The purpose of legislation of Article 132 (4) 8 of the former Enforcement Decree of the Local Tax Act amended on December 31, 1999 and the land owned by another person, where a housing construction business operator under Article 16 (2) of the Housing Act obtains a license to use and obtains approval for a housing construction project plan, whether the land provided for a housing construction project subject to separate taxation of property tax (affirmative)

Article 132 (4) 8 of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 20794, May 27, 2008) provides that "the previous provisions of Article 132 (4) 8 of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 20794, May 27, 2008) shall be subject to separate taxation of property tax (see Article 194-15 (4) 8 of the former Enforcement Decree of the Local Tax Act before amended by Presidential Decree No. 16673, Dec. 31, 199) that "the land for which a housing construction business operator registered under the Housing Construction Promotion Act has obtained approval of a business plan under the same Act to construct housing, and is owned by the housing construction business operator to more efficiently carry out the housing construction business, and it shall be deemed that the housing construction business operator is entitled to secure the ownership of the land for the public interest purpose of the housing construction business by excluding it from the aggregate tax base regardless of whether the land is owned, and thus securing the ownership of the housing construction project.

Article 182 (1) 3 (d) (e) (see current Article 106 (1) 3 (e)) of the former Local Tax Act (Amended by Act No. 8864, Feb. 29, 2008); Article 194-15 (4) 8 (see current Article 102 (5) 7) of the former Enforcement Decree of the Local Tax Act (Amended by Presidential Decree No. 16673, Dec. 31, 199); Article 132 (4) 8 (see current Article 102 (5) of the former Enforcement Decree of the Local Tax Act (Amended by Presidential Decree No. 20794, May 27, 2008); Article 16 (2) of the Housing Act

Plaintiff (Law Firm, Kim & Lee LLC, Attorneys Lee Dong-chul et al., Counsel for the plaintiff-appellant)

Gangwon-gu Director of the District Office

Seoul High Court Decision 2009Nu36561 decided November 25, 2010

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Regarding ground of appeal No. 1

A. Articles 104(1)2-7 and 104-3(1)4 of the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009; hereinafter the same shall apply) and subparagraph 1 of Article 168-6 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 20720, Feb. 29, 2008; hereinafter the same shall apply) provide that in cases where the ownership period of land is five years or more with respect to the portion of capital gains tax due to the transfer of “non-business land,” the period exceeding two years in the preceding five years, the period exceeding one year in the preceding three years, and the period exceeding 20/100 of the ownership period of land and the period exceeding 20/100 of the ownership period of land shall, in principle, be deemed as the non-business land, and the transfer income tax and the period falling under subparagraph 1(b) of Article 168-6 of the former Enforcement Decree of the Income Tax Act shall be excluded from the property tax.

Meanwhile, Article 182(1)3(d) of the former Local Tax Act (amended by Act No. 8864, Feb. 29, 2008; hereinafter the same) and Article 132(4)8 of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 20794, May 27, 2008; hereinafter the same) cited as one of the land subject to separate taxation of property tax as “land for which a housing construction business operator registered as a housing construction business operator under the Housing Act has obtained approval of a business plan under the same Act to construct a house” (hereinafter “housing construction project land”).

B. The lower court held that each of the instant lands acquired by the Plaintiff does not constitute a joint project proprietor of a housing construction project, which is subject to the separate taxation of property tax under Article 182 (1) 3 (d) of the former Local Tax Act and Article 132 (4) 8 of the former Enforcement Decree of the Local Tax Act, on the premise that the land owned by the housing construction business operator is the land subject to the separate taxation of property tax. Furthermore, insofar as the Plaintiff concluded an agreement on the promotion, etc. of the housing construction project and obtained the approval of the project jointly pursuant to the Housing Act and subordinate statutes, insofar as the Plaintiff did not fall under the joint project proprietor of the housing construction project that the non-party company conducted with the non-party company for each of the instant lands, regardless of whether the approval of the housing construction project plan was approved on December 30, 2005, the lower court determined

