Commencement date of housing construction and sales business

In the case of housing construction and sales business, the starting date of business shall be the time of commencing the sale of each multi-household house in this case, on which the supply of goods prescribed in Article 6 subparagraph 3 of the Enforcement Decree of the Value-Adde

The contents of the judgment are the same as the attachment.

2018Guhap6303 global income and revocation of disposition

Gangwon***00

AA head of the tax office overseas2

on October 018 06, 201

October 04, 2018

1. The plaintiffs' respective claims against the defendants are dismissed in entirety.

2. The costs of lawsuit are assessed against the plaintiffs.

Cheong-gu Office

Each disposition of imposition of global income tax (including additional tax) 114,369,014 won (including additional tax) for the year 2016 on October 10, 2017 against Plaintiff Gangnam*, the director of the competent tax office, the director of the competent tax office, the director of the competent tax office, the director of the competent tax office, the director of the regional income tax (including additional tax) 116,481,808 won for the year 2012 owed to Plaintiff KimA on October 13, 2017, and the head of the competent tax office, the director of the competent tax office, the director of the competent tax office, the director of the competent regional tax office, the director of the competent tax office of the competent tax office, the director of the competent regional income tax (including additional tax) 164,791,837 won for the year 2013, and the director of the competent regional tax office of Defendant DD for the director of the competent tax office, the director of the competent tax office of the competent tax office of Korea, revocation* the Plaintiff 123,64,

1. Details of the disposition;

A. The plaintiffs are enterprisers engaged in the housing construction and sales business, and each of them is listed as follows:

A household house (hereinafter referred to as "multi-household house in this case") shall be constructed and observed by the head of the Gu.

The approval was obtained and sold in lots.

The omission of Table

B. Meanwhile, the Plaintiffs calculated estimated income as indicated below [Attachment 2] by applying the simple expense rate, and accordingly reported and paid the comprehensive income tax (including evidence No. 2, number No. 2) in accordance with Article 143(4)2(b) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 28637, Feb. 13, 2018; hereinafter the same shall apply) in the taxable period immediately preceding the pertinent year in which the sales revenue amount was generated, if the revenue amount falls short of the amount stipulated in Article 143(4)2(b) of the former Enforcement Decree of the Income Tax Act, in the following taxable period:

The omission of Table

C. As a result of the income tax investigation on the plaintiffs, the director of the Central District Tax Office confirmed that the revenue amount of each multi-household of this case was processed revenue for the pertinent taxable year immediately preceding that in which the revenue amount of each multi-household of this case was generated, and ordered the defendants to estimate the income amount by applying the "standard rate, not the "simplified expense rate" but the "standard rate," as the date on which the actual revenue amount actually accrued due to the sale of each multi-household of this case is the starting date of the business.

D. Accordingly, the Defendants calculated necessary expenses according to the estimation method according to the "standard expense rate", deducted various deductible amounts, such as the amount of tax already paid by the Plaintiffs, and added additional taxes due to unfaithful return and payment (including additional taxes for underreporting 40% of the tax rate), and subsequently corrected and notified the comprehensive income tax as described in the "date of the first notice" column (including the evidence No. 3, No. B, and each number).

E. The Plaintiffs appealed and filed an appeal with the Tax Tribunal on January 2, 2018 and January 3, 2018. The Tax Tribunal rendered a decision to reduce the amount of additional tax by applying the general penalty tax for underreporting only for the portion of additional tax originally notified (hereinafter “tax amount remaining after the reduction or correction”) (hereinafter “each disposition of this case”).

Facts that there is no dispute over recognition, Gap evidence 1 through 5, Eul evidence 1 and 2 (each number);

each entry, the purport of the whole pleading, including the number of each

2. Whether each of the dispositions of this case is legitimate

A. The parties' assertion

The Defendants asserted that each of the dispositions of this case is lawful on the grounds of the grounds of the disposition and the relevant laws and regulations. Accordingly, the Plaintiffs asserted that each of the dispositions of this case, which applied the standard expense rate, is unlawful on the grounds that the Plaintiffs were subject to the application of the simple expense rate for the following reasons.

