Seocho 2013west 1499 ( October 27, 2014)

A nonprofit corporation shall not be deemed a disposition when it transfers its assets to a non-profit-making business, and evaluation profits shall not be the unrealized profits.

When real estate for rent of profit-making business is disbursed to a nonprofit business sector, the meaning of the Enforcement Rule of the Corporate Tax Act is interpreted as the return of the capital input, and if it is viewed as the profit from disposal of assets, it is not included in the gross income because it is a taxation of unrealized profits.

2014Guhap6045 Revocation of Disposition of Corporate Tax Imposition

○ Private Teaching Institutes

AA Head of the Tax Office

January 7, 2015

January 30, 2015

1. The disposition imposing corporate tax of KRW 0,000,000 (including additional tax) that the Defendant rendered to the Plaintiff on January 11, 2013 shall be revoked.

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

Cheong-gu Office

The same is as the order (as of January 15, 2013, it is the clerical error in January 11, 2013).

1. Details of the disposition;

A. (1) The Plaintiff is a school juristic person established under the Private School Act on January 24, 1964, and a secondary education and higher education are their proper purpose businesses.

(2) On December 26, 1966 for the proper purpose business, the Plaintiff took over the name of ○ University and High School (the name of ○○ High School around March 1970) and established the ○○ Graduate School on September 2009. In addition, the Plaintiff is operating real estate rental business as a profit-making business to support the proper purpose business, and the business year is from March 1 to the end of February of the following year.

B. (1) The Plaintiff, upon obtaining permission from the competent authority on February 29, 2008, transferred 'Seoul XX-Gu 00-0 large 1,134.7 square meters, 150-4 large 145 square meters, 0-0 large 92.4 square meters, 0-00 large 0-00 large 234.9 square meters, and 5 square meters of reinforced concrete building on each of the above sites (hereinafter referred to as the "real estate of this case") to a proper purpose business for the operation of ○○ graduate School of Korea.

(2) The Plaintiff evaluated the market price of the instant real estate as KRW 00,000,000 when transferring the instant real estate to the proper purpose business and accounted as follows.

The Plaintiff deemed KRW 00,000,000,000, which is the difference between the market price and the book value of KRW 0,000,000,00 in the corporate tax adjustment for the business year 2007, as the “voluntary evaluation marginal profit” under the Corporate Tax Act, and excluded the Plaintiff from the income.

C. On January 11, 2013, the Defendant: (a) deemed that the Plaintiff’s inquiry reply (including the corporate tax of the Ministry of Strategy and Finance and the corporate tax of the Ministry of Strategy and Finance-364, May 16, 2012; hereinafter the same shall apply) of the Ministry of Strategy and Finance and based on Article 76(4) of the Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 10, Mar. 31, 2008; hereinafter the same shall apply) and the appraisal profits of the instant real estate as “property disposal profits”; and (b) imposed and notified corporate tax of KRW 0,000,000 (including additional tax) for the business year 207

D. On March 20, 2013, the Plaintiff filed an appeal on March 20, 2013, and received a decision of dismissal from the Tax Tribunal on May 27, 2014.

[Reasons for Recognition] Unsatisfy, Gap evidence 1 to 10 (including virtual numbers), Eul evidence 1 to 7 (including virtual numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

In light of Article 76(4) of the Enforcement Rule of the Corporate Tax Act, evaluation profits cannot be deemed as "property disposal profits of fixed assets" or in light of the purport of the provision, taxation requirements for "property disposal profits of non-profit corporations" cannot be deemed as "property disposal profits of non-profit corporations", and since the real estate of this case is not disposed of to a third party but transferred to the accounts of non-profit business through separate accounting, evaluation profits of the real estate of this case constitute unrealized profits and there is no fact of tax evasion by exclusion of evaluation profits of the real estate of this case from the

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) Accounting of nonprofit corporations

(A) Article 113 of the Corporate Tax Act (amended by Act No. 9267 of Dec. 26, 2008; hereinafter the same) separate a corporation from a profit-making corporation and a non-profit corporation from income sources, but imposes tax liability only on the income generated from specific sources under each subparagraph of Article 3(2) of the Corporate Tax Act for non-profit corporations. Article 113 of the Corporate Tax Act (amended by Act No. 9267 of Dec. 26, 2008) includes "lease business (No. 1)" and "income generated from the disposal of fixed assets (No. 5)". Article 113 of the Corporate Tax Act requires a non-profit corporation to keep separate accounting of the income generated from the non-profit corporation as belonging to the profit-making business and its revenue-making business (the "non-profit corporation" and "non-profit corporation" (the "non-profit corporation") to whom the revenue-making business and profit-making business belongs.

