The commencement period of housing construction and sales business business should be regarded as the time of commencing the sale of housing.

Since the commencement of a business of the Housing Construction and Sales Business Act is substantially determined at the time when the preparation for the business is completed and becomes able to carry out the original business purpose, it shall be deemed the time of commencement of sale of each house, which is not the time of commencement of the housing

Article 19 of the Income Tax Act

Incheon District Court 2018Guhap5160 global income and revocation of disposition

○○ et al.

AA Head of the Tax Office

oly 2019.14

oly 2019.19

1. All of the plaintiffs' claims are dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposing global income tax of KRW 77,407,070 (including additional tax) and KRW 77,752,90 (including additional tax) and global income tax of KRW 128,515,980 (including additional tax) for the year 2013 on September 5, 2017 with respect to Plaintiff Ma○○, the same day of which belongs to Plaintiff 2013, shall be revoked.

1. Details of the disposition;

가. 원고들은 2012. 7. 1. 공동으로(지분 각 50%) 주택신축판매업에 관한 사업자등록을 하고, OO시 OO읍 OO리 00 지상에 '◆◆ 101동'이라는 명칭으로 공동주택 19세대(이하 '이 사건 1주택'이라 한다)를 신축하여 2013. 1. 17. 사용승인을 받아 그 무렵 분양하였다.

나. 원고 엄□□는 2014. 10. 8. 주택신축판매업에 관한 사업자등록을 하고, OO시 OO동 00 외 1필지 지상에 '◁◁ 101동, 102동'이라는 명칭으로 공동주택 14세대(이하 '이 사건 2주택'이라 하고, 이 사건 1주택과 통틀어 '이 사건 각 주택'이라한다)를 신축하여 2015. 4. 1. 사용승인을 받아 그 무렵 분양하였다.

C. On May 30, 2014, the Plaintiffs sold soil and sand, stone, and other by-products acquired while removing the existing building for the construction of the instant one house in 2012, which was the immediately preceding year, and generated a revenue of KRW 50,000,000, respectively. The Plaintiffs applied simple expense to the total revenue amount of the instant one house on the ground that the said revenue amount falls short of the standard amount of KRW 36,000,000, and engages in construction business, and applied special tax reduction and exemption for the small and medium enterprises under the Restriction of Special Taxation Act, and paid the comprehensive income tax for each year 2013

D. On May 26, 2016, in 2014, the immediately preceding year (2016) sold by-products, such as scrap metal, acquired while removing the existing building for new construction of the instant two houses, and generated revenue of KRW 381,150. The instant two houses on the ground that the said revenue amount falls short of the standard amount of KRW 36 million, applying simple expenses to the total revenue amount of the instant two houses, and applying special tax reduction and exemption for small and medium enterprises under the Restriction of Special Taxation Act to the comprehensive income tax for the year 2015.

E. From April 26, 2017 to June 24, 2017, the commissioner of BB Regional Tax Office: (a) conducted a personal consolidated investigation on the Plaintiffs; (b) as a result, (c) the Plaintiffs and the Plaintiff’s Fund: (d) took place business in 2012, including selling by-products; (d) year 2014; and (e) year 2013 and year 2015, which was the time of new construction or sale of each of the instant housing; and (e) shall exclude simple expenses applied at the time of filing a return and payment of global income tax for 2013 and 2015; (b) shall be deemed as having failed to engage in construction business; and (c) the Defendant notified the Plaintiff of the tax data to the effect that the special reduction and exemption of the amount of tax on small and medium enterprises should be excluded from the amount of tax on global income (including additional tax on global income for 2013,707,070 won (including additional tax on global income for 2084, 2975) year , 2975).

