Cho-2017-China-4054 ( November 03, 2017)

In addition to the contract construction cost, the period of attribution of the deductible expenses for a separate agreement to distribute the project implementation profits shall not be the time the construction is completed, but the obligation to perform the relevant obligation

The separate agreement of this case is that the plaintiff shall pay the contractor the proceeds of the project, separate from the construction cost, which is the cost incurred directly corresponding to the progress of the project pursuant to the construction contract. Thus, it shall be forfeited to deductible expenses as of the time when the obligation to implement the project becomes final and conclusive,

Article 40 of the Corporate Tax Act

2018Guhap60312 Revocation of Disposition of Rejecting Corporate Tax

○○ Co., Ltd.

Head of △ District Office

June 14, 2018

July 12, 2018

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The defendant's disposition rejecting correction of KRW 459,267,381 for the business year 2013 against the plaintiff on May 23, 2017 is revoked.

1. Details of the disposition;

가. 원고는 2010. 6. 28. 부동산 개발 및 시행 등을 목적으로 설립된 법인으로, 2011년부터 2013. 9.경까지 XXXX택지개발사업지구 내 주상복합용지 1,646.3㎡를 매입하여 오피스텔 및 근린생활시설 신축공사(이하 '이 사건 공사'라 한다)를 하였다.

B. On April 18, 201, the Plaintiff entered into a business agreement with AA Co., Ltd. (hereinafter “the instant construction agreement”) that is a contractor (hereinafter “instant agreement”), and agreed to additionally pay 20% of the profit from the project implementation (hereinafter “the separate agreement”) in addition to the contract construction cost of the instant construction project that the Plaintiff shall pay to the contractor at the time of six months after completion.

C. After that, the Plaintiff recognized the instant separate agreement amount of KRW 2,163,00,00 as deductible expenses for the business year of 2014, and filed a corporate tax for the business year of 2014. On March 31, 2017, the Defendant filed an application for rectification of the corporate tax for the business year of 2013 from 2011 to 2013, as the instant separate agreement amount became final and conclusive for the business year of 2013, to which the date of completion of the instant construction work belongs, this constitutes deductible expenses for the business year of 2013, and as such, it did not deduct the carried forward amount of KRW 133,36,906, which was omitted at the time of filing a corporate tax return for the

D. On May 23, 2017, the Defendant rejected the Plaintiff’s request for correction on the ground that the integrated investigation of the Plaintiff is being conducted in the YY Tax Office (hereinafter “instant disposition”).

E. On August 22, 2017, the Plaintiff filed an appeal seeking the revocation of the instant disposition with the Tax Tribunal, but the Tax Tribunal dismissed the Plaintiff’s appeal on November 3, 2017.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1, 2 and 4 (including branch numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

For the following reasons, the Plaintiff asserts that the instant separate agreement shall not vest in the deductible expenses for the business year 2013, and that the instant disposition, which did not additionally deduct any deficit brought forward from the calculation of the income amount for the business year 2013, should be revoked as unlawful.

1) Since the instant construction was completed in 2013 and its profit was confirmed, the instant construction became final and conclusive.

The obligation to pay the separate agreement was already determined in 2013. Accordingly, the instant separate agreement should be reverted to the Plaintiff’s deductible expenses for the business year 2013.

2) As the Plaintiff revised a revised corporate tax return as of April 16, 2013 to the amount of loss carried forward for the business year 201, the amount of KRW 133,336,906 should be additionally deducted from the amount of income for the business year 2013.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) The time when the separate agreement in this case was reverted to deductible expenses

A) Article 40(1) of the Corporate Tax Act provides, “The fiscal year of accrual of earnings and losses of a domestic corporation for each fiscal year shall be the fiscal year which includes the date on which the concerned earnings and losses are determined.” According to delegation under Article 40(2) of the Corporate Tax Act, Articles 68 through 71 of the Enforcement Decree of the Corporate Tax Act provide that the fiscal year of accrual of profits and losses shall be the fiscal year which includes the date of delivery of the goods, etc., the date of settlement of the price, the date of payment of the work progress from the commencement of the construction to the date of delivery of the goods, etc., and the date of payment of the rent. As such, the Corporate Tax Act

This is aimed at promoting legal stability and ensuring fair taxation by uniformly identifying taxable income of taxpayers (see, e.g., Supreme Court Decision 2016Du51511, Mar. 22, 2017).

In addition, in order to ensure that gross income or deductible expenses are determined, the rights and obligations that are the cause of income should be considerably mature in terms of feasibility, and that is merely established without reaching such degree, the gross income or deductible expenses cannot be deemed to have been determined. Here, whether the rights and obligations that may incur income are mature or finalized can not be uniformly determined, and the determination should be made by comprehensively taking into account the nature and contents of each specific right and various matters of legal and de facto law (see, e.g., Supreme Court Decision 2009Du1157, Sept. 29, 201).

B) The following facts are acknowledged according to the aforementioned evidence, Gap evidence Nos. 10, Eul evidence Nos. 2 and 3, and the purport of the whole pleadings.

