Cho Jae-2018-China-0166 (Law No. 14, 2018)

Land for non-business use as it is prohibited or restricted by Acts and subordinate statutes;

The forest of this case cannot be deemed as a land prohibited or restricted from use pursuant to the laws and regulations stipulated in Article 168-14 (1) 1 of the former Enforcement Decree of the Income Tax Act, and there is no ground to conclude that the forest of this case constitutes a land for business.

Scope of land for non-business use under Article 104-3 of the Income Tax Act

2018Gudan8645 Revocation of Disposition of Imposing Capital Gains Tax

literatureA

Cz superintendent of the tax office

June 12, 2019

July 10, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of capital gains tax of KRW 000,299,750 for the Plaintiff on October 00, 200 shall be revoked.

1. Details of the disposition;

A. On December 15, 198, the Plaintiff acquired a forest of 81,025 square meters in AA, AA, AA, A, A, A, A, 00 square meters (hereinafter “the forest of this case”) in exchange, and transferred it to a voluntary auction on October 0, 2016, and reported capital gains tax of 117,724,035 won by applying the special long-term holding deduction for the land for business.

B. On October 0, 2010, the Defendant did not constitute “land, the use of which is restricted pursuant to the relevant laws and subordinate statutes” under Article 168-14(1)1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 27829, Feb. 3, 2017; hereinafter the same) but did not reside in the forest of this case. As the Plaintiff did not reside in the forest of this case, the Defendant excluded the special deduction for long-term possession on the ground that it constitutes land for non-business use, and issued a correction notice (hereinafter “instant disposition”).

C. The Plaintiff filed a tax appeal on October 0, 2017, but was dismissed on October 0, 200.

[Reasons for Recognition] Unsatisfy, Gap evidence 1, 3, 5, 6, Eul evidence 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. Summary of the plaintiff's assertion

1) The instant forest land falls under “land, the use of which is limited under Article 104-3(2) of the former Income Tax Act (amended by Act No. 1525, Dec. 19, 2017; hereinafter the same) and Article 168-14(1)1 of the former Enforcement Decree of the Income Tax Act” under Article 12 of the Management of Mountainous Districts Act by being designated as a mountainous district for forestry use under the Management of Mountainous Districts Act on August 29, 2013, and thus, the instant forest land should not be deemed a land for non-business use. However, the Defendant did not report the instant forest land as the land for non-business use and made the instant disposition without applying the special deduction

Therefore, the instant disposition should be revoked as it is unlawful.

B. Determination

1) If Gap evidence Nos. 5 and Eul evidence Nos. 4 showed the overall purport of the pleadings, it is recognized that the KUA designated the forest of this case as a mountainous district for forestry use under the Management of Mountainous Districts Act pursuant to Article 2013-353 of the KUA notification of KUA on August 29, 2013, and designated the forest of this case as a livestock raising restriction area pursuant to Article 2015-336 of the KUA notification of KUA as of September 4, 2015.

2) Relevant statutes and legal principles

A) Relevant statutes are as listed in the separate sheet.

B) According to Article 104-3 (1) 2 of the former Income Tax Act and Article 168-6 (1) of the former Enforcement Decree of the Income Tax Act, where the land category and actual status are forest and the ownership period of forest is not less than five years, such forest shall be deemed forest and land for non-business in principle during the period exceeding two years in the five years immediately preceding the transfer date, more than one year in the three years immediately preceding the transfer date, more than one year in the three years immediately preceding the transfer date, and more than 40/100 of the ownership period of the land: Provided, That in applying the provisions of paragraph (1), the provisions of Article 104-3 (2) of the former Income Tax Act provide that "in case of applying the provisions of paragraph (1), it may not be deemed land for non-business use under the conditions as prescribed by the Presidential Decree, and Article 168-14 (1) 1 of the former Enforcement Decree of the Income Tax Act to which the delegated land was acquired, and after the use of land is prohibited or restricted under the Acts and subordinate statutes.

The term “land, the use of which is prohibited or restricted under Article 104-3(2) of the former Income Tax Act and Article 168-14(1)1 of the former Enforcement Decree of the Income Tax Act” means land, the use of which is specially restricted beyond the ordinary limit according to its use. Here, whether it constitutes “where the use is particularly restricted beyond the ordinary limit according to its use” is based on the principle of limitation on the use of the land according to its original purpose, but it shall be determined individually by taking into account the purpose of acquiring the land, the actual use of the land, and the possibility of changing its original use (see, e.g., Supreme Court Decisions 2011Du1425, Oct. 31, 2013; 2014Du7886, Jul. 14, 2016).

C) According to Article 12(1) of the former Management of Mountainous Districts Act, the head of a Si/Gun/Gu may not convert or temporarily use a mountainous district to engage in any of the following activities, except in the case of converting or temporarily using a mountainous district for forestry purposes. According to Article 8(1) of the Act on the Management and Use of Livestock Excreta, the head of a Si/Gun/Gu may designate and publicly announce a specific area and restrict livestock raising in any of the following areas where restriction on raising livestock is deemed necessary for preserving the living environment of local residents or preserving the quality of water sources:

3) We examine the instant case. The fact that the instant forest is both the actual status of the forest and the current status of the entry in the public record is either a dispute between the parties or pursuant to the overall purport of pleadings. According to the facts acknowledged earlier, the instant forest was designated as a mountainous district for forestry use, but the instant forest was not prohibited or restricted in itself, and the instant forest was designated as a livestock breeding restriction zone. The same applies to the instant forest, which is the original purpose of the forest, even if it was designated as a mountainous district for forestry use. The period during which livestock raising is restricted is not more than two years retroactively from December 21, 2016, on which the instant forest was transferred to voluntary auction. As such, it may be recognized that the instant forest falls short of the period of time stipulated in Article 104-3(1) of the former Income Tax Act and Article 1

Therefore, the evidence Nos. 2 and 3 alone cannot be deemed that the forest of this case falls under “land prohibited or restricted in use pursuant to the laws and regulations” under Article 168-14(1)1 of the former Enforcement Decree of the Income Tax Act, and there is no assertion or evidence to regard the forest of this case as land for business.

4) Sub-committee

Therefore, the plaintiff's assertion cannot be accepted, and the disposition of this case is legitimate.

3. Conclusion

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