Cho High Court Decision 2009Da1857 (Law No. 2009.08)

Whether it falls under non-business land

Where the ownership period of farmland is less than three years, it shall be the land for non-business use in cases where the ownership period of farmland is less than two years, the period exceeding the period obtained by subtracting two years from the ownership period and the period exceeding the period equivalent to 20/100 of the ownership period is not re-established.

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

1. All of the plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

Each disposition of KRW 72,063,470 against each of the plaintiffs as of October 10, 2008 by the defendant shall be revoked.

1. Details of the disposition;

A. On December 6, 2005, the Plaintiffs purchased 1/2 shares in Busan Gangseo-gu 00, 171-3, 171-3, 2471 square meters (hereinafter “the instant land”). On December 27, 2007, the Plaintiffs sold the instant land to BB Energy Co., Ltd. with the purchase price of KRW 900,000,000, and completed the registration of the entire co-owners’ share transfer.

B. On February 13, 2008, the Plaintiffs reported the tax amount to be voluntarily paid in KRW 71,219,250 calculated by applying 36%, the basic tax rate for capital gains tax, on the premise that the instant land is land for business, respectively, and paid the said amount around that time.

C. On October 10, 2008, the Defendant applied the tax rate of 9% to the land of this case, 2,429 square meters, and calculated capital gains tax again by applying the heavy tax rate of 60% to the land for non-business use. On October 10, 2008, the Defendant notified the Plaintiffs of the correction of KRW 72,063,470 as capital gains tax for attribution of 2007 (hereinafter “instant disposition”).

D. The Plaintiffs, who were dissatisfied with the instant disposition, filed an objection with the Commissioner of the Busan Regional Tax Office on December 19, 2008, but received a decision to dismiss the application on January 20, 2009, and filed a request for a tax trial with the Tax Tribunal on April 10, 2009, but was dismissed on July 8, 2009.

[Ground of recognition] Facts without dispute, Gap evidence 1 and 2, Eul evidence 1, 2, Eul evidence 1-1, 2, Eul evidence 2, Eul evidence 4, 5-1, 2, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

The plaintiffs asserted that in accordance with Article 104-3 (2) of the Income Tax Act, since the land of this case was a green area at the time when the plaintiffs acquired the land of this case, and since the green area was located during the period stipulated in Article 168-6 of the Enforcement Decree of the Income Tax Act, the land of this case cannot be deemed as land for non-business use under Article 104-3 of the Income Tax Act.

B. Relevant statutes

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

(c) Fact of recognition;

(1) From December 29, 1971, the instant land was designated as a development-restricted area under Article 728 of the Ministry of Construction and Transportation’s Notice. However, the Busan Metropolitan City Mayor publicly announced an urban management plan (cancellation of development-restricted areas and alteration of specific use areas) as of November 15, 2006 by the Busan Metropolitan City Notice No. 2006-397, and accordingly, the instant land was changed to a Class-I general residential area.

(2) On April 4, 2007, the Busan Metropolitan City Mayor publicly announced the decision on urban management planning (district unit planning) by the Busan Metropolitan City Notice No. 2007-128, and accordingly, 42 square meters out of the instant land was planned as a road planning facility.

[Ground of recognition] Statement B 3-1 to 3-3 of the evidence, and fact-finding results to the Busan Metropolitan City Mayor of this Court

D. Determination

(1) Whether the land constitutes non-business land

(A) Examining the main text of Article 104-3(1) of the Income Tax Act and the main text of subparagraph 1(b) of the same paragraph, during the period determined by the Presidential Decree among the periods of owning the relevant land, land corresponding to farmland (hereinafter referred to as "farmland within an urban area") located within an urban area (excluding green belt area and development restriction zone) under the National Land Planning and Utilization Act among the Metropolitan City areas falls under non-business land. In case where the ownership period of land is less than 3 years under each item of subparagraph 3 of Article 168-6 of the Enforcement Decree of the Income Tax Act, the above "period determined by the Presidential Decree" means the period exceeding the period calculated by subtracting two years from the ownership period of land, ② the period exceeding 20/100 of the ownership period of land; Provided, That in case of the proviso of Article 104-3(1)1(b) of the Income Tax Act, the period prescribed by the Presidential Decree shall be excluded from the date of incorporation of farmland within the urban area, which he had cultivated under the main sentence of Article 16(1) of the Income Tax Act.