F. The Plaintiffs appealed and filed an appeal with the Tax Tribunal on April 6, 2018 on November 30, 2017, but the Plaintiff’s claim was dismissed on August 16, 2018, and on September 4, 2018, respectively.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 6, Eul evidence 1 to 4 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. The plaintiffs' assertion

A. Simple expense application assertion

The plaintiffs' business commencement date of each of the houses of this case shall be registered as business operators, acquisition of each of the above houses and commencement of each of the above houses, and the amount of revenue from the sale of by-products, such as scrap iron, was 2012 (the new house sale business of this case) and 2014 (the new house sale business of this case). Since the total amount of revenue of each of the above years is less than 36 million won, which is the standard amount prescribed by the Enforcement Decree of the Income Tax Act, the simple expense expense rate shall apply to each new house sale business of this case. Nevertheless, each of the dispositions of this case applying standard expense rate, which is not the simple expense

(b) argument on the application of special tax reduction

Since the Plaintiffs directly constructed each of the instant houses with a construction business license, each of the instant dispositions that excluded them from being included in the reduction and exemption as a small and medium enterprise that is engaged in construction business under the Restriction of Special Taxation Act is unlawful.

3. Relevant statutes;

It is as shown in the attached Form.

4. Determination

(a) Simple expense rates apply;

(1) Relevant legal principles

Under the principle of no taxation without law, 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 circumstance. However, even in cases where the language and text of the tax law itself is not clear, or if it appears that they are contrary to or conflicting with other laws and regulations, the court must ex officio state 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 the legal stability and predictability pursued the principle of no taxation without law (see, e.g., Supreme Court en banc Decision 2011Du551, Apr. 16, 2015).

(2) Start date of business under the former Income Tax Act

Article 1-2(1)5 of the former Income Tax Act (amended by Act No. 15225, Dec. 19, 2017; hereinafter the same) provides for the definition of "business operator" under Article 1-2(1)5 of the Income Tax Act; Article 19(1) of the Income Tax Act provides that Article 8 of the Value-Added Tax Act on the method of filing a new application for business registration and applying for alteration of business registration shall apply mutatis mutandis to a business operator who registers his/her business pursuant to the former Income Tax Act; and Article 168(3) of the Value-Added Tax Act does not provide for the provision that explicitly determines the commencement date of business as prescribed in Article 6 of the Enforcement Decree of the Value-Added Tax Act or the provision that provides for such provision to the extent that it does not undermine legal stability and predictability, it shall be examined when the starting date of business of the former Income Tax Act shall be deemed the business income through the combined interpretation of laws and regulations that consider the legislative purport

In full view of the language, structure, and purpose of the relevant statutes, such as the former Income Tax Act and the Value-Added Tax Act, it is reasonable to view that the starting date of the business of the business income under the Income Tax Act is based on the time stipulated in each subparagraph of Article 6 of the Enforcement Decree of the Value-Added Tax Act, which prescribes the

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, Article 1-2(1)5 of the same Act defines a resident as a business entity, the business under the former Income Tax Act should be deemed as premised on the actual occurrence of income. Therefore, the commencement date of the business cannot be advanced until the preparation of the business, which is the time of providing goods or services directly causing income, begins.

② As a result, it is difficult to objectively specify the starting point of the preparation act in terms of the aspects that the scope is set by the enterpriser’s subjective intent or necessity, as well as considerable unspecific and extensive business preparation, it is difficult to objectively specify the starting point of the preparation act. If the starting point of the preparation of the project is earlier than the starting point of the acquisition point of land or the starting point of the building at the time of the commencement of the preparation of the project, then the revenue amount of the immediately preceding taxable period, which is the legal fiction of the application of the simple expense rate under Article 143(4)2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 28637, Feb. 13, 2018), may vary depending on the time of the preparation act, and thus, it may cause interference with the national legitimate exercise of the right to tax collection or cause inequality among the taxpayers.

③ According to Articles 1-2(1)5 and 19 of the former Income Tax Act, a resident who has income generated from continuous and repeated activities under his/her own account and responsibility for profit-making purposes is an entrepreneur. Article 2(3) of the Value-Added Tax Act provides that a person who independently supplies goods or services for business purposes regardless of the existence of profit-making purposes is an entrepreneur and is liable to pay value-added taxes. Here, “person who independently supplies goods or services for business purposes” is a person who supplies goods or services with continuous and repeated intent by meeting the business form to create added value (see Supreme Court Decision 98Du16705, Sept. 17, 199). Thus, except for the existence of profit-making purposes, the meaning of the entrepreneur as provided in the former Income Tax Act is not significantly different.

