Seocho 2016west 2173 (Law No. 16, 2016)

Where converting a business operated by a resident into a corporation, it shall not be deemed a reduction or exemption of a small or medium venture enterprise even if such business is added.

Where a private business is converted into a corporation or a part of manufacturing business is added, it shall not be subject to tax reduction or exemption if it does not fall under the case of start-up.

Article 6 of the Restriction of Special Taxation Act

2016Guhap78493 Revocation of Disposition of Imposing corporate tax

주식회사 쏨〇

Head of the tax office;

September 8, 2017

October 20, 2017

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 imposition of KRW 126,763,452 of corporate tax for the business year 2013 against the Plaintiff on February 17, 2016 and KRW 26,163,976 of corporate tax for the business year 2014 and KRW 292,168,901 of corporate tax for the business year 2014 and KRW 28,311,166 of corporate tax is revoked.

1. Details of the disposition;

A. On July 12, 2010, the Plaintiff was established on July 12, 2010, and registered as a business operator on July 16, 2010, and changed to the current trade name on June 24, 2015. Meanwhile, the Plaintiff’s representative director KimB operated an in-house retail trade enterprise (hereinafter “roA”) with the trade name “Ro-A” from January 1, 2009, and reported a closure of the business on September 30, 2010.

B. On May 27, 2013, the Plaintiff: (a) obtained confirmation from the Korea Technology Finance Corporation as a venture business; and (b) filed a tax return for each business year and each business year for 2013 and 2014, by applying the provision on tax reduction or exemption to the small and medium venture enterprise prescribed in Article 6(2) of the former Restriction of Special Taxation Act (amended by Act No. 13560, Dec. 15, 2015; hereinafter the same) on the grounds that it was confirmed as

C. On February 17, 2016, the Defendant imposed corporate tax of KRW 126,763,452 and additional tax of KRW 26,163,976, corporate tax of KRW 292,168,901 and additional tax of KRW 28,311,166 on the Plaintiff (hereinafter “each taxation disposition of this case”) on the ground that the Plaintiff’s representative KimB established the Plaintiff by converting “roB” into a corporation and establishing the Plaintiff.

[Reasons for Recognition] Facts without dispute, Gap evidence 1-1, 2, Gap evidence 3, 5, 6, Eul evidence 1-1 and 2-2, the purport of the whole pleadings

2. Related statutes;

It is as shown in the attached Table related statutes.

3. The plaintiff's assertion

A. Since after the establishment of July 12, 2010, the Plaintiff started the clothing retail business in addition to the clothing retail business, it cannot be deemed that KimB converted into a corporation and established the Plaintiff. Even if it cannot be deemed that the Plaintiff’s business among the Plaintiff’s business was a business start-up on July 12, 2010, the clothing retail business started-up on the part arising from the clothing manufacturing business among the Plaintiff’s income, tax credit should be granted for the portion that occurred from the clothing manufacturing business. Accordingly, each of the instant taxation dispositions should be revoked illegally.

B. Even if the Plaintiff is not eligible for tax reduction or exemption by the small and medium start-up venture enterprise, there were no precedents except for extremely lower court rulings, and the Plaintiff was not aware of them, and there were justifiable grounds for the Plaintiff’s failure to pay taxes due to significance in interpreting relevant tax laws, and thus, at least each of the instant taxation dispositions should be revoked in an unlawful manner.

4. Whether each taxation of this case is legitimate

(a) Facts of recognition;

The following facts or circumstances do not conflict between the parties, or may be acknowledged or known by adding together the purport of the whole pleadings in each entry in Gap evidence Nos. 2, 5, 7, 9 through 16, and Eul evidence Nos. 2 through 5 (including each number in the case of additional numbers):

(1) On January 1, 2009, KimB registered its business as the main business name: retail business / main business name: E-Commerce business (main business code 525101) and purchased clothing from wholesalers and sold them to general consumers on the Internet site (www.roCC.co., Ltd.). The Plaintiff was established on July 12, 2010, and was established on July 16, 2010, and revised its main business name: retail business / main business name: 1: 2.0 of the electronic commerce manufacturing business (main business code 525101), and 10 of the Plaintiff’s clothes manufacturing business as its main business name as its main business name: 2.0 of the Plaintiff’s clothes manufacturing business from its main business name as its main business name, and 1.0 of the Plaintiff’s clothes manufacturing business as its main business name as its main business name, and 2.0 of the Plaintiff’s clothes manufacturing business, etc. after its purchase and sale to general consumers.

