Cho-2016-China-2439 (Law No. 16, 227. 2016)

The transfer after the enforcement of the total amount of salaries 37 million won provision shall be subject to the application of the key provisions for the whole cultivation period.

Where there is a taxable period with a total amount of 37 million won or more, the provisions that are excluded from the period of cultivation shall apply to the portion transferred on July 1, 2014, which is not invalid provisions, but this case transferred on or after the enforcement date of the Acts and subordinate statutes shall not be subject to retroactive taxation.

Article 69 of the Restriction of Special Taxation Act: Reduction or exemption of transfer income tax for self-farmland

2016Guhap610 Revocation of Disposition of Imposing capital gains tax

AA

BB Director of the Tax Office

September 19, 2017

October 24, 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 14,94,120 against the Plaintiff on June 7, 2016 shall be revoked.

1. Details of the disposition;

A. On April 22, 2003, the Plaintiff acquired and owned 1204-4 square meters per annum 1204-2 road 318 square meters per annum (268 square meters per annum prior to the same Ri, July 15, 2005; hereinafter referred to as "land prior to the division") and owned 04-4 square meters per annum 1204-4 square meters per annum (hereinafter referred to as "total land of this case"), and sold to ○○○○, ○○, ○○-2 road, 318 square meters per annum, and filed a report on capital gains tax by applying the reduction or exemption of capital gains tax to the Defendant on August 14, 2014, by applying the reduction or exemption of capital gains tax for reasons of self-reliance under Article 69 of the Restriction of Special Taxation Act.

B. The Defendant conducted an investigation of capital gains tax on the Plaintiff, and confirmed that the total amount of salaries during the period from 2003 to 2008 was at least KRW 37 million during which the Plaintiff owned the instant land, and excluded the period of gross salaries of at least KRW 37 million (6 years) from the period of holding the instant land pursuant to Article 66(14) of the Enforcement Decree of the Restriction of Special Taxation Act (hereinafter “instant disposition”) for the reason that the Plaintiff did not meet the requirements for self-sufficiency for at least eight years, thereby excluding application for reduction and exemption from the Plaintiff on June 7, 2016 (hereinafter “instant disposition”).

C. On June 28, 2016, the Plaintiff filed an objection and filed an appeal with the Tax Tribunal, but was dismissed on July 22, 2016.

[Ground for Recognition: Facts without dispute, Gap's 1 through 5, 10 evidence (including branch numbers in case of provisional number; hereinafter the same shall apply), Eul's evidence 1, the purport of the whole pleadings]

2. Whether the disposition of this case is legitimate;

A. The plaintiff's assertion

1) The Plaintiff resided in ○○○ City from 1983 to 2009 and worked in EE located in ○○○ City. Since the Plaintiff cultivated the instant land within five kilometers from the place of residence by using leisure hours, holidays, leaves, etc. after acquiring the instant land for at least eight years, the Plaintiff satisfied the requirements for capital gains tax reduction under Article 69(1) of the former Restriction of Special Taxation Act (amended by Act No. 14390, Dec. 20, 2016; hereinafter “former Restriction of Special Taxation Act”).

2) In accordance with Article 66(14) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 27848, Feb. 7, 2017; hereinafter referred to as the “former Enforcement Decree of the Restriction of Special Taxation Act”) that the Plaintiff’s total amount of salaries is at least KRW 37 million (from 2003 to 2008), the Defendant denied the Plaintiff’s reduction and exemption on the grounds that the Plaintiff cannot be deemed to have replaced the instant land for at least eight years, on the grounds that the period was excluded from the farming period. Since the instant provision was newly established without delegation of specific and individual laws, it is contrary to the principle of no taxation without law or no taxation without law, and thus, it is contrary to the principle of no taxation without law or no taxation without law, and thus, the instant provision should be excessively null and void as it constitutes a violation of the principle of no taxation without law or no taxation without law.

3) Even if the instant key provision is valid, the period prior to the enforcement date of the instant key provision (from 2003 to 2008) shall be excluded from the cultivation period, even though the period of total pay of at least 37 million won after the enforcement date of the instant key provision ( July 1, 2014) should be excluded from the cultivation period.

B. Relevant provisions

It is as shown in the attached Form.

