Cho-2017-Divisions-1093 (Law No. 19, 2017)

It is not sufficient to recognize that not less than 1/2 of farming work was cultivated with his own labor.

It is insufficient to recognize that a person is engaged in the cultivation of crops or the growing of perennial plants at all times, or who has cultivated or cultivated not less than half of the farming works with his own labor, and there is no other evidence to acknowledge it.

Article 69 of the Restriction of Special Taxation Act (Reduction or Exemption of Transfer Income Tax for Self-Cultivating Farmland)

2017Guhap583 Revocation of Disposition of Imposing capital gains tax

United StatesA

○ Head of tax office

November 2, 2017

January 11, 2018

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of capital gains tax of KRW 225,459,160 against the Plaintiff on August 8, 2016 shall be revoked.

1. Details of the disposition;

A. On November 20, 1986, the Plaintiff acquired 92.75 square meters in a warehouse building, such as 00-0 ○○○○○○○, ○○○○, ○○○○, 00-0 m2, and 559 m2 (hereinafter “instant land”).

B. On March 20, 2015, the Plaintiff sold the instant land for KRW 400 million to ChoB, and filed a preliminary return on capital gains tax on June 1, 2015. On July 13, 2015, the Plaintiff sold the instant land for KRW 580 million and the instant warehouse buildings to JungCC for KRW 580 million, and filed a preliminary return on capital gains tax on September 10, 2015. Upon filing the preliminary return on each of the said capital gains tax, the Plaintiff applied reduction or exemption of capital gains tax on one’s own farmland under Article 69 of the former Restriction of Special Taxation Act (Amended by Act No. 13560, Dec. 15, 2015; hereinafter referred to as the “former Restriction of Special Taxation Act”).

C. After conducting an investigation of capital gains tax on the Plaintiff, the Defendant deemed that the transfer of each of the instant lands is not subject to reduction or exemption of capital gains tax on self-arable farmland, and on August 8, 2016, the Defendant issued a correction and notification of KRW 225,459,160 to the Plaintiff in 2015 (hereinafter “instant disposition”).

D. On October 24, 2016, the Plaintiff dissatisfied with the instant disposition and filed an objection with the ○○ Regional Tax Office. However, on November 21, 2016, the Plaintiff received a decision of dismissal from the ○○ Regional Tax Office, and filed an appeal with the Tax Tribunal on February 16, 2017, but received a decision of dismissal from the Tax Tribunal on April 19, 2017.

[Reasons for Recognition] Facts without dispute, Gap evidence 1 through 8, Eul evidence 1 through 8 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff acquired each of the instant land from around November 1986 to around May 26, 2007, and cultivated worship, etc. while residing in each of the instant land from around March 26, 2007 to around May 2015, and directly cultivated each of the instant land for at least eight years. As such, the Defendant’s disposition based on the different premise is unlawful.

B. Relevant statutes

Attached Form 3 is as shown in the "relevant Acts and subordinate statutes".

C. Determination

1) Relevant legal principles

Article 69 (1) of the former Restriction of Special Taxation Act provides that "the tax amount equivalent to 100/100 of capital gains tax shall be reduced or exempted on income accruing from the transfer of land prescribed by Presidential Decree, among land cultivated directly by a resident prescribed by Presidential Decree who resides in the seat of farmland for at least eight years, and Article 66 (13) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 26959, Feb. 5, 2016) provides that "the direct cultivation in the manner prescribed by Presidential Decree of Article 69 (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 in cultivating or growing them with his/her own labor."

However, the principle of strict interpretation derived from the ideology of no taxation without law and tax equity is applicable not only to the cases meeting the taxation requirements, but also to the cases meeting the requirements for non-taxation and tax exemption, and thus, it is not allowed to expand or analogically interpret the requirements for non-taxation and tax exemption as favorable to taxpayers without any reasonable grounds (see, e.g., Supreme Court Decision 2005Du15021, Jul. 12, 2007). In order to constitute “a cultivation or cultivation by using one half or more of the farming work with one’s own labor capacity,” it is insufficient to cultivate land on its own responsibility, and the ratio of one’s labor force, excluding family members, etc., out of the labor force invested for the cultivation of crops

In addition, even if the fact that the land has been cultivated as farmland is recognized, it is not presumed that the owner is the own fact, and the fact that the land has been cultivated as farmland must be proved by the transferor who asserts such fact (see, e.g., Supreme Court Decision 92Nu11893, Jul. 13, 1993).

