Kwonikwi: "Inherited Farmland Should Receive Capital Gains Tax Reduction if 'Direct Cultivation' is Confirmed"

[Asia Economy Sejong=Reporter Son Seon-hee] A decision has been made that capital gains tax should be reduced if it is confirmed that inherited land has been directly cultivated for more than one year.

The Anti-Corruption and Civil Rights Commission announced on the 25th that it recommended the tax authorities to cancel the imposition of capital gains tax on the grounds that although the inherited farmland was directly cultivated, the related details were not confirmed in the documents.

Mr. A, who filed a grievance complaint with the Anti-Corruption and Civil Rights Commission, inherited 11 plots of farmland from his late father Mr. B, who passed away in 2012. Mr. A directly cultivated the farmland and sold 2 plots in 2016 and 9 plots in 2018. These lands were acquired by Mr. B in 1974 and directly cultivated until his death in 2012.

The tax authorities recognized that Mr. A directly cultivated the 2 plots sold in 2016 for more than one year and, including the period Mr. B cultivated them during his lifetime, acknowledged cultivation for more than 8 years, thus reducing the capital gains tax. However, for the 9 plots sold in 2018, the tax authorities did not recognize direct cultivation by Mr. A due to lack of submitted documents proving farming activities and imposed capital gains tax.

Accordingly, Mr. A filed a grievance complaint with the Anti-Corruption and Civil Rights Commission requesting a reduction of capital gains tax for the 9 plots sold in 2018, as he had cultivated the inherited farmland for more than one year.

According to the Restriction of Special Taxation Act, capital gains tax is reduced if farmland is cultivated for more than 8 years. If the heir has cultivated the inherited farmland for more than one year and the period the decedent acquired and cultivated it is added to confirm cultivation for more than 8 years, capital gains tax is reduced.

The Anti-Corruption and Civil Rights Commission considered that Mr. A received direct payments (government subsidies for income stabilization of agricultural producers) from the government in 2014, owned agricultural machinery, and was registered as a member of the Nonghyup cooperative and as an agricultural and fishery business operator, concluding that he cultivated the inherited farmland for at least one year. Furthermore, since capital gains tax was reduced for the 2 plots sold in 2016, it was deemed reasonable to apply the capital gains tax reduction to the farmland sold in 2018 as well.

An Junho, Director of the Grievance Handling Bureau at the Anti-Corruption and Civil Rights Commission, stated, "We will continue to handle complaints meticulously to ensure that taxpayers are not unfairly burdened with taxes."

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