early 2011 Middle 0917 (201.05.04)

Land shall not be subject to reduction or exemption by transferring it for more than three years from the date of incorporation into a residential area;

The farmland located in the Si and transferred for more than three years from the date of incorporation into the residential area, and there is no data to recognize that the project or compensation has been delayed or that the project operator is responsible for it, so it does not constitute an inevitable case and thus does not constitute

Article 69 of the Restriction of Special Taxation Act (Reduction or Exemption of Transfer Income Tax for Self-Cultivating Farmland)

2011Guhap10257 Revocation of Disposition of Imposing capital gains tax

KimAA et al.

Head of Sungnam Tax Office et al.

January 20, 2012

February 17, 2012

1. All of the plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against all the plaintiffs.

Defendant Sung-nam Tax Office’s imposition of KRW 105,490,00 (including additional tax of KRW 5,490,000) for the transfer income tax corresponding to the year 2009 against Plaintiff KimA on December 1, 2010, and Defendant Leecheon Tax Office’s imposition of KRW 131,038,010 for the transfer income tax corresponding to Plaintiff Kim DD on December 15, 2010 (including additional tax of KRW 6,819,591) for the transfer income corresponding to the year 209.

1. Details of the disposition;

A. The details of the disposition against the plaintiff KimA

(1) On March 30, 1996 and May 15, 1996, Plaintiff KimA acquired and owned a co-ownership of the aggregate amounting to 826.46m2 of 00-0m2 (which is the co-owned share of the same 000-0,00-0,000,000-00 as co-owned share after the co-owned share was changed to that of co-owned share; hereinafter referred to as “the first land of this case”). On January 16, 2009, Plaintiff Kim Nam acquired and owned a co-owned share of 00-0m2 (which is the co-owned share of the same 00-0,000,000 as the co-owned share of the above divided land) to Korea Land Corporation (1,83,603,740 won).

(2) Accordingly, Plaintiff Kim A paid KRW 198,576,692, along with the application of the provisions on reduction and exemption of farmland for at least eight years under Article 69(1) of the former Restriction of Special Taxation Act (amended by Act No. 9921, Jan. 1, 2010; hereinafter “former Restriction of Special Taxation Act”) and the land reduction and exemption provisions for public works under Article 77(1)1 of the former Restriction of Special Taxation Act (amended by Act No. 9921, Jan. 1, 2010; hereinafter “former Restriction of Special Taxation Act”).

(3) However, on December 1, 2010, the head of Sungnam Tax Office applied the Land Reduction and Exemption Regulations to reduce capital gains tax to KRW 100 million; however, on the ground that the land of this case constitutes farmland for which three years have passed since the date of incorporation into a residential area at the time of transfer, he refused to apply for reduction and exemption of capital gains tax according to the self-sufficiency requirement for at least eight years; on the ground that the land of this case constitutes farmland for which three years have passed since the date of incorporation into a residential area; on the ground that the transfer income tax for 2009 was increased to KRW 304,06,69 (including additional tax); and on the other hand, he paid KRW 105,490,000 after deducting the amount of tax paid to

B. The process of the disposition against the plaintiff KimD

(1) On February 21, 1996, Plaintiff KimD acquired and owned co-owned shares equivalent to the aggregate of 661.16 square meters of co-owned shares (such as 000-0,00-0,000-0,000-0,000-00, and 000-00-00 as co-owned shares after the partition of co-owned property) of O0-0, 00-0, O200-0, 000, and was transferred to Korea Land Corporation (1,429,42,600 won) on February 20, 2009.

(2) Accordingly, Plaintiff KimD paid KRW 130,602,578, along with the application of the farmland reduction and exemption provisions and the land reduction and exemption provisions for public works under Article 77(1)1 of the former Restriction of Special Taxation Act for at least eight years at the time of filing a preliminary return on the tax base of capital gains tax with the head of Leecheon-cheon Tax Office.

(3) However, on December 15, 2010, the head of Leecheon Tax Office, applying the provisions on reduction and exemption of land for public works, reduced or exempted capital gains tax of KRW 75,781,57. However, on the ground that the land of this case constitutes farmland for which three years have passed since the date of incorporation into a residential area at the time of transfer, he refused to apply for reduction and exemption of capital gains tax according to the self-sufficiency requirement for at least eight years. The amount of capital gains tax of 2009 was increased to KRW 261,640,592 (including additional tax), and then additionally paid and notified the Plaintiff KimD of additional payment of KRW 131,038,010 after deducting the amount of tax paid (hereinafter “instant second disposition”).

C. The developments leading up to the incorporation of the instant land Nos. 1 and 2 into residential areas and the designation of the planned housing site development area

(1) On June 27, 2005, the Governor of the Gyeonggi-do determined and publicly announced an O-dong, O-dong, Sungnam-si, in accordance with Article 30 of the National Land Planning and Utilization Act (hereinafter “National Land Planning Act”), which was located in the land No. 1.2 of the instant case (hereinafter “each of the instant lands”), as the first-class general residential zone in the natural green area as the area subsequent to the development restriction zone’s revocation area.

