Cho-2017-China-900 (Law No. 22, 2017.09)

It is not subject to value-added tax exemption even if it has supplied officetels of 85 square meters or less for residential use.

In the provisions of Article 106 (1) 4 of the Restriction of Special Taxation Act, the term "house" means only a building constructed for the purpose of housing with a construction permit lawfully obtained at the time of its supply, and it cannot be deemed that it includes a building constructed with a construction permit obtained for the purpose of business facilities (offices).

Article 106 of the Restriction of Special Taxation Act

Incheon District Court-2017-Gu 5316 ( November 29, 2018)

최☆옥 외 1

북★★세무서장

November 8, 2018

November 29, 2018

1. The plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

Cheong-gu Office

The disposition of imposition of each value-added tax (including additional tax) by the defendant on the plaintiffs in the attached disposition sheet shall be revoked.

1. Details of the disposition;

A. New construction and sale of officetels by the plaintiffs

1) 원고 최☆옥은 ○○하우징이라는 상호로 주택신축판매업 사업자등록을 하고, 2013. 5.경 인천 부평구 부평동 **** 대 714.4㎡ 지상에 '○○레뷰'라는 명칭으로 지하 1층, 지상 10층 규모의 집합건물(공동주택 56세대, 오피스텔 16호)을 신축하여 2013년 제1기 및 제2기 부가가치세 과세기간에 위 오피스텔을 분양하였다.

원고 최☆옥은 ●●하우스라는 상호로 주택신축판매업 사업자등록을 하고, 2013. 9.경 인천 부평구 부평동 **** 대 315㎡ 지상에 '●●레뷰'라는 명칭으로 지하 1층, 지상 10층 규모의 집합건물(공동주택 16세대, 오피스텔 20호)을 신축하여 2013년 제2기 부가가치세 과세기간에 위 오피스텔을 분양하였다.

원고 최☆옥은 ○○하우징이라는 상호로 주택신축판매업 사업자등록을 하고, 2014. 12.경 인천 부평구 부평동 **** 대 398㎡, 같은 동 **** 대 121㎡, 같은 동 **** 대 7㎡, 같은 동 **** 대 46㎡ 지상에 '○○레뷰'라는 명칭으로 지하 1층, 지상 14층 규모의 집합건물(공동주택 16세대, 오피스텔 39호)을 신축하여 2015년 제1기 부가가치세 과세기간에 위 오피스텔을 분양하였다.

원고 최☆옥은 ○○하우징이라는 상호로 주택신축판매업 사업자등록을 하고, 2015. 8.경 인천 부평구 부평동 **** 대 935.9㎡ 지상에 'AAA아파트'라는 명칭으로 지하 2층, 지상 14층 규모의 집합건물(공동주택 22세대, 오피스텔 84호)을 신축하여 2015년 제2기 부가가치세 과세기간에 위 오피스텔을 분양하였다.

2) 원고 황◆숙은 ○○하우스라는 상호로 주택신축판매업 사업자등록을 하고, 2013. 1.경 인천 부평구 부평동 **** 대 379.8㎡ 지상에 '○○레뷰'라는 명칭으로 지하 1층, 지상 10층 규모의 집합건물(공동주택 29세대, 오피스텔 12호)을 신축하여 2013년 제1기 부가가치세 과세기간에 위 오피스텔을 분양하였다.

원고 황◆숙은 BB주택이라는 상호로 주택신축판매업 사업자등록을 하고, 2014. 8.경 인천 부평구 부평동 **** 대 452.2㎡ 지상에 'CC트홈'이라는 명칭으로 지하 1층, 지상 13층 규모의 집합건물(공동주택 40세대, 오피스텔 16호)을 신축하여 2014년 제2기 부가가치세 과세기간에 위 오피스텔을 분양하였다.

원고 황◆숙은 BB주택이라는 상호로 주택신축판매업 사업자등록을 하고, 2015. 3.경 인천 부평구 부평동 **** 대 91.4㎡, 같은 동 **** 대 740.5㎡ 지상에 'CC트홈'이라는 명칭으로 지하 2층, 지상 15층 규모의 집합건물(공동주택 56세대, 오피스텔 56호)을 신축하여 2015년 제1기 및 제2기 부가가치세 과세기간에 위 오피스텔을 분양하였다(이하 원고들이 신축하여 분양한 오피스텔을 통틀어 '이 사건 오피스텔'이라 한다).

