Whether a construction business falling under the category of business subject to retroactive deduction of losses is operated

As long as the Korean Standard Industrial Classification classifys and dividess the construction business into the real estate supply business by requesting another constructor to produce and sell buildings, it shall not be deemed to constitute the construction business, this disposition is justifiable.

Article 72 (Return by Retroactive Deduction of Deficits)

1. The plaintiff's claim is dismissed.

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

The defendant's refusal to refund corporate tax of KRW 2,628,468,02 against the plaintiff on April 30, 2007 shall be revoked.

1. Basic facts

A. On September 6, 1994, the Plaintiff was established for real estate development project implementation and agent business, real estate sales business, lease and sales agent business, real estate consulting and construction business, and real estate operation and management business, and was not holding a construction business license. Since the business year of 2003, the Plaintiff newly constructed and sold the “○○○○○○○○○○” (hereinafter referred to as “○○○”).

B. For the new construction of ○○○○, the Plaintiff: (a) obtained a complex commercial site by acquiring, coordinating and resolving complicated interests among market merchants, who were the owners of the above commercial site; (b) prepared a basic design for a comprehensive shopping mall; and (c) completed the construction of ○○○○ by entering into a contract with the contractor, and completed the sale with the contractor; and (d) completed the sale with the advertising cost and the sales cost, but caused enormous loss due to the erosion of the commercial site supply market in 2006.

C. The Plaintiff reported the corporate tax base to KRW 45,744,721,741 in 2005 and paid KRW 11,424,180,430 in corporate tax in 2006. However, in the business year 2006, the Plaintiff filed a return on the corporate tax base to KRW 10,513,872,08 in - and applied for refund of KRW 2,628,468,020 in corporate tax paid for the business year 2005 by retroactive deduction of deficit under Article 72(1) of the Corporate Tax Act.

D. As to the Plaintiff’s application for refund of corporate tax, the Defendant expressed his intention of refusal of refund by failing to refund after the lapse of April 30, 2007, which is the deadline for the decision of refund, on the ground that the Plaintiff’s application for refund of corporate tax is not a construction business but a real estate supply business entity subject to retroactive deduction of losses (hereinafter “instant refusal disposition”).

[Based on the recognition] The descriptions of the evidence Nos. 1-5, 4-1, 2, and 5 of the evidence Nos. 1-1, 2, 2, and 3 of the evidence Nos. 1-5, and the purport of the whole pleadings

2. Whether the rejection disposition of this case is legitimate

A. The plaintiff's assertion

(1) From among the general theory of the Korea Standard Industrial Classification, Article 5 of the applicable principles of industrial classification provides that the goods or services shall be produced in one’s own account by requesting another contractor to produce the goods or services without a direct production activity, and the units that are sold under one’s own responsibility shall be classified as the same industry as the unit of direct production of the goods or services itself. In the case of a manufacturing industry, the manufacturing industry shall play an important role in the device of the product and provide materials to one’s own account, and even if requesting another contractor to produce the goods or services to produce the goods or services, it shall be deemed that the Plaintiff directly produces the goods or services. In light of the above, since the Plaintiff planned the new construction of ○○○○ by independently raising funds and contracted only the construction work to the contractor, the new commercial building was developed under the Plaintiff’s own brand called “○○○○○○○” and sold only the economic effect of its profits and losses, the instant rejection disposition that did not recognize a retroactive deduction of losses is unlawful.

(2) The fact that the Plaintiff did not recognize a refund by retroactive deduction of deficit would cause a big discrimination in tax burden compared to other companies under the same conditions solely on the ground that he/she performed the project by granting a contract, thereby violating the provisions of the Constitution that all citizens are equal in front of the law, or essentially infringing on

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) Provisions and principles of statutory interpretation

Article 39(1) of the Enforcement Decree of the Corporate Tax Act, which provides for the scope of ‘small and medium enterprises to which retroactive deduction of losses is applied' under the delegation of Articles 72(1) and 25(1)1 of the Corporate Tax Act, provides that the above ‘small and medium enterprises' refers to enterprises under Article 2 of the Enforcement Decree of the Restriction of Special Taxation Act, and Article 2(1) of the Enforcement Decree of the Restriction of Special Taxation Act provides that if a small and medium enterprise falls under a manufacturing business (including businesses similar to the manufacturing business, as prescribed by the Ordinance of the Ministry of Finance and Economy; hereinafter the same shall apply), mining, construction, engineering business under Article 5(6), and logistics business under Article 5(8).

