Tax Tribunal-2018-C-1984 (20 September 20, 2018)

Whether business commencement of the Housing Construction and Sales Business and special tax reduction or exemption are applied.

Since the commencement of a business by a housing construction and sales business operator starts the sale of a house on which the provision of goods prescribed by the Value-Added Tax Act begins, the plaintiff as a new business operator shall apply standard expense rate based on the amount of income for the relevant year. Since it is difficult to view that the plaintiff directly engaged in construction activities, the plaintiff is not subject

Articles 143 and 208 of the Enforcement Decree of the Income Tax Act

Seoul Administrative Court 2018Guhap89015 General Value and Revocation of Disposition

○ Kim

○ Head of tax office

July 4, 2019

July 18, 2019

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of KRW 0 of the global income tax for the year 2013 against the Plaintiff shall be revoked.

1. Details of the disposition;

가. 원고는 2012. 7. 1. ㅇㅇㅇ과 공동으로 'ㅇㅇ주택'이라는 상호로 주택신축판매업 사업자등록을 마쳤다가, 2015. 6. 27. 폐업하였다.

나. 원고는 2012. 6. 12. 파주시 ㅇㅇ읍 ㅇㅇ리 000 외 1필지에 연면적 863.2㎡, 17세대 규모의 다세대주택(이하 '이 사건 주택'이라 한다)을 신축하기로 하는 건축허가를 받고, 2012. 7. 26. 착공하여 2013. 1. 28. 사용승인을 받았다.

C. When the Plaintiff filed a comprehensive income tax for the year 2013, the Plaintiff calculated estimated income by applying the simple expense rate pursuant to Article 143(4)2(b) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 25193, Feb. 21, 2014; hereinafter the same) and applied the special tax reduction and exemption for small and medium enterprises pursuant to Article 7(1) of the former Restriction of Special Taxation Act (amended by Act No. 12173, Jan. 1, 2014; hereinafter the same).

라. ㅇㅇ지방국세청장은 2017. 4. 26.부터 2017. 6. 9.까지 원고에 대한 개인사업자통합조사를 실시한 결과, ① 원고는 이 사건 주택의 분양수입금액이 발생한 2013년도에 사업을 개시한 신규사업자로서, 수입금액이 구 소득세법 시행령 제143조 제4항 제1호, 제208조 제5항 제2호의 기준금액을 초과하므로, '단순경비율'이 아니라 '기준경비율'을 적용하여 소득금액을 추계하여야 하고, ② 원고가 건설업을 영위하지 않았으므로 구 조세특례제한법 제7조 제1항의 중소기업특별세액감면을 배제하여야 한다는 취지의 과세자료를 피고에게 통보하였다.

E. Accordingly, on September 5, 2017, the Defendant issued a correction and notification of KRW 0 of the global income tax (including additional tax) for the Plaintiff for the year 2013 (hereinafter “instant disposition”).

F. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on April 6, 2018, but was dismissed on September 20, 2018.

[Reasons for Recognition] The facts without dispute, Gap evidence 1 through 7 (including each number, hereinafter the same shall apply), Eul evidence 1 to 4, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) As to application of standard expense rate

The commencement date of the housing construction and sales business run by the plaintiff is "when business activities for new construction of housing have commenced," and at least on July 26, 2012, when the construction of the housing in this case commenced, it shall be deemed that the business commenced on or before July 26, 2012. Since the commencement date of the business stipulated in Article 6 of the Enforcement Decree of the Value-Added Tax Act is only an example provision, it is not necessary to determine whether the business falls under the income amount under the above Enforcement Decree in determining whether the business falls under the income amount under the Income Tax Act. Therefore, as long as the plaintiff commenced the business in 2012, it is not possible to apply the standard expense rate on the ground that the

2) Regarding reduction of and exemption from special tax on small and medium enterprises

Although the constructor of the instant house is not the Plaintiff, but another construction company. However, it is merely merely borrowed the name of the construction company under the name of the construction business, and in fact, the Plaintiff purchased materials directly under the Plaintiff’s responsibility and supervision, and constructed the instant house by employing the figures, it should be deemed that the Plaintiff engaged in the construction business.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Determination on the application of simple expense rate

A) Under the principle of no taxation without law, a tax law shall be interpreted in accordance with the text of the law, and shall not be extensively interpreted or analogically interpreted without a reasonable reason, 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 to be contrary to or conflicting with other laws and regulations, the court must naturally indicate the true meaning of the language and text at issue through harmonious interpretation between the laws and regulations. In such cases, a judge can make a combined interpretation of the laws and regulations that consider legislative intent and purpose to the extent that it does not undermine legal stability and predictability oriented by the principle of no taxation without law (see, e.g., Supreme Court Decision 2007Du4438, Feb. 15, 2008).

