Whether a person subject to simple expense rate is applied

There is no evidence to deem that the Plaintiff had objectively expressed his intent to engage in the housing construction and sales business for the purpose of profit prior to commencing the sale of each of the instant houses, and the fact that each of the instant houses was commenced or completed, alone, is difficult to deem that the Plaintiff had objective substance as a new housing sales business entity due to continuous and repeated activities for profit-making purposes.

Article 143 of the Enforcement Decree of the Income Tax Act (Estimated Decision and Revision)

2018Guhap87972 Global Income and Revocation of Disposition

Gangwon ○

00. Head of tax office

on October 23, 2019

on October 27, 2019

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

Defendant’s global income tax amounting to KRW 000,000 for the year 2015, imposed on Plaintiff on November 1, 2017 (additional tax)

b) revoke each disposition of 000 won (including additional duties) of global income tax for the year 2016.

1. Details of the disposition;

A. The Plaintiff, a business proprietor operating the housing construction and sales business, with joint business operators:

In addition, each house (hereinafter referred to as "each house of this case") was constructed and sold.

B. In the event that the amount of income falls short of the amount stipulated in Article 143 (4) 2 (b) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26982, Feb. 17, 2016; hereinafter the same shall apply) has accrued in the taxable period immediately preceding the pertinent year, the Plaintiff registered the business as follows, and then the Plaintiff paid the estimated income by applying the simple expense rate under the above provision, and accordingly, reported and paid the comprehensive income tax.

C. From August 8, 2017 to September 16, 2017, the director of the Seoul Regional Tax Office, upon conducting a tax investigation with respect to the Plaintiff, notified the Defendant that the amount of income should be calculated by estimation based on ‘standard expense rate', deeming that the Plaintiff is not subject to the application of simple expense rate. On November 1, 2017, the Defendant notified the Plaintiff of the correction and notification of the global income tax amount of KRW 000 (including additional tax) and global income tax of KRW 000 (including additional tax) for the year 2015 and global income tax of KRW 000 for the year 2016 (hereinafter “instant disposition”).

D. On May 31, 2018, the Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on May 31, 2018. However, the Tax Tribunal dismissed the said appeal on September 6, 2018, and the Plaintiff was served with the written decision on the appeal on September 10, 2018.

[Reasons for Recognition] The facts without dispute, Gap evidence 1 to 4 (including each number), the whole purport of the pleading

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff reported the amount of KRW 000 and KRW 000 for the instant housing-related business in 2014 with regard to the instant housing-related business in 2014, respectively, with different members of a joint business for each of the instant housing units. In addition, the Plaintiff constitutes a business entity whose total amount of revenue during the immediately preceding taxable period is less than KRW 36 million under Article 143(4)2(b) of the former Enforcement Decree of the Income Tax Act and is subject to the simple expense expense application. In particular, the Income Tax Act imposes a duty to report the income tax on the expenses incurred before the supply of goods and services under the Value-Added Tax Act is finalized in the taxable period in which the relevant expenses are determined, and thus, the business entity whose income tax has already been reported due to the obligation to report pursuant to the said provisions shall be deemed to have already commenced the business in the taxable period on which the income tax was returned regardless of whether the goods

Nevertheless, by applying the Value-Added Tax Act to the determination of the taxable period and revenue attribution, the Defendant deemed that there was no income amount belonging to the Plaintiff for the immediately preceding year of each of the instant houses, and that the Plaintiff is not a person subject to the application of the simple expense rate under the proviso of Article 143(3) of the former Enforcement Decree of the Income Tax Act, and the disposition of this case was made by applying the standard expense rate under Article 143(1)1 of

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) 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, the amount of income shall be determined or corrected by deducting the amount of income from the amount of income, purchase costs, rent, personnel expenses, and income amount from the amount of income, by standard expense rate. However, with respect to 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" means a business operator newly commencing a business in the pertinent taxable period, and the constructor (including a residential building development and supply business; hereinafter the same shall apply) whose amount of income in the pertinent taxable period falls short of 150 million won or less, or a constructor (including a person subject to simple expense rate under Article 143(4)1 and Article 208(5)2)2 of the former Enforcement Decree of the Income Tax Act).

However, even based on the language and text of tax law itself, if its meaning is unclear, or if it appears that there is a conflict between laws and regulations, the court should naturally clarify 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, purpose, etc. to the extent that it does not undermine legal stability and predictability pursued by the principle of no taxation without law (see, e.g., Supreme Court en banc Decision 2011Du551, Apr. 16, 2015).

2) 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, in the case of a housing construction and sales business run by the Plaintiff, the starting date of the business is objective and practical time when the supply of each of the instant housing units was commenced, i.e., the starting date of the sale of each of the instant housing units

(1) 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. 143 (4) 1 of the same Act (amended by Presidential Decree No. 22580, Feb. 2, 2012; Presidential Decree No. 143 (1) of the same Act (amended by Presidential Decree No. 22580, Feb. 1, 2012) provides that, with respect to all new business operators who start a business in the relevant taxable period, they shall be excluded from the application of the simplified expense rate in order to prevent the reduction of income tax through the application of the simple expense rate, if the income amount of a new business among new business operators falls under the criteria for the application of the simple expense rate, and Article 12 (4) 2 of the Addenda to the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Feb. 2, 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 a business newly commenced in the relevant taxable period as well as a business operator (subparagraph 1) whose total amount of income for the immediately preceding 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 in its nature (see, e.g., Supreme Court Decision 2008Du21768, Jul. 22, 2010). The purpose of the business is to sell housing, and it is difficult to deem that the commencement of

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, the scale, frequency, mode, etc. of the 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 the purpose of profit prior to commencing the sale of each of the instant housing. The fact that the Plaintiff commenced or completed each of the instant housing, solely on the basis of the fact that the Plaintiff commenced or completed the construction of each of the instant housing for profit-making purposes, it is difficult to deem

3) Furthermore, according to the overall purport of evidence Nos. 3-2 and 3-3 of each of the instant housing, the Plaintiff’s report on income from each of the instant housing-related joint business in 2015 and the year 2016 constituted 0000. The Plaintiff newly started construction business, and the Plaintiff’s new entrepreneur who newly started construction business falls short of KRW 150 million of the standard amount of income in the relevant taxable period, or falls short of KRW 36 million of the standard amount of income in the immediately preceding taxable period, cannot be deemed to fall under a person subject to the application of simple expense rate under each subparagraph of Article 143(4) of the former Enforcement Decree of the Income Tax Act on the premise that the total amount of income in the immediately preceding taxable period falls short of KRW

3. Conclusion

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