Cho Jae-2016-0088 (Law No. 18, 2016.04)

Since high-amount wage and salary income earners fail to prove their large-scale self-sufficiency in farmland, they do not satisfy the requirements for reduction or exemption of capital gains tax on farmland.

The disposition that excludes transfer income tax reduction or exemption on the farmland substitute for the reason that there was high-amount earned income during the period of possession of the farmland at issue, and that it is not self-sufficient because it is not presented objective evidence to prove that large-scale farmland is engaged in other occupation and self-defense.

Article 70 of the Restriction of Special Taxation Act: Reduction or exemption of transfer income tax for self-Cultivating farmland

Suwon District Court 2016Gudan8061 Revocation of Disposition of Imposing Capital Gains Tax

GaO

O Head of tax office

December 09, 2016

2017.02.10

1. All of the plaintiff's claims are 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 91,517,110 (including additional tax) for the Plaintiff on October 1, 2014 shall be revoked.

1. Details of the disposition;

A. On May 27, 2005, the Plaintiff acquired 4,816 square meters in j. Ga-dong 4,816 square meters. On September 5, 2011, the said land was subdivided into 395-2 square meters in 1,142 square meters in 395-8 square meters in 395-8 square meters in 395-9 and 2,372 square meters in 395-9 square meters in 395-9. On May 17, 2012, the Plaintiff transferred the said 395-2 1,142 square meters (hereinafter “instant land”).

B. On July 16, 2012, the Plaintiff filed an application for reduction of or exemption from capital gains tax for substitute farmland upon filing a report on capital gains tax on this, and thereafter, on April 2, 2014, the Plaintiff acquired 2,852m2,852m2 (hereinafter referred to as the “alternative farmland”).

C. As a result of a field investigation on the instant land, the Defendant denied the reduction or exemption of the capital gains tax on the instant land on October 1, 2014, on the ground that the Plaintiff did not directly cultivate the instant land for at least three years, and rendered the instant disposition to determine and notify the Plaintiff of KRW 91,517,110 (including additional tax) of the capital gains tax on the instant land for which 2012 reverts.

D. The Plaintiff filed an appeal with the Tax Tribunal on April 18, 2016.

[Ground of recognition] A without dispute, entry of Gap evidence 6, purport of whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

After acquiring the instant land on May 27, 2005, until retirement from the local agricultural cooperative on October 1, 2010, the Plaintiff joined dF as a member of dF on March 20, 2006, and the Plaintiff was sufficiently weak, such as receiving subsidies for preserving rice income. After retirement from the local agricultural cooperative, the Plaintiff was self-employed until the transfer of the instant land on May 17, 2012.

Therefore, since the Plaintiff cultivated the instant land for not less than three years, the transfer of the instant land constitutes an exemption from capital gains tax under the farmland substitute land pursuant to Article 70(1) of the Restriction of Special Taxation Act.

B. Determination

Article 70 (1) of the Restriction of Special Taxation Act provides that the tax amount equivalent to 100/100 of capital gains tax shall be reduced or exempted on income accruing from the substitute land for farmland cultivated by a resident prescribed by Presidential Decree in such a manner as prescribed by Presidential Decree due to the necessity for cultivation, and Article 67 (2) of the Enforcement Decree of the Restriction of Special Taxation Act provides that "direct cultivation" means that "a resident is engaged in the cultivation of crops or the growing of perennial plants on his/her own land at all times or by cultivating or cultivating 1/2 or more of the farming works with his/her own labor." In this context, "a farmer who cultivates or cultivates 1/2 or more of his/her own labor with his/her own labor" can be abused as a means of tax evasion. In addition, the burden of proving "direct cultivation as a requirement for reduction or exemption of capital gains tax" is against a taxpayer who claims reduction or exemption of capital gains tax (see, e.g., Supreme Court Decision 94Nu996, Oct. 21, 1994).

On the other hand, even if a direct farming is engaged in another occupation, it shall be considered as a self-employed farmer as mentioned above, but if it is only an indirect management of agriculture while concentrate on other occupation, it shall not be deemed as a self-employed farmer (see Supreme Court Decision 98Du9271, Sept. 22, 1998).

The following circumstances, namely, Gap evidence Nos. 9 through 16 (including paper numbers) and witness fff testimony alone, aside from the time the plaintiff retired from d Nonghyup to the time of transfer of the land of this case, it is difficult to recognize that the plaintiff was self-employed for not less than three years at the time of transfer of the land of this case, even if the above period is included, and there is no other evidence to acknowledge it otherwise. Rather, the following circumstances are as follows: the plaintiff worked in NAF's testimony and arguments, from May 27, 2005 to May 17, 2012, and the plaintiff was paid KRW 92 million to ddyna, and at least KRW 10,000 to dyna, from KRW 2,000 to KRW 10,000,000,000 to KRW 100,000,000 to dyna, even if the plaintiff acquired the land of this case from dyna.

3. Conclusion

Thus, the plaintiff's claim is dismissed as it is without merit.