C. Determination

1) Whether the Plaintiff satisfied the requirements for capital gains tax reduction and exemption under Article 69(1) of the former Restriction of Special Taxation Act (whether the Plaintiff cultivated the instant land for at least eight years)

According to Article 69(1) of the Restriction of Special Taxation Act and Article 66(1) of the former Enforcement Decree of the Restriction of Special Taxation Act, a resident shall directly cultivate the relevant farmland while residing in a Si/Gun/Gu where the relevant farmland is located for at least eight years, in an area within a Si/Gun/Gu adjacent to the relevant farmland, or in an area within 20 kilometers in a straight line from the relevant farmland. Article 66(13) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that a resident shall be engaged in cultivating crops or growing perennial plants on his/her own farmland or cultivating or cultivating at least half of farming works with his/her own labor. Here, the meaning of the term "regular work" and "self labor force" should be interpreted in accordance with the language and text (see, e.g., Supreme Court Decision 2010Du8423, Sept. 30, 201); and it cannot be deemed that it is indirectly conducted by reliance on other occupation (see, e.g., Supreme Court Decision 2014Du9484, supra.).

According to the statements in Gap evidence Nos. 6 through 9, the plaintiff continued to reside in ○○ City until September 26, 2014, which was after the transfer of the land of this case from January 16, 1983 to September 26, 2014. The plaintiff stated in the farmland ledger (Evidence No. 7) that the land of this case is around 1204-2 land of this case and 1204-4 land from the land of this case. The plaintiff's disposal of this Chapter FF made a confirmation of the fact that the plaintiff had cultivated the land of this case from March 21, 2003 to September 201, 2014, and that the plaintiff's sale of the land of this case was legitimate, regardless of whether it was legitimate or invalid by evidence of this case's purchase of agricultural crops of this case by trader (Evidence No. 99). Thus, the plaintiff's disposal of this case's land of this case is without merit, even if it is found that the plaintiff had never been directly engaged in farming or retired from each of this case's agricultural crops.

A) Among the instant land, the land category of ○○○○-ri-2 was a road prior to the partition. Since it was divided into 1204-2 and 1204-5 square meters prior to the Plaintiff’s acquisition on July 15, 2005, the same Ri was divided into 1204-2 and 268 square meters after the Plaintiff’s acquisition on the instant land. It cannot be readily concluded that the land of ○○-ri-1204-2 and prior to the division was used as farmland during the period in which the land category was a road. Since the land of ○○-ri-ri-1204-5 was a road continuously divided during the period in which the Plaintiff owned, it is difficult to deem that it was used as farmland [the farmland ledger (Evidence evidence 7) does not include ○○-ri-1204-5 and road 50 square meters]

B) The farmland ledger (No. 7) is an internal data prepared and kept for the management of farmland and the efficient implementation of agricultural policies, and it is difficult for administrative authorities to believe that the farmland ledger was prepared after confirming the Plaintiff’s cultivation by themselves. Moreover, even if the contents of the farmland ledger are followed, the first date of the farmland ledger is May 15, 2008; the period from March 25, 2010 to August 16, 2011 (from April 15, 2011 to August 23, 2011); and in light of the fact that the first date of the farmland ledger was entered as May 15, 2008; the period from which the Plaintiff purchased crops, etc. by each trader was entered as the content of the farmland ledger (Evidence No. 9), the period from March 25, 2010 to August 15, 2013 (from August 23, 2011 to August 12, 2013).

C) In light of the fact that the Plaintiff, while working in the KTW area from 2003 to 2009, received wages of at least 37 million won from 2003 to 2008, the Plaintiff appears to have been on the part of the said company from 2003 to 2008, and thus, it is difficult to view that the Plaintiff was on the part of the Plaintiff that the Plaintiff had been on the part of cultivating crops during the pertinent period or directly cultivated 1/2 or more of the farming work by using leisure time, holidays, holidays, leave, etc. as the Plaintiff’s labor force.

2) Whether the key issue clause of this case is invalid (in addition, determination)

A) Whether the key issues of this case are contrary to the principle of no taxation without law or legal reservation.

Article 69(1) of the former Special Taxation Restriction Act provides that the tax amount equivalent to 100/100 of capital gains tax on income accrued from the transfer of land prescribed by Presidential Decree, among land cultivated directly by a resident prescribed by Presidential Decree for at least eight years, shall be reduced or exempted, and it is expressly delegated to subordinate statutes concerning residents, methods of cultivation, and land, and it does not delegate to subordinate statutes for eight years, which is a cultivation period. However, considering the following circumstances, it is reasonable to view the key clause of this case as being enacted based on the delegation provision of "land cultivated for eight years or more by a resident prescribed by Presidential Decree residing in a location of land" under Article 69(1) of the former Special Taxation Restriction Act, and therefore, the key clause of this case cannot be deemed as violating the principle of no taxation without