B. Plaintiffs’ failure to report value added tax and Defendant’s imposition of value added tax

1) 원고들은 이 사건 오피스텔이 1세대당 주거전용면적이 85㎡ 이하인 주택에 해당하므로 이 사건 오피스텔의 공급에 대해서는 조세특례제한법 제106조 제1항 제4호(이하 '이 사건 면제규정'이라 한다)에 따라 부가가치세가 면제된다는 이유로 이 사건 오피스텔 공급에 대한 부가가치세 신고(원고 최☆옥은 2013년 제1기 및 제2기, 2014년 제2기, 2015년 제1기 및 제2기 부가가치세 신고, 원고 황◆숙은 2013년 제1기, 2014년 제2기, 2015년 제1기 및 제2기 부가가치세 신고)를 하지 않았다.

2) As a result of conducting a tax investigation with respect to the Plaintiffs, the Director of the Regional Tax Office notified the Defendant that the instant officetel supply does not constitute a national housing under the instant exemption provision, deeming that the instant officetel supply is not subject to value-added tax exemption, thereby imposing value-added tax thereon.

3) On January 5, 2017, the Defendant issued a notice of correction and notification of each of the value-added tax and additional tax on the grounds that the instant officetel supply is not subject to value-added tax exemption (hereinafter “instant disposition”).

[Reasons for Recognition] Entry of Evidence Nos. 1 through 3, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiffs' assertion

1) The instant officetel was granted a building permit for business facilities to meet the building permit requirements under the Building Act, and was designed and constructed from the beginning for residential purposes with rooms, kitchens, living rooms, bathing rooms, floor heating facilities, etc., and falls under substantial houses, such as residential buildings sold for residential purposes and used for residential purposes by occupants. As such, the instant officetel constitutes “national housing prescribed by Presidential Decree” under the instant exemption provisions, and the supply of the instant officetel constitutes subject to value-added tax exemption, and thus, the instant disposition was unlawful.

2) Even if the supply of an officetel does not fall under value-added tax exemption, the Plaintiffs were found to have failed to report and pay value-added tax on the supply of the instant officetel in consideration of the following: (a) the Plaintiffs trusted the decision of the Tax Tribunal revoking the disposition imposing value-added tax on the grounds that the supply of an officetel constitutes the subject of exemption from value-added tax; and (b) thus,

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Whether the instant officetel supply is not subject to value-added tax exemption

The instant exemption provisions and Articles 106(4)1 and 51-2(3) of the Enforcement Decree of the Restriction of Special Taxation Act stipulate that “the supply of housing below the scale of national housing under the Housing Act” as one of the objects of value-added tax exemption, and the main sentence of Article 2 subparag. 3 of the former Housing Act (wholly amended by Act No. 13805, Jan. 19, 2016; hereinafter the same) stipulates that “the housing whose area used only for the purpose of residence is not more than 85 square meters per house or household (the housing whose exclusive residing area per house or household is not more than 100 square meters in the Eup area or Myeon area other than the Seoul Metropolitan area under Article 2 subparag. 1 of the Seoul Metropolitan Area Readjustment Planning Act).”

Article 2 of the former Housing Act defines “house” as a whole or in part of a building with a structure wherein members of a household can live an independent residential life for a long time as well as land annexed thereto, and classify it into detached houses and apartment houses. Article 2-2 subparag. 4 of the former Enforcement Decree of the Housing Act (wholly amended by Presidential Decree No. 2744, Aug. 11, 2016) defines “quasi-housing” as a building other than a house and its appurtenant facilities as a residential facility, and distinguish between houses and quasi-housing. Article 2-2 subparag. 4 of the former Enforcement Decree of the Housing Act (wholly amended by Presidential Decree No. 27444, Aug. 11, 2016) defines “house” as one of quasi-housing. Article 2(2) of the Building Act, Article 3-4 [Attachment Table 1] of the former Enforcement Decree of the Building Act (amended by Presidential Decree No. 25786, Nov. 28, 2014) and Article 3-5 [Attachment 1]

(4) The scope of "house" under the provisions of the Housing Act should be interpreted in accordance with the purport and purpose of the provisions. On the other hand, the interpretation of tax laws and regulations is not allowed without any justifiable reason, and it is also consistent with the principle of fair taxation if it can be objectively interpreted that it is difficult for the taxpayer to use the relevant housing for the purpose of the construction of the building because the provisions of the Housing Act provides for the housing of 8 square meters or less as one of the items to be exempted from value-added tax (see, e.g., Supreme Court Decision 2007Du21242, Feb. 14, 2008) as one of the items to be exempted from value-added tax; 2) as one of the items to be exempted from value-added tax, it is difficult to view that the area of the housing of 5 square meters or less as one of the items to be exempted from value-added tax because it can be objectively determined that the area of the housing of 100 square meters or less is to be used for the purpose of the construction of the building.