In addition, Article 2 of the Enforcement Rule of the Restriction of Special Taxation Act provides that "any business similar to the manufacturing business, which is prescribed by the Ordinance of the Ministry of Finance and Economy)" shall be the business of manufacturing goods by entrusting it to the manufacturing company (limited to the business in which the business place is located in Korea) instead of directly manufacturing the goods, and the business meets the following requirements:

As above, the interpretation of tax laws and regulations is interpreted in accordance with the principle of no taxation without the law, barring any special circumstance, regardless of the requirements for taxation, non-taxation, or tax reduction and exemption under the principle of no taxation without the law, and they shall not be extensively interpreted or analogically interpreted without reasonable grounds. In particular, it accords with the principle of fair taxation to strictly interpret the provisions that can be clearly viewed as preferential provisions among the requirements for reduction and exemption (see, e.g., Supreme Court Decision 2002Du9537, Jan. 24,

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

In light of the above legal principles and relevant laws, the Plaintiff’s business type operated by the Plaintiff cannot be deemed as falling under the construction business, and this part of the Plaintiff’s assertion is without merit.

(A) Article 2(1) of the Enforcement Decree of the Restriction of Special Taxation Act provides that a special provision shall include only manufacturing business as provided by the Ordinance of the Ministry of Finance and Economy with respect to the same type of business, mining, construction, engineering business, etc. as the type of small and medium business, and such special provision shall not apply to construction

(B) Under the Korean Standard Industrial Classification, which is the basis for classification of the types of business used in the Restriction of Special Taxation Act, the act of dividing and classifying "construction business" as one of "construction business" and "construction business (4521) of non-resident building construction business (referring to industrial activities directly constructing non-resident buildings, such as commercial buildings and industrial buildings)" and excludes "business" and "real estate supply business directly after being entrusted to another construction business (7012, real estate supply business)" and "real estate supply business (7012)" and "real estate supply business (70)" as one of "real estate business (70)" and "construction business (70)" and "construction business (740) is constructed and supplied to another person by being entrusted with the construction business or constructed with the construction business and supplied to another person without being sold to the Korean Standard Industrial Classification, and then the act of the plaintiff's purchase of real estate is defined or sold to another person without being sold to another person, such as the sale or purchase of the land or the building site."

(C) Of the general theory of the Korea Standard Business Classification, the principle of the application of the industrial classification is merely a principle that serves as a guideline to determine items according to the specific type of industrial activities, and even if industrial activities falling under subparagraph 5 of the above principle are classified as separate items from the industry that directly produces the relevant goods or services according to the purpose of the industrial classification, it may not be applied to this principle. Therefore, insofar as the Korea Standard Industrial Classification classifys construction business by requesting another constructor to produce and sell buildings as real estate supply business, it cannot be deemed as a construction business.

(3) Whether it was in violation of the Constitution that did not recognize a retroactive deduction of losses to the plaintiff

The original corporate tax is the tax imposed on a business year basis, and the profit and loss incurred in a business year cannot affect the taxation for another business year. However, in order to strengthen support for small businesses in the business year, it is an issue that the legislators can determine a wide range of discretion in consideration of various economic and policy factors such as the national economic situation, structure and characteristics of the industry, and impact on the national economy. As seen earlier, the Plaintiff’s business type constitutes a real estate supply business clearly distinguishable from the typical type of construction business, and thus it does not go against the principle of assessment, etc. The Plaintiff’s loss incurred in the business year 2006 cannot be retroactively deducted from the amount of tax for the business year 2005 because it appears in the length that the Plaintiff’s loss incurred in the business year 206 can be deducted as losses carried forward for the following business year. Thus, the Plaintiff’s property right cannot be viewed as a violation of the Plaintiff’s property right. Thus, this part of the Plaintiff’s assertion is without merit.

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.

