Changwon District Court-2013-Gu Partnership-3182 (Law No. 18, 2014)

It is not recognized that direct cultivation has been made for at least eight years.

(A) Since it is insufficient to recognize the fact that the land of this case has cultivated crops, etc. directly for at least eight years, the disposition that excludes the reduction or exemption of capital gains tax on self-arable farmland is justifiable.

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

2014Nu1185 Revocation of Disposition of Imposing capital gains tax

AA

BB Director of the Tax Office

March 6, 2015

March 27, 2015

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The Defendant’s disposition of imposition of capital gains tax of KRW 56,729,670 against the Plaintiff on April 1, 2013 shall be revoked.

1. Details of the disposition;

A. On July 24, 1996, the Plaintiff purchased 1,306/3,785/3,785/3,000 of 00 Do-nam 00,000,000,000,000,000,000. DDR purchased 2,479/3,785/3,00 of the above land from CCC on the same day. The Plaintiff and DDR completed the registration of ownership transfer in their own name as to each of the above shares on August 21, 1996.

B. Thereafter, on May 27, 1997, the above land was divided into 2,401 square meters prior to 323-2, and 323 square meters prior to 00,000 square meters prior to 323,00,000,000,000 square meters prior to 323-2,00 square meters prior to 323-3,000 square meters prior to 323-3,000 square meters.

C. On October 23, 1997, the Plaintiff completed the registration of ownership transfer based on the partition of co-owned property on October 20, 1997 as to the whole shares owned by DD among the land of this case, and became a sole owner of the land of this case.

D. On October 15, 2011, the Plaintiff entered into a sales contract with EE to sell the instant land at KRW 215,000,000 for the purchase price, and transferred the instant land to EE on November 30, 201.

E. On January 27, 2012, the Plaintiff filed an application for reduction or exemption of capital gains tax on the ground that the instant land constitutes self-employed farmland for at least eight years as prescribed by Article 69(1) of the former Restriction of Special Taxation Act (amended by Act No. 11133, Dec. 31, 2011; hereinafter “Act”).

F. However, the Defendant denied the special deduction for long-term possession of the instant land and the reduction of capital gains tax on the ground that the current status of the instant land appearing in satellite photographs does not constitute farmland, and that the Plaintiff cannot be deemed to have cultivated the instant land for at least eight years as a result of the on-site inspection of the instant land on January 7, 2013.

G. Accordingly, on April 1, 2013, the Defendant issued a correction and notification of capital gains tax of KRW 56,729,670 (including additional tax of KRW 7,749,239) to the Plaintiff (hereinafter “instant disposition”).

H. On June 24, 2013, the Plaintiff filed an appeal seeking the revocation of the instant disposition with the Tax Tribunal, which was dismissed on September 16, 2013.

[Reasons for Recognition] Unsatisfy, Gap evidence Nos. 1, 2, 4, 6, 8, Eul evidence Nos. 1, 2, Eul evidence Nos. 3-1, Eul evidence Nos. 4-1, 6, 8, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

From the day after the purchase of the instant land, the Plaintiff manages scar tree and big tree for landscaping in the instant land. The instant land has been used as farmland until now, as farmland, as the Plaintiff cultivated directly for not less than eight years. Therefore, denying the reduction or exemption of capital gains tax on the transfer of the instant land, and imposing capital gains tax on the Plaintiff is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Article 69(1) of the Act provides, “The amount of tax 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 directly cultivated by a resident prescribed by Presidential Decree who resides in the seat of farmland for at least eight years.” Article 66(13) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 23590, Feb. 2, 2012; hereinafter “Enforcement Decree”) provides, “Direct farming” means that a resident is constantly engaged in the cultivation of crops or the growing of perennial plants on his/her own farmland or who cultivates or cultivates at least half of farming works with his/her own labor.”

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 as the text of the law, barring special circumstances, and it shall not be extensively interpreted or analogically interpreted without reasonable grounds. In particular, it accords with the principle of equity in taxation to strictly interpret the provisions that can be seen as the preferential provisions in a clear manner among the requirements for tax exemption or reduction accords with the principle of equity in taxation (see Supreme Court Decision 2011Du20116, Dec. 13, 201).

Therefore, the meaning of "direct cultivation" as a requirement for reduction or exemption of capital gains tax shall be strictly viewed depending on whether a resident engages in the cultivation of crops in his/her own farmland or in the cultivation or cultivation of 1/2 or more of farming works with his/her own labor, and in light of the content and purport of the aforementioned relevant statutes, it is reasonable to deem that the meaning of "self's labor force" in this context must be interpreted as grammaticly, and that the resident satisfies the self-defense requirement only when he/she takes charge of 1/2 or more of his/her own labor capacity (see Supreme Court Decision 2010Du8423, Sept. 30, 2010).