(4) The former Income Tax Act imposes an obligation on the head of a tax office having jurisdiction over a new entrepreneur under Article 168 (1) to make a business registration under the former Income Tax Act, and imposes an obligation on the person who has made a business registration under Article 168 (2) of the same Act to make a business registration under the former Income Tax Act, which stipulates that the business operator shall be deemed to have made a business registration under the former Income Tax Act, and imposes an obligation to prepare an invoice or receipt as prescribed by Presidential Decree and to issue the goods or services upon the person who has received the goods or services if the business operator supplied the 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 the registration of business, uses the term "the starting date of business" as "the starting date of business" in relation to the registration of business, and Article 5(2) of the Value-Added Tax Act provides for the first taxable period for a new business operator, and Article 6 of the Enforcement Decree of the Value-Added Tax Act provides that "the starting date of business pursuant to Article 5(2) of the Value-Added Tax Act shall be the starting date of

(3) Determination on the instant case

(A) According to the following circumstances that can be seen by comprehensively taking account of the aforementioned legal principles, the evidence as seen earlier, and the purport of the entire pleadings, the commencement date of the business of the housing construction and sales business run by the Plaintiffs ought to be the time of commencing the sale of each of the instant housing units, on which the supply of goods as stipulated in Article 6 subparag. 3

(1) Before the former Enforcement Decree of the Income Tax Act (wholly amended by Presidential Decree No. 22580 on December 30, 2010) is partially amended.

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. 143(4)1 of the same Act (amended by Presidential Decree No. 2580, Feb. 2, 2012; Presidential Decree No. 143(4)1 of the same Act) stipulates that, with respect to all of the business operators who start a business in the relevant taxable period, subparagraph 2 of Article 143 (including the amount of revenue increased by determination or revision) shall apply the simple expense rate to those business operators whose aggregate amount of revenue during the immediately preceding taxable period (including the amount of revenue increased by determination or revision) falls short of the following amount. Since then, 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. 23580, Feb. 1, 201301).

In addition, Article 143 (4) of the former 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 partially amended by Presidential Decree No. 28637, Feb. 13, 2018, provides that where the total amount of income in the immediately preceding taxable period falls short of the standard amount, if the income in the relevant taxable period falls short of the standard amount by double-entry bookkeeping, it shall be excluded from the application by simple expense expense rate, and the standard expense rate shall be applied.

In light of the legislative history of Article 143 (4) of the former Enforcement Decree of the Income Tax Act, the simple expense rate system is a system 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, the legislators seem to be able to understand "the commencement of construction" and "the commencement of construction business, construction business, and 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 supply of housing for sale as objective and practical time rather than the commencement date which can determine the commencement date of the business according to the intention of the business operator.

② The commencement date of the business of the Housing Construction and Sales Business shall be determined on the basis of the time when the preparation for the business is completed and when the housing construction and sales business becomes a condition that the business is performed or is capable of performing its original business (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 former Housing Construction and Sales Business Act is to sell housing, and thus,

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 existence of profit-making purposes of the business and the scale, frequency, mode, etc. of the business (see, e.g., Supreme Court Decision 91Nu6559, Nov. 26, 191). However, there is no evidence suggesting that the Plaintiffs had objectively expressed their intent to engage in the housing construction and sales business for the purpose of profit prior to commencement of the sale of each of the instant housing units, and the fact that the Plaintiffs commenced or completed the construction of each of the instant housing units alone is insufficient to deem that the activities are continuously and repeatedly conducted for profit-making purposes and have objective substance as a

(B) The fact that the plaintiffs commenced the sale of each of the houses of this case around 2013 (one house of this case) and around 2015 (two houses of this case) is as seen earlier, and therefore, the plaintiffs commenced their business during the pertinent year. Thus, the plaintiffs' assertion on this part is not acceptable.

