Land used for real estate rental business shall not be deemed land used for storage, etc.

spring used for a day-to-day shop, other than a depository established separately by the lessee;

Other land used for the business under Article 168-11 of the Enforcement Decree of the Income Tax Act;

2016Guhap52185 Revocation of Disposition of Imposing capital gains tax

A Kim a

Head of Jinju Tax Office

December 13, 2016

January 17, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of capital gains tax of KRW 180,942,830 (including additional tax) for the taxable year 2015 that the Plaintiff rendered on December 1, 2015 shall be revoked.

1. Details of the disposition;

A. On June 7, 1982, the Plaintiff acquired bbbb 112-2 large 406.9 square meters (hereinafter “instant land”) and used them in a real estate rental business, and transferred the instant land to cC on January 9, 2015.

B. On March 31, 2015, the Plaintiff reported and paid capital gains tax to the Defendant by applying the special deduction for long-term possession under the Income Tax Act on the premise that the instant land constitutes a business territory used as a storage, etc.

C. From August 5, 2015 to August 24, 2015, the Defendant conducted an investigation into capital gains tax, and on December 1, 2015, the Defendant denied special long-term holding deduction on the ground that “the instant land was used by the lessee as a storage, not as a storage installed and used separately from the place of business, but as a general sales business place,” and corrected and notified capital gains tax of KRW 180,942,830 (hereinafter “instant disposition”).

D. On February 12, 2016, the Plaintiff filed a request for review of the instant disposition with the Commissioner of the National Tax Service, but the Commissioner of the National Tax Service dismissed the request on May 9, 2016.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, and 3, the purport of the whole pleadings

A. The plaintiff's assertion

(i) the first argument;

Since the general aggregate taxable period is less than 40/100 of the total holding period, the disposition of this case’s land constitutes a long-term of 40 m20 m20 m20 m20 m20 m20 m20 m20 m20 m20 m20 m236 m20 m20 m236 m2034 m20 m236 m20 m20 m20 m2013,000 from July 29, 208 to July 7, 2008 (excluding m20 m20 m24 m20 m236 m20 m20 m20 m236 m20 m20 m20 m20 m20 m2013 m20 m2013 m36 m2013.

(ii) the second argument;

Since the instant land was used as a storage for storing and managing materials, etc. necessary for the lessee’s business, it constitutes an object of special deduction for long-term possession, being excluded from the non-business land pursuant to Article 104-3(1)4(c) of the Income Tax Act and Article 168-1(1)7 of the Enforcement Decree of the same Act. Therefore, the instant disposition that differs from the premise is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) The Plaintiff leased the instant land after acquiring it, and the details thereof are as listed below.

2) On the instant land, four unauthorized buildings were built, and the details thereof are as listed below.

4 Panel 3.25

3) The subject land in this case was registered as the location of the place of business and the jFENT Co., Ltd. (hereinafter collectively referred to as the "Lessees").

4) According to the detailed statement of regular taxation against the Plaintiff in 2005 and 2006, the instant land was classified and managed as a separate aggregate taxable object of property tax until 2006.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 3, 6, 7, Eul evidence Nos. 3 and 3 (including branch numbers; hereinafter the same shall apply), the purport of the whole pleadings

D. Determination

1) Determination on the first argument

The Plaintiff’s transfer of the instant land constitutes one of the requirements for non-business land excluded from the special deduction for long-term holding (amended by Presidential Decree No. 26067, Feb. 3, 2015; hereinafter the same shall apply) under the former Income Tax Act (amended by Act No. 13558, Dec. 15, 2015; hereinafter the same shall apply) and the Enforcement Decree of the same Act (amended by Presidential Decree No. 26067, Feb. 3, 2015), one of the requirements for non-business land excluded from the special deduction for long-term holding (ii) during the period exceeding 20/100 of the land’s possession period (Article 104-3(1)4 (b) of the former Income Tax Act; Article 168-6 subparag. 1 (c) of the former Enforcement Decree of the Income Tax Act). The period for which the Plaintiff acquired the instant land on June 7, 1982 and the Plaintiff’s possession of the entire land constitutes the special deduction for non-business.

