Whether farmland, the cultivation of which has been suspended due to the land creation work, falls under a category of eight years or less.

The farmland in this case does not fall under farmland as of the date of transfer, since the farmland in this case was suspended due to the land-building project executed by the land-building project for the purpose of housing site creation cannot be considered as a temporary suspension condition unless there are special circumstances.

Article 69(1) of the former Restriction of Special Taxation Act

Article 66 (3) and (4) of the Enforcement Decree of the Restriction of Special Taxation Act

1. The plaintiff's claim is dismissed.

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

1. Details of the disposition;

A. On January 8, 2004, the Plaintiff transferred the instant land to ○○○○○○, ○○○○○-gun, ○○○○○○, ○○○-gun, ○○○○○, ○○○, which was owned from January 23, 1973 (hereinafter “instant land”), and paid KRW 102,23,960, capital gains tax on March 31, 2004.

B. On January 19, 2006, the Plaintiff filed a request for correction with the Defendant to refund KRW 90,000,000 to the effect that the land of this case directly cultivated for not less than eight years constitutes the reduction and exemption of capital gains tax.

C. Accordingly, the Defendant rendered the instant disposition rejecting the Plaintiff’s claim for correction on the ground that the Plaintiff’s transfer of the instant land without designating the reserved land for replotting was not a farmland cultivated for not less than eight years since it did not cultivate at the time of transfer.

(In fact that there is no dispute, Eul's evidence Nos. 1 through 4, Eul's evidence No. 2-1, Eul's evidence No. 3-1 through 3, the purport of the whole pleadings.

2. Whether each disposition of this case is lawful

A. The plaintiff's assertion

(1) The Plaintiff, after acquiring the instant land on January 23, 1973, was engaged in farming for more than eight years, transferred the instant land without being designated as a planned land substitution while the land creation work commenced as incorporated in the site of the land readjustment project of 001 district, and the instant land was not properly cultivated.

(2) However, Article 69 of the former Restriction of Special Taxation Act (amended by Act No. 7322 of Dec. 31, 2004; hereinafter the same), Article 66 (3) and (4) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 18704 of Feb. 19, 2005; hereinafter the same), which is a provision on capital gains tax reduction or exemption, shall be interpreted to include the land which was not designated as the land scheduled for replotting after the commencement of the construction work, as a matter of course. Thus, the instant land for which the construction work commenced prior to the designation of the land scheduled for replotting shall be included in capital gains tax reduction or exemption

(3) The transfer income tax should be reduced or exempted on the ground that the land development project, such as the instant land, was transferred without being used as farmland as of the date of transfer due to the commencement of the land development project, if it falls under farmland as of the date of transfer.

(4) Therefore, despite the fact that the instant land falls under “self-sufficient farmland for not less than eight years,” the instant disposition imposing capital gains tax is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

(c) Fact of recognition;

(1) The land of this case, which the plaintiff acquired on January 23, 1973 and cultivated through rice, is the land of this case.

Public notice of ○ Metropolitan City ○-○ and project implementation authorization by ○-○ and ○-○ and publicly notice was given.

○○1 District Partitioning Association (hereinafter referred to as ○2 District Partitioning Association was changed to ○○ District Partitioning Association in consequence of the merger with ○2 District Partitioning Association around June 2004; hereinafter referred to as “Land Partitioning Association”) was incorporated into the site of ○1 District Rearrangement Project (hereinafter referred to as “instant project”).

(2) The ○○ Comprehensive Land Construction Co., Ltd. (hereinafter referred to as “○○ Comprehensive Land Construction”) concluded an agreement on the instant project with the Land Partitioning Association, and commenced the construction of the site for the instant project from November 12, 1996.

(3) On May 23, 2003, the head of ○○ Metropolitan City ○○○○○○-○○○○○○○○○○○○○ Company, a construction company of the instant project, approved an application for the change of the implementation of the instant project by the land-building rearrangement association, which requires an extension of the project implementation period due to the suspension of construction due to the nonperformance of ○○ comprehensive soil, economic depression, etc.

(4) On January 8, 2004, the Plaintiff transferred the instant land to ○○ and ○○○ without being designated as a reserved land for replotting, as the Plaintiff took measures, such as restricting entry and exit, which may hinder the construction of fences, on the boundary of the project site.

(5) On July 13, 2005, 2005, the head of ○○ Metropolitan City ○○○○ Gun approved the land substitution plan for the instant project with respect to the land partition rearrangement cooperatives.

(In fact that there is no dispute, Gap evidence 1, Eul evidence 1-3, Eul evidence 3-4, Eul evidence 3-2, 3-4, Eul evidence 4-1 through 3, and the purport of the whole pleadings.

D. Determination

(1) According to Article 69(1) of the Restriction of Special Taxation Act and Article 66(3) and (4) of the former Enforcement Decree of the Restriction of Special Taxation Act, where the land which was cultivated by himself for not less than eight years from the time the person residing in the location of the farmland was acquired to the time of transfer is designated as a land reserved for replotting, other than the farmland, before a disposition of replotting is taken, the farmland for which three years have not elapsed since the date of such designation constitutes the farmland subject to reduction or exemption from capital gains tax, and the farmland subject to the above reduction or exemption provisions shall be based on the farmland as of the date of transfer. However, in cases where the relevant farmland was designated as a land reserved for replotting other than the farmland and it was no longer than three years after the date of the designation of the land

As to the instant case, the Plaintiff transferred the instant land without being designated as a land to be reserved after the implementation of the instant project, and was not cultivated as farmland at the time of the said transfer date, and was authorized to be a land substitution plan for the said land readjustment project district including the instant land on July 13, 2005. As seen earlier, insofar as it is evident that there was no land substitution plan designation disposition based on the transfer date of the instant land, even if there was no land creation project due to the land readjustment project, Article 66(3) and (4) of the former Enforcement Decree of the Act on Special Cases concerning Tax Restriction, which recognizes exceptions only in cases where the land, other than farmland, was designated as a land to be reserved as a land to be reserved as of the transfer date and the land creation

Therefore, this part of the Plaintiff’s assertion that capital gains tax should be reduced or exempted by applying the above provision to the instant land, for which the land development work commenced prior to the designation of the reserved land for replotting.