Therefore, the supply of the instant officetel does not constitute the supply of housing below the national housing scale under the Housing Act, which is subject to the exemption of value-added tax as stipulated in the instant exemption provision.

2) Whether the imposition of value-added tax is legitimate

Under the tax law, penalty taxes are administrative sanctions imposed, as prescribed by individual tax law, in cases where a taxpayer violates various duties, such as a return and tax payment, without justifiable grounds, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim (see, e.g., Supreme Court Decisions 2002Du10780, Jun. 24, 2004; 2016Du44391, Oct. 27, 2016). It is difficult to view that there were different opinions in the interpretation of the tax law as to whether the supply of an officetel falls under the object of value-added tax exemption stipulated in the instant provision. Considering that the determination was made on Oct. 11, 1996 by the Supreme Court Decision 96Nu8758, Oct. 11, 1996, it is difficult to deem that there was a justifiable reason for the Plaintiffs to be negligent in filing and paying the instant officetel.

3) Whether the instant disposition is lawful

The instant disposition is lawful when the Plaintiffs’ instant officetel supply is not subject to value-added tax exemption, and the Plaintiffs’ failure to perform their duty of return and payment of value-added tax is deemed lawful.

3. Conclusion

The plaintiffs' claims are dismissed as it is without merit. It is so decided as per Disposition.

Table of Disposition

Related Acts and subordinate statutes

former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013)

Article 1 (Taxable Objects)

(1) Value-added tax shall be imposed on the following transactions:

1. Supply of goods or services; and

Article 2 (Taxpayer)

(1) Any of the following persons shall be liable to pay value-added taxes under this Act:

1. A person (hereinafter referred to as an "business operator") who supplies goods (referring to goods under Article 1; hereinafter the same shall apply) or services (referring to services under Article 1; hereinafter the same shall apply) independently for business, regardless of whether the business purpose is profit-making or non-profit;

Restriction of Special Taxation

Article 106 (Exemption, etc. of Value-Added Tax)

(1) The supply of any of the following goods or services shall be exempted from value-added tax:

4. National housing prescribed by Presidential Decree and the services for constructing such housing (including remodeling services prescribed by Presidential Decree);

Enforcement Decree of the Restriction of Special Taxation

Article 51-2 (Special Taxation on Self-Managed Real Estate Investment Company, etc.)

(3) "Scale prescribed by Presidential Decree" in Article 55-2 (4) of the Act means the size of national housing under the Housing Act (referring to the area based on the exclusive use area per household in cases of multi-family houses prescribed by Ordinance of the Ministry of Strategy

Article 106 (Exemption, etc. of Value-Added Tax)

(4) "National housing prescribed by Presidential Decree and construction services for the housing" in Article 106 (1) 4 of the Act means the following:

1. Houses not more than the size under Article 51-2 (3);

former Housing Act (wholly amended by Act No. 13805, Jan. 19, 2016)

Article 2 (Definitions)

1. The term "housing" means all or part of a building with a structure wherein members of a household may carry on an independent residential life for a long time as well as the land attached thereto, and it shall be classified into detached housing and collective housing;

1-2. The term "quasi-housing" means buildings other than housing, and facilities, etc. annexed thereto, which are available as residential facilities, and the scope and type thereof shall be prescribed by Presidential Decree;

2. The term "multi-family housing" means housing with a structure wherein each household that jointly uses all or part of the walls, hallways, stairs, and other facilities, etc. of a building, can carry on an independent residential life respectively within one building; its kind and scope shall be prescribed by Presidential Decree;

3. The term "national housing" means housing constructed or improved by being financed by the Housing and Urban Fund established under the Housing and Urban Fund Act (hereinafter referred to as the "Housing and Urban Fund"), the area of which used exclusively for residential purposes (hereinafter referred to as the "exclusive residing area") is not more than 85 square meters per house or household (referring to housing the exclusive residing area of which is not more than 100 square meters per house or household in an Eup or Myeon area that is not an urban area, with the exception of the Seoul Metropolitan area under subparagraph 1 of Article 2 of the Seoul Metropolitan Area Readjustment Planning Act; hereinafter the same shall apply). In such cases, the methods for calculating exclusive residing areas

former Enforcement Decree of the Housing Act (wholly amended by Presidential Decree No. 27444, Aug. 11, 2016)

