Whether a person is subject to simple expense rate application

Business commencement of the Housing Construction and Sales Business for the Plaintiff’s three houses of this case shall be deemed to be the time of commencing the sale of the three houses of this case, on which the Plaintiff started the supply of goods under Article 6 subparag. 3 of the Enforcement Decree of the Value

Article 143 of the Enforcement Decree of the Income Tax Act: Estimation and correction

2018Guhap87514 Revocation of Disposition of Imposing global income tax, etc.

AA

BB Director of the Tax Office

on 18, 2019

on October 13, 2019

1. The plaintiffs' claims against the defendants are all dismissed.

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

Cheong-gu Office

The Defendant’s imposition of KRW 00 of global income tax for the year 201 X. X. 200, global income tax for the year 201 X, KRW 000, global income tax for the year 201 X, and KRW 000, global income tax for the year 201 X shall be revoked.

1. Details of the disposition;

A. The Plaintiff, a business operator running the housing construction and sales business, constructed each multi-household house (hereinafter referred to as “multi-household house”) as listed in the following table, and sold each house after obtaining approval for use from the permitting authority.

B. Meanwhile, the Plaintiff calculated estimated income by applying a simple expense under the aforementioned provision on the grounds that the amount of income falls short of the amount prescribed in Article 143(4)2(b) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26982, Feb. 17, 2016; hereinafter the same) in the taxable period immediately preceding the pertinent year in which the sales revenue accrues, and applying a special tax reduction and exemption for small and medium enterprises prescribed in Article 7(1) of the former Restriction of Special Taxation Act (amended by Act No. 1527, Dec. 19, 2017; hereinafter the same) by applying the special tax reduction and exemption for small and medium enterprises prescribed in Article 7(1) of the former Restriction of Special Taxation Act (amended by Act No. 15227, Dec. 1

C. As a result of the consolidated investigation against the plaintiff, the director of the regional tax office notified the defendant of taxation data to the effect that "the plaintiff is a new business operator, not a business operator who has engaged in the existing business on the basis of each taxable period after commencing the business at the time of new construction and sale of each house of this case. Since the amount of income exceeds the standard amount under Articles 143 (4) 1 and 208 (5) 2 of the former Enforcement Decree of the Income Tax Act, the amount of income shall be estimated by applying "standard expense rate" rather than "simplified expense rate" and the special tax reduction or exemption under Article 7 (1) of the former Restriction of Special Taxation Act should be denied because the plaintiff does not engage

D. Accordingly, the Defendant issued a correction and notification of global income tax (including additional tax) to the Plaintiff on X. 201X as listed below (hereinafter “instant disposition”).

E. The Plaintiff, upon filing an objection, filed an appeal with the Tax Tribunal on X. X. 201X, but dismissed X. X. 201.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 5, Eul evidence 1 to 14 (including each number; hereinafter the same shall apply) and the purport of whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

For the following reasons, the Plaintiff asserts that part of the instant disposition should be revoked as stated in the purport of the claim.

1) Application of simple expense rate (related to housing of this case No. 3)

The commencement date of the Housing Construction and Sales Business Act that the Plaintiff had engaged in the instant housing No. 3 ought to be the time when the Plaintiff started business registration and started work for the basic civil engineering work, or the time when the Plaintiff accrued from selling by-products, such as scrap metal that occurred in the process of removing the existing building. Therefore, as the Housing Construction and Sales Business for the instant housing No. 3 was commenced in 2014, the standard expense rate cannot be applied on the ground that the Plaintiff is a new business operator on the basis of the taxable year 2015, and so long as the previous income falls short of the standard expense amount under Article 143(4)2 (b) of the former Enforcement Decree of the Income Tax Act,

2) Reduction of and exemption from special tax on small and medium enterprises (related to each of the instant houses)

Although the contractor of each of the instant houses is not the Plaintiff but the Plaintiff, it is merely merely borrowed from the name of the construction company holding a construction business license, and in fact, the Plaintiff’s responsibility and responsibility.

Since the Plaintiff purchased materials directly under the supervision, and executed each of the houses of this case by employing the human body, the Plaintiff should be deemed to have run the construction business.

C. Determination

1) Determination on the application of simple expense rate

A) Under the principle of no taxation without law, tax laws shall be interpreted as the text of the law, unless there are special circumstances.

A broad and reasonable interpretation or analogical interpretation is prohibited. However, even according to the language and text of a tax law itself, if its meaning is not clear, or if it appears to be contrary or conflicting to other laws and regulations, the court must naturally clarify the true meaning of the language and text at issue through harmonious interpretation between the laws and regulations. In such cases, a judge, to the extent that it does not undermine the legal stability and predictability pursued by the principle of no taxation without law, can make a combined interpretation of the law in light of the legislative purport and purpose, etc. (see, e.g., Supreme Court Decision 2007Du4438, Feb. 15, 2008).