(B) As long as non-profit corporations run a profit-making business and compete with the profit-making corporation, it may result in unfair results, even if it is a non-profit corporation, taxation on the income amount is inevitable. Meanwhile, Article 19(2) of the Corporate Tax Act provides that the scope of losses or expenses generated or spent in connection with the business of the corporation is generally recognized as ordinary or directly related to profit-making business with respect to the scope of losses recognized under the Corporate Tax Act. Assets transferred from the accounts for profit-making business are not directly related to profit-making business, but not directly related to profit-making business. It is a principle that a non-profit corporation is able to spend the income for a non-profit business only after the corporate tax is imposed (in excess of this, the return of capital input). However, if a non-profit corporation operates a profit-making business to use it only for a non-profit business, the non-profit corporation is more likely to perform the proper purpose business in the form of corporate tax by appropriating some of the financial resources to be used for the profit-making business in the form of the corporation. Article 29(1).

(C) Article 76(4) of the Enforcement Rule of the Corporate Tax Act provides that “The amount in excess of the amount of profit-making business (including bonuses) out of the asset value shall be returned to the amount of capital input.” Since the General Rule 113-1563 of the Corporate Tax Act provides a set-off order, the assets used for profit-making business shall be accounted for as follows in cases where the assets used for profit-making business are disbursed to

Profit-making business.

Changes in the motor vehicle;

Secretary

Assets 】 Assets 】

Revenues of reserve funds for proper purpose business ¡¿

Revenue of donations ¡¿ Revenue of donations ¡¿

Contributions for profit-making business ¡¿

Profit-making business.

Changes in the motor vehicle;

Secretary

Reserve fund for proper purpose 】*

Surplus surplus ¡¿ earned surplus ¡¿

Contribution ¡¿ amount of contribution ¡¿

Assets 】 Assets 】

* Offset Order

Where assets for profit-making business are disbursed as non-profit-making business, they shall be offset and processed in the following order (Common Rule 113-1563 of the Corporate Tax Act).

(1) Reserve funds for proper business purposes included in deductible expenses (including the amount disbursed for proper business purposes in excess of the balance of reserve funds for proper business purposes as of the end of the

(2) Reserve funds for proper business purposes substituted by losses.

(3) Amount of profit-making business (including surplus funds) after corporate tax is imposed.

(4) The amount of capital input.

The reason for such a set-off order is to induce the performance of the obligation to tax benefits (in the calculation of deductible expenses for the proper purpose business) as soon as possible, and to present the status of such performance of the obligation as accounting. This is because it does not seem to clearly indicate whether this is paid to the proper purpose business solely on the accounting basis when the company arbitrarily lowers earned surplus in advance. ② If the proper purpose business reserve is not set at the present time or when the funds are disbursed in excess of the balance of the proper purpose business reserve at the end of the past, the amount transferred to the non-profit business sector will be treated as donations first.

Therefore, in this case, the increase of expenses for profit-making business and the increase in the amount of non-profit-making business will bring about the offsetting effect of earned surplus. Therefore, it is reasonable to reduce earned surplus before the reduction of the capital if the reserve fund for proper purpose business is not established or exceeded.

(2) Interpretation of Article 76(4) of the Enforcement Rule of the Corporate Tax Act

Article 76 (4) of the Enforcement Rule of the Corporate Tax Act provides that "if a nonprofit corporation has disbursed any asset belonging to the profit-making business or any other business, the amount in excess of the income amount (including surplus funds) of the profit-making business shall be returned. In this case, where a corporation subject to Article 74 (1) 1 of the Restriction of Special Taxation Act transfers the asset belonging to the accounting of profit-making business to the accounting of profit-making business, it

On the other hand, according to the inquiry of the Ministry of Strategy and Finance, "where a school juristic person has transferred assets other than money belonging to the profit-making business accounting to a non-profit business accounting, the value of such assets shall be appraised as the market value, and the appraised profit of assets (the difference between the book value and the market value) shall be deemed as the gross income of the profit-making business in the business year to which the date of transfer belongs." However, in light of the following circumstances, the interpretation of the above statutes cannot be interpreted as the "profit from the disposal of fixed assets" of the real estate of this case computed by the plaintiff as an educational foundation

① First of all, it is reasonable to interpret Article 74 (1) 1 of the Restriction of Special Taxation Act to mean "the return of capital input" in the latter part of Article 74 (1) 1 of the Restriction of Special Taxation Act, and the latter part of Article 74 (1) 1 of the Restriction of Special Taxation Act to be used for non-profit business. In the event that assets are transferred from non-profit profit-making business to profit-making business, the transaction is recognized, and in the opposite case, the transaction is recognized in accordance with Article 76 (3) of the Enforcement Rule of the Corporate Tax Act. In the opposite case, it is reasonable to interpret Article 76 (4) 1 of the Restriction of Special Taxation Act (amended by Act No. 8986 of Mar. 28, 2008) as "the school foundation under the Private School Act is recognized as a transaction even if it is "in the case of transfer". It is reasonable to interpret Article 74 (1) 1 of the Restriction of Special Taxation Act to mean "the transfer of assets belonging to non-profit Business."

