Cho-2018-China-16910 ( October 26, 2018)

Since the starting date of business shall be the date of commencing the supply of goods or services, it shall be deemed 2016, which is the date of approval for new building of the instant business establishment.

Since the starting date of business shall be the date of commencing the supply of goods or services, it shall be deemed 2016, which is the date of approval for new building of the instant business establishment.

Article 6 of the Enforcement Decree of the Value-Added Tax Act

2018Guhap54389 Revocation of Disposition of Imposing global income tax, etc.

여@@

000 director of the tax office

May 24, 2019

June 28, 2019

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposing global income tax of KRW 373,552,510 (including additional tax) for the Plaintiff on December 8, 2017 shall be revoked.

1. Details of the disposition;

가. 원고는 안@@와 공동으로(원고와 안@@의 지분 각 50%) 2015. 10. 5. 주택신축판매업에 관한 사업자등록을 하였고, 인천 $$구 $$동 34-100 지상에 '$$ ###8차'라는 명칭으로 오피스텔 56호(이하 '이 사건 1주택'이라 한다)를 신축하여 2016.10. 14. 사용승인을 받고 그 무렵 분양하였다.

나. 원고는 박@@, 박&&과 공동으로(원고 지분 17%, 박@@ 지분 78%, 박&& 지분 5%) 2015. 11. 2. 주택신축판매업에 관한 사업자등록을 하였고, 인천 서구 **동 506-5 지상에 '**###주상복합'이라는 명칭으로 주택 24세대, 오피스텔 54호(이하 '이 사건 2주택'이라 하고, 이 사건 1주택과 통틀어서는 '이 사건 각 주택'이라한다)를 신축하여 2016. 12. 7. 사용승인을 받고 그 무렵 분양하였다.

C. On May 31, 2017, the immediately preceding year, the Plaintiff sold scrap metals, trees, and other by-products acquired while removing the existing building for the new construction of each of the instant housing, and performed a string and Doing construction work (i.e., 2,514,750 won related to the new construction of the instant one house + KRW 1,179,171 won related to the new construction of the instant two houses). The Plaintiff reported and paid the income tax for the year 2016 by applying the simple expense rate to the total revenue amount of each of the instant housing (one house of this case, KRW 5,275,310,000, KRW 2 house of this case, KRW 1,897,735,568) on the grounds that the said revenue amount falls short of the standard amount of 36 million.

라. @@지방국세청장은 2017. 8. 9.부터 2017. 9. 14.까지 원고에 대한 개인통합조사

as a result of its implementation, the construction of each of the instant houses for which 2015 years have not elapsed, such as selling by-products, etc.

· In view of the commencement of the business in 2016, the time of sale, the Plaintiff’s global income tax for the year 2016

Exclusion of simple expense rate applied at the time of high and payment, and income amount shall be calculated again by standard expense rate.

The Defendant notified the Defendant of taxation data to the effect that the taxation data should be stated. Accordingly, the Defendant on December 8, 2017

The Plaintiff issued a revised notice of the global income tax of KRW 373,552,510 (including additional tax of KRW 49,442,836) to the Plaintiff in 2016 (hereinafter “instant disposition”).

E. On March 2, 2018, the Plaintiff dissatisfied with the instant disposition, filed an appeal with the Tax Tribunal on March 2, 2018.

On June 26, 2018, it was dismissed.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 4, 7, Eul evidence 1 (including branch numbers, hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

In applying mutatis mutandis the Corporate Tax Act, which is similar to the business income taxation system of the Income Tax Act, the Plaintiff’s business start shall be registered as the Plaintiff, the land for each of the instant houses was acquired, the new construction was commenced, and the amount of revenue generated from the sale of by-products, such as scrap iron, etc. was 2015, and the total amount of revenue in 2015, which was the immediately preceding taxable period in 2016, falls short of 36 million won, which is the standard amount under Article 143(4)2(b) of the Enforcement Decree of the Income Tax Act, and thus, the simple expense rate should be applied to the Plaintiff. Nevertheless, the instant

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) Relevant legal principles

Under the principle of no taxation without representation, tax laws shall be interpreted in accordance with the text of the law, and shall not be extensively interpreted or analogically interpreted without reasonable grounds. However, even according to the language and text of the tax laws itself, if their meaning 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 among 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 of the principle of no taxation without representation (see, e.g., Supreme Court Decision 2007Du4438, Feb. 15, 2008).

