Cho Jae-2014-5646 ( December 31, 2014)

Whether the members of the apartment house shall be deemed to jointly operate the business and to levy the comprehensive income tax on each member.

This case's profit has been used as management expenses or long-term repair appropriations of apartments, and even if the management rules of apartments stipulate that the management expenses and long-term repair appropriations shall be borne in proportion to the area of housing supplied per household, it cannot be deemed that this case's profit has been distributed to the members.

Article 19 of the Income Tax Act

2015Guhap7789 global income and revocation of disposition

Month AAAAAA

AA Head of the Tax Office

May 31, 2016

July 05, 2016

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

Defendant’s 6,897,650 won, reverted to the Plaintiff on March 3, 2014, and reverted to the Plaintiff in 2011 30,267,620

The imposition of global income tax of KRW 33,795,660, which shall accrue in 2012, shall be revoked.

1. Details of the disposition;

가. 원고는 ㅇㅇ시 ㅇㅇ구 ㅇㅇ로 AAA 에 있는 달빛 AAA(이하 '이 사건 아파트'라고만 한다)의 동별 입주자 대표로 구성된 아파트 입주자대표회의이다.

B. The Plaintiff received fees for allowing the installation of advertisements to the section for common use of the apartment in the instant apartment, or fees for allowing the sale of the merchants, and made profits as indicated below (unit: source) by selling recycled collected from the residents.

C. On March 3, 2014, the Defendant: (a) deemed the instant gains as business income and rendered the instant disposition imposing global income tax on the Plaintiff for the year 2010; (b) KRW AAA in the year 2011; and (c) KRW AAA in the year 2012.

D. On October 16, 2014, the Plaintiff appealed for a trial to the Tax Tribunal, but on October 16, 2014

12. 31. Appeal was dismissed.

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) Chapter 1: The Plaintiff is engaged in activities for its own purpose, such as improving the convenience and welfare of the apartment occupant of the instant apartment, and does not aim at profit-making. In addition, the incidental income such as the instant revenue is in principle accumulated in the long-term repair appropriations, and some of them are appropriated for management expenses. Accordingly, the instant revenue does not constitute business income subject to taxation under the Income Tax Act.

2) Chapter 2: Even if it is assumed that the instant revenues fall under the subject of taxation, the instant apartment management rules stipulate the method and ratio of distributing incidental revenues, such as the instant revenues, and the profit was actually distributed to individual occupants through the accumulation of reserves for long-term repairs and the deduction of management expenses. Legally, the benefits arising from the common areas of the instant apartment are acquired by each co-owner (Article 17 of the Act on the Ownership and Management of Aggregate Buildings). Accordingly, the taxation on the instant revenues should be made for individual occupants, not the Plaintiff.

B. Relevant statutes

It is as shown in the attached Form.

C. The assertion and judgment

1) Chapter 1: In light of the fact that the Plaintiff continuously and repeatedly created the instant revenue from 2010 to 2012 and the amount of the instant revenue is considerable, it is reasonable to deem that the instant revenue constitutes business income as prescribed in Article 19(1)5, 12, 14, or 20 of the Income Tax Act. Even if the Plaintiff has appropriated the instant revenue with the management expenses or the long-term repair appropriations of apartment, it cannot be deemed that the Plaintiff did not have any profit-making purpose. Accordingly, this part of the Plaintiff’s assertion is without merit.

2) Chapter 2: The purpose of Article 3-2 of the Enforcement Decree of the Income Tax Act, among associations, foundations, and other organizations deemed residents or non-residents, where the method of distributing profits or the ratio of distributing profits is explicitly determined or where profits are distributed even if they do not so, it is inappropriate to recognize independent tax-bearing capacity separate from their members because such organizations do not independently own and manage profits and assets in their own account and name. However, the Plaintiff is a non-corporate association with representatives elected in proportion to the number of households of each apartment building rather than all apartment residents (see, e.g., Article 50 of the Enforcement Decree of the Housing Act and Supreme Court Decision 2007Da6307, Jun. 15, 2007). Accordingly, the Plaintiff’s remaining residents except the representatives of each building among apartment tenants are not all members of the Plaintiff, as alleged by the Plaintiff, used the apartment house’s profit as management expenses or the ratio of distributing profits in this case, and the Plaintiff’s long-term repair appropriations are also prescribed in the management rules that provide for each apartment unit area.

3. Conclusion

Thus, the plaintiff's claim is dismissed as there is no ground.