Income earned from the Housing Construction and Sales Business Act with continuity and repetition to the extent that business activities can be seen as business income.

If real estate transactions have been conducted with continuity and repetition under the purpose of business as a whole, it constitutes real estate transactions, and income accrued therefrom constitutes business income, and the exclusion period for imposition shall be 10 years.

Article 2 of the Value-Added Tax Act

2014Guhap7409 Disposition of revocation of Disposition of Imposition of Value-Added Tax

IsaA

Head of the High Tax Office

September 23, 2014

November 4, 2014

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of KRW 46,224,480 of global income tax for the year 2004 and KRW 106,008,100 of global income tax for the year 204 and KRW 142,843,630 of global income tax for the year 2006 shall be revoked.

1. Details of the disposition;

A. From October 20, 1985, the Plaintiff served as a teacher of the OOO high school located in Eunpyeong-gu Seoul Metropolitan Government, and currently serves as an assistant principal of the above school.

B. The Plaintiff acquired the following land without having registered the housing construction and sales business, and newly constructed the housing on the ground, and sold the unregistered housing on the land and its ground before obtaining approval for use of the building.

1) Around March 17, 2004, the Plaintiff purchased an Odong-dong (hereinafter referred to as "Odong-dong") of 972-5 to 248.3 square meters (hereinafter referred to as "one land") in the amount of 437.5 million won, completed the registration of ownership transfer on the Plaintiff's name on May 14, 2004, and newly constructed a multi-family house of 299.44 square meters in the total floor area on that ground (hereinafter referred to as "one multi-family house"). On November 29, 2004, the Plaintiff acquired approval for the use of the first house (the date of approval for use: November 29, 2004), which was prior to the date of obtaining the approval for the use of the second house (the date of approval for use: November 29, 2004).

2) On February 4, 2005, the Plaintiff: (a) purchased 350 million won for the purchase of O-1 242 m2 m2 m2 (hereinafter referred to as "second m2", "the land in this case in case of common name with the land first; (b) completed the registration of ownership transfer in the name of the Plaintiff on March 23, 2005; (c) newly constructed a single house with the total floor area of 306.64 m2 (hereinafter referred to as "second m2 house"; and (d) newly built a single house and a common name; (c) on February 10, 2006, the approval for use of second m2 house (the date of approval for use: May 9, 2006), which was obtained prior to the acquisition of the land first and second m2.6 million won; and (d) sold the housing in this case toCC on February 10, 2006.

C. The Plaintiff, even though selling the instant land and housing, reported and paid only capital gains tax following the transfer of the instant land.

D. From April 8, 2013 to May 12, 2013, the Defendant: (a) conducted a personal integration investigation on eight persons, including the Plaintiff and the Plaintiff’s spouse’s difficulty in housing construction and sales business; (b) on the ground that the Plaintiff was evading income tax, value-added tax, etc. on the ground that the Plaintiff was evading income tax, value-added tax, etc. due to the “Fraud or other unlawful act, such as newly constructing the instant housing and selling it to others; and (c) before the approval for use of the building was granted; and (d) on July 16, 2013, the exclusion period for imposition of ten years stipulated in Article 26-2(1)1 of the Framework Act on National Taxes was applied. (d) On July 16, 2013, the Plaintiff imposed global income tax of 46,224,480 won (the first half of the year after reducing the amount of value-added tax by 78,831,780 won after July 16, 20136, 20008.

[Ground for Recognition: Facts without dispute, Gap's entries, Gap's evidence Nos. 1 through 4, 6, 9, 10, 16, 21, 22, 24, 26, 27, Eul's evidence Nos. 1 and 2, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The Plaintiff and the Plaintiff’s family members are merely constructing the instant housing for their residence, and they do not construct the said housing with business feasibility, and thus, they are not business operators liable to pay value-added tax with respect to the transfer of the instant housing, and income accrued from the instant housing sales for the same reason is not business income, not business income. Therefore, the instant disposition imposing value-added tax and general income tax

2) The Plaintiff did not evade national taxes by fraud or other unlawful act with respect to the transfer of the instant land and the instant house, and thus, seven years (Article 26-2(1)2 of the Framework Act on National Taxes) shall apply to the Plaintiff. The instant disposition is unlawful since seven years have passed since the date on which income tax and value-added tax, which became the object of the disposition, was imposed.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) As to land 1 and housing 1

A) On March 17, 2004, the Plaintiff purchased the land No. 1 in the amount of KRW 437.5 million. On May 14, 2004, the Plaintiff completed the registration of ownership transfer in the Plaintiff’s name. On May 24, 2004, the Plaintiff completed the registration of ownership transfer on the land No. 1 in the name of the Plaintiff. On May 24, 2004, after obtaining a construction permit for constructing the first house, which is a single owner of the land with a total floor area of KRW 299.

