Farmland incorporated in an urban area shall be land for non-business use;

Since farmland located in an urban area under the National Land Planning and Utilization Act as a result of incorporation into a residential area was located, barring any special circumstance, it is clear that the land in this case constitutes land for non-business under Article 104-3 (1) 1 (b) of the Income Tax Act.

2018Guhap2387 Revocation of Disposition of Imposing capital gains tax

Is 00

00. Head of tax office

November 23, 2018

December 21, 2018

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of capital gains tax of KRW 1,681,30 for the year 2013 against the Plaintiff on July 1, 2017 and KRW 86,998,480 for the capital gains tax of KRW 2015 shall be revoked.

1. Details of the disposition;

“A. On December 10, 2004, the Plaintiff purchased 1/3 shares of KRW 80.00,000,000 prior to 00-2,096 (hereinafter referred to as “instant land”). As seen thereafter, on June 25, 2013, the said land was replaced by a land readjustment project and rearrangement project, and became 00:0 00 :00 :00 :01-14 :10 :00 ; and 879.10). B. The replotting process of the instant land.

"1) On March 3, 200, the land of this case was designated as an urban planning zone pursuant to Article 18(1) and (4) of the former Urban Planning Act (amended by Act No. 6243, Jan. 28, 2000; hereinafter the same) on March 3, 200, and the land of this case was announced to implement the land readjustment project of Pyeongtaek-si District on May 15, 200 (hereinafter referred to as the "land readjustment project of this case"). 2) On May 21, 2007, Pyeongtaek-si sent the land readjustment project of this case for the project of this case from May 21, 2007 to May 20, 2010; and the land owner of this case was notified to implement the land readjustment project of this case for the land readjustment project of this case; on May 21, 2007, the project period of which was determined from May 20 to May 20, 2010.

3) Thereafter, on April 2010, Pyeongtaek-si extended the project period to May 20, 2012 in relation to the land readjustment project of this case. Around May 10, 2013, and designation of land reserved for replotting was made. Accordingly, on June 25, 2013, the construction was completed, and the instant land was replaced to Pyeongtaek-si, Dong-dong 01-4, 879.10.

4) The instant land was designated as a land readjustment project district, and a specific use area was designated as a residential area as shown below until now.

- - omitted -

C. After receiving KRW 74,473,667 from the Defendant on June 25, 2013, the Plaintiff reported and paid KRW 2,150,50,00 as capital gains tax calculated by filing a special deduction for long-term holding of KRW 7,590,546, the Plaintiff paid KRW 200,000 to the Defendant.

D. In addition, on April 10, 3015, the Plaintiff reported and paid KRW 135,309,824 of the capital gains tax calculated by deducting the special deduction for long-term holding from KRW 176,015,040, the acquisition value of the instant land, which was replaced by the substitute land, was KRW 948,448,00.

E. From March 3, 200, before the Plaintiff acquired the instant land, the Defendant denied all the long-term possession special deductible deductions applied by the Plaintiff while voluntarily filing a return of tax base and tax amount on the ground that the instant land was designated as a land for non-business regardless of whether the Plaintiff’s self-defense or not, and then notified the Plaintiff of KRW 1,681,30 of the capital gains tax for the year 301 and capital gains tax for 86,98,480 of the capital gains tax for the year 2015 (hereinafter “the instant disposition”). The Plaintiff filed a request with the Tax Tribunal for a trial on the instant disposition on November 20, 2017, which was dismissed on June 18, 2018.

【Fact that there is no ground for recognition, Gap evidence 1 through Gap evidence 8, Gap evidence 11, Gap evidence 13, Eul evidence 13, Eul evidence 1, Eul evidence 3, the purport of the whole pleadings, and the purport of the whole pleadings

8. Whether the instant disposition is legitimate

A. The plaintiff's assertion

(1) Since the Plaintiff had already been incorporated into an urban area since March 1, 200 and March 3, 200, the Plaintiff acquired the instant land from March 1, 200 to the urban area, the instant disposition was not subject to special deduction for long-term possession as it falls under the Plaintiff’s own land regardless of its own landscape. According to Article 104-3(2) of the former Income Tax Act (amended by Act No. 13558, Dec. 15, 2015; hereinafter “ Income Tax Act”), the land should not be deemed as non-business land as prescribed by Presidential Decree if it falls under the Plaintiff’s farmland due to the prohibition of use under the Act or other inevitable reasons prescribed by Presidential Decree after its acquisition, and Article 83-5 subparag. 8 of the former Enforcement Rule of the Income Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 538, Aug. 25, 2016; hereinafter “Enforcement Rule of the Income Tax Act”) provides that the Plaintiff’s land acquired from the instant land for two-year.

(3) Article 83-5 (1) 12 of the Enforcement Rule of the Income Tax Act provides that the period of land not used for the business due to justifiable grounds, such as alteration of urban planning, shall not be deemed land for non-business use during the period during which the relevant grounds occur after acquiring the relevant land, and is excluded from the standard for the period of the non-business land. Since the land in this case is extended from May 21, 2010 to May 20, 2010 to May 20, 2012, and May 20, the period of prohibition or restriction of the use of the land readjustment project plan was extended from May 21, 2010 to June 25, 2013 and the replotting was disposed until June 25, 2013, since the land in this case was disposed of until May 21, 2010, May 21, 201 to June 6, 2013 and 131 days ( March 4, 2013).