Article 1-2 (1) 5 of the former Income Tax Act (amended by Act No. 12169, Jan. 1, 2014; hereinafter the same) provides for the definition of "business operator" and Article 19 (1) provides for the business operator as business income. Article 8 (3) of the Value-Added Tax Act provides that Article 168 (3) shall apply mutatis mutandis to a business operator who registers his/her business in accordance with the Income Tax Act, and Article 8 of the Value-Added Tax Act, which provides for the method of filing a new application for business registration and filing an application for change of his/her business registration, shall not apply to "the starting date of business of his/her business income" as provided in Article 6 of the Enforcement Decree of the Value-Added Tax Act or shall not apply mutatis mutandis to the "the starting date of business". Therefore, it is necessary to examine when the business of the former Income Tax Act commences through the combined interpretation of the Act, which takes into account the legislative intent

Therefore, in full view of the language, structure, and purport of the relevant laws such as the former Income Tax Act and the Value-Added Tax Act, the starting date of business in the business income under the former Income Tax Act shall be also based on the point of appeal under Article 6 of the Enforcement Decree of the Value-Added Tax Act, which provides for the starting date of business under Article 5 (2) of the Value-Adde

① Considering that 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, it is reasonable to view that a business is based on the premise that a real income is generated under the former Income Tax Act, considering that Article 1-2(1)5 of the same Act defines a resident as a “resident with such business income”. Therefore, it is reasonable to view that a business is based on the premise that a real income is generated. Therefore, it is difficult to simply move forward to the time the preparation for the business, which is the time of providing goods or services

② As a result, it is difficult to objectively specify the starting point of the preparation act in terms of not only a considerable irregular and broad range, but also a business operator’s subjective intent or necessity. If the preparation of a new construction and sale business is conducted prior to the starting point of the business of the new construction and sale business, which is the starting point of the acquisition of the land or the starting point of the construction or completion of the building, 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 act, may vary depending on the time of the preparation act, and thus, the business operator’s voluntary selection of the date according to his own convenience may interfere with the national

③ Under Articles 1-2(1)5 and 19 of the former Income Tax Act, a resident with income arising from his/her own calculation and responsibility (in independence) and continuous and repeated activities for profit-making purposes becomes an entrepreneur; under Article 2(3) of the Value-Added Tax Act, a person who supplies goods or services independently for business purposes is an entrepreneur and becomes a person liable to pay value-added tax; and under this context, a person who supplies goods or services independently for business purposes is a person who supplies goods or services independently for profit-making purposes and has the type of business to an extent that a value-added tax can be created (see Supreme Court Decision 98Du16705 delivered on September 17, 199) and who supplies goods or services with continuous and repetitive intent to create a value-added tax (see Supreme Court Decision 98Du16705 delivered on September 17, 199), and there is a need to interpret business income related to one business under the former Income Tax Act uniformly from the date of commencing business under the former Value-Added Tax Act.

(4) From this point of view, the former Income Tax Act imposes an obligation on the head of the competent tax office under Article 168 (1) to make a business registration under the former Income Tax Act while imposing an obligation on the business operator who has made a business registration under Article 168 (2) of the same Act shall be deemed to have made a business registration under the former Income Tax Act, and may be deemed to impose an obligation on the person who has received the supply of goods or services by preparing an invoice or receipt as prescribed by Presidential Decree where the business operator has made a business registration under Article 163 (1) of the former Income Tax Act provides for the obligation to issue a tax invoice to the person who has received the supply of 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" in relation to business registration, and Article 5 (2) of the Value-Added Tax Act uses the term "the starting date of business" in relation to the first taxable period for a new business operator, and Article 6 of the Enforcement Decree of the Value-Added Tax Act sets the starting date of business under Article 5 (2) of the Value-Added Tax Act as "the starting date of

B) According to the following circumstances revealed by comprehensively taking account of the contents of the relevant statutes and 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 Plaintiff shall be deemed the time of commencing the sale of each house of this case, which is the date of commencing the supply of goods as stipulated in Article 6 subparag. 3 of

① Article 143(4)1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Dec. 30, 2010); Article 143(4)2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Dec. 30, 2010); Article 143(4)1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Dec. 30, 2010) provides that, “an entrepreneur whose revenue amount falls short of the standard amount of standard amount of income (including the revenue amount increased due to determination or revision) other than a new entrepreneur who starts a business in the relevant taxable period, shall apply simple expense expense expense to a new entrepreneur who starts a business in the relevant taxable period; Article 143(4)1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Dec. 31, 2012>

