Daejeon District Court-2017-Gu -100453 ( October 31, 2018)

Application of reduction or exemption in cases of transfer of land (road) required for public works to a project operator who is a private constructor deemed a public project operator, and whether or not the land for non-business

Of land transferred to a private constructor, an urban planning facility project for a road shall not fall under the provisions of the exception to land for non-business, if the transfer without going through the "acquisition or expropriation through consultation prescribed by the Land Compensation Act" for the public works to which the Land Compensation Act applies as a project implemented for the public interest after obtaining authorization

Article 77 of the Restriction of Special Taxation Act (Reduction or Exemption of Transfer Tax on Land, etc. for Public Works)

2018Nu10468 Revocation of Disposition rejecting capital gains tax rectification

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○ Head of tax office

January 30, 2018

February 28, 2019

April 4, 2019

1. Of the judgment of the first instance court, the part against the plaintiff falling under the order to revoke below shall be revoked.

On June 10, 2016, the Defendant’s disposition of correction of the capital gains tax belonging to the year 2015 against the Plaintiff is revoked that exceeds ○○○○○○○○○○.

2. The plaintiff's remaining appeal is dismissed.

3. Of the total litigation costs, 2/3 shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

The judgment of the first instance shall be revoked. The defendant's corrective rejection of the part exceeding ○○○○ out of the capital gains tax belonging to the year 2015, which belongs to the plaintiff on June 10, 2016, shall be revoked.

1. Details of the disposition;

A. On November 30, 2015, the Plaintiff sold 00,000,000 forest land owned by the Plaintiff to the non-party company, the implementer of the household apartment construction project, which is the non-party company.

B. On October 30, 2015, the ○○○○ City approved the housing construction project plan for the new apartment construction project (hereinafter referred to as “the instant project plan”) that is scheduled to be implemented on the 00 ○○ ○○ dong, ○○ ○○ dong, which is scheduled to be implemented on the 00 parcel of land, and then publicly notified the approval of the housing construction project plan (hereinafter referred to as “public notice of approval of the instant project plan”) in accordance with Article 16(8) of the former Housing Act (wholly amended by Act No. 13805, Jan. 19, 2016).

C. In the public notice of approval of the project plan of this case, the ○○○ City listed the matters concerning the determination of the urban management plan (district plan), the designation of the operator of the urban planning facility project and the authorization of the implementation plan as the legal fiction of other Acts in relation to the project of the urban planning facility project (road) for the construction of infrastructure for the ○○ apartment site (hereinafter referred to as the “instant urban planning facility project”), the matters concerning the determination of the urban management plan (district plan), the public notice of the designation of the operator of the urban planning facility project, and the matters concerning the authorization of the implementation plan for the urban planning facility project as the public notice of the approval of the project plan of this case. Accordingly, in the public notice of approval of the project plan of this case, the ○○ City included the land including the total sum of the land to be incorporated into the urban planning facility project as shown below in the public notice of approval of the project plan of this case, and the designation of the urban planning facility project (road) for the above road, and the designation of the project operator for the above urban planning facility project.

D. The Plaintiff’s transfer income tax reverted to the year 2015 due to the transfer of the entire land transferred on December 16, 2015.

00,000,000 won was reported and paid.

E. On April 20, 2016, the Plaintiff filed an application for rectification for refund of KRW 00,000,000, on the ground that the entire land transferred to the Defendant falls under the land for public works as prescribed by Article 77 of the former Restriction of Special Taxation Act (amended by Act No. 13498, Aug. 28, 2015; hereinafter the same) and that the special deduction for long-term holding and cash compensation should be applied.

F. However, on June 10, 2016, the Defendant dismissed the Plaintiff’s claim for correction on the ground that the non-party company, as a purchaser of the instant land, did not correspond to the project implementer for public works under Article 77(1)1 of the former Restriction of Special Taxation Act as a private constructor, and is not subject to reduction and exemption. For the same reason, Article 168-14(3)3 of the Enforcement Decree of the Income Tax Act cannot be applied to the instant land for non-business reasons (hereinafter “instant disposition

G. On November 15, 2016, the Plaintiff filed an objection against the instant disposition with the Tax Tribunal, which applied the special long-term holding deduction for the transfer margin of the instant land to the Tax Tribunal on November 15, 2016, and filed an appeal for refund of KRW 00,000,000 to the amount of capital gains tax calculated by applying the special long-term holding deduction for the transfer margin of the instant land as a whole, but was dismissed on January 2, 2017.