The entries in the attached statutes are as follows.

C. Determination

1) Relevant legal principles, etc.

A) The scope of "land for non-business" under Article 104-3 (1) of the Income Tax Act provides for the scope of "land for non-business use" under subparagraph 1 (a) as prescribed by Presidential Decree; "farmland not owned by the owner of the farmland or not cultivated by the owner of the farmland under the National Land Planning and Utilization Act among the Special Metropolitan City, Metropolitan Cities, Special Self-Governing City, Special Self-Governing Province and Si areas"; Provided, That in cases of farmland in urban areas, the farmland for which the owner of the farmland resides and cultivated by himself/herself has an exception to the farmland for which the period prescribed by Ordinance of the Ministry of Strategy and Finance has not elapsed from the date of incorporation into urban areas as prescribed by Presidential Decree. In other words, in cases of farmland incorporated into urban areas excluding green belt and green belt, the land falls under the category of land for which non-business use regardless of whether it has been opened, or if it falls under the category of land for which the use of the land is restricted by Presidential Decree of Article 168-8 (5) and (6) of the Income Tax Act.

C) The legislative purpose of the capital gains tax is to restrain speculative demand for land by classifying land for non-business as land owned by an individual without using it for productive purpose according to its actual demand and by imposing capital gains tax on it. However, even in cases where land cannot be used for productive purpose due to public interest or inevitable reasons or inevitable reasons beyond an individual’s responsibility, it is unreasonable to impose capital gains tax on such land as land for non-business use. As such, Article 104-3(2) of the Act, Article 168-14(1) of the Enforcement Decree, Article 88-5(1) of the Enforcement Decree of the Income Tax Act, etc. provide that such land shall not be deemed to be used for non-business use during the period in which such reasons exist (see Supreme Court Decision 2011Du28950, Feb. 14, 2013). On the other hand, Article 104-3(1)1(b) of the Income Tax Act does not require to be disposed of within a certain period of 20 years or less than 17.

D) The purport and language of Article 104-3(1) and (2) of the Income Tax Act, Article 168-14 of the Enforcement Decree of the same Act, and Article 83-5 subparag. 8 and 19 of the Enforcement Rule of the same Act, under the structure of Article 104-3(2) of the Income Tax Act, where a farmland owner is unable to cultivate the relevant farmland in an area other than an urban area which requires the re-village/self-reliance due to statutory provisions or other unavoidable reasons, the farmland owner may be exceptionally excluded from the non-business land, and it is reasonable to deem that the same cannot be applied as it is to the farmland to which the main sentence of Article 104-3(1)1(b) of the Income Tax Act, regardless of whether he/she re- specially re

2) Determination

A) In light of the above legal principles, as seen earlier, this case’s land was designated as a land readjustment project area in Pyeongtaek-gu on March 3, 200 and was incorporated into a land readjustment project area in Pyeongtaek-si on the same day and was located in the urban area pursuant to the National Land Planning and Utilization Act, barring any special circumstance, the land in this case’s land is obvious that it constitutes a land for non-business under Article 104-3(1)1 (b) of the Income Tax Act as urban land. Furthermore, in this case where there is no evidence to prove that the Plaintiff resided in the land in this case, there is no room to regard the land in this case’s land as land for business exceptionally pursuant to the proviso of Article 104-3(1)1 (b) of the Income Tax Act.

B) Also, as seen earlier, it is apparent that the instant land is the land for non-business use as farmland incorporated in the urban area from before the Plaintiff acquired it, and the Plaintiff acquired it with the knowledge of such fact, and there was a notice of prohibition of the cultivation of Pyeongtaek-si on January 10, 2008, which was after the Plaintiff acquired the instant land, on the ground that there was a prohibition of or restriction on the use from around that time, the Plaintiff’s assertion that the instant land should be deemed land for business use until the time when it was transferred pursuant to Article 104-3(8) of the Income Tax Act, cannot be accepted in light of the legal principles as seen earlier.

C) After acquiring the instant land, the Plaintiff asserted that the period of prohibition or restriction of use due to a change in the land readjustment project plan was extended from May 21, 2010 to May 20, 2012, and the land substitution disposition was made only after June 295, 2013, and the land was made during the period from May 21, 2010 to June 25, 2013 (3 January 4, 2013) under Article 83-5 (1) 12 of the Enforcement Rule of the Income Tax Act does not constitute land for non-business reasons, such as a change in urban planning pursuant to Article 83-5 (1) 12 of the Income Tax Act for the period from May 21, 2010 to June 25, 2013. However, as seen in the preceding legal principle, Article 83-5 (8) 8 and 12 of the Enforcement Rule of the Income Tax Act merely excludes farmland from the land for non-business reasons under the Act or other unavoidable reasons.

3) Sub-decisions

Therefore, it is legitimate for the Defendant to regard the instant land as land for non-business use by applying Article 104-3 (1) 1 (b) of the Income Tax Act, and exclude the special deduction for long-term possession and make the instant disposition.

3. Conclusion

Therefore, the claim of this case is dismissed in entirety as it is without merit. It is so decided as per Disposition.