The former Income Tax Act (Amended by Act No. 13558, Dec. 15, 2015; hereinafter the same shall apply) shall apply:

Article 1-2 (1) 5 of the Value-Added Tax Act provides for the definition of "business operator", Article 19 (1) provides for the existence of income generated from any type of business as business income, Article 168 (3) provides that Article 8 of the Value-Added Tax Act shall apply mutatis mutandis to a business operator who makes a business registration under the Income Tax Act, and Article 8 of the Value-Added Tax Act, which provides for the method of making a new application for business registration and an application for change of business registration, shall not apply to the starting date of business of business income, such as Article 6 of the Enforcement Decree of the Value-Added Tax Act, or such provision shall not apply mutatis mutandis to the starting date of business. Therefore, it is necessary to examine when the starting date of business in the business of business income under the former Income Tax Act shall be deemed the starting

Therefore, in full view of the language, structure, and purpose of the relevant laws such as the former Income Tax Act and the Value-Added Tax Act, the starting date of the business of the business of the business income under the former Income Tax Act shall be also based on the time stipulated in each subparagraph of Article 6 of the Enforcement Decree of the Value-Added Tax Act, which provides for the starting date of the business under Article 5 (2)

① Considering that Article 19(1) of the former Income Tax Act defines “income generated from various types of business, such as agriculture, forestry, fishery, mining, manufacturing, construction, etc.,” as business income, it is reasonable to view that a business is based on the premise that a real income is generated under the former Income Tax Act, considering that Article 1-2(1)5 of the same Act defines a resident as a “resident with such business income”. Therefore, it is reasonable to view that a business is based on the premise that a real income is generated. Therefore, it is difficult to simply move forward to the time the preparation for the business, which is the time of providing goods or services

② The starting point of the preparation activity is not only a considerable irregular and broad range of preparation activity, but also a aspect of determining the scope by the subjective intention or necessity of the enterpriser.

It is difficult to objectively specify the date of commencing the business of the new construction and sale business of a building. If it is earlier than the time of acquisition of land or the time of commencement or completion of construction of a building, which is the time of the commencement of the preparation of the business, the amount of revenue of the immediately preceding taxable period, which is the premise for the application of the simple expense rate under Article 143(4)2 of the former Enforcement Decree of the Income Tax Act, depending on the time of the preparation act, may vary depending on the time of the preparation act. Thus, by selecting a voluntary day according to one’s own convenience,

③ Under Articles 1-2(1)5 and 19 of the former Income Tax Act, a resident with income arising from his/her own calculation and responsibility (in independence) and continuous and repeated activities for profit-making purposes becomes an entrepreneur. According to Article 2(3) of the Value-Added Tax Act, a person who supplies goods or services independently for business purposes regardless of the existence of profit-making purposes is an entrepreneur and is liable to pay value-added taxes. Here, a “person who supplies goods or services independently for business purposes” is a person who supplies goods or services with a form of business to an extent that a value-added tax can be created (see Supreme Court Decision 98Du16705, Sept. 17, 199) and who supplies goods or services with continuous and repeated intent (see Supreme Court Decision 98Du16705, Sept. 17, 199). This is so, there is a need to interpret business income related to one business under the former Income Tax Act uniformly from the date of commencing business under the former Value-Added Tax Act.

(4) From this perspective, the former Income Tax Act imposes an obligation on the head of a tax office having jurisdiction over a business under Article 168 (1) to make a business registration under the former Income Tax Act, and stipulates that a business operator who has made a business registration under the Value-Added Tax Act shall be deemed to have made a business registration under the former Income Tax Act, and it may be deemed that Article 32 (1) of the Value-Added Tax Act provides that a business operator who has made a business registration under Article 168 (2) of the same Act imposes an obligation to prepare an invoice or receipt as prescribed by Presidential Decree and to issue a tax invoice to a person who has received goods or services if he/she supplies goods or services.

(5) Article 8 (1) of the Value-Added Tax Act, which provides that Article 168 (3) of the former Income Tax Act shall apply mutatis mutandis to business registration, uses the term "the starting date of business" in relation to business registration, and Article 5 (2) of the Value-Added Tax Act uses the term "the starting date of business" in relation to the first taxable period for a new business operator, and Article 6 of the Enforcement Decree of the Value-Added Tax Act sets the starting date of business under Article 5 (2) of the Value-Added Tax Act as "the starting date of

B) According to the following circumstances revealed by comprehensively taking account of the contents of the relevant statutes and the evidence and the purport of the entire pleadings, in the case of the Housing Construction and Sales Business Act that the Plaintiff engaged in the instant housing No. 3, the date of commencing the business shall be deemed the time of commencing the sale of the instant housing No. 3, which is the date of commencing the supply of goods as stipulated in Article 6

(1) Article 143 (4) 1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Dec. 30, 2010) and Article 143 (4) 1 of the former Enforcement Decree (amended by Presidential Decree No. 22580

However, subparagraph 2 of Article 143(4)1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Dec. 30, 2010; Presidential Decree No. 22580, Dec. 31, 2010; Presidential Decree No. 22580, Dec. 31, 2010; Presidential Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Dec. 31, 2010; Presidential Decree No. 22506, Feb. 21, 2010) provides that a new entrepreneur, among new entrepreneurs, shall be excluded from the application of the simple expense rate, if the amount of income falls under the standard of double-entry bookkeeping by applying the simple expense rate in order to prevent the reduction of income tax through the application of the simple expense rate. Article 143(4)1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Dec. 30, 2010).