Facts without any dispute, Gap's 1 through 4, 6, Eul's 1 and 3 (including additional numbers), and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. Summary of the plaintiff's assertion

The ○○○ City appointed a non-party company as the project implementer of the instant urban planning facility project, prepared a detailed statement of land and rights other than ownership to expropriate or use the instant land, etc. for the implementation of the project, and further approved and publicly announced the implementation plan of the instant urban planning facility project. Therefore, the instant land is intended to build an urban planning facility (road) corresponding to the public project as prescribed by the Act on Acquisition of and Compensation for Land, etc. for Public Works Projects (hereinafter “Land Compensation Act”). Thus, the Plaintiff transferred the instant land necessary for the public project under Article 77 of the former Restriction of Special Taxation Act, which does not fall under the non-business land pursuant to Article 168-14(3)3 of the Enforcement Decree of the Income Tax Act, to the implementer of the instant public project. Therefore, in calculating the transfer income tax, the amount of special deduction for long-term possession under Article 95(1) of the former Income Tax Act (amended by Act No. 1358, Dec. 15, 2015; hereinafter the same shall apply).

B. Relevant statutes

[Attachment] The relevant statutes are as stated.

C. Determination

1) Determination on the assertion of tax reduction or exemption under the former Restriction of Special Taxation Act

A) Major issues of the instant case

Article 77 (1) 1 of the former Restriction of Special Taxation Act provides that a tax amount equivalent to 15/100 of capital gains tax shall be reduced on income accrued from the transfer of land, etc. necessary for a public project to which the Land Compensation Act applies to the operator of the relevant public project, which is acquired two years retroactively from the date of the public project approval (the date of transfer where the land, etc. is transferred before the date of the public project approval) to the project area to which the relevant land, etc. belongs, as income accrued from the transfer of the land, etc

On October 30, 2015, the non-party company was designated as the implementer of the instant urban planning facility project in accordance with the public notice of the approval of the instant project plan and the public notice of the designation of the implementer of the instant urban planning facility project and the authorization of the implementation plan. On November 30, 2015, the Plaintiff transferred the instant land to the non-party company within the instant urban planning facility project area as the site for the road. Accordingly, the key issue in the instant case is whether the Plaintiff’s act of transferring the instant land constitutes the transfer of the land, etc. required for the public project governed by the Land Compensation Act under Article 77(1)1 of the former Restriction of Special Taxation Act to the non-party company.

B) Whether the land required for the public works to which the Land Compensation Act applies is "land" and "public project operator"

Article 1 of the Land Compensation Act stipulates that "the purpose of this Act is to promote the promotion of public welfare and the appropriate protection of property rights through the efficient implementation of public works by prescribing matters concerning compensation for losses incurred by the acquisition or use of land, etc. required for public works through consultation or expropriation." Furthermore, Article 2 subparagraph 2 and subparagraph 2 of the Land Compensation Act defines "public works" as "project concerning roads for public interest after obtaining authorization pursuant to relevant Acts," and Article 2 subparagraph 3 of the same Act as "project operator". Further, Article 19 (1) of the Land Compensation Act clearly defines "the land project operator may expropriate or use the land, etc. as prescribed by this Act if necessary for the implementation of public works." Article 20 (1) provides that "the project operator shall obtain approval of the project from the Minister of Land, Infrastructure and Transport as prescribed by Presidential Decree," Article 2 subparagraph 2 and Article 4 (2) of the Land Compensation Act as "the urban planning facility project of this case," Article 19 (2) of the Enforcement Decree of the National Land Planning and Utilization Act, Article 28 (hereinafter referred to "the National Land Planning and Utilization Act").

