Criteria for determining non-business real estate in unsold apartment prices

Even if the commercial buildings for which five years have elapsed from the date of usage inspection are not recognized to be excluded from non-business real estate and are established based on the former Housing Construction Promotion Act, there is no duty to own the commercial buildings thereafter, so it cannot be viewed that

Article 27 (Non-Inclusion of Expenses not Related to Business in Deductible Expenses)

Article 28 of the Corporate Tax Act [Non-Inclusion of Interest and Non-Inclusion of Loss]

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

1. Regarding ground of appeal No. 1

Articles 28(1)4(a) and 27 subparag. 1 of the Corporate Tax Act (hereinafter “the Act”) stipulate that a corporation shall not include interest paid in non-business expenses due to the holding of real estate for non-business use, and delegate the scope of real estate for non-business use to the Presidential Decree. Article 49 of the Enforcement Decree of the Act delegated by the corporation (hereinafter “Enforcement Decree”) provides for the scope of non-business use real estate, and delegate necessary matters to the Ordinance of the Ministry of Strategy and Finance concerning the determination of whether a real estate for non-business use is non-business use. Accordingly, Article 26 of the Enforcement Rule of the Act (hereinafter “Enforcement Rule”) provides for detailed matters concerning the determination of whether a real estate for non-business use is non-business use. The legislative intent of the provision is to prevent the deterioration of the financial structure of an enterprise from being disturbed due to an unreasonable corporate expansion dependent on the capital of others, to encourage the sound economic activities of an enterprise through the production of real estate and non-productive business expansion from financial assets of a large enterprise, and to promote efficient use of real estate.

The court below acknowledged the fact that the plaintiff owned each of the above commercial buildings in this case five years after the date of usage inspection, and determined that each of the above commercial buildings in this case constitutes real estate for non-business use under Article 26 (1) 2 of the Enforcement Rule, and since the evidence submitted alone is insufficient to deem that the plaintiff made an active effort to sell each of the above commercial buildings in this case, the plaintiff did not have any justifiable reason for holding each of the above commercial buildings in this case. In light of the above legal principles and records, as long as each of the above commercial buildings in this case falls under real estate for sale under Article 26 (1) 2 of the Enforcement Rule, regardless of whether the plaintiff's possession of each of the above commercial buildings in this case is directly related to the corporation's business, it is inappropriate to say that each of the above commercial buildings in this case is not deemed to have exceeded the scope of real estate for non-business use under Article 26 (1) 1 of the Enforcement Rule, the construction of each of the above commercial buildings in this case cannot be deemed to have a legitimate reason for modification of the housing construction standards in this case.

Therefore, the above decision of the court below is justified in its conclusion, and there is no error in the rules of evidence or in the misapprehension of legal principles as to non-business real estate as alleged in the grounds of appeal.

Supreme Court Decision 97Nu6476 Decided December 23, 1998 cited in the ground of appeal is different from the case and it is not appropriate to invoke this case.

2. Regarding ground of appeal No. 2

Meanwhile, in determining whether a real estate owned by a juristic person constitutes a real estate for non-business use under Article 49 (1) 1 of the Enforcement Decree, the legislative intent of the provision on non-taxation of interest paid in relation to loans for non-business use, and Article 28 (1) 4 (a) and Article 27 (1) 1 of the Act should consider the specific scope of non-business use real estate, the purport of delegation to the Enforcement Decree, and its criteria. Thus, inasmuch as the relevant provisions of the Enforcement Decree and the Enforcement Rule violate the upper law or are related to the upper law, it cannot be deemed null and void in violation of the principle of systematic legitimacy (see, e.g., Supreme Court Decisions 2005Du12527, Feb. 10, 2006; 98Du15092, May 29, 2001) and the grounds for appeal on this point cannot be accepted.

3. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

[Seoul High Court Decision 2007Nu31722, 2008.06.10]

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The defendant shall revoke the disposition of imposition of corporate tax of KRW 97,254,790 for the business year of 2002 against the plaintiff on May 1, 2005.

The reasoning of the court's explanation concerning this case is the same as that of the judgment of the court of first instance, and thus, it is acceptable to accept this case in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure

Therefore, the judgment of the court of first instance is legitimate, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.

