Cho Jae-2018-China1693 (Law No. 156, 2018)

Whether simple expenses may be applied when global income is estimated;

It is difficult to regard the sales amount of scrap metal, etc. as the revenue amount which is the basis for determining the application of simple expense rate because it is difficult to regard it as a continuous business activity, and Article 6 of the Enforcement Decree of the Value-Added Tax Act provides that the commencement date of the business shall be the commencement date of the supply of goods or

Article 24 of the Income Tax Act

Incheon District Court-2018-Gu 5419 ( October 22, 2019)

GaO

O Head of tax office

1, 2019.07

2, 2019.08

1. All of the plaintiff's claims are dismissed.

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

1. Details of the disposition;

A. Disposition imposing global income tax on the Defendant in 2015

1) On November 19, 2014, the Plaintiff, ○○○○○-dong, and Y○○○○○○○○○-dong, Incheon, registered the business of constructing a housing construction and sales business from October 11, 2014 (33.3% of the Plaintiff’s shares). On December 9, 2011, the Plaintiff, etc., issued a construction permit to construct an aggregate building consisting of urban residential housing and apartment (hereinafter referred to as “building 1”) on the land, other than ○○○○-dong, Incheon, ○○-dong, and completed the construction permit to construct an apartment building consisting of urban residential housing and apartment (hereinafter referred to as “building 1”), and completed the construction permit on June 12, 2015.

2) Upon filing a comprehensive income tax for the year 2015, the Plaintiff calculated the amount of income of the first business by deducting the amount of income of the first business from the amount of income of the second business in the year 2014, and the amount of income of the first business in the immediately preceding taxable period is less than 36,00,000 won, which is the standard amount of income for the construction business prescribed in Article 143(4)2(b) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 28637, Feb. 13, 2018; hereinafter referred to as the “former Enforcement Decree of the Income Tax Act”), and returned and paid the comprehensive income tax for the year 2015.

3) On December 8, 2017, the Defendant calculated the income amount of the first business by deducting the amount applied by the standard expense rate from the above income amount from the said income amount from the standard expense rate exceeding KRW 150,00,00,00,000, which is the amount for construction business under Articles 143(4)1 and 208(5)2(b) of the former Enforcement Decree of the Income Tax Act, as a business operator who newly started the first business in 2015, not in 2014 but in 2015, and subsequently corrected and notified the Plaintiff of global income tax of KRW 675,509,740 (including additional tax) for the year 2015 (hereinafter “instant Disposition 1”).

B. Disposition imposing global income tax on the Defendant in 2016

1) On November 2, 2015, the location of the business place of the Plaintiff, ○○ Multi-Family Housing (hereinafter referred to as “multi-unit housing”) was registered as a business operator with the content of housing construction and sales business from November 2, 2015 (78% of the Plaintiff’s share). On September 11, 2015, the Plaintiff, etc.: (a) obtained a construction permit for the construction of an aggregate building consisting of officetels and multi-unit housing (hereinafter referred to as “multi-unit building 2”), which is composed of officetels and multi-unit housing, and completed the construction after obtaining approval for use on December 7, 2016; and (b) sold officetels and multi-unit housing in the second building (hereinafter referred to as “multi-unit housing”) in the year 2016.

한편, 원고는 사업장 소재지를 인천 ▤▤▤구 ▤▤동 ▤▤▤-6 외 1필지로 하여 2015. 12. 8.부터 주택신축판매업을 하는 내용의 사업자등록을 하였다. 원고는 2015. 12. 7. 건축주를 주식회사 ▤▤▤신탁으로 하여 인천 ▤▤▤구 ▤▤동 ▤▤▤-6 외 1필지 지상에 오피스텔 및 연립주택으로 구성된 집합건물인 ○○○주상복합공동주택(이하 '제3건물'이라 한다)을 신축하는 내용의 건축허가를 받아 이를 완공하여 2016. 12. 5. 사용승인을 받았고, 2016년에 제3건물 내의 오피스텔 및 연립주택을 분양하였다(이하 '제3사업'이라 하고, 제1, 2, 3사업을 통틀어 '이 사건 각 사업'이라 한다).

2) In filing a return on comprehensive income tax for the year 2016, the Plaintiff calculated the amount of income for the second business by deducting the amount of income for the second business from the above amount of income for the reason that the amount of income for the second business in 2015, which was the standard income for the construction business under Article 143(4)2(b) of the former Enforcement Decree of the Income Tax Act, falls short of 36,00,000 won, which is the standard income for the construction business under Article 143(4)2(b) of the former Enforcement Decree of the Income Tax Act. ② The amount of income for the third business is KRW 16,643,357,515, and the amount of income for the third business in 2015, which was the previous taxable period, falls short of KRW 36,00,000, which is the standard income for the construction business under Article 143(4)2(b) of the former Enforcement Decree of the Income Tax Act.

