Business of the Housing Construction and Sales Business is not at the time of by-products sales but at the time of sales;

Since it is reasonable to see that the commencement of business of the Housing Construction and Sales Business is the starting point of sale of housing rather than the time of sale by-products, it is reasonable to estimate the Plaintiff’s income as standard expense rate because the income amount of the taxable period for which housing business has commenced is at least 1

Article 143 (3) of the former Enforcement Decree of the Income Tax Act;

2019Guhap51680 global income and revocation of such disposition

Hyo

○ Head of tax office

July 11, 2019

September 19, 2019

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

The Defendant’s imposition of global income tax on the Plaintiff 201 X. X. 201 X. is revoked the imposition of global income tax on the Plaintiff in 201X 5 XX, commercial-level, and commercial-level (including additional tax).

1. Details of the disposition;

A. The Plaintiff, a business operator operating the Housing Construction and Sales Business, constructed a multi-household 2 X-household (total floor area: 1,180.81m2, hereinafter “instant housing”) located in Seoul ○○-dong 200,000, and sold it around 201 X-gu.

B. The Plaintiff completed business registration related to the instant housing X. X. 201 X., supplied scrap metal equivalent to the total cost of the instant housing LOX 201X x. X. and XX. 201X x. The Plaintiff’s business registration pursuant to Article 7(1) of the former Restriction of Special Taxation Act (amended by Presidential Decree No. 28637, Feb. 13, 2018; hereinafter the same shall apply) to the immediately preceding taxable period (201X) was found to have accrued in 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. 28637, Feb. 13, 2018; hereinafter the same shall apply). On the other hand, the Plaintiff reported and paid the estimated amount of income by applying the aforementioned provision to the small and medium enterprise tax reduction and exemption provisions under Article 7(1) of the former Restriction of Special Taxation Act (amended by Act No. 14390, Dec. 20, 201). 201000.

C. The director of the Seoul Regional Tax Office, upon conducting an individual consolidated investigation against the Plaintiff, deemed that the Plaintiff is not a person subject to the application of the simple expense rate, calculated the income amount by means of estimation based on the standard expense rate, and notified the Defendant to rectify the amount of tax by excluding special tax reduction and exemption for small and medium enterprises, and the Defendant notified the Plaintiff on October 201 X of global income tax for the year 201 X, and notified the Plaintiff of the additional correction and notification of the global income tax for the year 201 X.

D. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on X. X. 201 X., but the Tax Tribunal dismissed the said appeal in XX. 201X.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1, 2, 4, 5, 6, Eul evidence No. 3, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case is unlawful and should be revoked for the following reasons.

1) The Plaintiff registered the business under X. 201X. X. 201 and removed the existing building of the instant housing site between X. X. 201X. to XX. 201X., and supplied scrap metal, etc. from the process to △. XX. 201X. As such, the Plaintiff’s starting date of the instant business is 201X as of the time of removal of the existing building, and pursuant to Article 143(4)2(b) of the former Enforcement Decree of the Income Tax Act, the amount of revenue of the immediately preceding taxable period of 201 X, which is the pertinent taxable period of the instant disposition, is less than 36 million won, and the instant disposition to which the standard expense rate otherwise applied is unlawful.

2) Of the “real estate development and supply business” under the Korean Standard Industrial Classification, the core of the “building development and supply business” is not direct construction activities but to build a building on a turnkey basis to another person. The Plaintiff was responsible for the instant housing construction by purchasing various insurance policies, such as employment insurance and industrial accident insurance, and was given a subcontract for a part of the instant housing construction works, and managed the instant housing construction as a whole while directly performing a part of the construction work, which can be subject to the application of the provision on special tax reduction and exemption for small and medium enterprises. Nevertheless, the Defendant’s disposition that excluded the said provision on the ground that the Plaintiff did not directly perform construction

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether simple expense rate is applied

A) According to the proviso of Article 80(3) of the former Income Tax Act (amended by Act No. 15225, Dec. 19, 2017; hereinafter the same) and Article 143(3) of the former Enforcement Decree of the Income Tax Act, when the amount of income is estimated, the amount of income shall be determined or corrected by deducting the amount calculated by multiplying the purchase cost, rent, labor cost, and income amount from the amount of income by standard expense rate. However, for a person subject to simple expense rate, the amount of income shall be determined or corrected by deducting the amount of income from the amount of income by simple expense rate. "person subject to simple expense rate" of the above provision means a new business operator who has commenced a business in the pertinent taxable period, and the constructor (including a residential development and supply business; hereinafter the same shall apply) whose amount of income in the pertinent taxable period falls short of 150,000 won or less, or a construction business operator who has applied for the change of business registration under Article 143(4)1 and 6 of the former Value-Added Tax Act shall not apply mutatis mutandis.

Meanwhile, under the principle of no taxation without representation, tax laws shall be interpreted as the text of the law, and shall not be extensively interpreted or analogically interpreted without reasonable grounds, barring any special circumstances. However, even according to the language and text of the tax laws itself, if their meaning is unclear or if it appears that there is a conflict between the laws and regulations, the court must naturally indicate the true meaning of the language and text at issue through harmonious interpretation between the laws and regulations. In such cases, a judge can make a combined interpretation of the laws and regulations that consider legislative intent and purpose to the extent that it does not undermine legal stability and predictability pursued the principle of no taxation without representation (see, e.g., Supreme Court en banc Decision 2011Du551, Apr. 16, 2015).