[Seoul Administrative Court 2007Guu1774, Nov. 06, 2007]

1. The plaintiff's claim is dismissed.

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

The defendant's disposition of imposition of corporate tax of KRW 97,254,790 for the business year of 2002 against the plaintiff on May 16, 2005 (which seems to be a clerical error in May 1, 2005) shall be revoked.

1. Details of the disposition;

The following facts may be acknowledged by integrating the whole purport of the pleadings in the respective descriptions of Gap evidence 1, 2, Eul evidence 1-1 through 9, Eul evidence 2 and 3, or the whole purport of the pleadings:

A. The Plaintiff, a corporation that is engaged in the business of leasing, selling, arranging, etc. of housing, commercial building, and real estate, newly constructed and sold a commercial building in an apartment complex between the business year of 1987 and the business year of 196, but partially unsold, and owned it as a partial official shop or leased it to a third party as shown in the attached list.

B. As a result of the ○○ National Tax Service’s tax investigation, the Defendant issued a disposition to impose corporate tax amounting to KRW 97,254,790 on the Plaintiff (hereinafter “instant disposition”), on the ground that each of the instant commercial buildings constitutes non-business real estate prescribed in Article 27 subparag. 1 of the Corporate Tax Act, Article 49(1)1(a) of the Enforcement Decree of the Corporate Tax Act, Article 26(1)2 of the Enforcement Rule of the Corporate Tax Act, etc., by excluding the relevant interest and property tax from deductible expenses, on the ground that the Plaintiff owned each of the instant commercial buildings for which five years have elapsed since the date of usage inspection as of the business year 2002 (hereinafter “each of the instant commercial buildings”).

C. On July 4, 2006, the Plaintiff filed an appeal with the National Tax Tribunal on the instant disposition, but the National Tax Tribunal dismissed the appeal on October 19, 2006.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case is unlawful for the following reasons.

(1) Each of the instant shopping districts is a welfare incidental facilities built by the Plaintiff under Article 3(2) of the former Housing Construction Promotion Act (amended by Act No. 6916 of May 29, 2003; hereinafter the same) and Article 50(1) of the Regulations on Housing Construction Standards, etc., that the Plaintiff has a duty to secure incidental and welfare facilities for the occupants while constructing a rental apartment complex, etc., and thus, they cannot be deemed as constituting non-business real estate because they merely left or leased in a public room due to their unexpected failure to sell in lots despite their efforts such as sales advertisement due to the economic crisis, etc.

(2) Even if each of the instant shopping districts constitutes non-business real estate, the Plaintiff has been making maximum efforts to dispose of each of the above shopping districts due to the above circumstances, such as discount of sales price, bidding system, and sales advertisement, but has not been disposed of. Thus, the Plaintiff is unable to dispose of each of the above shopping districts within the grace period as prescribed by the Enforcement Rule of the Corporate Tax Act, and there is a justifiable reason under Article 26(5)29 of the Enforcement Rule of the Corporate Tax Act.

(b) Related statutes;

○ Article 27 (Non-Inclusion of Expenses not Related to Corporate Tax Act)

The following amounts of expenses paid by a domestic corporation for each business year shall not be included in the calculation of losses in the calculation of the income amount for the relevant business year:

1. The amount prescribed by Presidential Decree, such as expenses, etc. incurred from the acquisition and management of assets prescribed by Presidential Decree as assets deemed not directly related to the business of the corporation

○ Article 28 (Non-Inclusion of Paid Interest in Loss)

(1) The interest on loans falling under any of the following subparagraphs shall not be included in deductible expenses in calculating the income amount of a domestic corporation for each business year:

4. The amount calculated under the conditions as prescribed by the Presidential Decree from among interest on loans paid during each business year by a domestic corporation which acquires or holds assets falling under any of the following items:

(a) Assets falling under subparagraph 1 of Article 27:

○ Scope of assets not related to the business under Article 49 of the Enforcement Decree of the Corporate Tax Act

(1) "Assets prescribed by Presidential Decree" in subparagraph 1 of Article 27 of the Act means the following assets:

1. Real estate falling under any of the following items:

(a) Real estate not used directly for the business of a juristic person: Provided, That this shall not include the real estate in the period before the period as determined by the Ordinance of the Ministry of Finance and Economy (hereafter in this Article, referred to as

○ Scope of real estate not related to Article 26 of the Enforcement Rule of the Corporate Tax Act

