National Tax Service Review Division 2010-0186 ( November 15, 2010)

The tenant has used for residential purpose and the urban gas for residential purpose has been supplied, and it is leased as a permanent residential purpose.

However, it is reasonable to view that a lessee leased and used an officetel for residential purpose and leased it as a permanent residence due to the fact that the officetel was sold in lots and the urban gas for residential purpose was supplied.

Article 12 (Exemption from Value-Added Tax)

Article 34 (Scope of Tax Exemption for Lease of Housing and Land annexed to Value-Added Tax)

2011Revocation of disposition imposing value-added tax;

XX

Daejeon Head of the District Tax Office

October 19, 2011

November 30, 2011

1. The plaintiff's lawsuit on the portion exceeding 9,57,925 won among the disposition of imposition of value-added tax of 11,244,618 won shall be dismissed;

2. The plaintiff's remaining claims are dismissed.

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

The Defendant’s disposition of imposition of value-added tax of KRW 11,244,618 (including additional tax of KRW 3,720,618) against the Plaintiff on September 1, 2010 is revoked.

1. Details of the disposition;

A. On May 10, 2005, the Plaintiff purchased XX 714 (hereinafter “the instant officetel”). On July 6, 2005, the Plaintiff: (a) was a person who registered his/her business with the type of business as a real estate leasing business on July 6, 2005; and (b) was paid KRW 7,524,00,000, equivalent to 10% of the sales price of the instant officetel at the time of the return of the value-added tax on January 2005, by reporting the sales price of the instant officetel as an input tax amount; and (c) was refunded KRW 7,524,00,00 by reporting it as an input tax amount.

B. On September 1, 2010, the Defendant: (a) leased the instant officetel as a permanent residence and then supplied the instant officetel to a person who exclusively uses the goods acquired by the instant officetel as a tax-free business; (b) on September 21, 2011, the Defendant: (c) deemed that the instant officetel’s acquisition value included the Plaintiff’s tax base for the second half-year sales in 2006, including the Plaintiff’s tax base for the second half-year sales in 2006; (d) imposed on the Plaintiff for the second half-year value-added tax (including additional tax 3,720,618 won; hereinafter referred to as the “instant disposition”); (c) on September 21, 201, after subtracting the Plaintiff’s tax base for the second half-year sales in 2006, 75, 2005, 3606, 206, 2006, 306, 2006, 206, 20636, 2006, 636

C. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the National Tax Service on September 27, 2010, but the National Tax Service dismissed it on November 15, 2010.

[Ground of recognition] Facts without dispute, entry in Eul 1, 2, 6, 11 (including paper numbers) and the purport of the whole pleadings

2. Determination

A. Whether the Plaintiff’s lawsuit on the part exceeding KRW 9,557,925 of the instant disposition is lawful

With respect to the legality of the Plaintiff’s lawsuit on the part exceeding KRW 9,57,925 of the instant disposition, as seen earlier, the Defendant already revoked the part exceeding KRW 9,557,925 of the instant disposition (i.e., KRW 1,686,693) ex officio on September 21, 2011. As such, the part exceeding KRW 9,557,925 of the instant disposition did not exist. As such, the part exceeding KRW 9,57,925 of the instant disposition, which exceeds KRW 9,57,925, among the instant disposition, became unlawful as there was no benefit to seek its revocation.

B. Whether the part of KRW 9,557,925 among the instant disposition is lawful

1) The plaintiff's assertion

A) The Plaintiff did not lease the instant officetel to the lessee for residential purposes because it leased the instant officetel to the lessee. In other words, the Plaintiff leased the instant officetel to the lessee on the condition that the lessee used it for business purposes, and cannot be deemed that the lessee used it for residential purposes because the lessee did not make a business registration. For such reason, the instant disposition is unreasonable since it transferred the lessor’s responsibility to the Plaintiff as the lessor.

B) In addition, it is unreasonable to impose penalty tax at the point of time when five years have elapsed since the tax authority failed to manage business registration.

2) Relevant statutes

The entries in the attached Table-related statutes are as follows.

3) Determination

A) Determination on the Plaintiff’s first argument

According to Article 12(1)1 and Article 17(2)4 of the Value-Added Tax Act and Article 34(1) of the Enforcement Decree of the same Act, the lease of an officetel used as a permanent residence is exempted from value-added tax, and accordingly, the input tax amount related to the building is not deducted from the output tax amount related to the lease of the building. Whether it constitutes a lease of a building used as a regular residence subject to the exemption of value-added tax shall be determined depending on whether the lessee actually uses it as a permanent residence based on the objective usage of the building. In cases where the usage of the object indicated in the use classification or lease agreement entered in the public registry and the lessee actually uses it, it is difficult to determine whether it falls under the lease of an officetel as the subsequent one (see Supreme Court Decision 91Nu12707, Jul. 24, 192). In addition, it is difficult to find that the Plaintiff used it as a permanent residence under the overall purport of this case from 4-1, 200 to 1, 200.

Therefore, the plaintiff's first argument is without merit.

B) Judgment on the second argument by the Plaintiff

Under the tax law, where a taxpayer violates various obligations, such as a return and tax payment, without any justifiable reason, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, the taxpayer’s intention and negligence are not considered as administrative sanctions imposed as prescribed by individual tax-related Acts and subordinate statutes. However, where a taxpayer is not negligent in performing his/her duty, and there is a justifiable reason not to impose taxes (see, e.g., Supreme Court Decision 2006Du11750, Oct. 23, 2008). The land, error, etc. in the statutes do not constitute justifiable reason not to cause the breach of duty (see, e.g., Supreme Court Decision 2002Du10780, Jun. 24, 2004). It is difficult to view that the aforementioned reason alleged by the Plaintiff alone is a justifiable reason not to impose penalty taxes, and there is no evidence to support such violation.

Therefore, the plaintiff's second argument is without merit.

3. Conclusion

Thus, the plaintiff's lawsuit on the part exceeding KRW 9,557,925 of the disposition of this case is unlawful. Thus, the plaintiff's remaining claims are dismissed as it is without merit. It is so decided as per Disposition.