Review Transfer 2009-0147 (Law No. 27 August 27, 2009)

Income generated from the transfer of natural forest trees shall not be deemed business income.

If the forest transaction cannot be deemed as the business, the transfer income tax shall be imposed on the land by deeming the transfer value of the land as the transfer value without distinguishing the transfer value of the land from the transfer value of the forest land

The contents of the decision shall be the same as attached.

1. The plaintiff's claim is dismissed.

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

The defendant's disposition rejecting a request for correction of capital gains tax against the plaintiff on March 20, 209 shall be revoked.

1. Details of the disposition;

A. On or around March 6, 2008, the Plaintiff transferred 1/4 shares out of 155-1 forest 5,420 square meters in BB-Eup AAri, BB-Gu (hereinafter “instant transfer”). On or around May 2008, the Plaintiff scheduled the transfer value of KRW 1,075,000,000, and the acquisition value of KRW 22,945,875 to KRW 227,226,519, and voluntarily paid the transfer income tax around that time.

B. On February 24, 2009, when the Plaintiff transfers forest land and forest trees to the Defendant along with the instant transfer, the income accrued from the transfer of forest land falls under the transfer income, and the income from the transfer of forest trees falls under the business income, and thus, the income from the transfer of forest trees is calculated by dividing the transfer value of this case into the transfer income from the transfer of forest land and the business income from the transfer of forest trees pursuant to Article 51(8) of the Enforcement Decree of the Income Tax Act, and by calculating the transfer income from the transfer of forest land according to the standard market price. The Plaintiff filed a request for correction to the effect that the transfer income tax of this case should be calculated according to the standard market price, on the premise that

C. On March 20, 2009, the Defendant rendered the instant disposition rejecting the instant claim for correction on the ground that there is no evidence to acknowledge that the forest trees among the instant transfer subject to feasibility are traded with business income, and that the income generated from the transfer of the forest trees cannot be deemed business income on the ground that the said claim for correction cannot be deemed business income on the ground that there is no evidence to support that the forest trees among the transfer subject to the instant transfer did not have been traded with business income.

D. Accordingly, on June 22, 2009, the Plaintiff filed a request for examination with the Commissioner of the National Tax Service on the grounds that the Plaintiff was dissatisfied therewith and August 2009.

27. The decision to dismiss the above request for examination was received;

[Reasons for Recognition] Each entry of Gap evidence Nos. 1 through 4, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

According to Article 19 of the Income Tax Act and Article 23-1 of the General Rules of the Income Tax Act, income generated by the transfer of naturally generated forest trees shall be always deemed business income regardless of the operation of forestry. However, the instant disposition that the Defendant reported differently is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) According to Articles 4(1)1 and 3, 19(1)1, and 94(1)1 of the Income Tax Act, income generated from forestry falls under business income which is subject to global income tax, and income generated therefrom shall be subject to transfer income tax unless transfer of land becomes real estate business, etc. Meanwhile, Article 51(8) of the Enforcement Decree of the Income Tax Act provides that income generated from the transfer of forest land along with the forest land shall not be included in the calculation of gross income amount in cases where the income amount of the business felling or transferring the forest land is calculated. In light of the above provisions, where the forest land and its fixtures are transferred together with the forest land, such income from the transfer of the forest land shall not be included in the calculation of gross income amount. Accordingly, in cases where the forest land and its fixtures are transferred together with the forest land, the transfer income tax shall not be included in the calculation of the transfer value of the forest land in question, and the transfer value of the forest land shall not be included in the calculation of the transfer value of the forest land in question.

(2) If we look at the purport of the entire pleadings in the statement No. 2 of this case as to the transfer of this case, the Plaintiff’s transfer of this case’s forest land and natural living trees fixed on the land can be acknowledged as having agreed with the total purchase price without distinguishing the transfer value of forest land from the transfer value of forest land. There is no evidence to acknowledge that the Plaintiff engaged in forestry at the time of the transfer of this case or separately collected or transferred naturally living trees within the forest subject to the transfer of this case as a business in relation to the transfer of this case. Thus, the transfer value of forest trees subject to the transfer of this case cannot be calculated by dividing the transfer value of forest trees into the transfer income of forest land and the business income of forest trees. Thus, the Plaintiff’s assertion premised on the premise that the transfer value of forest trees should be always viewed as business income regardless of whether they constitute the transfer of forest trees, etc.

Therefore, the instant disposition based on the premise that the entire income generated by the Defendant from the transfer of this case is subject to capital gains tax is lawful.

3. Conclusion

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