(1) "Period determined by Ordinance of the Ministry of Finance and Economy" in Article 49 (1) 1 (a) of the Decree means any of the following periods (hereafter referred to as "period of grace" in this Article):

2. Real estate acquired by a corporation whose main business is real estate trading: Five years;

(5) The term "real estate having an inevitable reason prescribed by Ordinance of the Ministry of Finance and Economy" in the proviso to Article 49 (1) 1 of the Decree means real estate falling under any of the following subparagraphs:

29. The real estate that is not used for business due to the justifiable reasons, such as changes in urban planning, except for the reasons under subparagraphs 2 through 28 after its acquisition.

C. Determination

(1) Determination on the first argument

Article 27 subparagraph 1 of the Corporate Tax Act provides that the scope of non-business real estate shall not be included in the calculation of losses, among the expenses paid by a corporation during a business year, which is recognized as not directly related to the business of the corporation concerned. Article 49 (1) of the Enforcement Decree of the Corporate Tax Act provides that the scope of non-business real estate shall be prescribed in the Enforcement Decree. Article 29 (1) of the Enforcement Decree so delegated shall provide general standards for the scope of assets for non-business use and shall be delegated to the Ministry of Finance and Economy again. Article 26 (1) of the Enforcement Decree of the Corporate Tax Act provides that the case of real estate for non-business use upon delegation by the above Enforcement Decree shall be individually listed, and Article 27 subparagraph 1 of the Corporate Tax Act provides that the case shall not be included in the calculation of losses. In light of the above related Acts and subordinate statutes, Article 27 subparagraph 1 of the Corporate Tax Act provides that "non-business real estate shall not be directly related to the business of the corporation." Thus, if any real estate falls under each subparagraph 1 of Article 26 (5).

In the case of this case, since there is no dispute between the parties that the plaintiff has owned each of the above commercial buildings in this case, five years after the date of usage inspection as shown in the separate sheet No. 1, and since each of the above commercial buildings constitutes real estate for sale as stipulated in Article 26 (1) 2 of the Enforcement Rule of the Corporate Tax Act, each of the above commercial buildings constitutes real estate for non-business use regardless of whether the plaintiff possessed each of the above commercial buildings directly related to the business of the corporation, as long as each of the above commercial buildings falls under the above, each of the above commercial buildings constitutes real estate for non-business use. Therefore, the plaintiff's assertion on this different premise is without merit.

Article 33(2) of the former Housing Construction Promotion Act provides that a plan for the establishment of ancillary and welfare facilities shall be included in a business plan to build housing exceeding a certain size. Article 50(1) of the Regulations on Standards, etc. for Housing Construction shall not exceed the area calculated by adding the area of neighborhood living facilities, retail markets, and stores installed in a housing complex at the rate of six square meters per household. Meanwhile, there is no dispute between the parties as to the incidental facilities established under each of the above provisions, but even according to each of the above provisions, only the upper limit on the commercial facilities, etc. installed in a housing complex shall be prescribed within the scope of the above upper limit, by predicting the future demand, etc. at the time of the business plan, and construction of a commercial building within the scope of the above upper limit is not required, and each of the above commercial buildings of this case is newly constructed for the business year from 1987 to 196, and there is no other evidence to prove that the Plaintiff's testimony or evidence No. 1 to No. 4, No. 1 to No. 7, No. 1, No. 6, No. 7, and No. 1, No. 1, No.

(3) Therefore, each of the instant commercial buildings constitutes real estate for non-business use as stipulated in Article 27(1) of the Corporate Tax Act, and thus, the instant disposition on the premise thereof is lawful.

3. Conclusion

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

Commercial name

Date of inspection

Jinay

○

April 23, 1987

○

may 3, 198

○○5 tea

March 9, 1989

○○1

November 13, 1990

○○2

may 13, 1993

○○ 4

October 28, 1993

○ 3rds

October 7, 1994

○ ○ Dong

December 7, 1994

○

December 9, 1994

○○6

may 13, 1995

○○6

July 24, 1995

○ ○9

July 24, 1995

○○ 4

October 10, 1995

○ 3rds

October 31, 1995

○○8

November 13, 1995

○

February 15, 1996

○○6

April 27, 1996

○○11

may 25, 1996

○ ○ Dong

December 11, 1996