In addition, Article 143 (4) of the Enforcement Decree of the Income Tax Act, which applies to the portion of income in the taxable period that begins after January 1, 2019, which was amended by Presidential Decree No. 28637, Feb. 13, 2018, provides that the standard expense rate shall be applied by excluding from the application of simple expense rate if the income amount in the taxable period concerned falls under the standard amount of double-entry bookkeeping, even if the total amount of income in the immediately preceding taxable period falls short of the standard amount, as well as the business operator (title 1)

In light of the amendment history of Article 143 (4) of the Enforcement Decree of the Income Tax Act, the simple expense rate system is a system that intends to minimize the tax payment costs of small small-scale business operators who lack the capacity to keep records of the principal expenses required by the standard expense rate system, and the legislators seem to have gradually reduced the scope of business operators subject to the simple expense rate application. Furthermore, according to the text of the supplementary provision, legislators seem to understand the "construction commencement", "construction business, construction business, and commencement of real estate development and supply business" as a separate concept.

Therefore, considering these legislative intent, in the case of housing construction and sales business that operates a business for a long period exceeding a certain scale due to its characteristics, it is necessary to grasp the business commencement at an objective and practical time of the supply of housing subject to sale rather than the commencement date that can be determined by the business operator's intent

② The commencement of a business of the Housing Construction and Sales Business shall be substantially determined at the time when the preparation for a business is completed and the preparation for the original business is conducted or is able to be conducted (see, e.g., Supreme Court Decision 94Nu15905, Dec. 8, 1995). The initial housing construction and sales business is included in real estate sales business given its nature (see, e.g., Supreme Court Decision 2008Du21768, Jul. 22, 2010). The purpose of the business is to sell a house, and it is difficult to view that the fact that a house has been completed

③ Whether a business income under the Income Tax Act falls under business income shall be determined according to social norms, taking into account whether business activities are continuously and repeatedly conducted in light of the existence of profit-making purposes of the business and 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 Plaintiff had objectively expressed the intent to operate a housing construction and sales business for the purpose of profit prior to commencing the sale of each of the instant housing. The fact that the Plaintiff commenced or completed each of the instant housing for profit-making purposes alone is difficult to deem that the Plaintiff continuously and repeatedly conducted activities for profit-making purposes to constitute an objective substance of a newly constructed housing seller.

2) Determination on whether to reduce or exempt special tax on small and medium enterprises

A) Articles 2(3), 7(1)1(g), and 7(2)2 of the former Restriction of Special Taxation Act provide that an amount equivalent to 20/100 of the income tax on income accrued from a business establishment among small and medium enterprises shall be reduced or exempted until the taxable year ending on or before December 31, 2014, which ends by multiplying the income tax by 20/10, but the classification of the types of business used in this Act shall be based on the Korean Standard Industrial Classification publicly notified by the Commissioner of the Statistics Korea pursuant to Article 22

However, according to the former Korean Standard Industrial Classification (amended by the Statistics Korea Notice No. 2015-311, Sept. 24, 2015), which applies in the global income tax taxable period subject to the instant disposition, the term “residential building construction business (Classification Code 4111)” refers to the industrial activities of constructing residential buildings, such as single and multi-households, apartment houses, etc., solely or multi-households. Meanwhile, the industrial activities of constructing residential buildings and selling and selling them after entering into a contract with the entire construction without performing their direct construction activities are classified as “residential building development and supply business (Classification Code 68121).”

B) In light of the following circumstances, Gap's evidence Nos. 1, 2, 4, 6 through 10, Eul's evidence Nos. 2 and 3, and the overall purport of the pleadings, the following facts are considered to be comprehensively considered: (i) the constructor entered in the building ledger of the housing of this case as "No construction company"; (ii) the plaintiff did not hold a construction business license; and (iii) the plaintiff did not submit any specific data to deem that the housing construction of this case is equipped with human resources, physical facilities, or capabilities to be constructed under the overall responsibility; and (iv) the report on the implementation status of withholding tax submitted by the plaintiff, the statement of payment of daily wages, and the tax invoice (Evidence Nos. 7 through 10), although it is deemed that the plaintiff paid some expenses for daily workers, such as labor expenses, material purchase expenses, etc., but the amount falls short of the sales revenue amount of the housing of this case, it is difficult to view that the business conducted by the plaintiff constitutes "construction business" under the Korean Standard Industrial Classification and Special Taxation Act.

3. Conclusion

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