Busan District Court 2017Guhap22474 ( October 19, 2018)

The transfer of this case constitutes real estate sales business and also constitutes business income.

(1) It is reasonable to deem that the act of transferring apartment of this case was conducted as part of the continuous and repeated real estate sales business for profit purposes, and the income thereby should also be viewed as the business income under the Income Tax Act.

Article 4 of the Income Tax Act shall be classified.

2018Nu20672 Revocation of taxation disposition

AAA Foreign1

○ Head of tax office

Busan District Court Decision 2017Guhap22474 Decided January 19, 2018

July 20, 2018

September 7, 2018

1. The plaintiffs' appeal is dismissed.

2. The costs of appeal are assessed against the Plaintiffs.

1. Purport of claim

The judgment of the first instance court shall be revoked. On November 3, 2016, the imposition of value-added tax ○○○○ and global income tax imposed on the Plaintiffs shall be revoked, respectively.

1. Quotation of judgment of the first instance;

The reasoning for this Court concerning this case is as follows: “No reason exists” in Section 5 of Section 6 of the judgment of the court of first instance; and “No reason exists” is added to “(the same shall apply even if the plaintiff added the statement of No. 4-1 or No. 9-5 of the evidence No. 4-1 or No. 9-5 of the judgment of the court of first instance.” In addition, Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act are cited.

2. Additional determination

A. As to the assertion of violation of the principle of trust protection

1) The plaintiffs' assertion

The tax authority, ○○○ Tax Office, entered and managed the instant apartment unit in the ledger for confirmation of unsold housing units as the "Article 98-5 of the Restriction of Special Taxation Act", and subsequently accepted an application for reduction or exemption of capital gains tax under Article 98-5 of the Restriction of Special Taxation Act, and imposed the instant disposition by reconcing it, which is against the principle of trust protection as it violates the protection of the plaintiffs' trust.

2) Determination

A) Generally, in order to apply the principle of trust and good faith to the acts of the tax authorities in tax and legal relations, the tax authorities must name the public opinion that is the subject of trust to taxpayers, the tax authorities’ explanation that is justifiable and trusted to the trust of the tax authorities does not cause the taxpayers to be attributable to them, and the taxpayer must act in trust to what is the subject of the above opinion explanation, and the tax authorities’ disposition that goes against the above opinion list should result in infringing on taxpayers’ interest (see, e.g., Supreme Court Decision 2015Du2758, Nov. 12, 2015). Meanwhile, in tax and legal relations, the principle of trust and good faith or the principle of trust protection is an exceptional legal principle applicable only where there are special circumstances that are deemed that the protection of taxpayers’ trust is consistent with the justice, even if it sacrifices the principle of trust and good faith to apply the principle of trust and good faith to the acts of the tax authorities. Therefore, in order to apply the principle of trust and good faith to the acts of the tax authorities, it should be reasonable and reasonable and reasonable for the average taxpayer (see, 201.

B) According to the results of the fact-finding on Gap evidence 10-1 and evidence 11-2, and the fact-finding on the head of the tax office of ○○○○○, this court held that the apartment supply contract of this case has a seal affixed to confirm that the apartment is unsold in lots by the head of ○○○○○,00, and that the ○○○○○○ was recorded and managed as "Article 98-5 of the Restriction of Special Taxation Act" in the column for the classification of the unsold houses in lots in the ledger for the confirmation of the unsold houses for the apartment of this case. However, it is difficult to view that the above fact-finding alone did not require the tax office to impose the business income tax on the transfer of the apartment of this case, and it is difficult to view that the tax office granted the plaintiffs the trust that it would not impose the business income tax on the sale of the apartment of this case, or that the plaintiffs, who run the real estate sales company, etc., have formed trust that