(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 on the starting date of business in the business income does not include any provision that explicitly determines the starting date of business as prescribed in Article 6 of the Enforcement Decree of the Value-Added Tax Act or such provision shall not apply mutatis mutandis to the business income so that it does not undermine legal stability and predictability. Therefore, it is examined when the starting date of business in the former Income Tax Act should be regarded as the business income

In full view of the language, structure, and purpose of 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 business in the business income under the Income Tax Act is not the Corporate Tax Act, but the starting date of business under Article 5 (2) of the Enforcement Decree of the Value-Added Tax Act is determined

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, the revenue amount in the immediately preceding taxable period, which is the premise for 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) depending on the time of the preparation act, may vary in the revenue amount in the immediately preceding taxable period, which is the premise for the application of the simple expense rate under Article

③ According to Articles 1-2(1)5 and 19 of the former Income Tax Act, a resident with income arising 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 is an entrepreneur and becomes a person liable to pay value-added tax, regardless of the existence of profit-making purposes. 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, the meaning of a business entity under the former Income Tax Act, except for the existence of profit-making purposes.

(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 revealed by comprehensively taking account of the contents of the relevant statutes and the evidence and the purport of the entire pleadings, the commencement of the business of the housing construction and sales business run by the Plaintiff shall be deemed to be the time of commencing the sale of each house of this case, on which the Plaintiff starts the supply of goods as stipulated in Article 6 subparag. 3 of

① Article 143(4)1 of the former Enforcement Decree of the Income Tax Act (wholly amended by Presidential Decree No. 22580, Dec. 30, 2010); Article 143(4)1 of the former Enforcement Decree of the Income Tax Act (wholly amended by Presidential Decree No. 22580, Dec. 30, 2010); Article 143(2) of the former Enforcement Decree of the Income Tax Act provides that “an entrepreneur whose aggregate amount of income (including an increased amount of income due to determination or revision) during the immediately preceding taxable period falls short of the following amount” shall be applied to all new entrepreneurs. After that, Article 143(4)1 of the former Enforcement Decree of the Income Tax Act, which was amended by Presidential Decree No. 22580, Dec. 30, 2010, in order to prevent the reduction of income tax through the application of simple expense rate, where the relevant taxable period falls under the criteria for the application of construction business, a new entrepreneur with income above the standard amount of income shall be excluded from the date of commencement.

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 January 1, 2019, which was partially amended by Presidential Decree No. 28637, Feb. 13, 2018, provides that the standard expense rate shall be applied by excluding from the application of simple expense rate, in cases where the total amount of income for the immediately preceding taxable period is less than the standard amount, as well as the business operator (title 1) who has commenced a business anew in the relevant taxable period, if the income for the relevant taxable

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 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 understand the "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 supply of housing subject to sale as objective and practical time rather than the commencement date which can determine the commencement date according to the business operator's intent.

② The commencement date of a business of the Housing Construction and Sales Business shall be determined on the basis of the time when the preparation for a business is completed and when the preparation for the original business is conducted or is able to be conducted (see 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 Supreme Court Decision 2008Du21768, Jul. 22, 2010);

The purpose of this study is to sell a house, and it is difficult to view that each of the houses of this case was commenced only by the fact that each of the houses of this case was commenced.

(3) Whether a business income under the Income Tax Act constitutes 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, 1991). However, it is difficult to deem that the intention to engage in a housing construction and sales business for the purpose of profit was objectively revealed before commencing the sale of a house, and the fact that the construction of a new house was commenced or completed for profit-making purposes alone cannot be deemed as having satisfied the objective substance of a housing construction and sales business entity.

(B) Since the Plaintiff’s commencement of sale of each of the instant housing units around 2016 is as seen earlier, the Plaintiff is deemed to have commenced a field business in 2016, and thus, the instant disposition is lawful.

3. Conclusion

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