Moreover, even if the public record is farmland, the land which is not actually used for farming as of the date of transfer can not be deemed farmland as of the date of transfer, unless it is used as farmland by the landowner’s own person or by another person, or temporarily in a state of temporary closure (see, e.g., Supreme Court Decision 97Nu706, Sept. 22, 1998). Such reduced or exempted farmland refers to the land actually used for farming as of the date of transfer regardless of its land category in the public record, and even if it is not actually cultivated, it does not refer to the land the form of which can be used for farming (see, e.g., Supreme Court Decision 88Nu6252, Feb. 14, 1989).

Furthermore, the burden of proof of the direct cultivation of the transferred land for at least eight years while living in the location of the farmland as above lies in a taxpayer who asserts the reduction or exemption of capital gains tax pursuant to the above provision (see, e.g., Supreme Court Decision 2002Du7074, Nov. 22, 2002).

2) In full view of the following circumstances, evidence as seen earlier, evidence Nos. 10-2, evidence No. 10-2, evidence No. 3, No. 4, and evidence Nos. 3, 5 and evidence Nos. 3, 4, and 5, as well as witness testimony of the trial party, which can be known by adding the whole purport of the pleadings to the witness testimony of the trial party, the following circumstances are examined. The testimony of Gap’s evidence Nos. 5, 9, 10-1, 11, and 16, and witness DD merely carried out the cultivation of the land of this case for not less than eight years before the plaintiff transferred the land of this case, or by cultivating not less than half of the farming work with his own labor, it is insufficient to view that the land of this case at the time when the plaintiff transferred the land of this case constitutes farmland, and there is no other evidence to acknowledge this otherwise.

① The satellite photograph (Evidence No. 16-1, 2, and 3) of the instant land taken in 2001, 2004, and 2008 does not clearly show the scam or crops, etc. of planting that may be seen as plants, such as trees, etc. on considerable parts of the instant land. Rather, the satellite photograph (Evidence No. 10-2, No. 3-2, No. 3-9) taken in 2010 near the time when the Plaintiff transferred the instant land, which was taken in 2010 and 2011, can only be seen as trees at the edge of the instant land, but cannot be seen as a trace of growing crops from the instant land. On the road side, vehicles are parked on the road, and agricultural crops, etc. do not appear.

② The FFF, which is operating a restaurant in the name of “00 breab in the vicinity of the instant land,” stated that, at the time of the on-site inspection conducted by the public official in charge of the Defendant, the said restaurant was operated since 1998; from that time, the instant land was left alone and did not cultivate; from 2007 to 2 years, the Plaintiff did not cultivate the instant land; the Plaintiff stated that, around 2009, the FF did not cultivate the instant land; and that, around 2009, the Plaintiff neglected the FF’s statement to the effect that the said statement was made differently from the fact (DF, the husband of FF, was the statement that the FF would have been made in a state where the appraisal of the Plaintiff was not good, it is difficult to completely eliminate the credibility of the FF’s statement solely based on such statement in light of the statement as seen in paragraph (3) above).

③ DD, the husband of FF, was in the main examination at the trial in around 1998, managed the Plaintiff at around the time of transferring the instant land by planting sty tree and big tree seedlings on the instant land. At the time of the purchase of the instant land, DD, which was the husband of FF, made a statement to the effect that the Plaintiff was directly engaged in small farmers for a period of ten years after the purchase of the instant land. However, DD, at the time of the cross-examination, stated that the period during which the Plaintiff left small farmers in the instant land would be accurate, and that some of them were neglected without cultivating the instant land and used as a parking lot around 2011.

④ At the time of the investigation by the public official in charge of the Defendant, the Plaintiff also confirmed that there was no farming house in the instant land from 2007.

⑤ Although the land category of the instant land is indicated in the copy of the register and the land cadastre before the division, the current status of imposing property tax on the instant land from around 2005 to 2011, the land category of the instant land is indicated as miscellaneous land, and there is no circumstance that the Plaintiff paid the tax on the premise that the actual status of the use of the instant land is prior to its payment.

④ The Plaintiff appears to have transferred this case’s land to EE, including the case’s land. However, the Plaintiff stated that the land was planted for the purpose of landscaping of the instant land in light of the Si’s proposal, instead of holding that the instant land was planted for a tourist path, and was planted without compensation from the military, on the edge part of the instant land. The Plaintiff did not evaluate and sell the value of the instant land separately from the instant land when concluding a sales contract for selling the instant land to EE, and there is no other extenuating circumstance to deem that the Plaintiff cultivated the instant trees for the purpose of sale. In light of the above, the Plaintiff merely planted the said trees for the purpose of landscaping of the instant land itself, and it is difficult to deem that the Plaintiff planted the said trees for the purpose of farming.

3) Therefore, the instant disposition is lawful, and contrary to this, the Plaintiff’s above assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit, and the judgment of the court of first instance sharing the conclusion is legitimate, and the plaintiff's appeal is dismissed. It is so decided as per Disposition.