B) On November 4, 2004, the Plaintiff entered into a sales contract to sell the first house of KRW 1,000,000 (the remaining payment date: December 20, 2004) prior to the approval of the use of the first land and the first house to SongB (However, the door-to-door was added to the purchaser), and entered into a sales contract to sell the first house of KRW 1,000,000 (the remaining payment date: December 20, 2004). The Plaintiff entered into a special agreement to obtain the completion of the first house under the purchaser’s name and complete all procedures, such as the Plaintiff’s construction and completion.

C) On November 5, 2004, SongB and Seomi-si completed the registration of transfer of ownership with respect to the land No. 1/2 shares, and on November 15, 2004, the change of the owner of the first house was reported on November 29, 2004. On November 29, 2004, after obtaining the approval of use for the first house, the registration of transfer was completed on December 9, 2004 with respect to the first house on December 1, 2004.

D) The Plaintiff reported the tax base of capital gains tax to the Defendant, and reported only the capital gains tax on the first land as if only the first land was transferred without excluding the portion on the first house.

2) As to land 2 and housing 2

A) On February 4, 2005, the Plaintiff purchased the second land in KRW 350 million, and completed the registration of ownership transfer in the name of the Plaintiff on March 23, 2005. On March 28, 2005, the Plaintiff obtained a construction permit for constructing the second house, which is a building owner of the second land with a total floor area of 306.64 square meters, and completed the report of commencement on April 1, 2005.

B) On February 10, 2006, the Plaintiff entered into a sales contract with ChoCC to sell the second house, which was prior to the approval for use of the second land and the second house, to KRW 1.277 billion, and with respect to the second land, the Plaintiff entered into a sales contract to sell the second house, KRW 470 million,000,000 (the remaining wage: March 30, 2006); with respect to the second house, the newly constructed parts and the remodeling parts are divided into the second house, and the newly constructed parts are KRW 620,00,000 (the remaining wage: May 31, 2006); and the remodeling parts are KRW 180,00,000 (the remaining wage is prohibited: May 31, 2006); and the Plaintiff entered into a contract to sell the second house to the second house, with respect to which the Plaintiff is liable for defect repair for one year.

C) After completing the registration of ownership transfer on the land No. 2 on March 30, 2006, the ChoCC changed the owner of the second house on April 13, 2006, and the approval for use on the second house on May 9, 2006, and completed the registration of ownership transfer on the second house on May 15, 2006.

D) The Plaintiff reported the tax base of capital gains tax to the Defendant, and reported only the capital gains tax on the second land as if only the second land was transferred without excluding the second land.

3) The Defendant issued a disposition imposing each corresponding value-added tax and income tax on the ground that eight persons, who are related or related to the Plaintiff and the Plaintiff, acquired each of the pertinent land indicated in the "attached Table" column, and newly built the relevant land on the ground and sold the unregistered housing on the land and its ground before obtaining the approval for the use of the building, such as the result of the above integrated investigation of the Plaintiff and eight persons, including the Plaintiff, etc., on the ground that they sold the unregistered housing on the land and its ground before obtaining the approval for the use of the building.

4) On April 11, 2013, KimD, a broker for the transactions of land 2 and 2, has mediated, submitted a written confirmation to the Defendant on April 11, 2013, and that “at the time of brokerage, the pertinent house was requested to trade brokerage in the actual completion of the construction (such as to the extent that it could live together). The Plaintiff was aware that the Plaintiff was newly constructing a building (a single house) on the land, such as the principal, her husband, and her relatives.”

[Ground for Recognition: Facts without dispute, Gap's statements, 3, 4, 6, 9 through 12, 16, 21 through 25, 27, Eul's statements, 2, 3 and 4, and the purport of the whole pleadings]

D. Determination

1) As to the corresponding business income and business income

A) Article 2(1) of the former Value-Added Tax Act (amended by Act No. 9268 of Dec. 26, 2008) provides that a person who independently supplies goods or services is liable for value-added tax regardless of whether it is for profit-making purposes. Here, “a person who independently supplies goods or services for business purposes” refers to a person who supplies goods or services in the form of business to an extent that it can create a value-added tax and continuously and repeatedly with an intent to create a type of business to create a value-added. Furthermore, business income subject to income tax refers to income generated from a business that continues and repeatedly takes place in an independent position for profit-making purposes (see, e.g., Supreme Court Decisions 2010Du8430, Sept. 9, 2010; 2006; 2010Du28144, Dec. 30, 2006; 2010Du2134, supra, whether the transferor acquired the relevant real estate or its income generated from transfer.