2) Determination

In light of the above legal principles, in light of the following circumstances acknowledged by comprehensively taking account of the evidence mentioned above, the statements and images of evidence set forth in Gap evidence set forth in subparagraphs 9 through 18, and witness Lee DoD's testimony as a whole, the evidence submitted by the plaintiff alone is insufficient to recognize that the plaintiff was engaged in the cultivation of crops or the growing of perennial plants in each land of this case, or has cultivated or cultivated not less than half of the farming works with his own labor, and there is no other evidence to prove otherwise. Accordingly, the disposition of this case made in the same purport is lawful.

(1) If a tax authority received a written confirmation from a taxpayer in the course of conducting a tax investigation, barring any special circumstance, such as that the written confirmation was forced against the will of the person who prepared the tax investigation, or that it is difficult to take the written confirmation as evidence to prove specific facts due to lack of details thereof, the evidence of the written confirmation cannot be readily denied (see, e.g., Supreme Court Decision 2001Du2560, Dec. 6, 2002

According to the written answer to the Plaintiff written at the time of the tax investigation, the Plaintiff acquired each of the instant land and continuously cultivated each of the instant land for about ten (10) years, and thereafter, Kim E-E, the Plaintiff’s father, proposed to cultivate each of the instant land, thereby Kim E-E cultivated each of the instant land until 2010. From 2002 to 201, Kim E-E commenced the cultivation of each of the instant land, Kim E-E possessed all of the harvesteds from each of the instant land to Kim E-E, and from 2010 to 2010, from 2002 to 2010 paid a monthly amount of KRW 1 million to Kim E-E, instead of cultivating each of the instant land under the Plaintiff’s responsibility.

In addition, the confirmation document prepared by Kim E-E at the time of the tax investigation indicates that KimE itself cultivated each of the instant land from 1996 to 2010.

In light of the above evidence, it appears that the Plaintiff mainly cultivated each of the instant land by 2010 was KimE. Even if the Plaintiff cultivated each of the instant land together with KimE, the Plaintiff’s role seems to have been auxiliary to the extent.

② The Plaintiff, including each of the instant land, owned farmland of a size equal to 2,767 square meters, 6,438 square meters, total of 13 square meters, 13 square meters, and 9,205 square meters in total, and thus, it was difficult for the Plaintiff to directly cultivate each of the instant land by inserting more than 1/2 of its own labor force in light of the Plaintiff’s farming experience and age.

③ The Plaintiff asserted that he directly cultivated each of the instant lands for at least eight years, and submitted a confirmation of residence prepared by the Lee FF and Lee GG, a letter of guarantee and fact confirmation prepared by the neighboring residents of each of the instant lands, a statement of deposit transaction recorded with sales proceeds, a confirmation of purchase of double buyers, and a statement of sales by purchasing feed necessary for farming, etc. The Plaintiff testified that the Plaintiff directly cultivated each of the instant lands at this court as a witness and the Plaintiff was present at this court to the effect that he directly cultivated the instant land.

However, the letter of guarantee and confirmation of facts, prepared by the neighboring residents of each of the instant lands, are merely stated that the Plaintiff directly cultivated each of the instant lands, but does not include specific facts that clearly support the self-defense itself, such as methods of cultivation, details and subject of work, frequency of work, etc., and the same applies to the testimony by the witness Lee GG.

In addition, it is insufficient to recognize the fact that the plaintiff directly cultivated each of the lands of this case by inserting not less than 1/2 of his own labor force, such as the confirmation of residence, the statement of deposit transactions, and the confirmation of purchase.

④ The Plaintiff’s spouse operates ○○○○○○-dong ○○○ dental clinic, and the Plaintiff stated that ○○ and each of the instant lands were living in the course of the tax investigation by entering the Plaintiff’s ○○ and the instant land for her husband’s launch. Even according to the Plaintiff’s statement, the Plaintiff appears to have failed to be able to concentrate on the cultivation of each of the instant lands.

3. Conclusion

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