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Even if the housing area is larger than the non-housing area, the special deduction rate for long-term possession shall not apply to the deduction rate corresponding to the holding period of the entire

In applying non-taxation provisions, where a building is combined with a house and a part other than a house, the entire building shall be deemed a house, but in applying the special long-term holding deduction rate, the entire building shall not be deemed a house and at the same time, the deduction rate corresponding to the holding period of the entire house is not applied on the ground that

Article 95 of the Income Tax Act

Seoul Administrative Court 2014Gudan3788

○ ○

○ Head of tax office

December 3, 2014

February 4, 2015

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The imposition of capital gains tax of KRW 00,000,000 (including additional tax; hereinafter the same shall apply) for the Plaintiff on July 1, 2012 shall be revoked.

1. Details of the disposition;

A. The Plaintiff’s acquisition and transfer of real estate

1) On April 4, 1975, the Plaintiff acquired the site listed in paragraph 1 (hereinafter referred to as “land 1”) and the land listed in paragraph 2 (hereinafter referred to as “land 2”) as indicated below, and newly built on December 11, 1996 the third floor building (hereinafter referred to as “the building of this case”) such as the land listed in paragraph 1 of the same Table on the ground.

2) On September 21, 2009, the Plaintiff transferred the instant land and the instant building (hereinafter collectively referred to as the “instant real estate”) to ○○○○○○, Inc. with the price of KRW 1.455 billion. The Plaintiff transferred the instant land in KRW 1.5 billion with the price of KRW 2 billion.

[Indication of Real Estate]

1. The real estate of this case

- Site: Seoul ○○○-dong ○○○○-dong 000 square meters (this case’s one land)

-Buildings: built built of reinforced concrete, light framed structure, brick structure, Class II neighborhood living facilities, detached housing/three floors;

The second class neighborhood living facilities (cafeteria) of 189.94 square meters per floor.

2. A detached house (one household in multi-family house) of 186.15 square meters;

108.48 square meters in a light 3-story steel structure;

Three stories and 22.50 square meters of detached houses (the instant building) 130.98 square meters per annum

2. Two land in this case

Seoul: ○○○-dong ○○○-dong 969 square meters prior to ○○-dong

(b) Particulars of imposing capital gains tax;

1) Details of the Plaintiff’s report and payment

On November 30, 2009, the Plaintiff reported the transfer income tax to the Defendant on November 30, 2009, as indicated below:

The real estate of this case is one house for one household, and the special deduction rate for long-term holding (hereinafter referred to as "special deduction rate") shall be 80% on the basis of the period held as a house for at least ten years, and the real estate of this case is reported and paid KRW 00,000,000, which is calculated by applying the deduction rate of 30% on the ground that the land of this case falls under the business (farmland).

2) The defendant's original disposition details

As a result of the tax investigation, the defendant's living facilities other than the housing for the building of this case

Therefore, the period during which the instant building can be recognized as a house is three and a half years, and 24% of the long-term deduction rate of 1 house for one household during that period and 30% favorable to the Plaintiff out of the deduction rate of 30% when the holding period is at least 10 years as assets not for one house for one household. ② With respect to the instant two land, the deduction rate of 30% shall apply as a business (road) and the remaining 830.79 square meters (hereinafter “the portion of the dispute”) are not farmland at the time of transfer, and thus, the remaining 830.79 square meters (hereinafter “the portion of the dispute”) did not fall under farmland at the time of transfer, thereby excluding the special deduction for long-term possession as land for non-business use. The Plaintiff corrected and notified the Plaintiff on July 1, 2012.

3) Details of the Defendant’s corrective disposition

The plaintiff filed an appeal on September 25, 2012 on the disposition of the above Paragraph 2, and the Tax Tribunal has made the appeal.

On December 4, 2013, "The second floor of the building of this case is recognized as being used as a house from September 10, 2005 to August 23, 2009 and the deduction rate is recognized as 56%."

Accordingly, the defendant reduced 00,000,000 won in total from the original disposition tax amount twice (the defendant's).

