National Tax Service Review Income 2011-0107 (Law No. 19, 2011)

The rent of a leased apartment residing by the plaintiff shall not be deducted from the necessary expenses corresponding to the rental revenue of real estate.

The rent of a rental apartment residing by the Plaintiff cannot be deemed as a usual cost that is corresponding to the rental revenue of real estate, and it does not constitute the cost necessary for purchasing, maintaining, and repairing apartment, so it is difficult to deduct the rental revenue from real estate as necessary expenses.

2011Guhap39509 global income and revocation of disposition

XX

Head of the District Tax Office

April 13, 2012

April 27, 2012

1. The plaintiff's claim is dismissed.

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

On July 4, 2011, the Defendant revoked each disposition imposing the amount exceeding KRW 00 of global income tax of KRW 000 in 2006, exceeding KRW 000 in global income tax of KRW 000 in 2007, exceeding KRW 000 in global income tax of KRW 00 in 2007, and exceeding KRW 00 in global income tax of KRW 00 in 2008.

1. Details of the disposition;

A. The Plaintiff, as the representative director of XX, owns the Gangnam-gu Seoul Metropolitan Government 467-29, the head of XX 000 (hereinafter referred to as the “instant apartment”) with the age of 000 (hereinafter referred to as “the instant apartment”).

B. From June 30, 2006 to June 29, 2008, the Plaintiff leased the apartment of this case to thisA in KRW 000 and KRW 000 for monthly rent, and the Plaintiff did not report the income tax on the lease of the real estate of KRW 000 in 2006, KRW 000 in 2007, and KRW 000 in 2008.

C. On July 4, 201, the Defendant calculated real estate rental income by applying a simple expense rate or standard expense rate to the above real estate rental income amount that was not declared by the Plaintiff, and subsequently corrected and notified the Plaintiff of KRW 000 global income tax for the year 2006, global income tax for the year 2007, and KRW 000 global income tax for the year 2008 (hereinafter “instant disposition”).

D. The Plaintiff filed a petition for examination against the instant disposition on August 2, 2011, but the Commissioner of the National Tax Service rendered a decision to dismiss the petition on September 19, 2011.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Since the Plaintiff is one house owner of only the apartment of this case, HaB leased and resided 10 million won and monthly rent of 2.5 million won in Seoul, Gangnam-gu, Seoul, 467-7 Odong A2104 (hereinafter “Lease apartment of this case”) from HaB to lease the apartment of this case. Therefore, since the rent of the leased apartment of this case constitutes necessary expenses required to obtain the real estate rental income amount of the apartment of this case, the rent of this case constitutes the rent of the leased apartment of this case under the principle of substantial taxation, which is similar to the expenses under subparagraphs 1 through 26 of Article 5(1) of the Enforcement Decree of the Income Tax Act, and is accordingly similar to the expenses under subparagraphs 1 through 26 of Article 5 of the Enforcement Decree of the Income Tax Act, it should be deemed as necessary expenses from the real estate rental income amount of the apartment of this case. Nevertheless, the part of the disposition of this case, which simply deducts only a certain expense rate from the real estate rental income amount, is unlawful.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Article 18 of the Income Tax Act (amended by Act No. 9270 of Dec. 26, 2008; hereinafter the same) provides that the real estate rental income amount under Article 18 of the Income Tax Act shall be the amount calculated by deducting necessary expenses from the total amount of income in the current year. Article 27 of the Income Tax Act provides that necessary expenses shall be the sum of expenses generally accepted, corresponding to the total amount of income in the current year. Article 55(1) of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 21301 of Feb. 4, 2009; hereinafter the same shall apply) provides that necessary expenses are similar to those under subparagraphs 1 through 26 of Article 27, and provides expenses corresponding to the total amount of income in question. Accordingly, in order to constitute necessary expenses deducted from the real estate rental income amount, the expenses must be the ordinary expenses generally accepted, and the expenses shall be the specific amount of expenses such as interest on the relevant leased real estate, depreciation expenses incurred in purchasing or public charges, etc.

2) However, the rent of the instant leased apartment residing by the Plaintiff cannot be deemed as ordinary expenses generally accepted as corresponding to the revenues from the lease of real estate, and it does not fall under the expenses necessary for the purchase, maintenance, and repair of the instant apartment, and therefore it is difficult to deduct the rent from the real estate rental income amount as necessary expenses. Moreover, in Article 12 of the Income Tax Act and Article 8-2 of the Enforcement Decree of the same Act, the rental income of a person who owns one house is non-taxable but is excluded from non-taxation, and is included in income tax subject to income tax by excluding the rental income of a high-priced apartment. However, in the event that the Plaintiff deducts the rent of the instant apartment from the rental income of the instant apartment on the ground that it is a single house for one household, it is difficult to accept the Plaintiff’s assertion in that it would result in hindering the purport of the said provision in order to stabilize national residence by imposing the rent income from the expensive apartment and to promote the equity in tax burden according

3. Conclusion

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