나) 앞서 본 사실관계 및 갑 제2, 7, 8, 13, 14, 15, 30, 21호증의 각 기재 또는 영상에 변론 전체의 취지를 종합하면, 원고는 2001. 6. 5. OO동 935 대 236.1㎡를 매매로 취득하여 그 지상에 철근콘크리트조 경사지붕 2층 단독주택(이하 위 대지 및 주택을 '종전 거주지'라고 한다)을 신축하여 2002. 1. 18. 소유권보존등기를 마친 후 종전거주지에서 거주하던 중 2004. 5. 14. 제1토지를 취득하였고, 같은 달 24. 그곳에 제1주택을 신축하는 건축허가를 받아 같은 달 28. 착공신고를 마쳤으며, 종전 거주지에 관하여는 2004. 9. 8. 이기남, 이유영에게 매매예약을 원인으로 한 소유권이전등기청구권 가등기를 마쳐준 후 2005. 1. 14. 이를 원인으로 소유권이전등기까지 경료해 준 사실, 원고는 2004. 8. 24. 처남댁인 이미자 소유의 OO동 997-13 대 219.3㎡ 지상에 연면적 298.1㎡ 규모의 단독주택을 신축한다는 건축허가를 받아 2005. 1. 17. 이곳으로 전입신고를 하였고, 2005. 2. 15. 위 단독주택을 완공한 후 같은 달 18. 원고 명의로 소유권보존등기를 마친 사실, 위 단독주택의 건축 과정에서 인접 대지(OO동 997-12) 등 이웃 주민과 담장, 조경 등의 훼손 문제로 마찰이 있었던 사실, 원고는 2005. 3. 23. 제2토지를 취득한 후 같은 달 28. 그곳에 제2주택을 신축하는 건축허가를 받아 2005. 4. 1. 착공신고를 마친 사실, 제1주택은 그 지하실 바닥과 벽 등에 습기 발생의 문제가 있는 것으로 보이는 사실을 인정할 수는 있다.

① However, the Plaintiff’s new construction permit and construction report on May 24, 204, and the Plaintiff’s new construction report on the 28th of the same month constituted 200 million won or more, and the Plaintiff’s new construction of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 3nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 2nd of the 3nd of the 2nd of the 2nd of the 3rd of the 1st of the 3rd of the 3rd of the 1.

2) As to the exclusion period of imposition

A) According to the provisions of Articles 26-2(1)1 and 47-2 of the Framework Act on National Taxes and Article 12-2(1) of the Enforcement Decree of the same Act, where a taxpayer evades national tax, obtains a refund or deduction due to “Fraud or other unlawful acts” under each subparagraph of Article 3(6) of the Punishment of Tax Evaders Act, the exclusion period of the imposition of national tax is extended to 10 years. In addition, where a taxpayer fails to report the tax base of national tax under tax-related Acts by the statutory due date of return due to such act, an amount equivalent to 40/100 of the calculated tax amount, etc. is imposed as additional tax. In this regard, the term “Fraud or other unlawful act” under Article 3(6) of the Punishment of Tax Evaders Act refers to an active act falling under any of the following subparagraphs, in which the imposition and collection of tax is impossible or considerably difficult, preparation and receipt of false or document documents, destruction of books and records, concealment of income, profit-making, fabrication or concealment of the account books, manipulation or management of the total tax invoices, or unlawful act

“Fraud or other unlawful act” in the crime of evading tax under Article 3(1) and (6) of the Punishment of Tax Evaders Act means an act which enables the evasion of tax, i.e., a deceptive scheme or other unlawful act which makes it impossible or considerably difficult to impose and collect taxes. Therefore, it does not constitute merely a failure to file a tax return under the tax law or making a false tax return without accompanying other acts, but it does not constitute the mere failure to file a tax return or making a false tax return. However, in cases where the circumstances indicate active concealment, such as failure to file a tax return or underreporting, and intentionally failing to enter revenues or sales in the account book, etc., it may be recognized that the imposition and collection of taxes are impossible or remarkably difficult (see, e.g., Supreme Court Decision 2010Do9871, Jun. 14, 2012). Whether the active concealment intention can be objectively seen as objectively revealed, not only whether the basic account book stating revenues or sales, but also the method and method of filing a false tax return or the details of a false tax return, etc.

B) In light of the above provisions and legal principles, it is difficult for the tax authority to impose taxes on the instant land unless the taxpayer voluntarily files a return on the tax base and tax amount of global income tax, i.e., the global income tax at issue and value-added tax at issue in the instant case, i.e., the taxpayer is obligated to pay taxes on his own. As long as the taxpayer does not do so by himself, it is difficult to capture the omission. The Plaintiff did not report the tax due to the new construction and transfer of the instant house, but did not allow the business registration. ② The owner of the instant building under the Building Act refers to the owner of the instant building who orders construction, substantial repair and alteration of the use of the building, installation of building equipment, or construction of a structure, or the owner of the instant building under the Building Act, who does not own the construction by designating a new construction or construction site manager on the instant land (see Article 2 (1) 12 of the Building Act), and the Plaintiff does not have any possibility of changing the owner’s name on the instant housing construction and sales business.

3. Conclusion

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

(c)