1) The former Rules of the Ministry of Strategy and Finance (Ministry of Strategy and Finance No. 50, Oct. 6, 201) cited by the Defendants as the grounds for each of the dispositions in this case is only the provision on the time of supply under the Value-Added Tax Act, not the provision on the date of commencing the business under the Income Tax Act, and the Income Tax Act does not have any provision on the starting date of the business. The starting date of the business is more logically prior to the starting date of the business, and Article 48 subparagraph 5 of the former Enforcement Decree of the Income Tax Act sets the starting date of the business as the starting date of the business, because Article 48 subparagraph 5 of the former Enforcement Decree of the Income Tax Act sets the "the date on which the provision of services is completed" as the starting date of the business. Thus, deeming the starting date of the

Therefore, in the case of housing construction and sales business, such as the plaintiffs, the "standard expense rate" shall be deemed to have already started at the time of acquisition of land or commencement of construction work, or at the latest, at the time of obtaining approval for use, and in particular, at least for the plaintiff KimA, who obtained approval for use in the year 2012, which was the immediately preceding year of 2013, the global income tax period for the global income tax, should be applied when calculating the global income tax for the year 2013. However, the defendants applied "standard expense rate on the premise that the plaintiff is a new business operator who commenced the business in the relevant taxable period, considering that the date of the occurrence of sales revenue of each multi-household house in this case, which can be seen as the time

2) Even if the date of commencement of the business of the Plaintiffs, as shown in the Defendants, the Defendants deemed the processed income amount in the immediately preceding taxable period as the processed income amount, the Plaintiffs, which eventually led to the business entity whose revenue amount in the immediately preceding taxable period falls short of KRW 36,00,000, and thus, fall under the business entity whose revenue amount in the immediately preceding taxable period falls short of KRW 36,000, and thus, Article 143(

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Determination on the first argument of the plaintiffs

A) Under the principle of no taxation without representation, a tax law shall be interpreted in accordance with the text of the law, and shall not be extensively interpreted or analogically interpreted without reasonable grounds, barring any special circumstance. However, even in the language and text of the tax law itself, if its meaning is unclear or if it appears that there is a conflict between the statutes, the court must naturally indicate the true meaning of the language and text at issue through harmonious interpretation of the law. In such cases, a judge can make a combined interpretation of the law that takes into account legislative intent and purpose to the extent that it does not undermine legal stability and predictability (see, e.g., Supreme Court en banc Decision 2011Du551, Apr. 16, 2015).

Article 1-2 (1) 5 of the former Income Tax Act (amended by Act No. 15225, Dec. 19, 2017; hereinafter the same) provides for the definition of "business operator"; Article 19 (1) provides for the existence of income generated from any type of business as business income; Article 8 of the Value-Added Tax Act provides that Article 168 (3) applies mutatis mutandis to the methods of filing a new application for business registration and applying for alteration of business registration to a business operator who registers his/her business pursuant to the former Income Tax Act; and Article 68 (3) of the former Income Tax Act does not provide for the provision that explicitly determines the commencement date of business as prescribed in Article 6 of the Enforcement Decree of the Value-Added Tax Act or the provision that provides for such provision to the extent that it does not undermine legal stability and predictability. Therefore, it is necessary to examine when the starting date of business of the former Income Tax Act should be deemed the business income through the combined interpretation of the Act.

Therefore, in full view of the language, structure, and purport of the relevant laws such as the Income Tax Act and the Value-Added Tax Act, the starting date of the business of the business income under the Income Tax Act shall be also the starting date of the business under the Article 5 (2) of the Enforcement Decree of the Value-Added Tax Act, which sets the starting date of the business under the Article 5 (2) of the

① Article 19(1) of the former Income Tax Act defines "income generated from various types of business, such as agriculture, forestry, fishery, mining, manufacturing, construction, etc." as business income, and considering that Article 1-2(1)5 of the same Act defines a resident with such business income as a business operator, the business under the former Income Tax Act is premised on the actual occurrence of income. Therefore, the commencement date of the business cannot be advanced until the preparation of the business, which is the time of providing goods or services directly causing income, begins.

