Busan District Court 2013Guhap4133 (Law No. 10, 2014)

Board of Audit and Inspection ( October 31, 2013)

The reduction or exemption for the farmland that has not been directly cultivated shall be justified.

The burden of proof for direct cultivation is against the Plaintiff, and it cannot be deemed that the direct cultivation under Article 67 (2) of the Enforcement Decree of the Restriction of Special Taxation Act is performed by comprehensively taking account of other business income, the weekend excessive work ability, the receipt of direct payments for preserving rice income, the disguised transfer of payments for preserving rice income, the lack of evidence to purchase fertilizers and agricultural chemicals.

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

2014Nu21738 Revocation of Disposition of Imposing capital gains tax

AA

O Head of tax office

Busan District Court Decision 2013Guhap4133 Decided July 10, 2014

December 12, 2014

January 16, 2015

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The imposition of total capital gains tax and special rural development tax (including additional tax) for the Plaintiff on October 5, 2012 shall be revoked in all.

1. Details of the disposition;

A. On February 14, 2007, the Plaintiff completed the registration of ownership transfer on the ground of donation with respect to OO-Myeon O-si O-si 265-1 1,655 square meters (hereinafter “the farmland in this case”). On June 29, 201, the Plaintiff completed the registration of ownership transfer on the farmland in this case on the ground of land expropriation in the Republic of Korea.

B. On May 25, 2012, the Plaintiff purchased 1/2 of the 000 square meters of OO-ri O-ri 75-8 square meters (hereinafter “the instant substitute farmland”) as substitute farmland of the instant farmland, and completed the registration of ownership transfer on June 12, 2012.

C. The Plaintiff: (a) on August 31, 201, on the premise that the transfer of the farmland in this case was subject to the transfer gains tax reduction or exemption on farmland substitute land under Article 70 of the former Restriction of Special Taxation Act (amended by Act No. 11133, Dec. 31, 2011; hereinafter the same shall apply) and the special long-term holding deduction under Article 95(2) of the former Income Tax Act (amended by Act No. 10580, Apr. 12, 2011; hereinafter the same shall apply), on the premise that the Plaintiff’s act of transferring the farmland in this case constitutes the subject of the special long-term holding deduction from the transfer gains, the Plaintiff made a preliminary return on the tax base of the transfer income tax calculated by applying the special long-term holding deduction of KRW 000,000, out of the calculated amount of transfer income tax calculated by applying the special holding deduction of KRW 000 to farmland substitute land as the transfer income

D. However, the Defendant, on the ground that “the Plaintiff cannot be deemed to have cultivated the instant farmland directly,” excluded the application of the provisions on capital gains tax reduction and exemption on farmland substitute land under the former Restriction of Special Taxation Act, and on October 5, 2012, issued a correction and notification of KRW 000 (including additional tax 000, 000, excluding the amount of tax paid at 000), and KRW 000 (including additional tax) for special rural development tax for the year 201 (hereinafter “instant disposition”).

E. On January 15, 2013, the Plaintiff filed a request for review with the Board of Audit and Inspection on January 15, 2013, but was dismissed on October 31, 2013.

Facts that there is no dispute with recognition, Gap Nos. 1-4 (including paper numbers), Eul No. 1-4 (including paper numbers), and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Around October 196, the Plaintiff’s father BB (hereinafter referred to as “the Plaintiff”) received cerebral cerebral surgery, but the status was not improved, and the inheritor, on March 10, 2001, entered into an inherited property division agreement including the contents that the farmland in this case should be owned by the Plaintiff. The Plaintiff directly cultivated the farmland in this case at this time, but did not work as a rice shed in consideration of the labor force and time when the Plaintiff could invest. Accordingly, the Plaintiff directly cultivated the farmland in this case for more than three years until June 29, 201, while this constitutes “reasons for reduction and exemption of capital gains tax on the farmland substitute land” as stipulated in Article 70 of the former Restriction of Special Taxation Act, the disposition in this case that imposed capital gains tax and special rural development tax on the Plaintiff is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) According to Article 70(1) of the former Restriction of Special Taxation Act, a person who resides in a farmland area shall have the meaning of 10/100 of capital gains tax reduced or exempted with respect to income accruing from the substitute land for another farmland due to necessity for cultivation. According to Article 67(2) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 23039, Jul. 25, 201; hereinafter referred to as the "former Enforcement Decree of the Restriction of Special Taxation Act"), a "direct farming" means that a resident is engaged in cultivating or cultivating crops or perennial plants on his own land at least 1/2 of the farming work at 10 of the former Enforcement Decree of the Restriction of Special Taxation Act (see, e.g., the previous Regulation of Tax Reduction or Exemption Act or Restriction of Special Taxation Act) and that a person who is directly engaged in cultivating or growing shall be deemed to have the meaning of "one-third or more of the above requirements for reduction or exemption of capital gains tax" (see, e.g., Supreme Court Decision 20000Da1694.

2) According to the results of the fact-finding conducted by the court of first instance as to Gap's witness CCC, the following facts are acknowledged, and according to these facts, the plaintiff appears to have been partially involved in the cultivation of the farmland of this case.

① On October 23, 1996, the Deceased was in a state of physical disability, etc. at the right upper part and the end end part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part part

② On March 4, 2001, the deceased’s successors, including the Plaintiff, made an agreement on the division of inherited property, including the content that the farmland in this case is owned by the Plaintiff, and received a notarized authentication on March 10, 201.

③ On December 29, 2008, the Plaintiff invested KRW 000,000 to the OF and joined the association as its members. The Plaintiff was paid annual dividends for investment.