(2) Even if the public record is farmland, the land which is not actually cultivated as of the date of transfer shall not be deemed farmland as of the date of transfer, unless it is in a state of temporary suspension, regardless of whether it is by the landowner’s own person or by another person, and thus, it does not constitute land subject to non-taxation of capital gains tax (see Supreme Court Decision 91Nu7422, Nov. 12, 1991).

According to the above facts, while the plaintiff acquired the land of this case on January 23, 1973 and cultivated as a rice, it can be recognized that the land of this case was incorporated into the site of ○○ District Land Readjustment Project, which was approved and implemented as of September 23, 1996 for the creation of housing sites, and that the land of this case cannot be cultivated due to the construction of site for ○○ District Land Readjustment Project, which was enforced accordingly, was transferred to the land of this case. Thus, the land of this case cannot be deemed as farmland as of the date of transfer, and it does not constitute land subject to reduction of capital gains tax, unless there are special circumstances.

Therefore, the Plaintiff’s assertion that capital gains tax constitutes land subject to reduction or exemption cannot be accepted in cases where the land development project is transferred without being used as farmland as of the date of transfer due to the commencement of land development project, such as the instant land.

3. Conclusion

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

Related Acts and subordinate statutes

The Restriction of Special Taxation Act (amended by Act No. 7322 of Dec. 31, 2004) shall apply.

Article 69 (Reduction or Exemption of Transfer Income Tax for Self-Cultivating Farmland)

(1) Where a resident prescribed by the Presidential Decree, residing in the seat of a farmland, transfers the farmland in the agricultural promotion area under Article 32 to the Korea Agricultural and Rural Infrastructure Corporation under the Korea Agricultural and Rural Infrastructure Corporation Act (hereafter in this Article, referred to as the “Korea Agricultural and Rural Infrastructure Corporation”) or to such corporation as prescribed by the Presidential Decree, whose main business is the agriculture, not later than December 31, 2005, not later than 5 years, and where the farmland, which is eligible for direct payments for managerial transfer as prescribed by the Presidential Decree, is transferred to the Korea Agricultural and Rural Infrastructure Corporation or agricultural corporations for not less than 3 years, not later than December 31, 2010, the tax amount equivalent to 100/100 of the transfer income tax on the income accruing from the transfer of the farmland, which is cultivated directly by the Korea Agricultural and Rural Infrastructure Corporation or agricultural corporations for not less than 3 years, and which is prescribed by the Presidential Decree,

Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 18704 of Feb. 19, 2005)

Article 66 (Reduction or Exemption of Transfer Income Tax for Self-Cultivating Farmland)

(1) For the purpose of the main sentence of Article 69 (1) of the Act, the term “resident prescribed by the Presidential Decree residing in the location of the farmland” means a person who has cultivated while living in the area falling under any of the following subparagraphs for not less than 8 years (5 years in the case of transfer to the Korea Agricultural and Rural Infrastructure Corporation (hereafter in this Article, referred to as the “Korea Agricultural and Rural Infrastructure Corporation”) or to the corporation under paragraph (2), and 3 years in the case of transfer of the farmland subject to a payment of subsidy for management transfer under paragraph (3) to the Korea Agricultural and Rural Infrastructure Corporation or the corporation under paragraph (2) (including

1. An area in a Si/Gun/Gu (referring to an autonomous Gu; hereafter the same shall apply in this paragraph) where farmland is located;

2. An area within a Si/Gun/Gu adjacent to an area referred to in subparagraph 1.

(2) omitted.

(3) The term "direct payments subsidy determined by the Presidential Decree" in the main sentence of Article 69 (1) of the Act means the subsidies for business transfer under Article 3-2 of the Regulations on the Implementation of Direct Payment Systems for Agricultural Producers.

(4) For the purpose of the main sentence of Article 69 (1) of the Act, the term “land as prescribed by the Presidential Decree” means the farmland, for which not less than 8 years (in case of transfer to the Korea Agricultural and Rural Infrastructure Corporation or the corporation under paragraph (2), 5 years; and in case of transfer to the Korea Agricultural and Rural Infrastructure Corporation or the corporation under paragraph (2), 3 years) have cultivated from the time of acquisition until the time of transfer, excluding the farmland falling under any of the following subparagraphs. In this case, in calculating the period of farmland cultivated inherited, the period acquired and cultivated by the decedent shall be deemed the period

1. Farmland located in the Special Metropolitan City, Metropolitan City (excluding Guns located in Metropolitan Cities) or Si (excluding Eup/Myeon areas in a Si in the urban and rural complex form established under Article 3 (4) of the Local Autonomy Act), for which three years have passed from the date of incorporation into the residential, commercial and industrial areas under the National Land Planning and Utilization Act as farmland: Provided, That farmland incorporated into the residential, commercial or industrial area under the National Land Planning and Utilization Act as a result of the implementation of a large-scale development project in an area for a development project falling under any of the following items (referring to an area for which project approval is identical) and for which three years have passed from the date of incorporation into

(a) An area with at least 1,00 landowners within the project execution area;

(b) Area where the project area is larger than that prescribed by Ordinance of the Ministry of Finance and Economy;

2. Where any land other than farmland has been designated prior to the date of a replotting disposition, the farmland for which three years have elapsed from the date of such designation.