in which the entire transfer income amount is included in a residential area, etc. or from “the date of acquisition from the time of transfer to the date of transfer, etc.” (hereinafter “the time of transfer”), and thus, it is desirable to apply the officially assessed individual land price at the time of transfer and the time of transfer to increase the validity thereof for each year to which it belongs, and even if the officially assessed individual land price at the time of the immediately preceding year is not known.”

Article 69(1) of the former Restriction of Special Taxation Act (amended by Act No. 9276 of Dec. 29, 2008); Article 66(7) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 21214 of Dec. 31, 2008); Article 99(1)1(a) of the former Income Tax Act (amended by Act No. 8144 of Dec. 30, 2006); Article 164(3) of the Enforcement Decree of the Income Tax Act

See Attached List of Plaintiffs (Law Firm B&S, Attorneys Ba-woon et al., Counsel for the plaintiff-appellant)

the director of the tax office of Western

Seoul High Court Decision 2010Nu16877 decided November 10, 2010

All appeals are dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

Article 69(1) of the former Restriction of Special Taxation Act (amended by Act No. 9276 of Dec. 29, 2008; hereinafter the same shall apply) provides that capital gains tax shall be exempted on any income accruing from the transfer of farmland directly cultivated by a person residing in a location of farmland for not less than eight years, but in cases where the relevant farmland is incorporated into a residential area, commercial area, and industrial area under the National Land Planning and Utilization Act (hereinafter referred to as "residential area, etc.") or a land reserved for replotting, other than farmland, has been designated prior to a disposition of replotting under the Urban Development Act and other Acts, only as prescribed by the Presidential Decree, which is generated from the date of such incorporation into a residential area, etc. or the date of such designation. Article 66(7) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 21214 of Dec. 31, 2008; hereinafter the same shall apply) by calculating the "income prescribed by the Presidential Decree" as mentioned above, and Article 95(1) of the standard market price at the time of the time of land substitution.

Meanwhile, Article 99(1) of the former Income Tax Act (amended by Act No. 8144 of Dec. 30, 2006) provides that “The standard market price pursuant to the provisions of Articles 96(2), 97(1)1(a)1(a)(i), 100 and 114(5)(a) shall be as follows.” As to “land” under subparagraph 1(a)(a) of the same Article, “the officially assessed individual land price pursuant to the Public Notice of Values and Appraisal of Real Estate Act” is stipulated, and Article 164(3) of the Enforcement Decree of the Income Tax Act provides that “in the application of the provisions of Article 99(1)1(a)(a) of the Act, the immediately preceding standard market price shall apply if the land is acquired or transferred before a new standard market price is publicly notified:

Based on the provisions of each of the above Acts and subordinate statutes, since the share of the standard market price from the time of acquisition to the date of incorporation or the date of designation of land substitution (hereinafter “the time of incorporation”) among the total amount of capital gains is divided in proportion to the increase in the standard market price from the time of acquisition to the time of transfer, the amount of capital gains from the time of acquisition to the time of incorporation into a residential area, etc. is estimated, so it is desirable to apply the officially assessed individual land price for each of the year to which the time of acquisition and transfer belongs in order to improve its validity, and Article 164(3) of the Enforcement Decree of the Income Tax Act provides that where the officially assessed individual land price for the relevant year is not publicly announced at the time of acquisition or transfer, if the individual land price for the pertinent year is known after that year, even if the publicly announced individual land price for the pertinent year is not publicly notified, it is reasonable to apply the officially assessed individual land price for the year to which the price belongs, and it does not apply the immediately preceding year on the ground that the officially assessed individual land price for that year was not publicly notified.

After finding the facts as indicated in its reasoning, the lower court determined that: (a) Article 164(3) of the Enforcement Decree of the Income Tax Act provides that the immediately preceding standard market price shall apply to the acquisition or transfer of the farmland before a new standard market price is publicly announced; (b) since all of the farmland in this case was settled by consultation or expropriation between June 2005 and July 2006, the standard market price was publicly announced in 2005; (c) the proviso of Article 69(1) of the former Restriction of Special Taxation Act restricts the reduction or exemption of capital gains tax on self-employed farmland; (d) it is necessary to strictly interpret and apply the same; and (e) the officially assessed individual land price as of January 1, 2005 is unreasonable to apply the above officially assessed individual land price as of January 1, 2005 without any clear provision that reflects the value of the land in this case’s 205 base market price as of January 1, 2004; and (d) the Plaintiffs were otherwise subject to the standard market price of the farmland price as of this case’s.

In light of the above legal provisions, legal principles, and records, the judgment of the court below is just, and there is no error in the misapprehension of legal principles as to the formula under Article 66 (7) of the former Enforcement Decree of the Restriction of Special Taxation Act, as otherwise

Therefore, all appeals are 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 on the bench.

[Attachment] List of Plaintiffs: omitted

Justices Kim Yong-deok (Presiding Justice)