Relevant statutes

○ Refund by a retroactive deduction of losses under Article 72 of the Corporate Tax Act

(1) Where a loss under the provisions of Article 14 (2) has occurred in each business year, the small and medium enterprise under the provisions of Article 25 (1) 1 may apply for the refund of the amount calculated as prescribed by the Presidential Decree within the limit of the corporate tax (referring to the corporate tax amount as prescribed by the Presidential Decree) levied on the income in the immediately preceding business year. In this case, with respect to the relevant loss, it shall be considered as the deducted amount in the application of

(2) A domestic corporation which desires to receive a refund of corporate tax amount under paragraph (1) shall apply to the chief of the district tax office having jurisdiction over the place of tax payment within the report period under Article 60 as

(3) Where the chief of the district tax office having jurisdiction over the place of tax payment receives an application under paragraph (2), he shall promptly determine the amount of refundable tax, and refund under Articles 51 and 52

(4) The provisions of paragraphs (1) through (3) shall apply only to cases where the domestic corporation concerned reports the tax base and tax amount of corporate tax on the income in the business year in which the loss occurred and the immediately preceding business year within the report period pursuant to Article 60.

(5) Where losses are reduced due to a correction of the tax base and tax amount of corporate tax for the business year in which losses have occurred after refunding the corporate tax under paragraph (3), the chief of the district tax office having jurisdiction over the place of tax payment shall collect as corporate tax for the business year in which the concerned losses have occurred the amount calculated by adding the amount equivalent

(6) The calculation of the amount refunded by retroactive deduction of losses and other necessary matters shall be prescribed by Presidential Decree.

Article 25 (Non-Inclusion of Entertainment Expenses in Deductible Expenses)

(1) Entertainment expenses (not including the amount falling under paragraph (2) paid by a domestic corporation in each business year in excess of the sum of the following subparagraphs shall not be included in the calculation of losses in the calculation of the income amount in the business year concerned:

1. Amount calculated by multiplying twelve million won (eight million won in the case of a small or medium enterprise prescribed by the Presidential Decree) by the number of months in the business year concerned, and by dividing it by 12;

Article 39 of the Enforcement Decree of the Corporate Tax Act

(1) "Small and medium enterprises prescribed by Presidential Decree" in Article 25 (1) 1 of the Act means enterprises (hereinafter referred to as "small and medium enterprises") under Article 2 of the Enforcement Decree of the Restriction of Special Taxation Act.

○ Scope of small and medium enterprises under Article 2 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 19329, Feb. 9, 2006)

(1) The term "small or medium enterprises prescribed by Presidential Decree" in Article 4 (1) of the Restriction of Special Taxation Act (hereinafter referred to as the "Act") means manufacturing business (including business similar to manufacturing business, which is prescribed by the Ordinance of the Ministry of Finance and Economy; hereinafter the same shall apply), mining, construction business under Article 5 (6), logistics business under Article 5 (8), ship management business under the Marine Transportation Act, passenger transport business, fishery, wholesale, retail business, telecommunications, research and development business, broadcasting business, data processing and computer operation-related business under Article 54 (1), automobile maintenance business under the Medical Service Act, waste disposal business (referring to the waste disposal business under the Wastes Control Act and the construction waste disposal business under the Construction Waste Recycling Promotion Act; hereinafter the same shall apply), private teaching institutes and construction waste disposal business under the Wastes Control Act, private teaching institutes and wastewater treatment business (hereinafter referred to as "wastewater treatment business"), private teaching institutes established under the Act on the Promotion of Sewage, Excreta and Livestock Wastewater, commercialization business, film and video-related business, film and video-related business, film and video-related business, private teaching business under the Tourism Act:

1. The number of employees who ordinarily use, capital, or sales shall not exceed the size under the provisions of attached Table 1 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises (hereafter referred to as "standard for small and medium enterprises" in this

2. Deleted;

3. Actual independence shall meet the provisions of subparagraph 2 of Article 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises.