(2) On July 21, 2006, the Minister of Construction and Transportation, on a project operator as the Korea Land Corporation (the Korea Land and Housing Corporation) designated and publicly announced the 6,788,000 square meters of land in Songpa-gu, including the Sungnam-si O-dong, Songpa-gu, Seoul Special Metropolitan City, Chungcheongnam-dong and Do, and the 6,768,000 square meters of land in Chungcheongnam-dong and Hanam-si, Seoul, under Articles 3 and 7 of the Housing Development Promotion Act, as the "housing Site Development Promotion Act". The 'the area planned to be a zone planned to be a zone to be a zone to be a zone to be a zone to be a zone to be a zone to be a zone to be a zone to be a zone to be a zone to be a zone to be developed by reflecting the opinions of local governments on the grounds of regional convenience, etc., and the 'the area was changed to 6,788,31 square meters of land development on August 5, 2008.

(3) Meanwhile, the Korea Land Corporation is a public institution designated under the Act on the Management of Public Institutions.

(d) Procedures of the previous trial; and

The Plaintiffs were dissatisfied with each of the instant dispositions Nos. 1 and 2 (hereinafter referred to as “each of the instant dispositions”) and filed an appeal with the Tax Tribunal on May 4, 201 and June 28, 201.

[Reasons for Recognition] Uncontentious Facts, Evidence Nos. 1 and 2, Evidence Nos. 3 through 5, Evidence Nos. 4 and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiffs' assertion

(1) The first argument

Since each of the instant lands has been owned for more than 8 years since its acquisition, each of the above lands was designated as a residential area on June 27, 2005 again, and subject to restrictions on construction of buildings, installation of structures, alteration of form and quality of land, collection of soil and rocks, etc. under the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Ordinance of the Ministry of Strategy and Finance No. 50, Jun. 27, 2005). The Plaintiffs, the owners of the instant lands, sold each of the above lands to Korea Land Corporation, and there was no other method of disposal except for receiving compensation. Furthermore, even though the initial transmission of land development projects completed all of the housing site development projects and apartment sale projects by 209, there was a plan to change the name of the said development projects from the date of completion of the project to the point of time of time before the date of completion of the project, and thus, there was no time for the Korea Land Corporation to purchase each of the instant land under the former Enforcement Decree of the Restriction of Special Taxation Act to the point of time of sale within 200 years.

(2) The second assertion

Even if Article 69(1) main text of the former Restriction of Special Taxation Act, Article 66(4)1(b) of the former Enforcement Decree of the Restriction of Special Taxation Act, and Article 27(5) of the former Enforcement Rule of the Restriction of Special Taxation Act do not apply to capital gains tax reduction regulations for the requirements of self-sufficiency for at least eight years, at least for the Plaintiffs, pursuant to the proviso of Article 69(1) of the former Enforcement Rule of the Restriction of Special Taxation Act, for the income accrued until June 27, 2005, from which each of the instant lands was incorporated into a residential area under the National Land Planning and Utilization Act, the capital gains tax reduction regulations shall apply to some of capital gains under Article 66(7) of the former Enforcement Decree of the Restriction of Special Taxation Act. Nevertheless,

B. Relevant statutes

The entry in the attached Form is as specified in the relevant statutes.

C. Determination

(1) Determination on the first argument

Article 69 (1) of the former Enforcement Decree of the Restriction of Special Taxation Act, Article 66 (4) 1 of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "the tax amount equivalent to 100/100 of transfer income tax arising from the transfer of self-owned farmland for not less than eight years between the time the resident living in the location of the farmland acquires the farmland," shall be reduced or exempted: Provided, That the former Enforcement Decree of the Restriction of Special Taxation Act provides that "if the land is located in the Special Metropolitan City, Metropolitan City (excluding Guns in Metropolitan Cities) or Si (excluding Eup/Myeon areas in Metropolitan Cities) (excluding Eup/Myeon areas in Metropolitan Cities) as of the date of transfer, which has been incorporated into a residential area under the National Land Planning and Utilization Act, is excluded from transfer income tax because it is not recognized that there is an inevitable reason for the transfer of the land within 3 years after the date of transfer, the former Enforcement Decree of the Restriction of Special Taxation Act provides that the operator is not subject to reduction or exemption of transfer income tax for the purpose of transfer of the land."

(2) Judgment on the second argument

The main sentence of Article 69(1) of the former Restriction of Special Taxation Act provides that "if the land is incorporated into a residential area under the National Land Planning and Utilization Act, the income tax equivalent to 10/100 of the transfer income tax shall be reduced or exempted, only from the income accrued until the date of incorporation into the residential area, as prescribed by the Presidential Decree." As to such income, Article 66(7) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "the amount calculated by the formula of "transfer income x (standard market price at the time of acquisition - standard market price at the time of transfer - the standard market price at the time of transfer) / (standard market price at the time of acquisition)" of the above provision. The proviso of Article 69(1) of the former Restriction of Special Taxation Act provides that "if the land is incorporated into a residential area under the National Land Planning and Utilization Act, the income tax shall be reduced or exempted from the transfer income tax as provided in the main sentence of Article 69(1) of the former Enforcement Decree of the Restriction of Special Taxation Act." The proviso of the former Restriction of Special Taxation Act provides that it shall be applied only to the transfer income tax without any ground for exclusion.

3. Conclusion

Therefore, the plaintiffs' claims are dismissed in entirety as it is without merit. It is so decided as per Disposition.