Of the disposition of July 1, 2012, the remaining amount of KRW 00,000,000 that has been reduced as above shall be referred to as the "disposition of this case"

Facts without dispute over the basis of recognition, Gap 1, 2, 3 evidence, Eul 1, 2, and 3 each entry

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The instant disposition shall be revoked on the grounds that the following illegal grounds exist:

1) As to the instant real estate

① Main assertion: Since the instant building is larger than the housing portion at the time of transfer, it shall be deemed a house pursuant to Article 154(3) of the Enforcement Decree of the Income Tax Act, and since the Plaintiff’s retention period is 12 years and 9 months, 80% of the deduction rate shall be applied.

(2) Preliminary assertion: even if the first floor and second floor of the instant building are applied by 56%, the deduction rate shall be at least 80% since the portion of the third floor which was used as a house continuously falls under the holding period of 12 years and 9 months.

2) As to the key part of the land of this case (830.79 square meters)

③ The Plaintiff acquired the instant land 2 in 1975, and owned it for a long period of 20 years or more, and used it as an orchard for a long time. In light of the fact-finding inquiry reply by the ○○○○ Office on farmland tax data, membership data, satellite photographs, and in particular, farmland ledger (Evidence A 10) submitted by the Plaintiff, it can be known that it is being used as farmland until the time of the instant transfer. Therefore, this part constitutes a business land which is an orchard (farmland) at the time of transfer, and thus, the deduction rate of 30% ought to be applied.

B. Relevant statutes

It is as shown in the attached Form.

C. Judgment on the Plaintiff’s assertion regarding the instant real estate

1) Judgment on the main argument

The principle of no taxation without law prevents the requirements of taxation or tax exemption.

Unless there are special circumstances, the interpretation of tax laws and regulations shall be interpreted as the text of the law, and it shall not be permitted to expand or analogically interpret with the benefit of taxpayers without any reasonable reason. In particular, the strict interpretation that clearly sees the preferential provisions among the requirements for reduction and exemption accords with the principle of fair taxation (see Supreme Court Decisions 2003Du7392, May 28, 2004; 2005Da19163, May 25, 2006; 2006Du16182, May 10, 2007).

In full view of the provisions of Articles 89 and 95 of the former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009; hereinafter referred to as the "former Income Tax Act") and Article 154 (3) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22034 of Oct. 18, 2010; hereinafter referred to as the "former Enforcement Decree"), income accruing from the transfer of one house for one household meeting certain requirements shall not be subject to capital gains tax; however, in applying the above non-taxation provisions, expensive houses exceeding a certain standard are excluded from those subject to taxation; and in applying the above non-taxation provisions, if the housing area is smaller than or equal to the non-housing area, the non-housing area shall be deemed a house, and in other words, Article 154 (3) of the former Enforcement Decree of the Income Tax Act shall not be deemed a house.

Therefore, under different premise, the Plaintiff’s assertion that when applying the special long-term holding deduction rate under Article 95 of the former Enforcement Decree of the Income Tax Act based on the provision of Article 154(3) of the former Enforcement Decree, the entire portion of the house ought to be applied on the ground that the portion of the house is larger than that of the part other than the house, and at the same time, the deduction rate corresponding to

2) Determination on the conjunctive assertion

According to the provisions of Articles 94 and 95 of the former Income Tax Act, capital gains shall have been generated in the year concerned.

The term “land or a building” refers to the income accrued from the transfer of the land or a building, and the amount of capital gains shall be calculated by deducting the amount of special deduction for long-term holding from such amount after deducting necessary expenses from the total amount of income of the above capital gains. Here, the amount of special deduction for long-term holding shall, in principle, be calculated by applying the ratio prescribed in Table 1 of Article 95(2) according to the holding period of the relevant asset, but in the case of one house for one household meeting certain requirements, the ratio prescribed in Table 2 of the same paragraph shall apply. In other words, since the unit of an object subject to capital gains tax is basically a “land” or a “building” as provided in Article 94, the application of each of the above Acts and subordinate statutes should be determined on the basis of the whole object, for example, by arbitrarily

Therefore, the plaintiff's conjunctive assertion that the standard table of special deduction for long-term possession should be applied differently by dividing the first, second, and third floors of the building of this case is without merit.

