Early High Court Decision 2013Du5316 (Law No. 10, 2013.04)

Claimant is not a farming child and is denied a gift tax reduction report.

Since it is difficult to see that farming children meet the requirements for farming children in light of the purpose of legislation of exemption and reduction of gift tax on the farmland donated to farming children, the fact that the claimant has earned income as regular workers, there is no error

2013Guhap12257 Revocation of Disposition of Imposition of Gift Tax

SAA

The director of the tax office

July 3, 2014

August 21, 2014

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 gift tax of KRW 97,439,280 against the Plaintiff on September 6, 2012 is revoked.

1. Details of the disposition;

A. On September 15, 2010, the Plaintiff completed the registration of ownership transfer on the ground of donation made on September 13, 2010, as to 9,403 square meters (hereinafter “the farmland of this case”) prior to ○○○○○○○○○○, which was owned by the Plaintiff’s ○○○○○○○, which was owned by the Plaintiff’s ○○○○○○.

B. On December 31, 2010, the Plaintiff filed a gift tax return with the Defendant on the ground that the Plaintiff was donated the instant farmland to the Defendant, a self-employed farmer, from his/her farmer, pursuant to Article 71(1) of the former Restriction of Special Taxation Act (amended by Act No. 10406, Dec. 27, 2010; hereinafter “former Restriction of Special Taxation Act”).

C. The Chairman of the Board of Audit and Inspection deemed that the Plaintiff was merely indirectly engaged in agriculture with a view to other occupation as a result of a specific audit status of tax investigation, and thus does not constitute a farmer;

On May 24, 2012, the Defendant notified the Defendant of the collection of gift tax. Accordingly, the Defendant imposed and notified the gift tax amount of KRW 97,439,280 on September 6, 2012 (i.e., the determined tax amount of KRW 83,295,680 + the additional tax on negligent tax returns of KRW 14,143,606) (hereinafter referred to as the “instant disposition”).

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on November 27, 2012, but was dismissed on April 10, 2013.

[Reasons for Recognition] Facts without dispute, Gap evidence 2, Eul evidence 1, Eul evidence 2-1 and Eul evidence 2-2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

It was true that the Plaintiff had been working in ○○ Korea Co., Ltd. (hereinafter referred to as “non-party company”) since 2000. However, rice farming company did not require a large number of labor force to grow except for the period of four months and the period of drilling in October, and thus, the Plaintiff cultivated the farmland of this case to ○○ by using the Plaintiff’s work hours before and after work hours and weekends. Therefore, since the Plaintiff cultivated 1/2 or more of the farming work while working in the non-party company and cultivated the farmland of this case with the Plaintiff’s labor force, the disposition of this case on a different premise is unlawful even though it constitutes a farming child under Article 71(1) of the former Restriction of Special Taxation Act.

(b) Related statutes;

director of the former Restriction of Special Taxation Act (amended by Act No. 10406, Dec. 27, 2010)

Article 71 (Reduction or Exemption of Gift Tax on Farmland, etc. Given to Farming Children)

(1) Where a resident prescribed by Presidential Decree (hereafter in this Article, referred to as a "self-employed farmer") who resides in the seat of farmland, grassland, or forest land (including shares acquired by investing the relevant farmland, grassland, or forest land in kind to an agricultural partnership corporation; hereafter in this Article, the same shall apply) that directly cultivates such farmland, etc., which meets all the following requirements, resides in the seat of such farmland, etc. and directly cultivates such farmland, etc., on or before December 31, 2011, donates such farmland, grassland, or forest land to his/her lineal descendants prescribed by Presidential Decree (hereafter in this Article, referred to as a "self-employed farmer"), the amount of tax equivalent to

1. Farmland, etc. falling under any of the following items:

(a) Farmland: Farmland subject to taxation of agricultural income tax (including those subject to non-taxation, reduction and exemption and small collection) under the Local Tax Act, which is not more than 29,700 square meters;

(b) Grassland: The grassland provided for in the Grassland Act, the area of which shall not exceed 148,500§³;

(c) Forest land: The forest land (including seed-gathering forests and forest protection zones under Article 7 of the Forest Protection Act; hereafter the same shall apply in this item) whose forest management plan is authorized or designated as a special forest project zone and newly afforested for at least five years pursuant to the Creation and Management of Forest Resources Act, among preserved mountainous districts under the Mountainous Districts Management Act, the area of which shall not exceed 297,00 square meters: Provided, That in cases of a forest land afforested for at least 20 years, the area of which shall not exceed 90,000 square meters, including forest land which is afforested for at least five years, the area of which shall