Therefore, the plaintiff's assertion that differs from this premise is without merit.

2) Judgment on the second argument

Article 104-3 (1) 4 of the former Income Tax Act provides that land, other than farmland, forest land, and stock farm land, on which capital gains is heavily imposed, shall be excluded from land for non-business use, and land prescribed by Presidential Decree as having considerable reasons to recognize that it is directly related to residence or business in consideration of the situation of use of land, whether the obligation under related Acts is fulfilled, amount of income, etc. shall be considered. According to delegation, Article 168-1 (1) 7 of the former Enforcement Decree of the Income Tax Act provides that land for storage, etc. [the storage, field storage, storage, etc. (a building which must obtain a construction permit or report under the Building Act and the land attached to a building for warehouse constructed without any permission or report) shall be excluded from land for non-business use, and land for which it is deemed that it is directly related to residence or business.]

As such, the former Income Tax Act and the Enforcement Decree of the same Act stipulate the storage and management of the goods for the purpose of storing and managing the goods for storage, etc. that are excluded from the non-business land. It is reasonable to view that the storage, etc. here refers to the storage, etc. installed and used separately from the place of business for the purpose of keeping and managing the goods (see Supreme Court Decision 201Du8427, May 25, 2012). The interpretation of tax laws and regulations is to be interpreted as a requirement for taxation or a requirement for tax exemption under the principle of no taxation without law, barring any special circumstances, and it is not permitted to expand or analogically interpret it without reasonable grounds. In particular, it is strict to regard the provision that the provision is clearly a provision on preferential treatment in the provision on reduction and exemption requirements as a provision on reduction and exemption requirements. 1) = The period classified as the non-business land 2,931/total holding period 11,905 x 100 x 1,00.

In light of the above legal principles, the following circumstances, which can be acknowledged by comprehensively considering the health stand, the evidence mentioned above, Gap evidence evidence No. 9, Eul evidence No. 10, Eul evidence No. 4, and the overall purport of the pleadings, i.e., the lessee registered a business entity with the location of the place of business, and there was no other report on the storage space, and ② there was a signboard stating the word "sale" at the entrance of the land of this case, ③ there was an office located on the land of this case, and the above office is deemed to have been in charge of the business related to the sale of the goods. ④ The Plaintiff leased the entire land to the lessee, and the Plaintiff did not separately lease part of the land of this case for separate use. Accordingly, the lessee appears to have directly stored, managed, and sold the goods after installing a building for storing the office and materials on the land of this case. Therefore, it cannot be deemed that the land of this case constitutes a storage space under Article 168-11 (1) 7 of the former Enforcement Decree of the Income Tax Act.

On the other hand, the Plaintiff asserts that, in a case where a building with a different usage is mixed on one parcel of land, the area of the appurtenant land can be calculated by dividing it by the ratio of the building area, so even if a part of the land was installed and used as a workplace, if the remaining building is used as a warehouse and the remaining site is used as a space for loading goods, if it actually functions as a storage, it may be excluded from the non-business land after calculating the area of the part used as a storage pursuant to Article 168-1

However, in applying the provisions of Article 168-11 (6) of the former Enforcement Decree of the Income Tax Act, where one or more buildings (including facilities, etc.; hereafter the same shall apply in this paragraph) are located on the land in applying the provisions of Article 104-3 (1) of the former Enforcement Decree of the Income Tax Act, and the part used for residence or specific business of residents (including a part of a building used for residence or specific business among multiple buildings; hereafter referred to as "specific usage portion" in this paragraph) and the different portion are located at the same time, the calculation of the area, etc. of annexed land of specific usage portion among the building's floor area and the annexed land's area (hereafter referred to as " annexed land' in this paragraph") shall be based on the following formula. Thus, in applying the provisions of Article 104-3 (1) of the former Enforcement Decree of the Income Tax Act, the land in this case does not fall under the category of annexed land's area for specific use, etc., and thus, the plaintiff's assertion in this part is unnecessary.

3. Conclusion

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

shall be ruled.