(1) According to the construction contract document (Evidence 10-1) drafted at the time the contract for the instant construction project was concluded on April 18, 201 by the Plaintiff and the instant construction project, the Plaintiff and the instant construction project set the contract cost of the instant construction project as KRW 30,580,00,000 (excluding value-added tax, as a usual rate of KRW 4,70,000, value-added tax), and the payment for the remainder shall be made every two months, and the payment for the contract amount shall be made within 20 days after the contract was delivered, and if the payment for the contract is delayed, interest at 12% per annum shall be added (Articles 21 and 24 of the General Conditions for the Contract for Construction Projects and Article 11 of the Special Conditions for the Contract for Construction Projects). In addition, if it is necessary to adjust the contract amount due to any change in design, price fluctuation, or any change in the terms of the contract, the requirements and method for adjustment of the contract amount (Articles 18 through 20).

(2) On the other hand, the Plaintiff and the instant contractor set forth matters concerning the instant separate agreement in accordance with the instant agreement, separate from the contract for the construction work as seen earlier. Article 13 of the Business Agreement (Evidence A, hereinafter referred to as the “Business Agreement”). The instant separate agreement that the Plaintiff pays to the instant contractor at the time of the instant agreement is the source of the project implementation profit and the amount equivalent to 20% of the said amount is paid. The payment period is six months after the completion of the contract. The payment method is the principle of cash payment through the change of the contract cost, but it is determined by the method of payment as goods if it is impossible to pay in cash due to unsold sale.

(3) On January 23, 2014, the Plaintiff concluded the second succession contract with BB Trust Co., Ltd., a trust company of the instant construction site, and the instant construction project, and agreed to pay the said contract construction cost by January 28, 2014, when changing the contract construction cost of the instant construction project to the amount of KRW 2,163,00,000 (excluding value-added tax), which is the amount of the instant separate agreement deposit.

C) According to the above facts, in a case where it is possible to pay cash, other than goods, as a result of calculating the project implementation profit after the completion of the instant construction project, the duty to pay the instant separate agreement can only be determined when the specific amount to be paid to the instant construction project is reflected in the modification of the construction cost under the construction contract through the modification of the construction contract. It is reasonable to view that the instant separate agreement was considerably mature in the feasibility of the duty through the second succession agreement on January 23, 2014.

The plaintiff asserts that the time when the separate agreement of this case reverts to deductible expenses in accordance with the principle of response to profit and expense, should be the business year of 2013, and this is examined.

Where expenses can be directly corresponding to specific profits, such as material costs, costs, etc., they may be included in deductible expenses for the business year in which such profits accrue, but where expenses cannot be directly corresponding to profits and expenses, they shall revert to deductible expenses as of the date on which the obligation to pay the relevant expenses is determined in accordance with the principle of determination

As seen earlier, the instant separate agreement was determined separately from the source, amount, time of payment, and method of payment. Article 13 of the instant separate agreement stipulating the instant separate agreement amount also provides for the sale at discount or the trust of real estate owned by the representative director of the Plaintiff (mortgage trust) as a measure to compensate for losses incurred by the instant construction in the event the sale amount falls short of the amount of the responsible sale of the construction works of the instant case. In full view of these, the instant separate agreement amount is determined to be agreed to pay the instant construction project to the Plaintiff in order to distribute the project benefits through the instant construction project, separate from the construction cost, which is incurred directly corresponding to the progress of the construction project pursuant to the instant construction contract. As such, it shall not be deemed that the instant construction project was completed, but shall be forfeited to deductible expenses as of January 23, 2014 through the second inheritance agreement of the construction contract of the instant case as of January 23, 2014.

D) Therefore, the period of attribution of the instant separate agreement amount as deductible expenses is not the 2013 business year to which the time of completion of the instant construction works belongs, but the specific obligation on the instant separate agreement amount was mature and finalized for 2014 business years. Therefore, the Plaintiff’s assertion on this part is rejected on a different premise.

2) Whether additional deductions were carried forward for 2013

Article 13 Subparag. 1 of the former Corporate Tax Act (amended by Act No. 1355, Dec. 15, 2015) limits the scope of losses that may be deducted from the income amount of each business year to losses included in the tax base that has completed a report, determination, correction, or revised return in a specific method. The Plaintiff asserted that there was a revised return on the tax base for the business year of 201, even though it was alleged that there was a fact that the revised return was filed separately from the details initially reported, it is insufficient to acknowledge the fact that the revised return was filed with respect to the tax base for the business year of 2011. However, there is no evidence to acknowledge otherwise.

Therefore, the plaintiff does not accept this part of the plaintiff's assertion on the premise that the revised return of the tax base for the business year 201 was made (the plaintiff is the Supreme Court Decision 2016Du60577 Decided March 9, 2017 and Supreme Court Decision 91Nu3819 Decided March 27, 1992, and in this case, it is argued that the delivery of the revised return is presumed through the registration mail receipt in this case, but the above decision was made when the other party to the disposition becomes aware of the disposition, which is the starting date of the filing period as provided by the Administrative Litigation Act, in relation to the "the date when the plaintiff becomes aware of the disposition," which is the starting date of the filing period as provided by the Administrative Litigation Act, and it is not appropriate to apply to this case, which is another case. In addition, it is not appropriate to apply to this case, even if it is presumed that the revised return of the tax base for the business year was made as alleged by the plaintiff, even if it is presumed that

3) Sub-decisions

Therefore, we cannot accept all the Plaintiff’s assertion that the instant disposition is unlawful.

3. Conclusion

Thus, the plaintiff's claim is dismissed as it is without merit.