(B) In order to fall under the land for non-business as farmland within the urban area under the Income Tax Act, the period corresponding to farmland in the urban area due to the cancellation of development restriction during the period for which the plaintiffs owned the land of this case falls under both the period exceeding the period calculated by subtracting two years from the period for which they owned the land of this case, and the period exceeding twenty percent of the period for which the plaintiffs owned the land of this case exceeds twenty percent. The period corresponding to farmland in the urban area is forty-seven days from November 15, 2006 to December 26, 2007, which constitutes the period exceeding twenty one day after subtracting two years from December 6, 2005 to December 26, 2007, since the period for which the plaintiffs owned the land of this case falls under the period exceeding twenty one day after subtracting two years from December 21, 2005 to December 26, 2007.

In addition, the plaintiffs owned the land of this case on December 6, 2005, and the land of this case was re-established for not less than one year retroactively from November 15, 2006, which was the date of incorporation into the urban area, and did not do so. Thus, the provisions of Article 104-3 (1) 1 (b) of the Income Tax Act excluding non-business land do not constitute the provisions.

The plaintiffs' assertion that the non-business land regulations of the Income Tax Act should not be applied because they were green areas at the time of acquisition, or that the period under subparagraph 3 (a) of Article 168-6 of the Enforcement Decree of the Income Tax Act should be calculated as the green

(2) Whether land constitutes land not deemed land for non-business use under the Income Tax Act and subordinate statutes

(A) The purpose of the Income Tax Act is to prevent speculation demand and to enable the land owner to own the land centered on the actual owner by imposing capital gains tax in cases where land is owned regardless of its use, regardless of its use.

However, Article 104-3 (2) of the Income Tax Act, Article 168-14 (1) 1 and 4 of the Enforcement Decree of the Income Tax Act, and Article 83-5 (1) 12 of the Enforcement Rule of the Income Tax Act provide that in a case where land is not used for business due to justifiable grounds, such as changes in urban planning, etc. due to the acquisition of land, the period during which the use of land is prohibited or restricted by statutes shall not be a non-business land. The purport of the above provisions is that in a case where land is intended to be used for business but it cannot be used for business due to reasons not attributable to the owner, it shall not

(B) The Mayor of Busan Metropolitan City, on November 15, 2006, cancelled the area including the land handling in this case from the development restriction zone to the Class 1 general residential area, and changed the specific use area to the Class 1 general residential area. However, even though the Mayor of Busan Metropolitan City took the above measures, there was no restriction on the plaintiffs' cultivation of the land in this case as farmland. Therefore, it cannot be said that the use of the land could not be used for business due to justifiable reasons, such as the modification of the urban plan, etc. due to the prohibition or restriction pursuant to the Income Tax Act and subordinate statutes, the above circumstance does not constitute an inevitable reason under Article 104-3 (2) of the Income Tax Act. The plaintiff'

(3) Whether the prohibition of retroactive legislation violates the prohibition of retroactive legislation or the protection of trust.

(A) Article 13 of the Constitution of the Republic of Korea only means that the pertinent tax law cannot be applied to the completed facts prior to the entry into force of the relevant tax law. Since the continued facts or the application of new laws and regulations on the taxation requirements that occurred thereafter are not limited, in this case, the amended laws and regulations in the direction of strengthening the taxation requirements at the time of the completion of the taxation requirements are applied even if the continued fact is recognized as the ownership of the land in this case, so long as the taxation requirements of the transfer of the land in this case have not yet been completed, it cannot be deemed as a violation of the principle of non-payment of tax laws and regulations. The plaintiffs' above prosecution is without merit.

(B) As long as the provisions on taxation requirements and exceptional provisions on non-taxation or tax exemption requirements are not considerably unreasonable, the legislators’ legislative discretion is also subject to non-taxation of capital gains tax as a matter of principle. Barring special circumstances, barring any special circumstance, even if a taxpayer trusted non-taxation, etc. under the previous provisions, it is merely merely a simple expectation, and it cannot be deemed as a substitute for the vested right, and thus, should be protected. Articles 1 and 3 of the Addenda of the Income Tax Act (amended by Act No. 7873, Mar. 3, 2006) to which the first provision on heavy taxation on non-business land was introduced, apply the heavy taxation on non-business land from the portion transferred after the enforcement of the grace period of one year to the portion transferred after the enforcement of the grace period, and the said provision cannot be deemed to violate the principle of trust protection contrary to the trust protection of the people who acquired real estate before the enforcement of the said provision. The Plaintiffs’ aforementioned assertion also

3. Conclusion

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