The time when the contract for sale expires shall be retroactive to the time of the contract for sale.

Where a sales contract is terminated, losses due to the cancellation of sales cancellation shall accrue retroactively to the business year in which the initial sales contract was concluded.

Article 69(3) of the Enforcement Decree of the Corporate Tax Act (the time when profit and loss should be reverted)

2016Guhap235 Revocation of Disposition of Rejecting Corporate Tax

AA Construction Corporation

Head of the High Tax Office

December 13, 2016

oly, 2017.02

1. On April 16, 2015, the part of the Defendant’s refusal to rectify corporate tax of KRW 14,958,923,570 for the Plaintiff for the year 2010, in excess of KRW 4,285,958,054, in the disposition of refusal to rectify corporate tax of KRW 14,958,923,570, and the part of the disposition of refusal to rectify the amount of KRW 75,458,194,576, in excess of KRW 54,909,296,637, which reverts

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

The same shall apply to the order of the Gu office.

1. Details of the disposition;

가. 원고는 주택 및 상가 신축ㆍ판매업 등을 영위하는 회사로서 2008년경부터 ㅇㅇ시 ㅇㅇㅇ구 ㅇㅇ동 000일원의 DDDD 도시개발사업구역 중 A3, A5, E4 블럭에서 'FFFFFF아파트(이하 '이 사건 아파트'라고 한다)'를 신축・분양하였고, 2011. 3. 31. 그 작업진행률과 분양률을 기준으로 수입금액을 산정하여 2010년 귀속 법인세를 신고・납부하였다.

B. However, some of the buyers of the apartment of this case did not pay any balance. AAD Construction Co., Ltd, a contractor of a commercial building which was newly built in the E4 block, defaulted, 332 households and A5 block 142 households in 201, A3 block 20 households and A5 block 12 households in 2012, A3 block 20 households, A5 block 189 households in E4 block, and A33 block 320 households and A5 block 106 households in 2013.

C. On March 27, 2013, the Plaintiff filed a request for rectification to the Defendant for refund of KRW 4,409, 906,749 out of the corporate tax reverted to year 2010, which was 00 households in 2011 and 2012, by asserting that the termination of the contract constitutes grounds for filing a claim for rectification under Article 25-2 subparag. 2 of the Enforcement Decree of the Framework Act on National Taxes.

D. As to this, the Defendant rejected the Plaintiff’s request for correction on May 16, 2013 on the grounds that the difference in the amount of sales revenue related to the cancellation of the contract ought to be included in the gross income and deductible expenses for the business year to which the date of cancellation of the contract belongs, and thus, it cannot be the grounds for filing a claim for correction of the corporate tax for the business year to which the date of cancellation of the contract belongs in 2010. E) On August 20, 2013, the Plaintiff dissatisfied with the Defendant’s rejection disposition, filed an appeal with the Tax Tribunal on August 20, 2013. On March 31, 2015, the Plaintiff was determined to correct the tax base and amount of corporate tax for the business year to which the sales contract was cancelled prior to December 31, 2011, and was dismissed.

F. According to the above decision of the Tax Tribunal, the Defendant issued a request for correction to the effect that: (a) the Plaintiff’s total amount of corporate tax for the year 2010 on April 8, 2014 and December 10, 2015, the amount of KRW 4,749,032,380 against the Plaintiff was reduced or refunded; (b) the Plaintiff again asserted that the termination of the contract with respect to the 000 households released in 2012 and 203 constitutes grounds for filing a request for correction stipulated in subparagraph 2 of Article 25-2 of the Enforcement Decree of the Framework Act on National Taxes, along with the refund of KRW 14,958,923,570 for the same business year as the corporate tax for which March 28, 2015 belonged to KRW 75,458,194,576 for the same business year (hereinafter “instant request for correction”).

H. As to this, when the Defendant cancels the sales contract from the business year beginning after January 1, 2012, the difference between the profit and loss should be reflected in the profit and loss of the business year in which the date of cancellation of the contract falls. On April 16, 2015, the Defendant rejected the instant request for correction on the ground that it is the case (hereinafter “instant refusal disposition”).

I. On July 10, 2015, the Plaintiff filed an appeal with the Tax Tribunal on July 10, 2015, but the appeal was dismissed on December 14, 2015.

[Ground of recognition] Unsatisfy, Gap evidence Nos. 1 through 9 (including evidence attached with a serial number; hereinafter the same shall apply), the purport of whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The circumstances where a contract for sale in lots was cancelled after filing a corporate tax return are grounds for ex post facto request for correction under Article 45-2(2)5 of the former Framework Act on National Taxes (amended by Act No. 13552, Dec. 15, 2015; hereinafter the same) and Article 25-2 subparag. 2 of the Enforcement Decree of the Framework Act on National Taxes. In such cases, the tax authority should revise the disposition of rejection on the premise that the sales in lots does not constitute grounds for ex post facto request for correction in cases where the sales in lots was cancelled after the first business year after January 1, 2012, instead of reflecting the changed matters caused by the cancellation into gross income and deductible expenses for the business year in which the date of cancellation of the sales in lots falls.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Article 25-2 (2) 2 of the Enforcement Decree of the Framework Act on National Taxes delegated by Article 45-2 (2) 5 of the former Framework Act on National Taxes refers to one of the grounds for the first return, determination, or correction, where a contract related to the validity of a transaction, act, etc., which served as the basis for calculating the tax base and the amount of tax, is cancelled by the exercise of the right of rescission or where the contract is cancelled or cancelled due to

The purpose of this ex post facto request for correction is to expand the remedies of taxpayers by allowing taxpayers to file a request for reduction in cases where there is a change in the basis of calculating the tax base and the amount of tax due to the occurrence of certain ex post facto reasons after the establishment of the tax liability.

