Incheon District Court 201Guhap5760 (27 April 2012)

Early High Court Decision 201Du2684 ( October 21, 2011)

It is difficult to recognize farmland as having been self-sufficient for not less than eight years.

In light of the fact that a person nearby farmland actually cultivated farmland according to the results of a field investigation conducted by the tax authority, it is difficult to regard the farmland as having been directly cultivated for not less than eight years in view of the fact that the person near farmland was investigated as having actually cultivated farmland, and that he did not submit objective data on the purchase details, such as fry seed or fertilizer necessary for farmland cultivation.

2012Nu14677 Revocation of imposition of capital gains tax

Gangwon A

The director of the Southern Incheon District Office

Incheon District Court Decision 201Guhap5760 Decided April 27, 2012

December 11, 2012

January 11, 2013

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 000 for the year 2009 against the Plaintiff on May 1, 201 is revoked.

1. Transfer income tax;

In full view of the contents of Gap 1 and 2, the following facts are recognized:

○ On October 21, 1994, the Plaintiff acquired KRW 000,000,000 O-dong, Yeonsu-gu, Incheon (hereinafter referred to as “instant farmland”) and transferred it to KRW 000,000 on April 21, 2009.

On May 19, 2009, the Plaintiff filed an application for reduction of capital gains tax on the ground that the Plaintiff directly cultivated the farmland of this case for not less than eight years at the time of filing a preliminary return of capital gains tax base to the Defendant.

○ On May 1, 201, the Defendant issued a disposition of KRW 000 on the ground that the Plaintiff did not directly cultivate the instant farmland for at least eight years, and that the Plaintiff did not meet the requirements for reduction and exemption, and that the Defendant imposed a disposition of KRW 000 on the Plaintiff (hereinafter “instant disposition”).

2. The plaintiff's assertion

As the Plaintiff is engaged in a creative construction business that is going to engage in work for daily workers with subcontracting, the Plaintiff has time to directly cultivate the instant farmland, and actually cultivated drilling, drilling, fishing, and shoulders in the instant farmland, and divided it into neighboring residents. The instant farmland is located 2 km away from the Plaintiff’s residence, and its size is 377 square meters, and the Plaintiff directly cultivated the instant farmland. Accordingly, the instant disposition imposing capital gains tax on the Plaintiff on the ground that the Plaintiff did not meet the requirements for reduction or exemption on the ground that the Plaintiff did not directly cultivate the instant farmland and does not constitute the requirements for reduction or exemption is unlawful.

3. Determination

(a) Restriction of Special Taxation Act;

(1) Article 69(1) of the Restriction of Special Taxation Act (amended by Act No. 9921, Jan. 1, 2010) which was in force at the time of the transfer of the farmland in this case, and Article 69(1) of the same Act (amended by Act No. 9921, Jan. 1, 2010) provides that the tax amount equivalent to 10/100 of the transfer income tax shall be reduced for the income accruing from the transfer of the land prescribed by the Presidential Decree among the land subject to agricultural income tax, which is subject to the taxation of agricultural income tax, shall be reduced or exempted. Article 66(13) of the Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22037, Feb. 18, 2010) and Article 69(1) of the same Act provide that "direct cultivation" means that a resident cultivates agricultural products or perennial plants in his own farmland, or cultivates or cultivates them with his own labor.

(2) Meanwhile, Article 2 of the Farmland Act (amended on December 29, 2008 and enforced on June 30, 2009), which was enforced at the time of the transfer of the farmland in this case, provides that "self-arable" means that a farmer is engaged in cultivating crops or growing perennial plants on his own farmland, or cultivating or cultivating crops with his own labor not less than half of farming work. Article 4 of the Enforcement Rule of the Farmland Act (which was amended on June 29, 2009 and came into force on June 30, 2009) as well as Article 4 of the same Enforcement Rule of the Farmland Act (which was in force on June 30, 2009) provides that a farmer is engaged in cultivating crops or growing perennial plants with not less than half of its labor force, and a farmer is engaged in cultivating or growing perennial plants with more than half of its labor force.

(3) The purport of Article 6(1) of the Restriction of Special Taxation Act stipulating that capital gains tax shall be reduced or exempted for farmland directly cultivated for not less than eight years as above is for the owner by reducing the tax burden due to the transfer of farmland (Supreme Court Decision 94Nu11859 delivered on February 3, 195) as part of the land farming policy, and the Farmland Act aims to contribute to strengthening agricultural competitiveness based on the stable management of farmers and the improvement of agricultural productivity. In light of the above purport and legislative purpose, "direct cultivation" means "direct cultivation" in Article 6(13) of the Enforcement Decree of the Restriction of Special Taxation Act means "on the cultivation of crops or perennial plants", and it is reasonable to interpret that such "on the basis of not less than 1/2 of labor force as provided for in the Farmland Act, and that the land directly cultivated or transferred for not less than 10 years by the owner of the farmland shall not be presumed to be subject to reduction or exemption of 1/9 of the capital force, and that it shall not be presumed that the owner of the farmland is engaged in not more than 9/1/2 of the said farmland.

