If a building permit is obtained as an officetel, even if the size of national housing smaller than that of national housing is sold for residential purposes, it is subject to value-added tax.

If a building permit is obtained as an officetel, even if the size of national housing smaller than that of national housing is sold for residential purposes, it is subject to value-added tax.

Article 106 of the Restriction of Special Taxation Act

Incheon District Court 2018Guhap566 Such disposition shall be revoked.

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○○ Head of tax office

October 25, 2018

November 29, 2018

1. The plaintiffs' claims are dismissed.

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

Cheong-gu Office

The Defendant’s imposition of value-added tax of KRW 384,297,300 (including additional tax) on July 10, 2017 against the Plaintiffs on July 10, 2017 shall be revoked.

1. Details of the disposition;

A. New construction and sale of officetels by the plaintiffs

On August 28, 2012, the Plaintiffs registered housing construction and sales business, etc. with the trade name of ○○○○○○-dong ○○○-dong 433-179 large 201.5 square meters, 433-162 large 198 square meters, 433-162 large 198.5 square meters, and 433-168 large 198 large 198.5 square meters, and newly constructed an aggregate building of 10 stories above the ground and 10 stories above the ground (multi-family housing 16 households, officetels 20 square meters) in the first taxable period of value-added tax in 2013.

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

1) The Plaintiffs did not report the first value-added tax for the supply of the instant officetel in 2013 on the ground that the instant officetel constitutes a national housing with an exclusive residential area of 85 square meters or less per household, and thus, the instant officetel is exempt from value-added tax pursuant to Article 106(1)4 of the Restriction of Special Taxation Act (hereinafter “instant exemption provisions”).

2) On May 2017, the director of the regional tax office of ○○○ (the director of the regional tax office) notified the Defendant of the imposition of value-added tax by deeming that the instant officetel does not constitute national housing under the instant provision on exemption of value-added tax, as a result of conducting a tax investigation on the Plaintiffs.

3) On July 10, 2017, the Defendant issued a correction and notification of KRW 384,297,300 (including additional tax) for the first year value-added tax in 2013 to the Plaintiffs on the ground that the instant officetel supply is not subject to value-added tax exemption (hereinafter “instant disposition”).

[Grounds for recognition] Class 3, 4, Eul evidence Nos. 1, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiffs' assertion

1) The instant officetel obtained 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 purposes, which are sold for residential purposes and used for residential purposes by occupants. As such, the instant officetel constitutes “national housing prescribed by Presidential Decree,” and the supply of the instant officetel constitutes the object of value-added tax exemption, and thus, the instant disposition was unlawful.

2) The Tax Tribunal decided to revoke the imposition of value-added tax on the ground that the supply of a residential officetel constitutes the subject of the exemption of value-added tax as stipulated in the instant exemption provision, and considering the fact that the Plaintiffs trusted this and did not report and pay value-added tax on the supply of the instant officetel, the instant disposition is unlawful as it violates the good faith principle.

(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 first sentence of Article 2 subparag. 3 of the former Housing Act (amended by Act No. 12989, Jan. 6, 2015; hereinafter the same) stipulates that “the housing whose area used exclusively 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).”

(2) Article 2 subparag. 4 of the former Housing Act provides for the following: (a) the purpose of this case’s construction of officetels is to stipulate that an officetel is exempt from taxation; and (b) it is difficult to interpret that an officetel is exempt from taxation as one of the above provisions under Article 2 subparag. 14(b) of the former Enforcement Decree of the Housing Act (amended by Presidential Decree No. 2527, Mar. 24, 2014; hereinafter “No. 206, Jan. 28, 2014; and (c) it is difficult to interpret that an officetel is exempt from taxation for a certain size of housing as one of the following reasons: (a) it is difficult to objectively interpret that an officetel is exempt from taxation for the purpose of this case’s construction; and (b) it is difficult to interpret that an officetel is exempt from taxation for the purpose of this case’s construction; and (d) it is an area of the housing as one of the instant provisions under Article 3-4(1) of the former Enforcement Decree of the Housing Act.

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 instant disposition violates the principle of good faith

The mere fact that the Tax Tribunal’s decision was made to revoke the disposition imposing value-added tax on the ground that the supply of a residential officetel constitutes an object of exemption from value-added tax as prescribed by the provisions of this case’s exemption, the Defendant cannot be deemed to have made a public statement of opinion that the instant officetel’s supply constitutes an object of exemption from value-added tax. Thus, the instant disposition cannot be deemed to violate

3) Whether the instant disposition is lawful

The instant disposition is legitimate in view that the supply of the instant officetels is not subject to value-added tax exemption.

3. Conclusion

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