Meanwhile, Article 40(1) of the Corporate Tax Act provides that the business year in which a domestic corporation’s income and deductible expenses accrue shall be the business year which includes the date on which the relevant income and deductible expenses are determined. The so-called “rights confirmation principle” shall be deemed realizing the income when a right which does not actually accrue even if there is no income. In such a case where there is an interval between the time when the right which is the cause of the income and the time when the income is determined and the time when the income is realized, the right which is the cause of the income is not the time when the income is determined and the time when the income is realized is determined and the income is calculated based on the time when the right which is the cause of the income is not the time when the income is realized and the income is calculated based on the premise that it would be realized in the future. Accordingly, even if the tax liability was established by the occurrence of the right which is the cause of the income and the time when the income is determined, the tax liability initially established cannot be imposed in principle on the income that is not realized due to the occurrence of a certain cause.

Therefore, the corporate tax also becomes a ground for filing a subsequent claim for correction, in principle, for the revocation of a contract due to the exercise of the right to cancel or the unavoidable reasons under Article 25-2 subparagraph 2 of the Enforcement Decree of the Framework Act on National Taxes (Supreme Court Decision 2013Du12829 Decided March 13, 2014). In light of the aforementioned legal principles, the portion related to the sales contract cancelled after January 1, 2012, among the corporate tax reverted to year 2010, shall also be subject to a subsequent claim for correction, unless there are special circumstances.

3) However, in special circumstances, such as ① concerning the cancellation of a certain contract under the Corporate Tax Act or relevant regulations, the amount of income not realized therefrom is separately defined as the grounds for deduction, etc. of the amount of income for the business year to which the date of such cancellation belongs, or ② the taxpayer has filed corporate tax for the cancellation of a sales contract, etc. that occurs on the ordinary and repetitive basis in accordance with corporate accounting standards or practices in the business year to which the date of such cancellation belongs in the manner of deducting the amount of income for the business year to which the date of such cancellation belongs, the contract cannot affect the original tax liability, and thus, it cannot be the grounds for filing a later request for correction (see Supreme Court Decision 20

A) Whether Article 69(3) of the Enforcement Decree of the Corporate Tax Act applies

Article 69(3) of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 23589, Feb. 2, 2012; Presidential Decree No. 23589, Feb. 2, 2012; Presidential Decree No. 20135, Feb. 2, 2012; Presidential Decree No. 20145, Feb. 2, 2012; Presidential Decree No. 20135, Feb. 2, 2012; Presidential Decree No. 20135, Feb. 2, 2012; Presidential Decree No. 20255, Feb. 2, 2012; Presidential Decree No. 201155, Feb. 2, 2012; Presidential Decree No. 20100, supra; Presidential Decree No. 2010, Jan. 1, 2012; Presidential Decree No. 20130, Feb. 3, 201).

B) According to the evidence No. 1, in light of the former corporate tax return method, whether there are special circumstances that could not serve as a ground for requesting the ex post facto correction, the income statement in 201, which was submitted by the Plaintiff at the time of filing a corporate tax return, contains KRW 40,579,275,609, and KRW 39,440,669,852, respectively, as loss for cancellation of the contract, and the income statement in 2012, are recognized as profit only when the loss for cancellation of the contract is highly likely to bring into an enterprise, and the consolidated companies in the consolidated financial statements are highly likely to bring into an enterprise. If economic profit is less likely to bring into an enterprise, it is not recognized as profit until there is cash income. On the other hand, if uncertainty of the amount already recognized as profit and loss for termination of the contract occurs, such as termination of the contract, it shall be treated as loss for termination of the contract.

However, it is justified in terms of corporate accounting that the nature of the discount or return of sales in accordance with corporate accounting standards is equivalent to the price reduction or return that takes place according to the need for transaction, and thus, it is reasonable in terms of corporate accounting that intends to accurately analyze and measure the business performance of an enterprise for each fiscal period in response to continuous and repeated business activities. Thus, a relatively large amount of changes caused by special circumstances, such as cancellation of the sales contract of the apartment of this case, such as the cancellation of the sales contract of this case, are the same as the cancellation of the sales contract of this case.

In addition, according to the evidence mentioned above, there is no other way of accounting that changes the profits and losses already recognized on the financial statements after the fact, while the plaintiff cancelled part of the sales contract concluded in 2008 in March 3, 201, and recognized it as a ground for filing a subsequent claim for correction of corporate tax for the corporate tax belonging to the year 2008 and requested correction of the corporate tax belonging to the defendant around March 3, 2012, but the defendant rejected the correction, but it can be sufficiently recognized that the corporate tax was made in order to report corporate tax as pointed out by the defendant and correct it by future appeal or administrative litigation, etc. Thus, it is difficult to view that the plaintiff has reported corporate tax in a way that reflects the profits and losses arising from the cancellation of the contract in accordance with corporate accounting standards or practices in the business year at the time of cancelling the contract

4) Ultimately, the rejection disposition of this case is unlawful and the plaintiff's assertion pointing this out is with merit.

3. Conclusion

If so, the plaintiff's claim is justified.