(1) Article 69(1) of the former Restriction of Special Taxation Act provides that a resident’s total amount of salary under Article 20(2) of the Income Tax Act during the cultivation period shall be excluded if there is a taxable period of not less than 37 million won, and this is limited to a resident’s cultivation for not less than 8 years under Article 69(1) of the former Restriction of Special Taxation Act as “a resident with a total amount of salary of not less than 37 million won who has been cultivated for not less than 8 years.” Since the period of cultivation under Article 69(1) of the former Restriction of Special Taxation Act (8 years) does not extend itself, the key provision of the instant case shall be deemed to be prescribed in accordance with the explicit delegation

Article 69(1)1 of the former Restriction of Special Taxation Act (amended by Act No. 5584 of Dec. 28, 1998, and amended by Act No. 6538 of Dec. 29, 2001) provides that capital gains tax or special surtax shall be exempted on any income accruing from the transfer of land which a resident living in the seat of a farmland continuously cultivated for not less than eight years as prescribed by the Presidential Decree. The legislative purpose of Article 69 of the same Act is to reduce the tax burden due to the transfer of farmland as part of the land farming policy. In particular, Article 69(1)1 of the same Act provides that the purpose of Article 69(1)1 of the same Act is to reduce the tax burden due to the transfer of farmland and to exempt self-employed farmers from the tax burden for eight or more years in order to promote agriculture and rural communities (see, e.g., Constitutional Court en banc Decision 2003Hun-Ba, Nov. 27, 2003).

B) Whether the key issues of the instant case are contrary to the principle of prohibition of retroactive legislation

In principle, an administrative disposition shall be based on the amended Act and subordinate statutes enforced at the time of the disposition, unless otherwise prescribed by the transitional provision. Even in cases where the amended Act and subordinate statutes provide a legal effect unfavorable to the previous in relation to the property rights of the people while applying the existing facts or legal relations, if such facts or legal relations are not already completed or terminated before the amended Act and subordinate statutes enter into force, it shall not be deemed an infringement of property rights by retroactive legislation prohibited under the Constitution (see, e.g., Supreme Court Decision 2008Du9324, Sept. 10, 2009).

The key issue clause of this case is revised in a way that strengthens the requirements for reduction and exemption of capital gains tax as seen earlier, providing for the legal effect unfavorable to the previous one in relation to the property rights of the people, and Article 2(3) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that the same shall apply from the division transferred after July 1, 2014 (proviso of Article 1 and Article 2(3) of the former Enforcement Decree of the Restriction of Special Taxation Act). However, although the main issue clause of this case is only applicable to the farmland transferred after the enforcement of the main issue clause of this case, and it is not applicable to the farmland whose legal relationship has been terminated due to the transfer before

C) Whether the key issues of the instant case are contrary to the excessive prohibition principle

The main issue clause of this case was newly established on February 21, 2014 and newly established on and after July 1, 2014, and thus a grace period of about four months was granted. The Plaintiff cannot be deemed to be excessively short in disposing of the land of this case, and the need for the State to flexibly and rationally operate tax, financial policies in the field of tax law is very large. As such, the laws and regulations and systems on taxes have to be changed flexibly, barring any special circumstance that actively form a new legal relationship based on trust in accordance with the former law and order, taxpayers cannot expect or trust the current tax law in principle (see, e.g., Constitutional Court en banc Decision 2009Hun-Ba67, Oct. 28, 2010).

D) Sub-determination

Therefore, since the issue clause of this case cannot be deemed null and void, the plaintiff's assertion on a different premise is rejected.

3) Whether only the period in which the total amount of salaries is at least KRW 37 million after the enforcement date of the instant key issues clause should be excluded from the cultivation period (additional determination)

The key issue of this case is that a taxable period of at least 37 million won is excluded from the total amount of salaries of a resident during the cultivation period under Article 66(4) of the former Restriction of Special Taxation Act, and Article 66(4) of the same Act provides that the period shall be at least 8 years from the time of acquisition to the time of transfer of the farmland. Thus, the period to be excluded from the cultivation period under the main issue of this case is only a period of at least 37 million won out of the total amount of salaries during the cultivation period from the time of acquisition to the time of transfer of the farmland, and there is no ground to view that only the period after the enforcement date of the main claim of this case should be excluded from the cultivation period, as alleged by the Plaintiff. Accordingly, the Plaintiff’s assertion on this

3. Conclusion

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