In a case where Gap was incorporated into a residential area under the National Land Planning and Utilization Act on June 27, 2005, and after the daily price of the above land was designated and publicly announced as a planned housing site development area on July 21, 2006, Gap reported on March 6, 2009 that the land was subject to reduction and exemption of capital gains tax under Article 69 (1) of the former Restriction of Special Taxation Act while transferring the land, but the tax authority imposed capital gains tax on the ground that the said land was not subject to reduction and exemption, the case holding that the above disposition was lawful.

In a case where Party A reported that the land acquired on May 4, 1993 was subject to a residential area under the National Land Planning and Utilization Act on June 27, 2005, and the daily price of the said land was designated and publicly announced as a planned housing site development area on July 21, 2006, and Party A transferred the land on March 6, 2009 and imposed capital gains tax on the ground that the said land was not subject to reduction or exemption of capital gains tax under Article 69 (1) of the former Restriction of Special Taxation Act (amended by Act No. 9921, Jan. 1, 2010; hereinafter “former Special Provision”), but the tax authority imposed capital gains tax on the said land on the ground that the said land was not subject to reduction or exemption, the case affirming the lower court’s determination that the said land was transferred more than three years after it was already incorporated in a residential area before the development project was implemented, and thus, it did not constitute farmland incorporated in a residential area due to the implementation of the development project, and thus excluded from Article 16516 subparag.

Article 69(1) of the former Restriction of Special Taxation Act (Amended by Act No. 9921, Jan. 1, 2010); Article 66(4)1(b) of the former Enforcement Decree of the Restriction of Special Taxation Act (Amended by Presidential Decree No. 21565, Jun. 26, 2009)

Plaintiff (Law Firm Lee & Lee LLC, Attorneys Lee Han-san et al., Counsel for the plaintiff-appellant)

The Director of the Pacific District Office

Seoul High Court Decision 2012Nu9323 decided April 12, 2013

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. The main sentence of Article 69(1) of the former Restriction of Special Taxation Act (amended by Act No. 921, Jan. 1, 2010; hereinafter “former Special Taxation Act”) provides that “The tax amount equivalent to 100/100 of the capital gains tax shall be reduced or exempted for the income accruing from the transfer of land prescribed by the Presidential Decree among the land directly cultivated by the person residing in the location of such land for not less than eight years.” Furthermore, Article 66(4) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 21565, Jun. 26, 2009; hereinafter “Enforcement Decree of the former Special Taxation Act”) provides that “farmland cultivated by himself/herself for not less than eight years” in the main sentence of subparagraph 1 shall be excluded from the national land planning and use Act among the farmland located in the Special Metropolitan City, Metropolitan City or Si, which falls under the unavoidable reasons for exclusion from the national land planning and development project, as prescribed by Ordinance of the Ministry of Strategy and Finance.”

2. citing the reasoning of the first instance judgment, the lower court acknowledged that the instant land acquired by the Plaintiff on May 4, 1993 was incorporated into a Class-I general residential area under the National Land Planning Act on June 27, 2005, and the Plaintiff transferred the instant land on March 6, 2009 after three years have elapsed since then, on July 21, 2006, the Minister of Construction and Transportation designated and publicly announced a single unit of land development area in Sung-nam City ( Address omitted) where the instant land belongs to the Korea Land Corporation as a planned residential area, and determined that the instant land was lawful for more than three years after it was already incorporated into a residential area before the implementation of the development project, and thus, it does not constitute farmland incorporated into a residential area due to the implementation of the development project, and thus excluded from the reduction and exemption of capital gains tax provided for in Article 66(4)1 of the Enforcement Decree of the former Special Cases Act.

Examining the record in light of the aforementioned provisions and relevant legal principles, the above determination by the court below is just, and contrary to what is alleged in the grounds of appeal, the court below did not err by misapprehending the interpretation of Article 66(4)1 of the Enforcement Decree of the former Enforcement Decree of the Special Act or by omitting judgment by misapprehending the legal principles on the principle of equity

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Poe-young (Presiding Justice)