Whether to exclude simplified taxation and deduct input tax amounts

Despite the amount of profit acquired by sub-lease of real estate, a simplified taxation is excluded for the plaintiff's real estate rental business, and a tax invoice prior to business registration is issued, so the input tax amount cannot be deducted from the output tax amount.

Article 61 of the Value-Added Tax Act

2018Guhap7426 Disposition of revocation of Value-Added Tax Imposition

Gangwon A

BB Director of the Tax Office

July 18, 2019

August 13, 2019

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of value-added tax of 00 won for the first year of 2015 against the Plaintiff on November 6, 2017, value-added tax of 000 won for the second year of 2015, value-added tax of 1st year of 2016, value-added tax of 200 won for the second year of 2016, value-added tax of 000 won for the second year of 2016, value-added tax of 00 won for the first year of 2017, and 00 won for the total amount of

1. Details of the disposition;

A. From March 15, 2015 to March 15, 2017, the Plaintiff subleted CCC a deposit of KRW 10 million to the deposit of KRW 1,200,000,000 (excluding value-added tax), and KRW 1.2 million,00,000,000,000,000 in monthly rent, as the Plaintiff leased to CCC.

B. The Defendant: (a) deemed the Plaintiff as a unregistered real estate rental business operator on September 14, 2017; (b) made business registration ex officio on November 6, 2017; and (c) imposed value-added tax of KRW 000, value-added tax for the first year of 2015, value-added tax for the second year of 2015, value-added tax for the second year of 2016, value-added tax for the first year of 2016, value-added tax for the second year of 2016, value-added tax for the second year of 200, value-added tax for the second year of 2017, value-added tax for the first year of 200, and value-added tax for the first year of 200 for the first year of 200 (including additional tax) (hereinafter referred to as “instant disposition”).

C. On March 16, 2018, the Plaintiff filed an objection against the instant disposition with the Tax Tribunal on March 16, 2018, but was dismissed on October 8, 2018.

[Based on recognition] Gap evidence 1 to 3, Eul evidence 1 to 2 (including separate numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The Plaintiff only acquired revenues of KRW 320,00 per month while sub-leaseing the instant real estate for two years. Thus, the same cannot apply to the case where the Plaintiff owned the instant real estate and run the leasing business. Therefore, the Plaintiff cannot be deemed to have run the real estate rental business, which is a simplified taxable business category excluding the sub-lease of the instant real estate. Therefore, the Plaintiff constitutes

2) Even if the Plaintiff is not a simplified taxable business operator, the mere fact that the Plaintiff did not recognize the input tax deduction under the tax invoice received from the owner of the real estate in this case solely on the ground that the Plaintiff did not make a business registration is unreasonable as it imposes an excessive burden on the Plaintiff compared to the gains actually acquired. Therefore, the said tax invoice

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether the Plaintiff is a simplified taxable business entity

A) Under Article 61(1)2 of the former Value-Added Tax Act (Amended by Act No. 15223, Dec. 19, 2017; hereinafter the same shall apply), Article 109(2)6 of the Enforcement Decree of the Value-Added Tax Act and Article 71(3) of the Enforcement Decree of the Value-Added Tax Act, the provisions on simplified taxation shall not apply to a person who runs a business exceeding the size determined by the Commissioner of the National Tax Service, which is located in the Special Metropolitan City, Metropolitan City, Special Self-Governing City, administrative city, or Si area, and Si area, and whose value-added tax exemption is less than 48 million won, for the reduction of the burden of value-added tax and for the convenience of tax payment. In such a case, the provisions on simplified taxation are not applicable to a person who runs a business exceeding 20,000 won, which specifically provides for the exclusion criteria of simplified taxation in Seoul, which is abolished by the National Tax Service No. 2014-28, Dec. 9, 2015>

On the other hand, it is difficult to view that there is a substantial difference in the nature of the business in that the person who owns real estate and carries on the leased business is allowed to use and take profits from the leased real estate and receive rent in return. In the above notice, in the case of the leasing business of a building, it does not consider whether to exclude a simplified taxation on the basis of the officially announced land price and the total floor area of the building. According to Article 4(1) of the Enforcement Decree of the Value-Added Tax Act, the division of the business supplying goods or services is in accordance with the Korean Standard Industrial Classification as of the first day of the pertinent taxable period publicly announced by the Commissioner of the Statistics Korea in principle.

B) In full view of the purport of the entire argument in the statement in Eul evidence No. 3, it is recognized that the officially assessed individual land price of 000,000 per square meter from 2015 to 2017, as the real estate was located in Songpa-gu Seoul, Songpa-gu, where the real estate in this case was located. The real estate in this case is a building located in Seoul, and the officially assessed land price of 1 square meter per square meter of land, which is the object of the site right, exceeds KRW 10 million, and the area of the section for exclusive use exceeds 62 square meters, which is the basic area. Therefore, regardless of the amount of profit acquired by the Plaintiff by sub-lease the real estate in this case, a simplified taxation is excluded for the real estate rental business in this case by the Plaintiff

2) Whether the Plaintiff may deduct the input tax amount on the tax invoice received

A) According to Article 39(1)8 of the former Value-Added Tax Act, an input tax amount before filing an application for registration of business does not, in principle, be deducted from the output tax amount. This is to ensure that the functions of mutual verification between the taxpayers of the tax invoice system can be properly operated under the current Value-Added Tax Act, and that the registration of

B) In full view of the purport of the entire argument in Gap evidence No. 2, even though the plaintiff was issued with a tax invoice of KRW 800,000,000 from January 2015 to June 2017, the Plaintiff, who was the owner of the instant real estate, as the supply price of the rent of KRW 80,000,00,00 from one other, each month, was found to have been issued from January 2015 to June 201, this constitutes a transfer on or before September 14, 2017, and thus, the input tax amount under the above tax invoice cannot be deducted from the output

3. Conclusion

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