Article 2-2 (Scope and Type of Quasi-Housing)

The scope and types of quasi-housing defined in subparagraph 1-2 of Article 2 of the Act shall be as follows:

1. Dormitory under subparagraph 2 (d) of attached Table 1 of the Enforcement Decree of the Building Act;

2. Multi-living facilities under subparagraph 4 (o) and subparagraph 15 (c) of attached Table 1 of the Enforcement Decree of the Building Act;

3. A welfare house for the aged under Article 32 (1) 3 of the Welfare of the Aged Act among welfare facilities for the aged under subparagraph 11 (b) of attached Table 1 of the Enforcement Decree

4. Officetels under subparagraph 14 (b) of attached Table 1 of the Enforcement Decree of the Building Act.

Building Act

Article 2 (Definitions)

(2) Each building shall be classified into the following categories, and the detailed uses of each building shall be prescribed by Presidential Decree:

1. Single houses;

2. Apartment houses;

14. Business facilities;

Enforcement Decree of the former Building Act (Amended by Presidential Decree No. 25786, Nov. 28, 2014)

Article 3-4 (Kinds of Buildings by Use)

Types of buildings falling under the uses prescribed in subparagraphs of Article 2 (2) of the Act shall be as listed in attached Table 1.

[Attachment 1] Types of Buildings by Use (Related to Article 3-4)

1. Single houses (including homes, child-care centers, communal homes, local children's centers, and welfare facilities for older persons (excluding welfare houses for older persons) which have the form of single houses);

(a) Single houses;

(b) Multi-user housing: Housing that meets all of the following requirements:

(a) things with a structure that makes it possible for many people, such as students or employees to reside for a long time;

(ii)that does not have an independent residential form (a bath room may be installed for each room, but cooking facilities are not installed; hereinafter the same shall apply);

3. Those the total floor area of which does not exceed 30 square meters and the number of floors of which does not exceed three;

(c) A multi-family house: The house that meets all of the following requirements and is not a multi-family housing:

1. The number of floors (excluding underground floors) used for housing shall not exceed three: Provided, That where at least 1/2 of the floor area of the first floor is used as a parking lot with the piloti structure and the remainder is used for purposes other than housing, the relevant floor shall be excluded from the number of floors of housing;

(b) The total floor area (excluding the area of an attached parking lot; hereinafter the same shall apply) used for housing shall not exceed 660 square meters;

(iii) 19 or less households are able to reside;

(d) Diplomatic missions;

2. Multi-family housing (including home childcare centers, communal homes, local centers for children, welfare facilities for older persons (excluding welfare houses for older persons) and studio-type housing under Article 3 (1) of the Enforcement Decree of the Housing Act): Provided, That in calculating the number of floors referred to in items (a) or (b), where all of the first floor is used as a parking lot with a piloti structure, it shall be excluded from the number of floors, and where the remaining part is used as a parking lot with a pen structure of at least 1/2 of the floor area of the first floor when calculating the number of floors referred to in item (c), and where the relevant floor is used as a parking lot for purposes other than housing, the number of floors concerned shall be excluded from the number of floors of the housing,

(a) An apartment house: A house with at least five floors used for housing;

(b) A tenement house: A house with a total floor area (where at least two Dongs are connected to underground parking lots, each Dong shall be deemed respectively) exceeding 660 square meters, and the number of floors of which is four or less;

(c) Multi-household housing: Housing with the total floor area of not more than 660 square meters, and with not more than four floors (where not less than two Dongs are connected to underground parking lots, each Dong shall be deemed respectively);

(d) Dormitory: They shall be used for students or employees of schools, factories, etc., and have a structure for joint cooking, etc., but they shall not have an independent dwelling form (including student welfare housing referred to in Article 27 (2) of the Framework Act on Education);

14. Business facilities;

(b) General business facilities: Business facilities meeting the following requirements:

(b) Officetels (referring to officetels which meet the standards publicly notified by the Minister of Land, Infrastructure and Transport, and allow board and lodging in part of the partitioned land, the main business of which is sold or leased;

Enforcement Decree of the Building Act

Article 3-5 (Types of Buildings by Use)

Types of buildings falling under the uses prescribed in subparagraphs of Article 2 (2) of the Act shall be as listed in attached Table 1.