C. However, we cannot accept the judgment of the court below that only the land owned by the housing construction business operator constitutes the land of housing construction business which is the land subject to separate taxation of property tax under Article 182 (1) 3 (d) of the former Local Tax Act and Article 132 (4) 8 of the former Enforcement Decree of the Local Tax

The above provisions of the former Enforcement Decree of the Local Tax Act amended the previous contents of "land owned by a housing construction businessman registered as a housing construction businessman under the Housing Construction Promotion Act for the construction of housing, from the approval date of a business plan under the same Act until the completion date of sale" as separate taxation of property tax (see Article 194-15 (4) 8 of the former Enforcement Decree of the Local Tax Act before amended by Presidential Decree No. 16673, Dec. 31, 199) as mentioned above. In order for the housing construction businessman to carry out a housing construction business more efficiently, the legislative purpose of the former Enforcement Decree is to reduce tax burden by excluding the land used for public interest of the housing construction business from the comprehensive aggregate tax base regardless of its ownership, by exceptionally subject to separate taxation of low-rate rate. Article 16 (2) of the Housing Act provides that a business operator who intends to obtain approval of a housing construction plan shall secure the ownership of the housing construction site or secure the title to use the land, etc., so even if the land is owned by another person, the land shall be granted the approval of the housing construction project.

In full view of the contents of the above relevant statutes, the legislative intent and amendment history thereof, etc., it cannot be deemed that the land subject to separate taxation of the property tax is limited to the land owned by the housing construction proprietor.

D. Examining the record in light of the above legal principles, 1/2 of the shares of each of the instant lands acquired from the Nonparty on March 29, 2007, after the Plaintiff approved the housing construction project plan on December 30, 2005, shall be deemed land subject to separate taxation under the former Local Tax Act as land for housing construction business for the period of ownership owned by the Plaintiff. Nevertheless, the court below erred by misapprehending the legal principles on the interpretation of land for housing construction business subject to separate taxation under the former Local Tax Act, and thereby affecting the conclusion of the judgment. The Plaintiff’s ground of appeal pointing this out is with merit.

E. However, according to the above provisions, even if the land is subject to a separate aggregate of property tax or a separate taxation under the former Local Tax Act, if the period of ownership is not less than five years, if the land is excluded from a separate aggregate of property or a separate taxation for the period corresponding to all items of Article 104-3 (1) 4 of the former Income Tax Act and Article 168-6 (1) 1 of the former Enforcement Decree of Income Tax Act during the period of ownership, the land concerned ultimately constitutes a non-business land under Article 104-3 (1) of the

Examining the record in light of this, even if the Plaintiff’s share of 1/2 of each of the instant lands acquired on June 29, 2001 was subject to separate taxation under the former Local Tax Act due to the approval of the housing construction project on December 30, 2005, the lower court’s conclusion that it constitutes non-business land because it did not be subject to separate taxation for the period falling under all items of Article 104-3(1)4 of the former Income Tax Act and subparagraph 1 of Article 168-6 of the former Enforcement Decree of the Income Tax Act during the entire ownership period until June 18, 207, which is the transfer date.

Therefore, with respect to the portion of one half of the lands of this case acquired by the plaintiff on June 29, 2001, the lower court’s error as to the interpretation of the land of the housing construction project subject to separate taxation as seen earlier shall not be deemed to have affected the conclusion of the judgment. Ultimately, this part of the ground of appeal cannot be accepted.

2. As to the third ground for appeal

Examining the records in light of the relevant laws and regulations, the court below is justified in holding that each of the land of this case acquired by the plaintiff does not constitute "land having considerable reasons to recognize that it is directly related to the business, considering the situation of land use, the fulfillment of the obligations under the relevant laws and regulations, etc." that is excluded from the scope of non-business land under Article 104-3 (1) 4 (c) of the former Income Tax Act and Article 168-1 (1) 14 (c) of the former Enforcement Decree of the Income Tax Act, based on the reasons stated in its holding. Contrary to the allegations in the grounds of appeal, the court below did not err by misapprehending the legal principles on the interpretation of the scope of non-business land under Article 104-3 (1) 4 (c) of the former Income Tax

3. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Yong-deok (Presiding Justice)