In addition, Article 3 (2) 5 of the Corporate Tax Act provides that "the revenues derived from the disposal of fixed assets as taxable income listed in the non-profit corporation," while the main sentence of Article 76 (4) of the Enforcement Rule of the Corporate Tax Act provides that "the expenses for non-profit business" shall be the same as "the disposal of fixed assets".

(2) According to Article 76(3) of the Enforcement Rule of the Corporate Tax Act, where a nonprofit corporation uses or transfers assets belonging to other businesses for profit-making business, the value of assets shall be based on the market price. Thus, in cases where assets belonging to other businesses are disbursed for profit-making business, it conforms to the accounting principles to ensure that they are based on the market price even if they are disbursed for profit-making business. Therefore, the same interpretation as the disposal of fixed assets

(3) No corporate tax shall be imposed on profits from the disposal of fixed assets generated by disposing of fixed assets directly used for the proper purpose business for not less than three years (Article 3 (2) 5 of the Corporate Tax Act, Article 2 (2) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 20930, Jul. 24, 2008; hereinafter the same shall apply). In addition, pursuant to Article 24 (2) 4 (a) of the Corporate Tax Act and Article 37 (1) of the Enforcement Decree of the same Act, where a non-profit corporation provides donations, other than money, to private schools under the Private School Act, as assets, the relevant assets shall not be assessed at the book value and taxed. Accordingly, in imposing tax on profits from the disposal of fixed assets generated by a non-profit corporation to a non-profit business, unlike the cases where assets newly acquired or donated as a proper purpose business, this violates the provisions of the Corporate Tax Act, which is non-taxation of fixed assets of a non-profit corporation for the proper purpose business.

In addition, according to Article 76 (3) of the Enforcement Rule of the Corporate Tax Act, when a nonprofit corporation uses or transfers assets belonging to other business for profit-making business, the amount of capital input shall be adjusted to the amount of capital input, so there is no reasonable ground to interpret that the assets used for profit-making business are not part of gross income pursuant to Article 15 (1) of the Corporate Tax Act, and in the opposite case, there is no reasonable ground to interpret that the assets used for profit-making business are disbursed to non-profit-making business

④ According to the separate accounting and accounting process, ‘for-profit business accounting' includes ‘for-profit business reserve funds, earned surplus, contributions, and (other) assets' and ‘for-profit business accounting, ‘for-profit business accounting' includes ‘for-profit business accounting', ‘for-profit business reserve funds, revenue from reserves for proper purpose business, revenue from donations, and contribution for profit-making business' and does not include ‘for-profit business accounting' or ‘for-profit business accounting at the time of disposal.

⑤ Considering that the difference between the market price and the book value should be considered as a "property disposal profit" in cases where the accounts for profit-making business is transferred from the accounts for profit-making business to the accounts for profit-making business under Article 74 (1) 1 of the Restriction of Special Taxation Act, such as school juristic persons under the Private School Act, the taxation on unrealized profits would occur even if they are imposed as fixed asset disposal profit when they are sold to a third party; Article 76 of the Enforcement Rule of the Corporate Tax Act provides for separate accounting; Article 76 of the Corporate Tax Act provides for separate accounting; Article 42 (1) of the Corporate Tax Act provides for taxation on unrealized profits; and Article 76 (4) of the Enforcement Rule of the Corporate Tax Act provides for the assessment of assets under the Insurance Business Act; and in principle, the unrealized profits are limited to the assessment of assets under the Corporate Tax Act; and Article 18 (1) of the Corporate Tax

(6) No interpellation may become a taxable ground and verify the legal basis thereof.

(7) The defendant asserts that "the reserve fund for proper purpose business is offset under the General Rule 113-1563 of the Corporate Tax Act when transferring into non-profit business accounts, and therefore the offset amount shall be imposed as non-deductible income."

However, as in the order of offset, reserve funds for proper purpose business, which are offset as in the calculation of losses, are included in the calculation of earnings if they are not spent for proper purpose business for five years, and reserve funds for proper purpose business for proper purpose business shall be reduced to KRW 00,000,000 by adding KRW 00,000,000 to KRW 00,000,000 due to the transfer, etc. of the real estate in this case, and shall be added to KRW 00,000,000,000, and reserve funds for proper purpose business for proper purpose business shall be added to the calculation of earnings only if they are not spent for five years (Article 29(1) of the Corporate Tax Act). Thus, considering that reserve funds for proper purpose business for proper purpose business for proper purpose business for proper purpose business purposes are not immediately included in the calculation of earnings, it cannot be viewed as the "evaluation profits of fixed assets only because they have been offset in the calculation of losses."

3. Conclusion

Therefore, the claim of this case is reasonable, and it is decided as per Disposition.