② As a result, it is difficult to objectively specify the starting point of the preparation activity in terms of not only a considerable irregular and broad range, but also the aspect that the scope is set by the enterpriser’s subjective intent or necessity. If the starting point of the preparation of the project is earlier than the starting point of the acquisition point of the land or the starting point of the building at the time of the commencement of the preparation of the project, the revenue amount of the immediately preceding taxable period, which is the premise for the application of the simple expense rate under Article 143(4)2 of the former Enforcement Decree of the Income Tax Act, depending on the time of the preparation activity, may vary depending on the time of the preparation activity, and thus, the entrepreneur’s voluntary selection of the date according to his own convenience may hinder the exercise of the

③ According to Articles 1-2(1)5 and 19 of the former Income Tax Act, residents with income arising from activities conducted on their own account and responsibility for profit-making purposes (in independence) and continuous and repeated basis as business operators. Meanwhile, according to Article 2(3) of the Value-Added Tax Act, a person who supplies goods or services independently for business purposes regardless of the existence of profit-making purposes is an entrepreneur and is liable to pay value-added taxes. Here, a “person who supplies goods or services independently for business purposes” is a person who supplies goods or services in the form of business to an extent that the value-added tax can be created (see Supreme Court Decision 98Du16705, Sept. 17, 199) and is a person who supplies goods or services with continuous and repeated intent (see Supreme Court Decision 98Du16705, Sept. 17, 199). Thus, it is necessary to uniformly interpret the starting date of business related to business income under the former Income Tax Act from the starting date of business under the Value-Added Tax Act.

It is also true in that legal stability should be given to them.

(4) From this point of view, Article 168 (1) of the former Income Tax Act imposes an obligation on the head of the competent tax office to make a business registration under the former Income Tax Act, and Article 168 (2) of the same Act provides that a business operator who has made a business registration under the Value-Added Tax Act shall be deemed to have made a business registration under the former Income Tax Act, and Article 32 (1) of the Value-Added Tax Act provides that where a business operator supplies goods or services, he/she shall also impose an obligation to prepare an invoice or receipt as prescribed by Presidential Decree and to issue the goods or services to the person who has received the goods or services.

(5) Article 8 (1) of the Value-Added Tax Act, which provides that Article 168 (3) of the former Income Tax Act shall apply mutatis mutandis to business registration, uses the term "the starting date of business" as "the starting date of business", and Article 5 (2) of the Value-Added Tax Act provides for the first taxable period for a new business operator, and Article 6 of the Enforcement Decree of the Value-Added Tax Act provides that "the starting date of business pursuant to Article 5 (2) of the Value-Added Tax Act shall be the starting date of provision of goods or services

B) According to the following circumstances that can be seen by comprehensively taking account of the contents of the relevant statutes, the evidence and the purport of the entire pleadings, the date of commencing the business of the housing construction and sales business run by the Plaintiffs should be deemed the time of commencing the sale of each multi-household house of this case, which is affixed to the supply of goods under Article 6 subparag. 3

① The initial housing construction and sales business is included in real estate sales business under its nature (see, e.g., Supreme Court Decision 2008Du21768, Jul. 22, 2010). The commencement of the business of the housing construction and sales business shall be substantially determined based on the time the preparation for the business is completed and the housing sales, which is the original business purpose, is performed or can be conducted (see, e.g., Supreme Court Decision 94Nu15905, Dec. 8, 1995).

② Whether a business income falls under business income under the Income Tax Act ought to be determined according to social norms, taking into account whether business activities are continuously and repeatedly conducted in light of the business profit purpose, the scale, frequency, mode, etc. of the business (see, e.g., Supreme Court Decision 91Nu6559, Nov. 26, 1991). However, there is no evidence suggesting that the Plaintiffs had objectively expressed the intent to operate a housing construction and sales business for profit prior to commencing the sale of each of the instant multi-household housing. The fact that the Plaintiffs commenced or completed each of the instant multi-household housing, solely on the sole basis of the fact that the instant multi-household housing was continuously and repeatedly conducted for profit-making purposes, it is difficult to deem that the Plaintiffs had objective substance as a

2) Judgment on the second argument by the plaintiffs

Article 143 (4) 2 of the former Enforcement Decree of the Income Tax Act provides that the business is operated in the immediately preceding taxable period but the amount of revenue is below a certain amount. However, in the case of the plaintiffs, the part where the amount of revenue for the immediately preceding business year is recognized as processed revenue and the business is denied is not recognized in itself. Thus, there is no room to apply the simple expense rate within the meaning of the above provision.

3. Conclusion

Thus, the plaintiffs' claim of this case is dismissed as it is without merit.