B. As to the allegation of illegality in imposing penalty tax

1) The plaintiffs' assertion

Article 98-5 of the Restriction of Special Taxation Act (amended by Act No. 98-5 of the Restriction of Special Taxation) provides that the plaintiffs acquired the apartment of this case by actively responding to the government policy that seeks to resolve the unsold apartment problem, and accordingly, trusting that Article 98-5 of the Restriction of Special Taxation Act applies to the copy of the sales contract of the apartment of this case with the seal verifying that the apartment of this case is unsold in lots, and that there is a justifiable reason that the plaintiffs cannot be attributable to the failure to report and pay global income tax and value-added tax on the grounds that they transfer the apartment of this case

2) Determination

A) In order to facilitate the exercise of taxation rights and the realization of tax claims, additional tax under tax law is an administrative sanction imposed by a taxpayer who violates various obligations, such as reporting and tax payment, as prescribed by the Act without justifiable grounds, and is not considered the taxpayer’s intentional and negligent acts, but does not constitute justifiable grounds that do not cause a breach of duty (see, e.g., Supreme Court Decision 2007Du3107, Apr. 23, 2009).

B) Comprehensively taking account of the aforementioned evidence and the purport of the entire pleadings, the following circumstances acknowledged by the Plaintiffs alone cannot be deemed justifiable for the Plaintiffs to not properly perform their duty to report and pay global income tax and value-added tax. Therefore, the Plaintiffs’ assertion on this part is without merit.

① As seen earlier, the tax authority’s public opinion that the transfer of apartment in this case would not impose the business income tax on the transfer of apartment in this case was indicated, or the tax authority granted the Plaintiffs a trust that it would not impose the business income tax on the sale of apartment in this case.

② Whether the income from the transfer of real estate is business income under the Income Tax Act or capital gains shall be determined by taking into account all circumstances before and after the time when the transfer took place throughout the entire real estate held by the transferor. Therefore, it cannot be said that the same name income constitutes the same income under the Income Tax Act at all times.

③ Since the plaintiffs are the representative director or shareholders of a number of corporations with the aim of real estate sales business, it is anticipated that the income from the transfer of the apartment of this case constitutes business income.

C. As to the assertion on the violation of the principle of prohibition of duplicate tax investigation

1) The plaintiffs' assertion

Based on the right to ask questions, investigation, etc. under Article 170 of the Income Tax Act, the Defendant made a tax investigation in writing by notifying the Plaintiffs of the “written notification of submission of explanatory data,” the “information on explanation of taxation data of value-added tax,” and the “information on the submission of explanatory data of global income tax”. Since ○○ Director of Regional Tax Office, which is a higher administrative office, conducted an integrated tax investigation on the same taxable period and tax item for the Plaintiffs, and issued the instant disposition based on this, it constitutes a duplicate tax investigation prohibited under Article 81-4(2) of the Framework Act on National Taxes.

2) Determination

A) Article 7-2 of the Framework Act on National Taxes provides for the method, procedure, and limitation of tax officials’ exercise of their authority to conduct a tax investigation under the title "the taxpayer's right". Article 81-2(2)1 of the same Act provides that "in cases where questions are made to determine or correct the tax base and amount of national tax or the relevant account books, documents or other articles are inspected, investigated, or ordered to submit them (including the investigation of tax offence under the Procedure for the Punishment of Tax Evaders Act)" and Article 170 of the former Income Tax Act (amended by Act No. 13558, Dec. 15, 2015) also grants the public official in charge of questioning and investigation authority to the same effect.

The above tax investigation is a kind of administrative investigation to realize the State’s right to impose taxes, and is an inquiry to determine or correct the tax base and amount of national tax and to inspect or investigate books, documents and other articles or to order the submission thereof. In the case of a tax investigation to which the tax authority’s right to ask questions to a taxpayer or a person, etc. who is deemed to have a transaction with the taxpayer (hereinafter “taxpayer, etc.”) bears the legal obligation to allow a tax official to answer questions and undergo an inspection to collect the taxation data of the tax official. However, the act of an investigation where a taxpayer, etc. has no or no duty to answer and allow any other taxpayer, and which is not likely to infringe on the taxpayer’s freedom of business or abuse the right to investigate is not a “tax investigation” subject to the provisions of Chapter VIIB of the Framework Act on National Taxes. Ultimately, whether an investigation conducted by a tax official constitutes such “tax investigation” ought to be determined individually in a specific case by comprehensively taking into account the purpose and process of the investigation, the object and method of the investigation, data acquired through the investigation, size and period of the investigation (see, etc.).