2. Farmland, etc. located outside a residential area, commercial area or industrial area under Article 36 of the National Land Planning and Utilization Act;

3. Farmland, etc. located outside a prearranged housing site development district under the Housing Site Development Promotion Act or a development project district prescribed by Presidential Decree;

(2) When farmland, etc., the gift tax of which is reduced or exempted pursuant to paragraph (1) is transferred within five years from the date of donation, such as the death of farming children, or is no longer engaged in farming directly in the relevant farmland, etc. without any justifiable ground prescribed by Presidential Decree, such as disease, school attendance, etc., an amount equivalent to the reduced or exempted

(8) In applying paragraphs (1) through (7), the period of holding farmland, etc. on which gift tax is reduced or exempted, method of calculating acquisition thereof, and other necessary matters shall be prescribed by Presidential Decree

【Enforcement Decree of the Restriction of Special Taxation

Article 68 (Reduction or Exemption of Gift Tax on Farmland, etc. Given to Farming Children)

(1) "Resident prescribed by Presidential Decree" in the part other than the subparagraphs of Article 71 (1) of the Act means a person who meets all of the following requirements:

1. Farmland, etc. (hereafter in this Article, referred to as "farmland, etc.") under the part other than the subparagraphs of Article 71 (1) of the Act shall be residing within 20 kilometers in a straight line from Si/Gun/Gu (referring to an autonomous Gu; hereafter in this Article, the same shall apply), Si/Gun/Gu adjacent thereto, or the relevant farmland, etc.;

2. That he is directly engaged in farming for three or more years retroactively from the date of donation of farmland, etc.

(2) "Direct cultivation" in the part other than the subparagraphs of Article 71 (1) of the Act means that a resident is engaged in cultivating crops or growing perennial plants on his/her own farmland at all times or is engaged in cultivating or growing at least half of farming with his/her own labor.

(3) The term "a lineal descendant prescribed by Presidential Decree" in the main body of Article 71 (1) of the Act means any of the following persons:

1. The successor to farming and forestry prescribed by Ordinance of the Ministry of Strategy and Finance who satisfies all of the following requirements:

(a) A lineal descendant of at least 18 years of age as of the date of donation of farmland, etc.;

(b) A Si/Gun/Gu where farmland, etc. is located, a Si/Gun/Gu adjacent thereto, or a Si/Gun/Gu adjacent thereto within 20 kilometers in straight line from the farmland, etc.

2. A person, other than those referred to in subparagraph 1, who satisfies all of the following requirements:

(a) A lineal descendant of at least 18 years of age as of the date of donation of farmland, etc.;

(b) A Si/Gun/Gu where farmland, etc. is located, a Si/Gun/Gu adjacent thereto, or a Si/Gun/Gu adjacent thereto within 20 kilometers in straight line from the farmland, etc.

(c) They are directly engaged in farming for three or more years retroactively from the date of donation of farmland, etc.

C. Determination

1) Article 71(1) of the former Restriction of Special Taxation Act (amended by Presidential Decree No. 2035, Jan. 1,

Article 71(1) of the Enforcement Decree of the Restriction of Special Taxation Act provides that "If a resident prescribed by the Presidential Decree, who cultivates farmland in the area of farmland, etc. and directly cultivates farmland until December 31, 2011, donates to a lineal descendant prescribed by the Presidential Decree who resides in the area of farmland, etc., the tax amount equivalent to 10/100 of the gift tax on the value of the relevant farmland, etc. shall be reduced or exempted." Article 68(2) of the Enforcement Decree of the Restriction of Special Taxation Act provides that "direct cultivation" means that "the resident is engaged in cultivating crops or growing perennial plants in his/her own farmland or cultivating them with his/her own labor for at least 1/2 of the cultivation or growing of perennial plants." Meanwhile, Article 68(3)2(c) of the Enforcement Decree of the Restriction of Special Taxation Act provides that "a person is engaged directly in farming for at least three years retroactively from the date of donation to a child of agriculture under Article 71(1) of the former Restriction of Special Taxation Act, which does not have been directly collected the amount of the tax reduction or exemption.