In addition, Article 143 (4) of the Enforcement Decree of the Income Tax Act, which applies to the portion of income in the taxable period that begins after January 1, 2019, which was amended by Presidential Decree No. 28637, Feb. 13, 2018, provides that the standard expense rate shall be applied by excluding from the application of simple expense rate if the income amount in the taxable period concerned falls under the standard amount of double-entry bookkeeping, even if the total amount of income in the immediately preceding taxable period falls short of the standard amount, as well as the business operator (title 1)

In light of the amendment history of Article 143 (4) of the Enforcement Decree of the Income Tax Act, the simple expense rate system is a system that intends to minimize the tax payment costs of small small-scale business operators who lack the capacity to keep records of the principal expenses required by the standard expense rate system, and the legislators seem to have gradually reduced the scope of business operators subject to the simple expense rate application. Furthermore, according to the text of the supplementary provision, legislators seem to understand the "construction commencement", "construction business, construction business, and commencement of real estate development and supply business" as a separate concept.

Therefore, considering these legislative intent, in the case of housing construction and sales business that operates a business for a long period exceeding a certain scale due to its characteristics, it is necessary to grasp the business commencement at an objective and practical time of the supply of housing subject to sale rather than the commencement date that can be determined by the business operator's intent

(2) The commencement of a business of a housing construction and sales business shall be substantially determined at the time when the preparation for the business is completed and the preparation for the original business is conducted or can be conducted.

(See Supreme Court Decision 94Nu15905 Decided December 8, 1995). The original housing construction and sales business is included in real estate sales business in its nature (see Supreme Court Decision 2008Du21768, Jul. 22, 2010). The purpose is to sell a house ultimately, and it is difficult to deem that a sales act commenced solely on the fact that the house was completed.

③ Whether a business income under the Income Tax Act falls under business income shall be determined according to social norms, taking into account whether business activities are continuously and repeatedly conducted in light of the business profit purpose, the scale, frequency, and mode of business (see, e.g., Supreme Court Decision 91Nu6559, Nov. 26, 1991). However, there is no evidence suggesting that the Plaintiff had objectively expressed his intent to engage in the housing construction and sales business for profit prior to commencing the sale of the instant third house, and the fact that the Plaintiff commenced or completed the instant third house for profit-making purposes alone is difficult to deem that the Plaintiff continuously and repeatedly conducted activities for profit-making purposes to have satisfied the objective substance of the housing construction and sales business.

C) Therefore, the Plaintiff’s business of newly constructing and selling the housing for the housing No. 3 of this case

The Plaintiff’s income amount in 2015 from the above business exceeds the standard amount under Articles 143(4)1 and 208(5)2 of the former Enforcement Decree of the Income Tax Act. Thus, the Plaintiff is not subject to the application of simple expense rate, and the income amount should be estimated by applying “standard expense rate” under Article 143(3) of the former Enforcement Decree of the Income Tax Act. Therefore, the Plaintiff’s assertion on this part is without merit.

2) Determination on whether to reduce or exempt special tax on small and medium enterprises

A) Articles 2(3), 7(1)1(g) and 7(2)2 of the former Restriction of Special Taxation Act provide that an amount equivalent to the tax amount calculated by multiplying the income tax on income generated from the relevant workplace by 20/10 shall be reduced or exempted for a company running a construction business among small and medium enterprises, and the classification of the type of business used in the relevant Act shall be in accordance with the Korean Standard Industrial Classification publicly notified by the Commissioner of the Statistics Korea pursuant to Article

However, according to the former Korean Standard Industrial Classification (amended by the Statistics Korea Notice No. 2015-311, Sept. 24, 2015) that applies in the taxable period of the instant disposition, the term “residential building construction business (Classification No. 4111)” refers to the industrial activities of constructing residential buildings, such as independent and multi-households, apartment houses, and apartment houses. On the other hand, the industrial activities of constructing residential buildings and selling and selling them after entering into a contract for the construction of the entire building without performing their direct construction activities are classified as “residential building development and supply business (Classification No. 68121).”

B) We examine the following circumstances, which are acknowledged by integrating the overall purport of the arguments in Eul evidence Nos. 1, 2, 4, 5, 7, 8, 13, and 14: (i) The building ledger of each of the housing of this case includes: (i) the contractor, not the plaintiff, the "PB Adjustment Co., Ltd.", "E", and "Regulatory Co., Ltd."; (ii) the plaintiff is not holding a construction business license; and (iii) there is no specific data to deem that each of the housing construction of this case is equipped with human resources, physical facilities, or capacity to be constructed under the overall responsibility of the construction; (iii) the purchase tax invoice list and the tax invoice list submitted by the plaintiff at the time of the individual integrated investigation, and the tax withholding report (No. 13 and 14 evidence), but it is difficult to view that the plaintiff's construction business falls under the "new construction and sale of the housing of this case."

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit, and it is so decided as per Disposition.

(c)