3) The Defendant calculated the amount of income of the second and third businesses in December 8, 2017, the amount of income of the second businesses in 2016, which was 8,707,257,312 won, the amount of income of the third businesses in 2016, and the amount of income of the third businesses in 16,643,357,515 won, respectively, exceeds 150,000,000 won for construction businesses under Articles 143(4)1 and 208(5)2(b) of the former Enforcement Decree of the Income Tax Act, and deducted the amount of income of the second and third businesses from the above income to the Plaintiff on December 8, 2017, on the ground that the amount of income of the second businesses in 2016, exceeds 1,70,210,720 won (including additional taxes) (hereinafter referred to as the “instant disposition”) and notified the Plaintiff to the Plaintiff on December 1, 2017.

[Reasons for Recognition] Gap evidence Nos. 1, 3, 8, 10 (including branch numbers), Eul evidence Nos. 1 and 2, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) Illegal application of standard expense rate

원고가 제1사업에 관하여 2014년에 사업자등록을 하고 제1건물의 건축허가를 받아 착공을 하는 등 실질적인 사업활동을 개시하였고, 기존 건물을 철거하고 건축 부지를 조성하는 과정에서 고철을 획득하여 이를 2014. 12. ▤▤▤(▥▥상사)에게 대금6,477,600원에 판매하여 수입을 얻은 점 등에 비추어 원고는 2014년에 제1사업을 개시하고 6,477,600원의 수입을 얻은 것이므로, 제1사업에 따른 원고의 2015년 귀속 사업소득을 산정함에 있어서는 직전 과세기간인 2014년의 제1사업의 수입금액이 건설업에 관한 기준수입금액인 36,000,000원에 미달하는 경우에 해당하여 구 소득세법 시행령 제143조 제4항 제2호 나목에 따라 단순경비율이 적용되어야 한다. 따라서 기준경비율을 적용하여 이루어진 이 사건 제1처분은 위법하다.

또한, 원고가 제2, 3사업에 관하여 2015년에 사업자등록을 하고 제2, 3건물의 건축허가를 받아 착공을 하는 등 실질적인 사업활동을 개시하였고, 제2사업의 경우 기존 건물을 철거하고 건축 부지를 조성하는 과정에서 고철을 획득하여 이를 2015. 12. ▨▨▨(▨▨기업)에게 대금 2,157,200원에, ▨▨▨개발 주식회사에 대금 1,779,100원에 판매하고 2015. 11. 미장 및 도배 공사를 하여 수입을 얻었고, 제3사업의 경우 기존 건물을 철거하고 건축 부지를 조성하는 과정에서 고철을 획득하여 이를 2015. 12. 주식회사 ▩▩상사에 대금 2,083,367원에, ▨▨▨개발 주식회사에 대금 3,154,180원에 판매하여 수입을 얻은 점 등에 비추어 원고는 2015년에 제2, 3사업을 각각 개시하고 36,000,000원에 미달하는 수입을 얻은 것이므로, 제2, 3사업에 따른 원고의 2016년 귀속 각 사업소득을 산정함에 있어서는 직전 과세기간인 2015년의 제2, 3사업의 각 수입금액이 건설업에 관한 기준수입금액인 36,000,000원에 미달하는 경우에 해당하여 구 소득세법시행령 제143조 제4항 제2호 나목에 따라 단순경비율이 적용되어야 한다. 따라서 기준경비율을 적용하여 이루어진 이 사건 제2처분은 위법하다.

2) Violation of the principle of good faith

The Plaintiff received notification from the Defendant to verify that the Plaintiff is subject to the simplified expense return in relation to the global income tax return for the year 2015 and 2016, and subsequently, reported by applying the simple expense rate at the time of filing global income tax return for the year 2015 and 2016. As such, each of the instant dispositions taken by applying the standard expense rate violates the principle of good faith and thus is illegal.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) Whether standard expense rate is applicable

According to the proviso of Article 80 (3) of the former Income Tax Act (amended by Act No. 15225, Dec. 19, 2017; hereinafter referred to as the "former Income Tax Act"), Articles 143 (3) and (4), and 208 (5) of the former Enforcement Decree of the Income Tax Act, when the amount of income is estimated or revised, the amount of income shall be determined or revised by deducting the amount calculated by multiplying the amount of income by the standard expense rate (in the case of a person subject to double-entry bookkeeping, the amount calculated by multiplying the amount of income by 1/2 of the standard expense rate), etc. from the amount of income, but in the case of a person subject to the application of simple expense rate, the amount of income shall be determined or revised by deducting the amount of income by the amount of income multiplied by the simple expense rate from the amount of income, and in the case of a construction business (including a residential building development and supply business), the amount of income in the relevant taxable period falls short of 150,000,000 won.

