Board of Audit and Inspection 2010 depth0139

It is reasonable to see that it is not a construction business, but a real estate supply business in light of material cost and labor cost, other than land cost.

The project planning and design, authorization and permission, construction of model housing, sale in lots, etc. are directly implemented, and the remaining construction works are real estate supply business with the main business to sell and sell buildings for office use, not business affairs and construction business, by considering the fact that there is no material cost and labor cost, except for the fact that the contract has been made, land cost, etc.

2011Guhap1233 Revocation of Disposition of Corporate Tax Imposition

XX Co., Ltd

Head of the High Tax Office

September 27, 2011

October 25, 2011

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of corporate tax of KRW 327,948,350 against the Plaintiff on January 4, 2010 shall be revoked.

1. Details of the disposition;

A. On January 14, 200, the Plaintiff was a corporation established for the purpose of business, such as housing and commercial building construction business, housing and commercial building sales business, real estate rental business, etc., and newly constructed and sold apartment units on the ground under Article 00-0 of the Dobong-gu Seoul Metropolitan Government 00-0 from September 2003 to September 2005 (hereinafter “instant building”).

B. When the Plaintiff suffered losses in KRW 1,026,121,269 in the business year 2006, the Plaintiff applied for a refund of KRW 256,530,310 in the business year 2005, on May 2, 2007, under Article 72(1) of the former Corporate Tax Act (amended by Act No. 9267, Dec. 26, 2008; hereinafter referred to as the “former Corporate Tax Act”) by making the main business type of the business as the construction business.

C. On January 4, 2010, the Defendant imposed 327,948,350 won, adding 256,530 won to the corporate tax refunded to the Plaintiff pursuant to Article 72(5)2 of the former Corporate Tax Act (amended by Act No. 9267, Dec. 26, 2008; hereinafter “Amended Corporate Tax Act”) on the ground that the Plaintiff’s corporate tax was paid to the Plaintiff pursuant to Article 72(5)2 of the former Corporate Tax Act (amended by Act No. 10221, Mar. 31, 2010; hereinafter “amended Corporate Tax Act”) on the ground that it is not a small or medium enterprise that runs a real estate supply business, but a real estate supply business.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 6, Eul evidence 1 and 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case is unlawful for the following reasons, and thus should be revoked.

(1) On January 14, 200, the Plaintiff registered a business as a housing construction and housing construction and sales business, and directly conducted industrial activities such as building purchase, design, authorization, permission, construction of model house, sale of buildings, management of buildings such as management of occupancy after approval for use, repair of defects, etc., and determined that the Plaintiff’s type of business constitutes a real estate supply business.

(2) The former Corporate Tax Act and its Enforcement Decree, which was enforced on May 2, 2007 when the Plaintiff received a refund by a retroactive deduction of losses, did not provide for the grounds for collecting the amount of corporate tax when the Plaintiff received a refund by a person who is not a corporation subject to a retroactive deduction of losses, so even in such a case, the tax authorities did not collect the amount. In Supreme Court Decision 2005Du13506 Decided April 26, 2007, the Supreme Court held that even in the case where a corporation that is not subject to a retroactive deduction of losses received a refund by a retroactive deduction of losses, it cannot be collected by applying Article 72(5) of the former Corporate Tax Act and Article 110(6) of the Enforcement Decree of the same Act

However, in cases where a person who is not a small or medium enterprise subject to retroactive deduction of losses under the amended Corporate Tax Act, which was enforced on January 1, 2009, receives corporate tax refund, a basis provision for calculating the amount equivalent to the interest accrued to the refund amount by adding it to the amount of the corporate tax (Article 72(5)2 of the amended Corporate Tax Act). Article 9 of the Addenda of the same Act provides that "Article 72(5) of the amended Act shall apply from the amount of the first refund tax collected after this Act enters into force," and the defendant was subject to the disposition in this case pursuant to the Addenda provision, which is in violation of the principle of prohibition of retroactive taxation, since

B. Relevant statutes

The entries in the attached Table-related statutes shall be as follows.

C. Determination

(1) Relevant statutes and their interpretation

(A) Article 39 (1) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20849 of Jun. 20, 2008) which provides for the scope of "small and medium enterprises subject to retroactive deduction of losses" under the delegation of Article 72 (1) and Article 25 (1) 1 of the former Corporate Tax Act (amended by Presidential Decree No. 20849 of Jun. 20, 2008) provides that "small and medium enterprises" refer to enterprises under Article 2 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 20854 of Jun. 20, 2008; hereinafter the same shall apply). Article 2 (1) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that small and medium enterprises are manufacturing businesses (including businesses similar to manufacturing businesses), construction businesses, engineering projects, etc. which list

(B) Meanwhile, Article 2(3) of the former Restriction of Special Taxation Act (amended by Act No. 9088 of Jun. 5, 2008) delegated the classification of the types of business to be used in the Restriction of Special Taxation Act according to the Korean Standard Industrial Classification publicly notified by the Commissioner of the Statistics Korea on Dec. 28, 2007. The Korean Standard Industrial Classification publicly notified by the Statistics Korea on Dec. 28, 2007 is divided into "construction business" (45), "construction business (452)," "construction business (452)," "non-residential building construction business (4522)," "construction business (4521)" and "construction business (4521)" and "construction business" and "construction business (7012, real estate supply business (70, real estate supply business)" are excluded from the category of "construction business" and "sale real estate (70, real estate supply business" and "sale real estate" (701, real estate supply business).