○ Scope of small and medium enterprises under Article 2 of the Enforcement Rule of the Restriction of Special Taxation

(1) "Business prescribed by Ordinance of the Ministry of Strategy and Finance" in the main sentence of Article 2 (1) of the Enforcement Decree of the Restriction of Special Taxation Act (hereinafter referred to as the "Decree") means a business which manufactures products by entrusting a manufacturer (limited to a business located in the Republic of Korea or in the Gisung Industrial District under subparagraph 1 of Article 2 of the Gisung Industrial District Support Act) to do not directly manufacture products, and which satisfies the following requirements:

1. If he/she personally plans (referring to the idea, design, sample making, etc.) the product to be manufactured;

2. If he manufactures the product under his own name; and

3. He shall accept the products concerned and sell them directly under his responsibility.

○ Article 2 of the former Restriction of Special Taxation Act

(3) Except as otherwise provided for in this Act, the classification of types of business used in this Act shall be governed by the Korean Standard Industrial Classification publicly announced by the Commissioner of the National Statistical Office under Article 22

[Korean Standard Industrial Classification (Public Notice of Statistics Korea 2000-1]

F. Construction business (45 to 46);

1. Summary;

The activities of constructing temporary buildings, assembly-type buildings and structures shall be included in the activities of constructing, expanding, reconstructing, remodelling, repairing, dismantling, dismantling, etc., of ground construction, such as blasting, drilling, excavation, suspension, etc. for ground creation by contract or self- account, and of constructing, expanding, reconstructing, remodeling, repairing, dismantling, etc. of various buildings and structures in construction sites. Such construction activities shall be conducted by contractors, contractors, general constructors or specialized constructors.

2. Relation to other industries;

(e) Where real estate (land, mining rights, etc.) other than a building is directly developed and sold, leased, or does not conduct construction activities directly, and a building is requested to be constructed by another constructor and it is sold or sold (701).

45 Integrated construction business

Industrial activities and various buildings that perform the construction works of ground creation works and civil engineering facilities are the industrial activities that are generally responsible for the construction, extension, reconstruction and reconstruction of buildings and perform construction activities.

452 Building construction business

Industrial activities that newly build, extend, rebuild, or rebuild a building by a contractor or a comprehensive constructor, and includes the construction activities of a prefabricated-type building.

Exclusions

· Cases of direct sale after the construction by entrustment of another construction company (7012)

4522 Construction of a non-resident building

Industrial activities that directly build a non-residential building, such as commercial buildings and industrial buildings.

45221 Business and Commercial Building Construction

The term "business and commercial buildings" means industrial activities of constructing industrial buildings.

For example, the time limit for such event shall be

· Construction of buildings for school and public amusement;

· Construction of museums and similar buildings, stores and shopping centers

· Construction of hotels, dormitories, Military Ambsium construction, police stations, and fire stations

Foreign Affairs and Trades

· Construction of general warehouses (4522)

·Construction of a particular warehouse ( hangars, etc.) (4529),

· Construction of swimming pools and related slopes (45129)

· Cases of direct sale after being entrusted to another construction company (7012)

L. Real estate and lease business (70-71)

1. Summary;

This sub-classification includes real estate business, industrial activities that lease various machinery equipment and personal or household goods without operators.

(a) Real estate business;

Industrial activities related to the operation, lease, purchase, sale, etc. of buildings, land, and other real estate (excluding cemeteries) owned or leased by the person concerned.

2. Relation to other industries;

(a) Where buildings are directly constructed, sold in lots and sold through its own account, it shall be classified into "452: Building construction business";

70 Real estate business

As an industrial activity related to the lease, purchase, and sale of real estate, it includes lease activities of non-residential buildings directly constructed, and development, sale, and lease activities of land and other real estate.

701 Real Estate Lease and Supply Business

7012 Real Estate Supply Business

The term “industrial activities” means industrial activities of selling and selling land, such as farms, housing sites, industrial sites, etc. directly developed and buildings, etc. constructed by being awarded a contract to others. It includes the resale of purchased real estate without leasing or operating it.

For example, the time limit for such event shall be

· Sale and purchase of buildings and sale of land

Foreign Affairs and Trades

· Construction of a self-managed building (452)

70122 Supply of non-residential buildings

It refers to an industrial activity that constructs and sells a non-residential building by entrusting a construction company without performing direct construction activities. It also includes resale without leasing or operating a non-residential building purchased.

For example, the time limit for such event shall be

· The supply and sale of buildings for office use.