B) According to the overall purport of Gap evidence Nos. 12-1, 2, and 13-1, 2, 13-1, 1-2, and 2-2, the following facts may be acknowledged.

(1) On October 15, 2015, in the process of processing the transfer income tax data on the instant apartment reported by the Plaintiffs, the Defendant sent the Plaintiffs a notice of submission of the “written explanation on the transfer of the instant apartment as follows.” On October 27, 2015, the Plaintiffs submitted explanatory materials stating that the current status of the acquisition and transfer of the instant apartment and the profits from the transfer of the instant apartment constitute transfer income.

B. On March 11, 2016, the Defendant sent to Plaintiff AA a notice of explanation of taxation data of value-added tax, and to Plaintiff BB a notice of submission of explanation data of global income tax. The Plaintiffs submitted explanation data of the same content as the pre-written explanation data in lieu of the pre-written explanation data on April 15, 2016.

Meanwhile, from June 9, 2016 to August 11, 2016 (from July 8, 2016 to August 5, 2016), the ○○○ Regional Tax Office conducted an individual tax investigation on the Plaintiffs, and notified the Defendant that the income accrued from the sale of the instant apartment constitutes the business income of the real estate sales businessman, subject to a resolution of the Advisory Committee for Determination of Tax Facts on August 25, 2016, by deeming that the income from the sale of the instant apartment constitutes the business income of the real estate sales businessman, and accordingly, the Defendant issued the instant disposition against the Plaintiffs.

C) Comprehensively taking into account the aforementioned legal principles and the aforementioned facts acknowledged by comprehensively taking account of the overall purport of the pleadings, it is reasonable to view that the Defendant’s “information on the submission of explanatory data” as of October 15, 2015, “information on the explanation of taxation data of value-added tax and guidance on the submission of global income tax data” does not constitute a tax investigation prohibited by reinvestigation.

① There is no specific calculation data (such as the amount of taxation data) to determine or correct the tax base or the amount of tax, and the explanation of the submission of explanatory data of global income tax, which the Defendant notified the Plaintiffs of the submission of explanatory data, shall not be deemed to constitute data to determine or correct the tax base or the amount of tax. Since the submission of explanatory data by the Plaintiffs is repeated only for the assertion that the instant apartment sales are capital gains, it does not constitute data to determine or correct the tax base or the amount of tax.

② There was no additional act to collect data from the Plaintiffs after the foregoing guidance was given, and the Defendant did not directly contact the Plaintiffs in the office of the Plaintiffs, and the procedure, such as prior notice to commence a tax investigation, was not conducted when guidance was given for the submission of the above explanatory materials.

(3) The guidance to submit the above explanatory materials is merely a request for cooperation in the submission of materials to confirm whether a real estate sales businessman has faithfully filed a tax return and paid tax by clarifying the unclear transaction relations, such as whether he is a real estate

④ It is difficult to view that the above guidance to submit explanatory materials does not peep into circumstances to deem that the Plaintiffs infringed on freedom of business or freedom of privacy, etc., and that the right to tax investigation may be abused.

D) As such, insofar as the Defendant’s guidance to submit the above explanatory materials does not constitute a tax investigation, the consolidated tax investigation by the director of ○○ Regional Tax Office on the Plaintiffs cannot be deemed as a reinvestigation prohibited under Article 81-4(2) of the Framework Act on National Taxes. Therefore, the Plaintiffs’ assertion on this part is without merit

3. Conclusion

Therefore, the plaintiffs' claims are dismissed in its entirety due to the lack of reason, and the judgment of the court of first instance is just, and the plaintiffs' appeal is dismissed in its entirety due to the lack of reason, and it is so decided as per Disposition.