Changwon District Court 2009Guhap636 ( October 01, 2009)

Cho High Court Decision 2008Da4111 (Ob. 18, 2009)

Reduction of or exemption from capital gains tax due to land for non-business and incorporation into residential areas;

Farmland in an urban area for which two years have elapsed from the date of incorporation into an urban area falls under land for non-business regardless of whether crops are cultivated, and the plaintiff does not have the land subject to reduction or exemption as incorporated in a residential area before acquiring the land.

The contents of the decision shall be the same as attached.

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 shall revoke the disposition of imposition of capital gains tax of KRW 29,990,370 against the plaintiff on September 12, 2008.

1. Details of the disposition;

The reasons stated in this part are the same as the corresponding part of the judgment of the court of first instance, and therefore, they are cited in accordance with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act;

2. Whether the disposition is proper; and

(a) a master of the Party;

1) Plaintiff

The instant land is either deemed non-business land or is subject to reduction or exemption of capital gains tax due to extenuating circumstances as follows. Nevertheless, the Defendant rendered the instant disposition imposing capital gains tax on the land for non-business use by deeming the instant land as non-business land. Therefore, the instant disposition is unlawful.

① From the acquisition to the transfer of the instant land, the land was used as farmland for its original purpose for 20 years.

② In 2002, the Plaintiff farming and transferred the instant land in 2008.

③ The Plaintiff was concurrently holding the instant land for not less than eight years.

2) Defendant

Article 104-3 (1) 1(b) of the Income Tax Act (amended by Act No. 9270 of Dec. 26, 2008; hereinafter the same) applies to the land of this case as the land for non-business use, and there is no reason to regard the land of this case as the land for non-business use or as the land for non-business use. Therefore, the disposition of this case is legitimate.

(b) Related statutes;

It is the same as the entry of the attached statutes.

C. Determination

(a) Whether it falls under the non-business land under Article 104-3 (1) 1 (b) of the Income Tax Act;

According to Article 104-3 (1) 1 (b) of the Income Tax Act and Article 168-6 (1) 1 of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 21062 of Oct. 7, 2008; hereinafter the same), in case of farmland in an urban area under the National Land Planning Act among the Special Metropolitan City, Metropolitan Cities, and Sis, if the possession period is not less than five years, the land is defined as non-business land if it exceeds the period equivalent to 20/100 of the ownership period of one year and 3 years immediately preceding the date of transfer in the five-year period immediately preceding the date of transfer.

In full view of the above facts and the purport of the entire pleadings as to the land in this case, it is recognized that the land in this case constitutes a non-business land under Article 104-3 (1) 1 (b) of the Income Tax Act, since the Plaintiff acquired the land in this case on February 26, 198 and transferred it on May 21, 2008, as it was within the Plaintiff’s ownership period, since the land in this case belongs to an urban area under the National Land Planning Act, it constitutes a non-business land under Article 104-3 (1) 1 (b) of the Income Tax Act.

Therefore, the disposition of imposing transfer income tax is legitimate because the land of different different situations is the non-business land.

2) Whether the land is not deemed land for non-business or is subject to reduction or exemption of capital gains tax

A) The Plaintiff’s assertion ①

According to Article 168-6 (3) 2 of the Enforcement Decree of the Income Tax Act, in the case of the land owned for not less than 20 years prior to December 31, 2006 and the land for stock farms transferred not later than December 31, 2009, it shall not be deemed the land for non-business use. As seen earlier, it is evident that the Plaintiff acquired the instant land on February 24, 198, but the Plaintiff did not own the instant land for not less than 20 years prior to December 31, 2006. Therefore, the Plaintiff’s above assertion is without merit.

B) The Plaintiff’s assertion ②

(1) According to Article 83-5 (3) 2 of the Enforcement Rule of the Income Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 71 of Apr. 14, 2009; hereinafter the same), land owned by a person who transferred before December 31, 2006 as farmland at the time of transfer under Article 6 (2) 5 of the Farmland Act shall not be deemed land for non-business purposes due to inevitable reasons. The provisions of the above Enforcement Rule shall be applied under the premise of the Income Tax Act as a mother corporation. According to Article 104-3 (1) 1 (a) and (b) of the Enforcement Rule of the Income Tax Act, which is the applicable provision of the mother law, provides land for non-business purposes regardless of whether the farmland in an urban area is re-owned or re-owned (limited to land for non-business purposes) and if the farmland outside the urban area is not re-owned or re-owned, it shall not be interpreted as land for non-business purposes in light of such contents of the Income Tax Act.

However, since the land of this case is farmland in an urban area, even if the plaintiff moved in farming, the land of this case still constitutes non-business land.

(2) Even if such a different interpretation is considered, the pertinent provision of the Enforcement Rule of the Income Tax Act stipulates that farmland owned at the time of immigration farming pursuant to Article 6(2)5 of the Farmland Act is farmland, so the meaning of this farming should be interpreted in accordance with the Farmland Act.

According to the Farmland Act, a person who has engaged in agricultural business concurrently for more than eight years while prohibiting farmland ownership to a person other than a farmer or an agricultural corporation is allowed to do so only in exceptional cases, such as transfer of farmland to another person. Here, a farmer among the persons engaged in agricultural management refers to a person who has cultivated or cultivated agricultural products or perennial plants in the farmland not less than one thousand square meters, or is engaged in agriculture for more than 90 days in a certain size (such as a person who has installed facilities necessary for agricultural production, such as a fixed greenhouse, mushroom cultivation, greenhouse, greenhouse, etc. which is not less than 30 square meters in farmland and a person who has cultivated or cultivated agricultural products or perennial plants for more than eight years).

Therefore, this shall be interpreted to mean that a person who has been engaged in agriculture more than the above certain scale for not less than eight years has retired from office, and there is no evidence to deem that the plaintiff is detrimental to the above farmer.

(3) Furthermore, comprehensively considering the following circumstances, Gap evidence Nos. 11-1 and Eul evidence Nos. 11-7 and the overall purport of the pleadings, the plaintiff has been living in ○○○○○○○○○○○○○○○○○○○○○ on October 28, 1982 and has been living in ○○○○○○○○○○○○○ on September 3, 2008, and the plaintiff submitted a certificate of fact that he had cultivated the land of this case from 1988 when he acquired the land of this case to 2008 when he transferred the land of this case, it is difficult to view that the plaintiff had been farming before December 31, 2006, and there is no evidence to prove otherwise.

(4) Therefore, there is no reason for the plaintiff's recommendation.

C) The Plaintiff’s assertion

According to Article 69(1) of the Restriction of Special Taxation Act (amended by Act No. 9272 of Dec. 26, 2008), where a person who resides in a location of land has cultivated directly for not less than eight years, all transfer income tax on the income accruing from the transfer of land shall be reduced or exempted, but where such land is incorporated into a residential area, etc. under the National Land Planning and Utilization Act, transfer income tax shall be reduced or exempted only on the income accrued until

However, as seen earlier, the instant land was incorporated into a residential area on August 21, 1978, before the Plaintiff acquired the instant land, and thus, the Plaintiff’s transfer of the instant land does not constitute the subject of capital gains tax reduction or exemption under the said provision. Therefore, the Plaintiff’s 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 is just in its conclusion, and the plaintiff's appeal is dismissed as it is without merit, and it is so decided as per Disposition.