D. Determination as to the land of this case 2

1) In full view of the provisions of Articles 95(2), 104(1)2-7, and 104-3(1)1 and (2) of the former Income Tax Act, and Article 168-14(3)2 of the former Enforcement Decree of the Income Tax Act, "specific land for non-business" is not subject to special long-term holding deduction, but is examples of "farmland located in an urban area as a paddy, paddy and orchard" as one of the non-business land. However, "cases falling under a non-business land due to any inevitable reason prescribed by the Presidential Decree" may not be regarded as a land for non-business under the conditions as prescribed by the Presidential Decree. The former Enforcement Decree of the Income Tax Act delegated refers to the farmland, forest and stock farm land owned for not less than 20 years prior to December 31, 2006, which is transferred not later than December 31, 2009."

Therefore, if you want to be recognized as an exception to the non-business land under the above provision, it should be considered as farmland until the time of transfer as a "electric field, paddy field and orchard" under the former Income Tax Act.

2) According to Gap evidence No. 15 in this case, the land of this case belongs to an urban area.

Since the land is ‘the whole', it should be ‘the exception to the non-business land' under the above provisions, it should be ‘the whole land, the answer, and the orchard' at the time of its transfer.

Therefore, each entry of evidence Nos. 7, 9, 10 and 00 of this Court's ○○ Office

According to the results of each fact-finding, the Plaintiff joined a cooperative that demanded that the size of 1,00 square meters or more in 1990 is not smaller than 1,00 square meters as a partner, and the said land was treated as non-taxable as farmland, and furthermore, until September 17, 2001, at least 200-0,000 land including the instant land was in fact-finding, and even if the Plaintiff was aware of such fact-finding, it is insufficient to recognize that the land of this case was “farmland,” prior to the time of transfer (as of September 21, 2009), answer, or orchard, only with the entries and images of evidence No. 11 and No. 19, submitted by the Plaintiff, in light of such circumstances and other circumstances, it is difficult to recognize that the land of this case was “farmland,” as farmland, which is an orchard.

Rather, according to the above evidence and the purport of the whole pleadings, the following circumstances are revealed.

① In addition, according to the farmland ledger as of September 17, 2001, the date of the final change of the certified copy of the farmland ledger, the farmland cultivation status was recorded as “electric field,” and according to the fact-finding results with the ○○○ Office, the said farmland ledger was prepared after investigating the actual category and cultivation of the land. Meanwhile, the term “electric field” under the relevant statutes refers to the land where plants, such as grains, raw crops (excluding fruit trees), medicinal herbs, mulberry trees, mulberry trees, seedlings, ornamental trees, ornamental trees, etc. are mainly cultivated and the land where plants are mainly cultivated with food, and the term “ody field” refers to the land where plants are collectively cultivated with plants, such as sand, fish farming, night, lake, walkey trees, walkey trees, etc. and the land where trees are collectively cultivated, and the site for the attached facilities, such as the land connected thereto, which is clearly distinguishable from the land and the site for the waterway survey (excluding the Act and the Enforcement Decree thereof).

② However, as at the time of the above transfer, some of the instant land was used as a parking lot in a restaurant operated by the Plaintiff, and the remaining parts were planted in the aerial field trees. As to this, the Plaintiff stated that the Plaintiff, along with the instant land, had operated the “dual orchard” by adding up the Plaintiff’s neighboring land, but it was not submitted sufficient objective data on the timing and developments of converting from “dry field farming company to a large-scale orchard operation, and materials, expenses, etc. necessary for operating the orchard.

③ At least 200-0 land in the vicinity of the instant land has been cut to “pre-sale,” and the part of the land has been used as a restaurant parking lot from any time to any time, and there is insufficient evidence to acknowledge that the Plaintiff cultivated the land as an orchard by the time of transfer, in detail, only trees, the number of which is unknown, are planted in the remaining parts, and there is insufficient evidence to acknowledge that the Plaintiff cultivated the land as an orchard by the time of transfer.

3) Ultimately, we cannot accept the Plaintiff’s assertion that the instant land was cultivated as farmland (water sources) until it was transferred.

4. Conclusion

Ultimately, the defendant's disposition of this case is not recognized as an illegal cause, and the plaintiff's claim of this case is not reasonable, and it is so decided as per Disposition.