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, it is reasonable to view that the commencement date of the instant housing construction and sales business run by the Plaintiff is not the date of business registration or the date of removal of existing buildings, but the time when the supply of the instant housing is objective and practical, i.e., the starting date of the sale of the instant housing

① Article 143(4)1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Dec. 30, 2010); Article 143(4)2 of the same Enforcement Decree provides that, “an entrepreneur newly commencing a business during the pertinent taxable period, other than a newly commencing one, shall apply simple expense rates to “an entrepreneur whose total amount of revenue during the immediately preceding taxable period (including an increased amount of revenue due to determination or revision) falls short of the standard amount.” Thereafter, Article 143(4)1 of the former Enforcement Decree of the Income Tax Act amended by Presidential Decree No. 22580, Dec. 30, 2010; 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. 22100, Feb. 13, 2012>

In addition, Article 143 (4) of the Enforcement Decree of the Income Tax Act, which applies to the portion of income for the taxable period that begins after February 13, 2018, is amended by Presidential Decree No. 28637, which applies to the portion of income for the taxable period that begins after January 1, 2019, provides that the standard amount of expense shall be applied by excluding the amount of income from the application of simple expense expense expense when the amount of income for the taxable period concerned falls short of the standard amount of income for the immediately preceding taxable period, even if the total amount of income for the taxable period falls short of the standard amount.

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 with insufficient capacity to keep records of the disbursement evidence required by the standard expense rate system, and it is determined that legislators have gradually reduced the scope of business operators subject to the simple expense rate. Furthermore, according to the text of the supplementary provision, legislators seem to understand "construction commencement", "construction business, construction business, and commencement of real estate development and supply business" as separate concepts.

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 commencement date of the business as objective and practical time for the supply of housing subject to sale rather than the commencement date that can be determined according to the intention of the

② The commencement date of a housing construction and sales business shall not be formally determined on the basis of the date of business registration, etc., but be actually determined on the basis of the time when the preparation for the business was completed and the preparation for the original business was performed or is able to perform (see, e.g., Supreme Court Decision 94Nu15905, Dec. 8, 1995). The initial housing construction and sales business is included in real estate sales business under its nature (see, e.g., Supreme Court Decision 2008Du21768, Jul. 22, 2010). The purpose of the business is to sell a house, and it is difficult to deem that the commencement of sales activities

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 housing. The fact that the Plaintiff commenced or completed the instant housing for profit-making purposes alone is not enough to deem that the Plaintiff continuously and repeatedly conducted the instant housing for profit-making purposes to have satisfied the objective substance of the housing construction and sales business.

C) According to the evidence Nos. 1 and 5 of the evidence Nos. 1 and 5, the Plaintiff’s report on the instant housing-related income amount in 201 X is deemed to have been 7, economic-level, economic-level, economic-level, and economic-level. Thus, it is apparent that the Plaintiff, who started a new business, did not have the income amount in the pertinent taxable period amount of KRW 150 million under Article 143(4)1 of the former Enforcement Decree of the Income Tax Act. Thus, the Plaintiff cannot be deemed to be a new business operator in the 201X taxable period, and the Plaintiff’s assertion on the application of the simplified expense rate

2) Whether the provision on special tax reduction or exemption applies to small and medium enterprises

A) Article 7(1) of the former Restriction of Special Taxation Act provides that a small or medium enterprise prescribed by Presidential Decree shall list "construction business" as a type of business eligible for special tax reduction or exemption on income tax, etc. and classify the specific type of business into the Korean Standard Industrial Classification publicly notified by the Commissioner of the Statistics Korea pursuant to Article 17 of the Statistics Act. The Korean Standard Industrial Classification defines "construction business (411)" as "construction business (41) of a building that belongs to the small classification item of the construction business as "industrial activities newly constructed, expanded, reconstructed, or reconstructed by a contractor or a comprehensive constructor" and excludes "construction business" as a type of "real estate development and supply business (6812)", which is a separate sub-classified item of "real estate business".

In addition, the special tax reduction system for small and medium enterprises under Article 7 (1) of the former Restriction of Special Taxation Act is to support small and medium enterprises so that their financial restructuring and facility investment can be achieved smoothly by granting a temporary reduction of income tax and corporate tax in order to protect and foster domestic small and medium enterprises with weak competitiveness. In light of the fact that the special tax exemption system is based on the premise that the amount of the tax reduced or exempted should be used for the prescribed purpose of the same Act, a national operating a small and medium enterprise is required to operate the relevant business at least at the end of the taxable period subject to the reduction or exemption (see Supreme Court Decision 2005Du685, Jan. 13, 2006).

B) On the other hand, the evidence presented by the Plaintiff alone is insufficient to recognize that the Plaintiff actually constructed the instant housing with human resources, physical facilities, or capabilities capable of executing the instant construction project under the overall responsibility. There is no other evidence to acknowledge this otherwise. Rather, the Plaintiff is a person who is not qualified as a constructor under Article 41(1) of the former Framework Act on the Construction Industry (amended by Act No. 14015, Feb. 3, 2016) with respect to the instant housing, which is a residential building with a total floor area exceeding 661 square meters. According to the evidence evidence No. 1, it is recognized that the instant housing company was performing the construction project. Therefore, it is difficult to deem that the Plaintiff only carried on the construction project under the Korean Standard Industrial Classification.

C) Even if the Plaintiff is deemed to have engaged in the construction business that becomes the business subject to Article 7 Subparag. 1 of the former Restriction of Special Taxation Act, the Plaintiff’s business related to the instant housing was closed in XX. of 201 X. As such, the Plaintiff cannot be deemed to have engaged in the business at the time after closing the business in 2016, the end of the taxable period of global income tax for the global income tax for the year 2016. XX. Thus, in light of the aforementioned legal principles, the Plaintiff cannot be deemed to be subject to special tax reduction and exemption under the above provision. The Plaintiff’s assertion on the application of the provision on special tax reduction and exemption is without merit.

3. Conclusion

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