In full view of the contents and circumstances of the aforementioned relevant laws and regulations, and the following circumstances that can be recognized by the above macroscopic evidence, the instant urban planning facility project constitutes a public project to which the Land Compensation Act applies as a project for public interest after obtaining authorization under the relevant laws and regulations under Article 2 Subparag. 2 and Article 4 Subparag. 2 of the Land Compensation Act, and the non-party company is recognized as having the status of "project operator," who is "person performing the public project under Article 2 Subparag. 3 of the Land Compensation Act by being designated as the project operator of the instant urban planning facility project (such as this, insofar as the instant urban planning facility project falls under the public project under the Land Compensation Act and the non-party company is deemed to fall under the project operator, it is judged that the conclusion does not affect the conclusion whether the non-party company actually acquired the specific authority to expropriate the instant land

① The purpose of the instant urban planning facility project is to build a new road which is surrounded by Nonparty Company’s surrounding ○○ apartment complex. Although the content of the instant urban planning facility project includes part of the construction of a road in a multi-family housing site, the purpose of creating infrastructure for multi-family housing is to create a new road, which is a public facility used by the public in addition to residents of the relevant housing complex.

② As recognized earlier, the ○○ Mayor also prepared and announced “a land record and any rights other than ownership” to be expropriated or used while publishing the approval of the instant project plan. This cannot be deemed as a premise that the consultation or expropriation procedures under the Land Compensation Act may be applied to the land subject to the instant urban planning facility project including the instant land.

③ The ○○○ City was incorporated into the subject of the instant urban planning facility project only for the land to be used as “road,” rather than for multi-unit housing land subject to the approval of the instant project plan. Nonparty Company cannot use the land incorporated into the instant land, etc. as a site for multi-unit housing, and ought to proceed with the instant urban planning facility project as a site for the public interest. Even if the instant urban planning facility project (or designation) is not designated as a project implementer (or designation) and the implementation plan is not authorized, Nonparty Company may not construct a road identical with the instant urban planning facility project, which is an essential infrastructure.

④ In the case of a non-party company, the non-party company could separately apply for the designation of the project implementer and the authorization of the implementation plan of the instant urban planning facility project. Considering the consultation with the related agency (department) prior to the approval of the instant project plan, the non-party company could obtain the status of acquiring or accommodating the site to be incorporated into the road, such as the instant land, in accordance with the procedures prescribed by the Land Expropriation Act pursuant to Articles 86, 95 and 96 of the National Land Planning and Utilization Act by obtaining such designation and authorization, barring any special circumstance. However, as seen earlier, it seems that the non-party company designated the "road site" as the "urban planning facility project operator" under the National Land Planning and Utilization Act, depending on whether the non-party company acquired the "road site" as the land necessary for the public service project to which the Land Compensation Act applies, the case where the non-party company was treated differently from the case where the "private housing developer who obtained the approval of the project plan pursuant to the Housing Act" under Article 77 of the former Restriction of Special Taxation Act.

⑤ As seen later, Article 77(2) of the former Restriction of Special Taxation Act provides that the transfer income tax on the relevant land may be reduced or exempted in the same manner under a certain condition when the relevant business operator is designated as an executor of public works, even in cases where the land necessary for public works is transferred to an operator of public works. Thus, as long as the requirements for transferring “land necessary for public works” to the “business operator who implements public works” are satisfied, it is reasonable to view that the specific expropriation authority under the Land Compensation Act at the time of transfer is not problematic.

(6) Although there is no objective evidence to verify whether the Plaintiff sold the instant land on the premise that only the instant land will be incorporated into a road in the course of selling the entire land transferred to Nonparty Company, considering the background leading up to designating the project implementer for the instant urban planning facility project, the current status of the instant land, and the relationship with the apartment site subject to the instant project, etc., the instant land may be deemed to have existed the risks of ultimately being expropriated in the situation of being incorporated into the instant urban planning facility project rather than the said apartment site at the time the transfer registration of ownership was completed to the Nonparty Company. Therefore, even if the transfer income tax is reduced or exempted pursuant to Article 77(1)1 of the former Restriction of Special Taxation Act only on the instant land, it cannot be concluded that it violates the taxation disposition of transfer income tax on other apartment lots and the principle of tax equality

C) Whether the transfer constitutes "transfer" under Article 77 (1) 1 of the former Restriction of Special Taxation Act

The defendant asserts that the transfer of the land in this case does not fall under the "transfer" under Article 77 (1) 1 of the former Restriction of Special Taxation Act because the transfer of the land in this case is not by expropriation or consultation.