(b) Fact of recognition;

The following facts are recognized in full view of the descriptions of Gap 2, 3, and 13, and 2, and 3, and 5, as the whole, of the arguments:

From Jun. 1, 1994, the Plaintiff runs each creative construction business under the trade name called "GG industrial company" from Feb. 21, 1995 to Dec. 31, 1999, and "GGG Changho" from Nov. 29, 199 to Nov. 29, 199.

○ The farmland in this case is being used as ‘the answer' or ‘the fact-finding'.

○ The Plaintiff submitted a simplified receipt to the Defendant that the Defendant purchased from “HH vegetable source,” on April 8, 2005, from 50, from 30, and from mast 20, and from mast 20,000, combined fertilizers were purchased from 00,000, and from April 10, 2006, combined fertilizers were purchased from 14,000, from 14,000, from 30, from mast 20, from math 30, and from math 10, from 26,000, respectively.

○ Company GG Chang reported their revenue amount of KRW 00, KRW 000, KRW 000 in 2001, KRW 000 in 2002, and KRW 000 in 2003, KRW 000 in 2004, KRW 000 in 2005, KRW 000 in 2006, and KRW 000 in 2007, and KRW 000 in 2008, and KRW 000 in 2009, respectively.

As a result of the on-site investigation of the farmland of this case by the Defendant, the following contents are stated in the name statement (the investigation period: March 14, 2011; March 28, 201).

(Omission of Contents)

(c) Direct cultivation;

This paper examines whether the Plaintiff directly cultivated the farmland of this case due to the above facts of recognition.

(1) Direct cultivation stipulated as a requirement for reduction of or exemption from the transfer income tax under the Restriction of Special Taxation Act, and one half or more of its own labor into the cultivation of the farmland in question, engaging in the cultivation thereof at all times or one half or more of the farming work conducted in question at the farmland in question.

(2) The Plaintiff is running a creative construction business from February 21, 1995 to the present date, and in particular from February 200 to 2009 to KRW 000 to KRW 000, while the farmland in this case is 377 square meters. According to these circumstances, the Plaintiff appears to have put a substantial portion of its own labor into a creative construction business, and it is difficult to deem that the Plaintiff was engaging in the cultivation of the farmland in this case by inserting more than half of its own labor into the cultivation of the farmland in this case.

(3) According to the Defendant’s results of the on-site investigation on the farmland in this case, and there are no special circumstances to suspect the credibility of the survey content. Moreover, the Plaintiff only submits a simplified receipt to purchase a small number of maternity or fertilizer in 2005, 2006, and 2008, and does not submit objective data, such as receipts issued from a reliable customer with respect to the details of purchase of maternity or fertilizer to the extent necessary for the cultivation area of the farmland in this case or in other years. According to these circumstances, it is difficult to view that the Plaintiff performed the farming work conducted on the farmland in this case with its own labor.

(4) 당심증인 박II의 증언에 의하면， 원고가 주로 주말에 이 사건 농지에 나와 땅을 파놓는 일을 하면 원고의 처 박JJ이 주중에 4-5회 이 사건 농지에 나와 상추， 쑥갓， 열무， 무 배추 등을 심고 이를 관리하였다는 것이다. 이러한 증언에 의하면， 이 사건 농지에서 이루어지는 농작업의 상당 부분을 원고의 처가 행한 것으로 보여， 원고가 그 농작업의 2분의 1 이상을 자기 노동력으로 행하였다고 보기 어렵다.

(5) The Enforcement Decree of the Restriction of Special Taxation Act, which was in force at the time of the transfer of the farmland in this case, stipulates that the term "direct cultivation" refers to the cultivation of the farmland in this case or the cultivation of perennial plants, or the cultivation or cultivation with one half or more of the farming work with its own labor. This provision is a newly established provision upon the amendment of the above Enforcement Decree on February 9, 2006. Even if the above Enforcement Decree had the family members living or living together with the same household cultivate the farmland in this case before the amendment, it can be considered as "direct cultivation" in this case, but the plaintiff transferred the farmland in this case on April 21, 2009, the above Enforcement Decree was amended, and even if the plaintiff was in the wife, it cannot be considered as "direct cultivation" of the plaintiff.

(6) If so, it is difficult for the Plaintiff to regard the farmland of this case as directly cultivated, and the Plaintiff’s above assertion is without merit with respect to each description of Gap’s 6 through 13, 15, 16, and 18 through 22 (including each number), and some testimony of the Simna Witness II, there is no other evidence to recognize that the Plaintiff directly cultivated the farmland of this case.

4. Conclusion

Therefore, the part of the disposition of this case imposing transfer income tax on the Plaintiff on the ground that the Plaintiff did not directly cultivate the farmland of this case and does not meet the requirements for reduction or exemption of definition under Article 69 (1) of the Restriction of Special Taxation Act is lawful. Thus, the Plaintiff’s claim seeking revocation of the disposition of this case should be dismissed as it is without merit, and the judgment of the court of first instance is just in conclusion, and it is so decided as per Disposition.