(C) On the other hand, the interpretation of tax laws and regulations shall be interpreted in accordance with the law, barring special circumstances, and shall not be extensively interpreted or analogically interpreted without reasonable grounds, barring special circumstances, and in particular, it accords with the principle of fair taxation to strictly interpret the provisions that can be seen as clearly preferential provisions among the requirements for reduction and exemption (see Supreme Court Decision 2002Du9537, Jan. 24, 2003).

(D) In full view of these legal principles, the business subject to retroactive deduction of losses and the industrial activities of constructing commercial buildings (4521) should be engaged in small and medium enterprises running the business and commercial buildings (45221), and the "real estate supply business (7012)" should be deemed to be engaged in the case where the buildings are constructed by entrusting another construction enterprise with the construction of the buildings or by giving another person a contract for the construction of the buildings and then are sold in lots.

(2) Whether the Plaintiff’s business constitutes a construction business

In light of the overall purport of arguments and arguments as to this case, the plaintiff's construction cost of KRW 1.5 billion to KRW 200 billion to KRW 1.6 billion to KRW 4 billion, the plaintiff's construction cost of KRW 1.6 billion to KRW 200 billion to KRW 4 billion to KRW 5 billion to KRW 200 billion to KRW 5 billion, the remaining construction cost of KRW 1.6 billion to KRW 3 billion to KRW 4 billion to KRW 5 billion to KRW 200,000 to KRW 1.6 billion to KRW 4 billion to KRW 5 billion to KRW 5 billion to the sales cost of the building. The plaintiff's sales cost of KRW 2,656,059 to KRW 40,000 to KRW 20,000 to KRW 5 billion to the sales cost of the building. The plaintiff's sales cost of KRW 2500,000 to KRW 265 billion to the sales cost of the building and KRW 1.65 billion to the sales cost of the building.

(3) Whether Article 9 of the Addenda to the amended Corporate Tax Act is against the principle of retroactive taxation prohibition

Articles 38 and 59 of the Constitution providing for the duty to pay taxes and the principle of no taxation without law can only be applied to the case where a new duty to pay taxes or the previous duty to pay taxes are incurred or met after its promulgation. The State’s right to impose taxes can not be more unfavorable than the legal effect that could have been anticipated by the provisions of the tax law at the time of the act of realizing the duty to pay taxes. However, with respect to these principles, in a case where the taxpayer’s trust at the time of the act of realizing the duty to pay taxes lacks reasonable grounds, where it is inevitable to realize the principle of fair taxation or where it is necessary to do so for public welfare (see, e.g., Supreme Court Decision 81Nu423, Apr. 26, 1983).

On the other hand, Article 9 of the Addenda of the amended Corporate Tax Act provides that the newly established provision (Article 72 (5) 2 of the amended Corporate Tax Act provides that where a person who is not a small or medium enterprise subject to a retroactive deduction of deficit has received corporate tax, the newly established provision (Article 72 (5) 2 of the amended Corporate Tax Act provides that the amount equivalent to the amount corresponding to the interest shall apply from the amount of the initial refund after the enforcement of the above Act, which provides that the amount of the refund shall be collected retroactively

However, even before the amendment of the former Corporate Tax Act enters into force, where a business that is not a small or medium enterprise subject to a retroactive deduction of deficit was operated during the pertinent business year, there was no change in the circumstance that the business could not be refunded by the retroactive deduction of deficit. If a person who is not a small or medium enterprise subject to a retroactive deduction of deficit was refunded corporate tax, this would not have been actually refunded, and thus, the former Corporate Tax Act, even though such a request is naturally required to collect the refund amount and the corresponding amount, there was no separate provision for collecting the refund amount and the corresponding amount, so there was a need to keep clear-founded legal basis for the quota under the principle of no taxation without law. Accordingly, Article 72(5)2

In light of such circumstances, even if a corporation that was refunded corporate tax but was not subject to a retroactive deduction of deficit was found to have been not subject to such refund, such trust cannot be deemed as a trust worthy of protection because it lacks reasonable grounds, and even if it was trusted that it would not be subject to such refund, and even if it was not subject to a retroactive deduction of deficit under the former Corporate Tax Act, if it was not fixed on the ground that a decision of refund was made prior to the enforcement of the amended Corporate Tax Act, which prepared a ground provision for collection of the refund amount, even if it was refunded the corporate tax, it does not constitute a small and medium enterprise subject to retroactive deduction of deficit in the same business year, and thus, it goes against the principle of fair taxation. Accordingly, Article 9 of the Addenda of the amended Corporate Tax Act does not have any value to protect the taxpayer due to lack of reasonable grounds, and it is inevitable to realize the principle of fair taxation, and thus, the Plaintiff’s assertion that the aforementioned provision of the amended Corporate Tax Act is unfavorable to the taxpayer as an exception to the principle of prohibition of retroactive taxation.

3. Conclusion

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