Article 77 (1) 1 of the former Restriction of Special Taxation Act only provides that "transfer of land" shall be limited to "acquisition by expropriation or consultation." In addition, the purport of the above provision is to relieve the burden of transfer income tax by taking into account that even if a landowner does not respond to a consultation, he/she is bound to accept any disadvantage that his/her land is expropriated by a public project. Furthermore, Article 77 (2) of the former Restriction of Special Taxation Act provides that even if a resident transfers a land, etc. necessary for a public project to be purchased by consultation or expropriation before the designation as an executor of a public project, if the resident satisfies certain requirements, the transfer income tax may be reduced or exempted pursuant to Article 77 (1) of the former Restriction of Special Taxation Act. In light of the language and purport of the former Restriction of Special Taxation Act, the defendant's assertion that the transfer of the land in this case belongs to the land in the project site of urban planning facility project of this case and the transfer of the land to the non-party company after the public announcement of an implementation plan of urban planning facility project of this case can not be accepted.

D) Sub-committee

Therefore, the Plaintiff is deemed to have transferred the land necessary for public works to the executor of the public works project as prescribed by Article 77(1)1 of the former Restriction of Special Taxation Act. As such, the tax reduction or exemption (8,889,136 won) shall apply to the transfer of the land in this case. On the other hand, the part concerning the Defendant’s tax reduction or exemption under the former Restriction of Special Taxation Act (the portion exceeding KRW 00,000,000,000, out of the capital gains tax belonging to year 2015) is unlawful.

2) Determination on the assertion of special deduction for long-term possession under the former Income Tax Act

A) Relevant legal principles

According to Article 95 (1) and (2) of the former Income Tax Act, when a certain asset is transferred after holding it for not less than three years, the amount of special deduction for long-term possession should be deducted from gains from transfer to calculate capital gains, and "land for non-business" under Article 104-3 of the same Act is excluded from the special deduction for long-term possession. Article 104-3 (1) of the same Act provides that "forest" as "land for non-business" (Article 104-3 (2) of the same Act shall be excluded from the special deduction for long-term possession. However, in the case of forest land, "forest land for public interest" (Article 2 (a)) or "forest land owned by a person who resides in a forest where it is located"

In addition, Article 104-3 (2) of the former Income Tax Act provides that when applying Article 104-3 (1) of the former Income Tax Act, where the land falls under any of the subparagraphs of paragraph (1) due to the prohibition of use of the land after the acquisition of the land or other inevitable reasons prescribed by Presidential Decree, the land may not be deemed a non-business land again according to certain conditions. Article 168-14 (3) 3 of the Enforcement Decree of the Income Tax Act, which is delegated by the former, provides that "land purchased by consultation or expropriated

When interpreting the provisions of the relevant laws systematically, forest land falls under land for non-business as a matter of principle and is excluded from special deduction for long-term possession, but it constitutes land for non-business use as above due to inevitable reasons under the laws, i.e., Land Compensation Act.

With respect to "land purchased by consultation or expropriated by consultation, etc.", the amount of income shall be calculated by recognizing the special deduction for long-term holding as not falling under the land for non-business again.

B) Determination

In light of the above legal principles, the transfer of the land in this case constitutes "forest land" and it does not constitute "non-business land" in principle because it does not constitute "non-business land" under Article 104-3 (1) through (c) of the former Income Tax Act. ② Even if the Plaintiff transferred the land in this case to the non-party company as seen earlier, it is not a "acquisition or expropriation by consultation" under Articles 3 and 4 of the Land Compensation Act. ③ In the transfer of the ownership based on consultation on the land in this case, the transfer of the land in this case entered the grounds for registration as "acquisition by consultation on public land". However, in the transfer of ownership based on consultation on land in accordance with the Land Compensation Act, the transfer of the land in this case does not constitute "land for non-business" under Article 168-14 (3) through (c) of the Enforcement Decree of the Income Tax Act. Thus, it cannot be viewed as "land purchase by consultation or expropriation".

Therefore, the disposition of this case is legitimate, which did not deduct the special deduction amount for long-term possession with respect to the transfer of the land of this case.

3. Conclusion

Therefore, the plaintiff's claim is reasonable within the above scope of recognition, and the remaining claims shall be accepted and dismissed as it is without merit. However, since the judgment of the court of first instance is unfair with different conclusions, part of the plaintiff's appeal is accepted and part of the judgment of the court of first instance is revoked and part of the disposition of this case is revoked, and the remaining appeal of the plaintiff is dismissed as per Disposition.