Cho High Court Decision 2013 0830 (O6, 2013)

Since the Plaintiff cannot be deemed to have cultivated the farmland of this case directly, it does not fall under the requirements for capital gains tax reduction or exemption.

The farmland in this case appears to have been cultivated by proxy by neighboring residents, and it is difficult to see that more than half of the farming works have been cultivated directly with his own labor, and the disposition excluding the requirements for reduction or exemption of capital gains tax for self-defense for eight years is justifiable.

Article 70 of the Restriction of Special Taxation Act for Substitute Land for Farmland

Article 67 of the Enforcement Decree of the Restriction of Special Taxation Act: Requirements for Reduction or Exemption of Transfer Income Tax on Substitute Land

2013Guhap352 Revocation of Disposition of Imposing capital gains tax

OO

O Head of tax office

April 10, 2014

May 22, 2014

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of capital gains tax of KRW 140,705,770 for the Plaintiff on July 11, 2012 shall be revoked.

1. Details of the disposition;

A. The Plaintiff, acquired on June 14, 2005, sold OO-dong OO-dong OO-dong 2,149 square meters (hereinafter “instant farmland”) to AA on May 18, 201, and completed the registration of ownership transfer on June 13, 201.

B. On September 18, 201, the Plaintiff purchased 1150/1646 shares out of OOOO 1,464 square meters on an O-type OO O-type O-type O-type O-type O-type O-type 1,464 square meters, and completed the registration of ownership transfer on November 15, 201.

C. On August 31, 2011, the Plaintiff filed a preliminary return on the tax base of capital gains tax on the premise that the transfer of the farmland in this case constitutes the subject of the reduction or exemption of capital gains tax on the farmland substitute land under Article 70(1) of the Restriction of Special Taxation Act and the special long-term holding deduction under Article 95(2) of the Income Tax Act, on the basis that the transfer of the farmland in this case constitutes the subject of the special long-term holding deduction of 84,875,119 won out of the gains from transfer, 119,553,62 won out of the calculated capital gains tax amount of 119,562 won calculated by applying the special long-term holding deduction of 84,875,119 won from the gains from transfer, as the reduced or exempted capital gains tax on the farmland substitute land.

D. However, on July 11, 2012, the Defendant notified the Plaintiff of KRW 140,705,770 of the transfer income tax reverted to year 201, on the ground that “the Plaintiff cannot be deemed to have directly cultivated the farmland of this case”, thereby excluding the application of capital gains tax reduction and exemption and special deduction for long-term possession of farmland substitute land (hereinafter “instant disposition”).

E. On October 8, 2012, the Plaintiff filed an objection with the Defendant, and filed an appeal with the Tax Tribunal on February 5, 2013. On June 26, 2013, the Plaintiff was dismissed by the Tax Tribunal.

Facts without dispute over the basis of recognition, Gap evidence 1, Eul evidence 1, Eul evidence 8, Eul evidence 9 and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) After acquiring the farmland of this case on June 14, 2005, the Plaintiff temporarily cultivated BB by proxy, and had CCC acquired neighboring farmland adjoining the farmland of this case and cultivated the farmland of this case directly from May 2008.

The Plaintiff worked through DD in the case of fluoring, fluoring, hulling, and spraying agricultural machinery by failing to possess agricultural machinery. However, the Plaintiff directly worked for agricultural production, such as fluoring, fluoring, fluoring, fluoring, and gluoring, fluoring, etc., of fertilizers, mainly using human power.

Therefore, from May 2008 to June 13, 201, the Plaintiff directly cultivated the instant farmland for a period of not less than three years, which is deemed to fall under the “reasons for capital gains tax reduction or exemption on substitute land for farmland as stipulated under Article 70 of the former Restriction of Special Taxation Act (wholly amended by Act No. 10406, Dec. 27, 2010; hereinafter referred to as the “former Special Act on Taxation Restriction”), but the disposition of this case, which was imposed by excluding its application, is unlawful.

2) Even if it is unclear whether the Plaintiff’s self-determination in 2008 is the Plaintiff’s self-determination, it is clear that the Plaintiff’s self-determination was for at least two years from the date of the transfer, namely, for at least two years from the three years immediately before the date of the transfer, and thus, the special long-term holding deduction under Article 95(2) of the former Income Tax Act (amended by Act No. 10408, Dec. 27, 2010; hereinafter “former Income Tax Act”) should be applied. However, the instant disposition against which the transfer income tax was imposed is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) The issues of the case

According to Article 70 (1) of the former Restriction of Special Taxation Act, the tax amount equivalent to 100/100 of the transfer income tax shall be reduced or exempted for the income accruing in the event that a person who resides in the farmland owns the farmland as another farmland due to the necessity for cultivation. However, according to Article 67 (2) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 30, 2010; hereinafter the "former Enforcement Decree of the Restriction of Special Taxation Act"), "direct cultivation" refers to the case where a resident engages in the cultivation of crops or the cultivation of perennial plants on his own farmland at all times or cultivates or cultivates or cultivates with his own labor not less than half of the farming work.

In addition, according to Article 95 (2) of the former Income Tax Act, the special deduction for long-term possession of land or buildings, the holding period of which is not less than three years, is excluded from the application of Article 104 (1) 4 through 10 of the same Act to the assets subject to the tax rate of Article 104 (1) 8 of the same Act. One of them is "land for non-business" and Article 104-3 (1) 1 (a) of the same Act and Article 168-6 (1) of the Enforcement Decree of the same Act, "land for non-business" in this context includes farmland for which a farmer does not always engage in crops cultivation and does not cultivate more than 1/2 of the farming work with his own labor.

Ultimately, in order to be subject to the reduction or exemption of capital gains tax or special deduction for long-term holding of farmland substitute land, the Plaintiff should be deemed to have been engaged in crops cultivation in the instant farmland or cultivated not less than 1/2 of farming works with his own labor. Furthermore, the burden of proof is that the Plaintiff is a person liable to pay capital gains tax or special deduction for long-term holding of farmland substitute land (see, e.g., Supreme Court Decision 92Nu1893, Jul. 13, 1993).

2) Specific determination

6. According to the reasoning of the judgment below, the Plaintiff’s assertion that the Plaintiff had no record of 0G 1 and no record of 20G 1 and no record of 2G 1 and no record of 20G 1 and no record of 2G 3G 1 and no record of 2G 3G 1 and no record of 2G 1 and no record of 3G 2 were found to have been found to have been 5G 5 and no record of 2G 1 and no record of 3G 2, and that the Plaintiff had no record of 1/2 or more of 2G 1 and the record of 20G 2, and that the Plaintiff had no record of 2G 1 and no record of 3G 3G 1 and the record of the fact that the Plaintiff had no record of 5G 1 and no record of 3G 3G 1 were found to have been found to have been found to have been able to receive the farmland of this case.

Therefore, the disposition of this case imposing capital gains tax by excluding the application of the provision on reduction of capital gains tax to farmland substitute land under Article 70 (1) of the former Restriction of Special Taxation Act and the special deduction for long-term holding under Article 95 (2) of the former Income Tax Act is justifiable. Therefore, the plaintiff's assertion against this cannot be accepted.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.