Under the principle of no taxation without law, the interpretation of tax laws shall be interpreted in accordance with the text of the law, barring any special circumstances, and it shall not be permitted to expand or analogically interpret without any reasonable reason, and in particular, it is in line with the principle of fair taxation to strictly interpret the provisions that can be deemed as clearly preferential provisions among the requirements for tax reduction and exemption (see, e.g., Supreme Court Decision 97Nu20090, Mar. 27, 1998). In cases where a self-employed farmer donates farmland to a farming child, the purpose of the system of reducing and exempting the gift tax is to provide the economic activities of the farming child on the premise that the farming child continues to engage in farming, while preserving the farmland, which is the physical foundation of farming. Therefore, in order to reduce and exempt the gift tax pursuant to Article 71(1) of the former Restriction of Special Taxation Act, the farming child must cultivate the farmland directly and continuously engage in farming for three years or more retroactively from the date of donation, and even if the donee is engaged in farming concurrently, it cannot be deemed as constituting a farming child with another occupation.

(ii) the facts of recognition

A) On March 27, 2000, the Plaintiff was employed in the non-party company with a distance of 12km from the farmland of this case and served as a deputy head of production management until now. From 2007 to 2012, the Plaintiff received benefits from the non-party company as follows.

Year

2007

208

209

2010

2011

2012

Total amount of benefits (won)

00,000,000

00,000,000

00,000,000

00,000,000

00,000,000

00,000,000

On the other hand, from September 20, 2012 to September 20, 2012, the Plaintiff is operating a mutually convenient store in ○○○○○○○○○○○○○○○, and the sales amount are as follows.

Period

From September 20, 2012 to December 31, 2012

From January 1, 2013 to June 30, 2013

Total sales (cost)

00,000,000

00,000,000

B) From 2000 to 2007, the Plaintiff’s wife Hong-dong worked in the Certified Tax Accountants 00 office. From July 10, 2007 to June 30, 2012, ○○○○○○○○○○ School operated a party branch of each other’s “○○○○-dong club” from July 10, 2007 to June 30, 2012. From January 19, 2012, ○○○-dong operated a mutual convenience store, and the sales amount are as follows.

Period

From January 19, 2012 to June 30, 2012

From July 1, 2012 to December 31, 2012

From January 1, 2013 to June 30, 2013

Total sales (cost)

00,000,000

00,000,000

00,000,000

C) According to the Plaintiff’s farmland ledger (No. 9), the farmland in this case is written by the Plaintiff’s father ○○.

[Reasons for Recognition] Unsatisfy, Gap evidence 7 to 9, Eul evidence 3 to 8, the purport of the whole pleadings

3) The following circumstances known through the aforementioned evidence and the facts of recognition are as follows:

In sum, it is insufficient to recognize that the Plaintiff was directly engaged in farming for at least three consecutive years retroactively from the date of donation from the farmland in this case, and there is no other evidence to acknowledge it. Therefore, the Plaintiff’s assertion that the Plaintiff constitutes “agricultural children” under Article 71(1) of the former Restriction of Special Taxation Act is without merit.

A) Article 71(1) and (2) of the former Restriction of Special Taxation Act; Article 68(1)2 of the Enforcement Decree of the same Act

If the Plaintiff and the Plaintiff’s wife are not directly engaged in farming on the farmland, etc. without any justifiable reason, for at least three consecutive years retroactively from the date of donation of the farmland, etc., and do not directly engage in farming on the relevant farmland, etc. within five years retroactively from the date of donation, the Plaintiff and the Plaintiff’s wife are obligated to collect the tax amount reduced or exempted. However, within five years retroactively from the date of donation, the Plaintiff and the Plaintiff’s wife were working for the Nonparty company or operated personal business, and they are operated for separate convenience stores business, and it is difficult to view that the Plaintiff and the Plaintiff cultivated 1/2 or more of the farming work on the farmland

B) In light of the fact that the farmland in this case is a large-scale electric field with 9,403 square meters, it seems difficult for the Plaintiff and the Plaintiff’s wife to directly cultivate the farmland in this case while concurrently engaging in work and business operation as above.

C) Even in accordance with the farmland ledger, the farmland of this case is additionally cultivated by the Plaintiff.

section 30.

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.