[Attachment 1] Types of Buildings by Use (Related to Article 3-5)

1. Single houses (including homes, child-care centers, communal homes, local children's centers, and welfare facilities for older persons (excluding welfare houses for older persons) which have the form of single houses);

(a) Single houses;

(b) Multi-user housing: Housing that meets all of the following requirements:

(a) things with a structure that makes it possible for many people, such as students or employees to reside for a long time;

(ii)that does not have an independent residential form (a bath room may be installed for each room, but cooking facilities are not installed; hereinafter the same shall apply);

3. Those the total floor area of which does not exceed 30 square meters and the number of floors of which does not exceed three;

(c) A multi-family house: The house that meets all of the following requirements and is not a multi-family housing:

1. The number of floors (excluding underground floors) used for housing shall not exceed three: Provided, That where at least 1/2 of the floor area of the first floor is used as a parking lot with the piloti structure and the remainder is used for purposes other than housing, the relevant floor shall be excluded from the number of floors of housing;

(b) The total floor area (excluding the area of an attached parking lot; hereinafter the same shall apply) used for housing shall not exceed 660 square meters;

(iii) 19 or less households are able to reside;

(d) Diplomatic missions;

2. Multi-family housing (including home childcare centers, communal homes, local centers for children, welfare facilities for older persons (excluding welfare houses for older persons) and studio-type housing under Article 3 (1) of the Enforcement Decree of the Housing Act): Provided, That in calculating the number of floors referred to in items (a) or (b), where all of the first floor is used as a parking lot with a piloti structure, it shall be excluded from the number of floors, and where the remaining part is used as a parking lot with a pen structure of at least 1/2 of the floor area of the first floor when calculating the number of floors referred to in item (c), and where the relevant floor is used as a parking lot for purposes other than housing, the number of floors concerned shall be excluded from the number of floors of the housing,

(a) An apartment house: A house with at least five floors used for housing;

(b) A tenement house: A house with a total floor area (where at least two Dongs are connected to underground parking lots, each Dong shall be deemed respectively) exceeding 660 square meters, and the number of floors of which is four or less;

(c) Multi-household housing: Housing with the total floor area of not more than 660 square meters, and with not more than four floors (where not less than two Dongs are connected to underground parking lots, each Dong shall be deemed respectively);

(d) Dormitory: It shall be used for students, employees, etc. of schools, factories, etc., and at least 50 percent of the total number of households using one joint cooking facility under one consent (including student welfare housing referred to in Article 27 (2) of the Framework Act on Education);

14. Business facilities;

(b) General business facilities: Business facilities meeting the following requirements:

(b) Officetels (referring to officetels which meet the standards publicly notified by the Minister of Land, Infrastructure and Transport, and allow board and lodging in part of the partitioned land, the main business of which is sold or leased;

Officetel construction standards (Public Notice of the Ministry of Land, Infrastructure and Transport No. 2013-789)

Article 1 (Purpose)

The purpose is to establish the building standards for officetels under Article 3-4 of the Enforcement Decree of the Building Act and subparagraph 14 (b) of attached Table 1.

Article 2 (Standards for Construction of Officetels)

An officetel shall meet the following standards:

1. No balcony shall be installed by any office partition;

2. In cases where construction is conducted in combination with other purposes (excluding buildings with a total floor area of not more than 3,00 square meters on the ground floor), exclusive entrance exits for officetels shall be separately installed: Provided, That in cases where detached houses and apartment houses are built in combination, exclusive entrance exits need not be installed by the project owner in consideration of residential functions, etc.;

3. Where the exclusive area by administrative section exceeds 85 square meters, floor heating using hot-water, hot-water and hot-water, electric heat heaters, etc. shall not be installed.

Special Act on Private Rental Housing;

Article 2 (Definitions)

The terms used in this Act shall be defined as follows:

1. The term "private rental house" means a house (including quasi-housing prescribed by Presidential Decree, such as a house constructed on a leased land and officetel (hereinafter referred to as "quasi-housing"), and a house leased only part of those prescribed by Presidential Decree; hereinafter the same shall apply), which is registered by a rental business operator under Article 5, and is classified into privately constructed rental housing and purchased rental housing;