Plaintiff (Law Firm LLC, Attorneys Jeon Jong-chul et al., Counsel for the plaintiff-appellant)

head of Sung Dong Tax Office

November 22, 2017

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition rejecting correction of KRW 548,502,326 of the transfer income tax attributed to the year 2014 against the Plaintiff on December 9, 2016 is revoked.

1. Details of the disposition;

A. The Plaintiff, along with the Nonparty, acquired on October 17, 2005 the Gangnam-gu Seoul Metropolitan Government ( Address 1 omitted) 396.5 square meters and ( Address 2 omitted) 210.5 square meters (hereinafter “instant land”), and transferred on December 4, 2014. On February 28, 2015, the Plaintiff reported and paid capital gains tax without deducting the amount of special deduction for long-term possession from the gains on transfer of the instant land, on the premise that the instant land is non-business land.

B. On the other hand, the instant land was a model hybrid (hereinafter “instant temporary building”) and was removed on November 17, 2012.

C. However, on February 28, 2015, the Plaintiff: (a) was the Defendant on the instant land; (b) and (c) the amount of the instant land subject to a special aggregate taxation under Article 106(1)2(a) of the former Local Tax Act (Amended by Act No. 12855, Dec. 23, 2014; hereinafter the same shall apply); (c) and (d) Articles 101(1)2 and 103(1)1 of the former Enforcement Decree of the Local Tax Act (Amended by Presidential Decree No. 25910, Dec. 30, 2014; hereinafter the same shall apply); and (d) the amount of the instant land subject to a special aggregate taxation under Article 106(1)2(a) of the former Income Tax Act (Amended by Presidential Decree No. 25910, Nov. 17, 2012; hereinafter the same shall apply); and (c) the land excluded from the tax base of the instant land under Article 26(16(b) of the former Income Tax Act.

D. On December 15, 2016, the Defendant rejected the Plaintiff’s claim for correction on the ground that the instant land cannot be seen as the land subject to the separate taxation of property tax (hereinafter “instant disposition”).

E. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on January 3, 2017, but the Tax Tribunal dismissed the Plaintiff’s appeal on May 24, 2017.

[Reasons for Recognition] No dispute, entry of Gap evidence Nos. 1 through 10 and the purport of the whole pleadings

2. Relevant statutes;

As shown in the attached Form.

3. Whether the disposition is lawful;

A. The issues of the instant case

Whether the land of this case is deemed land subject to separate taxation of property tax during the period of this case and can be seen as land excluded from non-business land.

B. Determination

Article 104-3 (1) 4 (b) of the former Income Tax Act provides that “land subject to the separate aggregate taxation of property tax under Article 106 (1) 2 of the Local Tax Act shall be excluded from non-business land.” Article 106 (1) 2 (a) of the former Local Tax Act provides that “land annexed to a building prescribed by Presidential Decree, such as land annexed to a factory building,” shall be one of the separate aggregate taxation of property tax. Article 106 (1) 2 (b) of the former Local Tax Act provides that “any land annexed to a building prescribed by Presidential Decree, among the land annexed to a building, the area of which is calculated by multiplying the floor area of the building by the applicable ratio by special-purpose area,” and Article 103 (1) 1 of the former Enforcement Decree of the Local Tax Act provides that “any building under Article 101 (1) 2 (a) of the former Local Tax Act shall include a building for which six months have not elapsed since its actual destruction or loss as of the base date of taxation.”

In full view of the legislative forms, structure, contents, etc. as seen earlier, Article 103(1)1 of the former Enforcement Decree of the Local Tax Act provides that the site constitutes a general aggregate taxation subject to property tax in principle, but in exceptional cases where six months have not elapsed since the time when the building was destroyed or lost as of the tax base date, even if there were no sufficient time to commence construction of a new building on the site, it is merely merely a provision stipulating that a certain extent of land equivalent to the floor area of the destroyed or lost building should be viewed as a special aggregate taxation subject to property tax, and it is apparent that the purport of deeming the site to be a separate aggregate taxation subject to property tax for six months after the building was destroyed or lost (the property tax base date is difficult to be presented as a concept of separating the period as a tax imposed at the specific point of time).

Furthermore, Article 83-5 (1) 9 of the former Enforcement Rule of the Income Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 447, Dec. 19, 2014; hereinafter the same) provides that a building shall be excluded from a non-business land for two years from the date of the destruction, removal, or collapse of the building under the title "standards for determining land not deemed a non-business land due to extenuating circumstances" [Provided, That this provision is interpreted to the purport that the temporary building of this case shall not be deemed a non-business land if it is inevitably impossible for a landowner to use the land for business due to any inevitable reason, taking into account the statutory restrictions due to public interest or inevitable reasons, the current status of the land, the reason for the acquisition, or the current use of the land, etc., and therefore, it can be recognized that there is no dispute between the parties or that the temporary building of this case was removed due to the expiration of the agreed lease period of the land of this case, so this provision shall not apply to the temporary building of this case (similar: Supreme Court Decision 2022910

In full view of these facts, even if the land annexed to a building, even though six months have not passed since a certain building was destroyed as of the tax base date, falls under the aggregate aggregate taxation of property tax, it is reasonable to view that the land annexed to the building as "land subject to aggregate taxation of property tax under Article 104-3 (1) 4 (b) of the former Income Tax Act" cannot be excluded from the land for non-business use for six months from the time the building was destroyed or lost (only, it is unclear whether the temporary building in this case is excluded from the land for non-business use as the land subject to aggregate taxation of property tax under Article 106 (1) 2 of the Local Tax Act).

C. Sub-committee

The instant disposition is lawful.

4. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

[Attachment]

Judges Yu Sung-sung