The plaintiff sold clothings for about five years using the Internet site (www.roCC.co.kr) located in the same Internet site as DoroA, and the Seoul regional tax office requested the Seoul regional tax office to explain the business start-up in the reduction or exemption of the tax amount for the small and medium start-up venture enterprise on June 2015, the Internet site address was changed into www.roD.co.m2.

Article 28(1)(2)(2)(1)(2)(2)(3)(3)(3)(3)(3)(3)(3)(3)(3)(1)(3)(2010(2)(3)(3)(2010(2)(3)(30)(1)(1)(1)(205)(1)(1)(1)(205)(3)(205)(1)(1)(205)(20)(20)(2)(1)(20)(20.7)(20)(2)(1)(1)(20)(20)(20)(1)(20)(20)(3)(10)(205,266,184)(20)(20)(10)(205,184)(20)(3)(3)(205,405)(3)(3)(14)(2)(2)(3)(2)(3)(2)(10).05.

(v) The term “ro-A” means: (a) the Seoul EF-dong FF-0 GG store 00-0 GG store was leased 0-01 on September 30, 2010; (b) the lessor’s report on the closure of the business was made on September 30, 2010; (c) however, the lessor’s report on the first real estate lease price in 2010 on the said place stated that “ro-A” was out of the said place on March 27, 2010; and (v) the rent was reported only three months (from January 3, 2010) and said “ro-A” appears to have moved the place of business to another place before the closure of the business. Meanwhile, in light of the lessor’s report on the first real estate lease price in 200-0Y building from the date of its establishment in Seoul EF-dong, Seoul, 209 to the date of its establishment, the Plaintiff appears to have operated the business for a considerable period from before its establishment.

B. Determination

(1) Article 6(2) of the former Restriction of Special Taxation Act provides for tax reduction or exemption for a small or medium start-up venture enterprise. Article 6(6) of the same Act provides that “Where a business entity succeeds to a previous business through a merger, division, investment in kind, or acquisition of business, or where a business has been used for the previous business is acquired or purchased (main sentence of subparagraph 1), “where a new corporation is established by converting a business operated by a resident into a corporation after discontinuance of business,” “where a business is operated by the same type as the previous business after discontinuance of business ( Subparagraph 2),” “where it is difficult to deem that a new business is commenced for the first time due to expansion of business or addition of other types of business” ( Subparagraph 4). It is also reasonable to exclude the above provision from tax reduction or exemption in cases where a new business has an effect on the initial creation of business by starting a new business, it is reasonable to deem that the new business has an effect on the first commencement of a new business or a new business creation of another type of business without the first change of business.

In full view of the facts and circumstances mentioned above, the Plaintiff’s representative KimB appears to have converted “roB” into a corporation by establishing the Plaintiff and operating the same as “roB” in the same way as “roB, and commencing the clothing manufacturing business after a few months. Therefore, the Plaintiff should be deemed to fall under the grounds for excluding the reduction or exemption of the tax amount imposed on the small and medium start-up venture enterprise under Article 6(6)2 of the former Restriction of Special Taxation Act (where a new corporation is established by converting the business run by a resident into a corporation), so the Plaintiff’s assertion that the Plaintiff constitutes the object of reduction or exemption of the tax amount imposed on the small and medium start-up venture enterprise after the establishment is rejected

Article 6(2) of the former Restriction of Special Taxation Act stipulates that corporate tax shall be reduced or exempted for a small or medium start-up enterprise with the income accrued from the relevant business, but this premise is that the relevant enterprise may be reduced or exempted as a small or medium start-up enterprise. The Plaintiff cannot be granted a reduction or exemption of corporate tax on the income accrued from the relevant business pursuant to Article 6(2) of the former Restriction of Special Taxation Act because it falls under the grounds for exclusion from the reduction or exemption of a small or medium start-up venture enterprise under Article 6(6)2 of the former Restriction of Special Taxation Act. Therefore, the Plaintiff’s assertion that

5. Whether each of the instant taxation dispositions is legitimate

The Plaintiff’s assertion on the portion of additional tax is rejected, on the grounds that it is difficult to expect the Plaintiff to fulfill his/her duty to pay taxes, or there is no justifiable reason for failing to perform his/her duty to pay taxes, on the grounds that it is difficult to expect the Plaintiff to fulfill his/her duty to pay taxes, and that the Plaintiff’s assertion on the portion of additional tax is not accepted.

6. Conclusion

Thus, the plaintiff's claim of this case is dismissed as it is without merit.