Seocho 2014west 4768 ( October 11, 2015)

The profit-making business of the apartment residents' representative council shall be deemed to be one resident and fall under the business income of the apartment residents

It is reasonable to regard apartment residents as the income of the council of occupants' representatives because they are continuously and repeatedly engaged in business for profit. It is difficult to see that all apartment occupants do not constitute the council of occupants' representatives and distribute the income to members.

Article 2 of the Income Tax Act, Article 19 of business income

Seoul Administrative Court-2015-Gu Partnership-62545 ( October 17, 2016)

AAAAAA apartment council of occupants' representatives

BB Director of the Tax Office

January 29, 2016

on October 17, 2016

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 on the Plaintiff on May 2, 2013 is revoked.

1. Details of the disposition;

A. The plaintiff is the council of occupants' representatives consisting of representatives of occupants elected in proportion to the number of households by buildings of AAAAAAA apartment (hereinafter referred to as " apartment") located in Seoul 00-Gu,000-ro, Seoul 00.

B. During the period indicated in the attached Table, the Plaintiff received fees in return for the Plaintiff to lease part of the apartment in managing the section for common use of the apartment, or to allow the Plaintiff to install the vending machine and sell the goods by installing the vending machine (hereinafter referred to as “the profits of this case”).

C. On May 2, 2013, Defendant BB head of the tax office prior to the rectification, deemed that the pertinent proceeds constituted each business income listed in the separate applicable provisions of the attached Table, and imposed each global income tax on the Plaintiff as stated in the separate sheet (hereinafter “instant disposition”).

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on September 21, 2014, but received a decision of dismissal on February 11, 2015, and the said decision of dismissal was served on the Plaintiff on February 13, 2015.

E. On the other hand, on May 6, 2013, the locked Tax Office was newly established, and the right to impose tax on the Plaintiff was transferred from the head of the relevant tax office on May 9, 2013 to the Defendant.

Facts without any dispute, Gap's 1 through 8, Eul's 1 through 8 (including those with more than one number; hereinafter the same shall apply), and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) In order to constitute business income subject to taxation, it is recognized that certain income has continuously and repeatedly been generated through profit-making activities. The Plaintiff has appropriated the instant income as management expenses or long-term repair appropriations, and thus, the Plaintiff cannot be deemed to have engaged in business activities for profit-making purposes. Accordingly, the instant income does not constitute business income subject to taxation.

2) According to Article 2(2) of the former Enforcement Rule of the Income Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 323, Feb. 23, 2013; hereinafter the same), where an association, foundation, or other organization deemed a resident or non-resident pursuant to Article 2(3) of the Income Tax Act explicitly provides for the method of distributing profits or the ratio of distributing profits to its members, or where actual profits are distributed to its members, such organization, etc. shall not be deemed as one resident or non-resident, and the income tax shall not be applied by deeming that the organization, etc. is jointly engaged in the business and the members of the organization, etc. are jointly engaged in the business, and the income tax shall be applied with the individual as the taxpayer. However, the instant apartment income has been used as the management fee or the long-term repair reserve to be paid by all the occupants, and the management rules and the long-term repair reserve to be borne in proportion to the area of housing supplied to each household. Therefore, even if the apartment income in this case is subject to taxation, it should not be imposed on the Plaintiff as the taxpayer.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) Determination as to the assertion that the business income subject to taxation does not constitute business income

In light of the fact that the Plaintiff has continuously created the instant revenue for a period exceeding four years and the size of the instant revenue, it is reasonable to deem that the Plaintiff engaged in a business activity that creates the instant revenue through continuous and repeated business activities for profit-making purposes. Even if the Plaintiff has appropriated the instant revenue with the management fee or the long-term repair appropriations for apartment, such circumstance alone alone cannot deny the Plaintiff’s profit-making purpose. The Plaintiff’s assertion is without merit.

2) The purport of Article 2(1) and (2) of the former Enforcement Rule of the Income Tax Act regarding the assertion that an apartment should be taxed against the occupant is that where the method of distributing profits or the ratio of distributing profits is explicitly prescribed among associations, foundations and other organizations deemed residents or non-residents pursuant to Article 2(3) of the Income Tax Act, or where profits are distributed even if they are not so, the association members of the organization, etc. shall be deemed to jointly run the business and apply the Income Tax Act by deeming that such organization is inappropriate to recognize the capacity to pay taxes independently from its members because it is difficult to view that such an organization independently owns and manages profits and assets in its own account and name. However, the Plaintiff is an association that is not a juristic person consisting of the representatives of buildings elected in proportion to the number of households of each apartment building (see Article 50 of the Enforcement Decree of the Housing Act and Supreme Court Decisions 2007Da6307, Jun. 15, 2007; all other occupants except the representative of each apartment building among the occupants are not members of the Plaintiff. Therefore, the Plaintiff's's's have no reason to pay for the payment of apartment housing management fees.

3) Sub-decisions

The instant disposition is lawful as it imposes upon a legitimate taxpayer on the business income subject to taxation.

3. Conclusion

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