④ On April 25, 2010, the Plaintiff filed an application for registration of a person eligible for direct payments compensating for rice income, etc. with respect to the farmland in this case. In this regard, the Plaintiff received a written confirmation of the fact of cultivation from DD, which was located in the Dongndong Chapter as of April 28, 2010, confirming that the Plaintiff is a farmer of the farmland in this case.

⑤ The Plaintiff’s purchase of fertilizers equivalent to KRW 37,500 from OOF on April 29, 2010 remains.

3) However, in light of the following circumstances, the evidence and the above recognition facts alone, which can be acknowledged by comprehensively taking into account the descriptions Nos. 2, 5-7, 12, 14 (including paper numbers), and evidence Nos. 5-11 (including paper numbers), and evidence Nos. 5-11 (including paper numbers), and each fact inquiry as to EE and FFF corporation in the court of first instance, are insufficient to view that “direct cultivation of the farmland of this case by cultivating not less than 1/2 of the farming work in the farmland of this case for a period of not less than 3 years before the Plaintiff transferred the farmland of this case, or cultivating not less than 1/2 of the farming work with its own labor, and there is no other evidence to prove otherwise.

① The Plaintiff had worked for a ship technical inspection service company prior to acquiring the shares in the instant farmland, and had no record of engaging in farming prior to the acquisition of the instant farmland. From April 26, 2007, after the acquisition of the instant farmland, the Plaintiff reported the annual business revenue amount of the instant annual business revenue to the tax authority, as indicated in the following table, while operating the “GGGG” as from April 26, 2007 after the acquisition of the instant farmland.

Omission of the Table

② While running the above company, the Plaintiff entered into a ship technical service contract with HH (Co., Ltd., EE, contract period from February 2009 to October 2010), FFF Co., Ltd. (contract period from June 14, 2010 to November 201). The aforementioned service contract’s working hours are based on nine hours a day-day or noday a day a month or noday a day a week, and the Plaintiff was to receive more money than the daily working hours. The working hours table submitted by the Plaintiff to claim payment of the above service price was made only on the weekend or no day, and it was recorded that the Plaintiff was engaged in more than thirty-six hours a month or more (36-eight hours a month) and that the Plaintiff did not visit the above service contract after the death of the Deceased, and thus, the Plaintiff did not appear to have been in charge of the Plaintiff’s work hours and no day a day a day a day a day a day a day a day a day a day a day a day a day a day a day a week a day a day a day a day a day a day a day a day a day a day a day a day a day a day a day a day a day a day a day a day a day a day a day a day a day a day a day off.

③ According to the report on the completion of on-site verification of transfer income tax prepared by a public official belonging to the defendant, it is stated that "the actual farmer is confirmed that the mother and the fire fighter are the dynamics who are the fire fighters," and even based on the confirmation (Evidence A 5) received by the neighboring residents, it is stated that the plaintiff was working together with the JJ, South East East-North J.

④ The farmland in this case is not smaller than 1,655 square meters (around 500 square meters), and it is necessary to manage rice farmers at each work stage, such as seedlings, religion, management, spreading of blight and harmful insects, harvesting, harvesting, transporting, building, etc. It is difficult for the Plaintiff to take part in the cultivation of the farmland in this case without going to rest after retirement or on holidays, in the event that the Plaintiff works in various places as above.

⑤ Under the premise that the Deceased was directly cultivated in the instant farmland, the Plaintiff filed an application for registration of a person subject to prohibition of direct payments compensating for rice income, etc., and the Plaintiff also prepared a certificate of cultivation confirming the decedent’s cultivation. Even if the Deceased was unable to form a farmer on his own due to a disability, it may be deemed that the mother KK (1941 G), which forms a family with the Deceased, is cultivating the instant farmland.

6. The purchase of agrochemicals and fertilizers by the Plaintiff appears to have been mostly purchased by the Plaintiff’s mother or her mother, and recorded as purchased by the Plaintiff is only one time.

7) On March 15, 2007, after the Plaintiff’s parents resided in the present residence from May 15, 2006 and completed the move-in report on March 15, 2007, which was the date of the registration of transfer of ownership with respect to the farmland of this case, the Plaintiff’s spouse continued to reside in the present domicile of the Plaintiff, and the Plaintiff’s spouse completed the move-in report again on June 5, 2012, which was after the transfer of the farmland of this case, to the present domicile. During the above period, the Plaintiff reported the business income from 2007 to 2011 of the said GG, which was reported to the present domicile. In fact, the Plaintiff appears to have been placed only in the nearby residence of the Plaintiff’s parents, who were the farmland of this case, in order to maintain the eligibility for reduction or exemption of the transfer income tax (in addition, the Plaintiff reported the move-in report on the tax of this case to the neighboring OO farmland of this case, which is the farmland of this case.

(8) The legislative intent of the former Restriction of Special Taxation Act, which provides for capital gains tax reduction or exemption for self-arable farmland, is to prevent speculation on non-owned farmland and to prevent the reduction of rural population and revitalize agriculture and rural communities by reducing the tax burden so that a person engaged in agriculture directly can engage in the long-term agriculture. In order to recognize "direct farming", it is reasonable to interpret that the farmland owner shall be excluded from the subject of capital gains tax reduction or exemption if he/she cultivates farmland on a intermittent basis by mainly cultivating farmland using other people's labor in the state of occupation other than agriculture.

4) Therefore, the instant disposition that the Plaintiff imposed capital gains tax and special rural development tax (including additional tax) by excluding the application of capital gains tax reduction and exemption provisions on farmland substitute land under Article 70(1) of the former Restriction of Special Taxation Act on the transfer of the instant farmland is justifiable, and the Plaintiff’s assertion against this is without merit

3. Conclusion

Therefore, the plaintiff's claim shall be dismissed as it is without merit. The judgment of the court of first instance is just with this conclusion, and the plaintiff's appeal is dismissed. It is so decided as per Disposition.