(b) Application of special tax reduction or exemption for small or medium enterprises;

(1) Article 2(3), 7(1)1 (g), and 7(1)2 of the former Restriction of Special Taxation Act (amended by Act No. 12853, Dec. 23, 2014; hereinafter the same shall apply) (amended by Act No. 15221, Dec. 19, 2017; hereinafter the same shall apply) provides that the amount of tax calculated by multiplying the income tax on the construction income accrued from the relevant place of business by 20/10 shall be reduced or exempted; the type of business to be used in the Act shall be subject to the Korea Standard Industrial Classification publicly announced by the Commissioner of the Statistics Korea (amended by Act No. 15221, Dec. 19, 2017; hereinafter the same shall apply); and the comprehensive provision of construction codes, including the total number of construction works, to a company operating a construction business among small and medium enterprises, shall not be subject to the Korea Standard Industrial Classification (amended by Act No. 15281, Dec. 31, 2017). 2017).

이 사건에 관하여 보건대, 갑 제2, 4, 7 내지 10호증, 을 제2호증의 각 기재 및 변론 전체의 취지를 종합하여 인정되는 다음과 같은 사정들, 곧 ① 이 사건 각 주택의 집합건축물대장에는 시공자가 주식회사 ◐◐건설(이 사건 1주택), 주식회사건설(이 사건 2주택)로 각 기재되어 있으며, 원고들이 위 각 시공자로부터 세금계산서 및 계산서를 발급받은 자료를 발견할 수 없는 점, ② 원고들은 건설업 면허를 소지하고 있지 않고, 원고가 위 각 시공자한테 명의를 차용하였다거나, 부분도급을 주었다거나, 이 사건 각 주택 건설공사를 총괄적인 책임 하에 건설할 인적, 물적 시설이나 능력을 갖추었다고 볼 만한 별다른 자료도 제출하지 못하고 있는 점, ③ 원고들이 제출한 세금계산서 및 원천징수이행상황신고서 등에 의하면, 원고들이 일용근로자에 대한 노무비 등으로 일부 비용을 지출한 사정은 인정되나, 그 액수가 이 사건 각 주택의 분양수입금액에 크게 미치지 못하는 점 등을 고려하면, 이 사건 각 주택에 관하여 원고들이 영위하는 사업은 위 한국표준산업분류상 '주거용 건물 개발 및 공급업'에 해당하고, 구 조세특례제한법상 중소기업특별세액 감면 대상이 되는 '건설업'에 해당하지 않는다.

(2) In addition, the special tax reduction and exemption system for small and medium enterprises under the Restriction of Special Taxation Act is to support the improvement of financial structure and the investment in facilities of small and medium enterprises by granting a temporary reduction and exemption of income tax and corporate tax to protect and foster domestic small and medium enterprises with weak competitiveness. In light of the fact that the amount of tax reduced and exempted is a special taxation system premised on the use of the amount of tax reduced and exempted for the purpose prescribed by the same Act, a national operating the relevant business at least at the end of the taxable period subject to the reduction and exemption (see Supreme Court Decision 2005Du685, Jan. 13, 2006).

However, comprehensively taking account of the evidence No. 4 and No. 1 evidence, the Plaintiffs’ new housing sales business of this case was closed on December 31, 2013, and the new housing sales business of Plaintiff Dohsan of this case on August 1, 2015, based on the overall purport of the pleadings in each of the statements No. 4 and No. 1 evidence No. 1, and the newly built housing sales business of this case was recognized as having been closed on August 1, 2015. The Plaintiffs did not already discontinue their business before December 31, 2013 and December 31, 2015, which is the end of the taxable period of global income tax for which the application for special tax reduction or exemption was filed for each of the instant housing, and thus, in this respect, the relevant business was not subject to the special tax reduction or exemption under Article 7(1) of the former Restriction

(3) Therefore, we cannot accept this part of the plaintiffs' assertion.

5. Conclusion

Therefore, each claim of the plaintiffs is dismissed in entirety as it is without merit, and it is so decided as per Disposition.