In the instant case, considering the following circumstances, the Plaintiff’s primary business was commenced in 2015 in which the sale of the building was conducted in 2015, and its income in 2015 was 8,238,968,348,000,000 won or more, and the Plaintiff’s second and third businesses were commenced in 2016 when the sale of the building was conducted in 2016, respectively. The Plaintiff’s revenue in 2016 was 8,707,257,312, and 16,643,57,515 won or more, respectively. As such, the Plaintiff’s primary business was an entrepreneur who newly commenced a business in the instant taxable period in 2015, and thus falls short of 150,000,000,000,000 won or more, the Plaintiff’s total income in 20,000,000 won or less than 30,000 won.

① The Housing Construction and Sales Business Act is included in real estate sales business due to its nature as a business that newly constructs and sells a building (see, e.g., Supreme Court Decision 2008Du21768, Jul. 22, 2010). The commencement of a business of the Housing Construction and Sales Business Act ought to be substantially determined based on the time when preparation for a business is completed and a situation in which the business is performed or is able to perform its original business purpose (see, e.g., Supreme Court Decision 94Nu15905, Dec. 8, 1995). Meanwhile, whether a business income under the Income Tax Act is a business income must be determined according to ordinary social norms, taking into account whether there is continuity and repetition of business to the extent that such business is deemed a business activity in light of the purpose of profit and the size, frequency, mode, etc. of the business (see, e., Supreme Court Decision 91Nu6

In relation to the first business in 2014, the Plaintiff’s business registration for the second and third businesses in 2015 and obtained a building permit for the new construction of a building, or obtained income by selling by-products, such as scrap metal, it is difficult to deem that the Plaintiff was equipped with the objective substance of the business by completing the business preparation of the Housing Construction and Sales Business having the characteristics of real estate sales business and continuously and repeatedly conducting the business, or by continuously and repeatedly conducting the housing construction and sales business, and there is no other circumstance to deem that the Plaintiff’s intent to engage in the housing construction and sales business for the purpose of profit-making was objectively rare before each building was sold in lots. Therefore, it is reasonable to deem that the Plaintiff’s first business was commenced in 2015 in which the first building was sold in lots, and in 2016 in which the Plaintiff’s second and third businesses were sold in lots of building 2 and 3, respectively.

② The Plaintiff asserts to the effect that the starting point of each business of this case cannot be recognized under the Income Tax Act based on the VAT Act, Article 6 of the Enforcement Decree of the Value-Added Tax Act.

However, Article 168 of the former Income Tax Act provides that a business operator who has registered his/her business pursuant to the Value-Added Tax Act shall be deemed to have registered his/her business pursuant to the Income Tax Act, and Article 8 of the Value-Added Tax Act shall apply mutatis mutandis to the time of application for business registration. Article 8 of the Value-Added Tax Act provides that "the starting date of business" is the same as "the starting date of business under Article 5 (2) of the Value-Added Tax Act". Article 6 of the Enforcement Decree of the Value-Added Tax Act provides that "the starting date of business shall be the date of supplying goods or services other than manufacturing business and mining business". Thus, Article 6 of the former Enforcement Decree of the Value-Added Tax Act provides for the definition of the starting date of business in accordance with the above provision of the Income Tax Act shall be deemed to apply mutatis mutandis to a new business operator and Article 168 (1) of the former Enforcement Decree of the Income Tax Act (see Article 168 (1) of the Income Tax Act and Article 14 (2) of the former Enforcement Decree of the Value-Added Tax Act).

2) Whether the principle of good faith is violated

In general, in tax law relations, in order to apply the principle of trust and good faith to tax authorities’ acts, the tax authorities should have the name of public opinion that is the subject of trust to taxpayers (see, e.g., Supreme Court Decision 90Nu9575, Sept. 13, 1991). The statement of evidence No. 14 is insufficient to acknowledge that the Defendant issued to the Plaintiff a public opinion statement that the Plaintiff constitutes the subject of simple expense rate in calculating the amount of income accrued to each of the of the instant businesses in relation to the return of global income tax for which 2015 and 2016 belongs. Since there is no other evidence to acknowledge it, the Defendant’s execution of each of the instant dispositions by applying standard expense rate cannot be deemed to violate

3. Conclusion

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