A building constructed with a building permit for a business facility (office) shall not be deemed included in a house.

The term "housing" means only a building constructed for housing purposes as at the time of its supply with a building permit lawfully obtained, and it cannot be deemed that it includes a building constructed with a building permit granted for business facilities (offices).

Article 106 of the Restriction of Special Taxation Act

2019Guhap51707 Disposition to revoke the imposition of value-added tax

Prosecution ○

○ Head of tax office

2019.19

October 17, 2019

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of KRW 7,021,930 (including additional taxes) for the first period of value-added tax in October 1, 2018 on the Plaintiff on October 1, 2018 and the imposition of KRW 29,049,350 (including additional taxes) for the second period of value-added tax in 2015 is revoked.

1. Details of the disposition;

(a) New construction and sale of officetels by the plaintiff;

On October 15, 2014, the Plaintiff registered the business of the Housing Construction and Sales Business with the trade name of ○○○○-dong ○○○-dong 2-72 large scale 231 square meters on the ground of ○○-dong 27, 2015, and sold three units of officetels among the above aggregate buildings (hereinafter referred to as “the instant officetels”) in the first and second taxable periods of 2015, by newly constructing an aggregate building of 7 stories above the ground (8 households and three units of officetels) in the name of ○○-dong ○○-dong 2-72 large scale 231 square meters on the ground of ○○-dong 2015 (hereinafter referred to as “Otel”).

B. Plaintiff’s failure to report value added tax and Defendant’s imposition of value added tax

The Plaintiff was exempt from value-added tax pursuant to Article 106(1)4 of the Restriction of Special Taxation Act (hereinafter “the instant exemption provision”) on the supply of the instant officetel on the ground that the instant officetel constitutes a national housing with an exclusive residential area of 85 square meters or less per household, and thus, the Plaintiff did not report the first and second value-added tax for the supply of the instant officetel in 2015.

On October 1, 2018, the Defendant: (a) deemed that the supply of the instant officetel does not constitute an object of value-added tax exemption; and (b) notified the Plaintiff of the correction and notification of KRW 7,021,930 (including additional taxes) and KRW 29,049,350 (including additional taxes) for the second period of value-added tax in 2015 (hereinafter referred to as “instant disposition”).

[Ground of recognition] Gap evidence Nos. 1, 10, 11 (including additional numbers), Eul evidence No. 1, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) In light of the purport of the instant exemption provisions, “national housing prescribed by Presidential Decree” under the instant exemption provisions, which is not a house under the Housing Act, but a house with a residential room, bank, toilet, etc., which is designed and constructed from the beginning as a house with a room, bank, and toilet, which is used as a residential purpose by occupants, is used as a residential purpose, and “national housing prescribed by Presidential Decree” under the instant exemption provisions, should include an officetel which is a residential purpose, such as a house under the Housing Act and a quasi-housing under the Housing Act, even if it is not a house under the Housing Act, it constitutes “national housing prescribed by Presidential Decree,” and the supply of the instant officetel constitutes “national housing prescribed by Presidential Decree, which has an residential area of 85 square meters or less per household and is subject to the exemption of value-added tax. Therefore, the instant disposition was unlawful by deeming that the supply of the instant officetel is not subject to exemption of value-added tax.

2) The Tax Tribunal decided that the supply of a residential officetel constitutes the subject of value-added tax exemption stipulated in the provisions of this case’s exemption provision, and thus, the interpretation of tax law or the practice of national tax administration had been established prior to the instant disposition, which was accepted by the taxpayer. The Plaintiff did not report and pay value-added tax on the supply of the instant officetel in trust. On September 21, 2017, the Defendant changed the judgment of the Tax Tribunal to the effect that the supply of a residential officetel does not constitute the subject of value-added tax exemption stipulated in the provisions of this case’s exemption provision, and thus, the instant disposition was retroactively imposed on the basis of such new interpretation. Accordingly, the instant disposition was unlawful as it violates the principle of trust protection and the principle of prohibition of retroactive taxation.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Whether the instant officetel supply is not subject to value-added tax exemption

The instant exemption provisions and Articles 106(4)1 and 51-2(3) of the Enforcement Decree of the Restriction of Special Taxation Act stipulate that “the supply of housing below the scale of national housing under the Housing Act” as one of the objects of value-added tax exemption, and the main sentence of Article 2 subparag. 3 of the former Housing Act (wholly amended by Act No. 13805, Jan. 19, 2016; hereinafter the same) stipulates that “the housing whose area used only for the purpose of residence is not more than 85 square meters per house or household (the housing whose exclusive residing area per house or household is not more than 100 square meters in the Eup area or Myeon area other than the Seoul Metropolitan area under Article 2 subparag. 1 of the Seoul Metropolitan Area Readjustment Planning Act).”

Article 2 of the former Housing Act defines "house" as a whole or part of a building with a structure that makes it possible for members of a household to live an independent residential life for a long time as well as land annexed thereto, and classify it into detached houses and apartment houses. Article 2-2 of the former Enforcement Decree of the Housing Act (wholly amended by Presidential Decree No. 27444, Aug. 11, 2016) defines "quasi-housing" as a building other than a house and its appurtenant facilities as a residential facility, and distinguish between houses and quasi-housing. Article 2-2 subparagraph 4 of the former Enforcement Decree of the Housing Act (wholly amended by Presidential Decree No. 27444, Aug. 11, 2016) provides officetels under subparagraph 14 (b) of the Enforcement Decree of the Building Act as one of quasi-housing. Article 2(2) of the Building Act, Article 3-5 [Attachment Table 1] of the Enforcement Decree of the Building Act classify the use of a building

(4) In the instant case, the provisions of the Restriction of Special Taxation Act stipulating that officetels is exempt from value-added tax under the Housing Act as one of the items of non-taxable construction under the 1st 5th mtel, and that the scope of "house" should be interpreted in accordance with the purport and purpose of the said provisions. On the other hand, the interpretation of tax laws and regulations is not allowed in accordance with the law unless there are special circumstances. In particular, it conforms with the principle of fair taxation to clearly interpret that officetels is eligible for exemption from value-added tax as one of the items of non-taxable housing under the 5th mtel’s 1st mtel’s 6th mtel’s mtel’s 8th mtel’s mtel’s mtel’s 4th mtel’s mtel’s mtel’s mtel’s mtel’s mtel’s mtel’s mtel’s mtel’s mtel’s mtel’s m.

Therefore, the supply of the instant officetel does not constitute the supply of housing below the national housing scale under the Housing Act, which is subject to the exemption of value-added tax as stipulated in the instant exemption provision.

2) Whether the instant disposition violates the principle of trust protection and the principle of prohibition of retroactive taxation

The mere fact that the supply of residential officetels constitutes an object of the exemption of value-added tax as stipulated in the instant exemption provision and the Tax Tribunal’s decision was made to revoke the imposition of value-added tax, the Defendant issued a public opinion expressing that the instant officetel’s supply constitutes an object of the exemption of value-added tax, or that such interpretation of tax law or the practice of national tax administration is not established. Thus, the instant disposition cannot be deemed to contravene the principle of trust protection and the principle of prohibition of retroactive taxation.

3) Whether the instant disposition is lawful

The instant disposition is legitimate in view that the supply of the instant officetels does not fall under the object of value-added tax exemption stipulated in the instant exemption provision.

3. Conclusion

The plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.