Seocho 2018west 2118 ( September 4, 2018)

Business commencement of the Housing Construction and Sales Business shall be deemed to be the time of commencing the sale of housing, and it does not fall under construction business subject to special tax reduction or exemption under the Restriction of Special Taxation Act.

The starting date of the housing construction and sales business run by the Plaintiff shall be not the date of business registration, but the time when the supply of housing is objective and practical, i.e., the starting date of sale, 2013, and not the construction business subject to the special tax reduction or exemption

Article 48 (Receipt Date of Business Income) of the Enforcement Decree of the former Income Tax Act

2018Guhap87750 global income and revocation of such disposition

KimA

head of Dongjak-gu Tax Office

July 25, 2019

August 27, 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 imposition of global income tax of KRW 130,848,540 (including additional tax of KRW 41,185,875) for the year 2013 against the Plaintiff on August 10, 2017 and global income tax of KRW 111,148,250 for the year 2015, each disposition exceeding KRW 100,183,580 for the imposition of global income tax of KRW 115 shall be revoked.

1. Details of the disposition;

A. The plaintiff constructed each multi-household house (hereinafter referred to as "multi-household house of this case") as listed below, and all of the first and second houses of this case were built, and sold them after obtaining approval for use from the permitting authority.

No.

Date of Building Permission

Date of Commencement

Date of approval for use;

Parcel Number

Total floor area

The number of households

1

August 23, 2012

December 15, 2012

May 27, 2013

○○○-si ○○○-dong x-1

540.32С

8 Generations

2

April 10, 2015

April 14, 2015

August 24, 2015

△-dong x x

93.39С

8 Generations

B. Meanwhile, the Plaintiff calculated the amount of income by applying the simple expense pursuant to the above provision on the ground that the amount of income falls short of the amount stipulated in Article 143 (4) 2 (b) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26982, Feb. 17, 2016; hereinafter the same) in the immediately preceding taxable period, upon filing an application for registration of business as listed below [Attachment 1], and by applying the special tax reduction and exemption for small and medium enterprises as stipulated in Article 7 (1) of the former Restriction of Special Taxation Act (amended by Act No. 15227, Dec. 19, 2017; hereinafter the same), the Plaintiff filed a comprehensive tax return and payment as listed below [Attachment 2].

[Attachment 1]

Business Operator

Classification

Equity Holdings

Places of business

Opening date of business

(Date of Closure)

Type/Types of Business

Plaintiff, Lee In-bok

This case

1 For 1 House

50%

○○-si ○○○○ Dong

Xx-1

May 30, 2012

November 30, 2012

Real Estate Business/

Hypoland and other land

Plaintiff, Lee In-bok

This case

1 For 1 House

50%

○○-si ○○○○ Dong

Xx-1

November 30, 2012

June 30, 2013

Construction/Sgd./

New Housing Sales

This case

2 House 2

100%

△-dong x x

April 13, 2015

December 16, 2015

Construction/Sgd./

New Housing Sales

[Attachment 2]

(unit: 1000 won)

Taxation Period

(Reversion) Year of Reversion

Classification

Revenue amount

Amount of income;

Tax reduction or exemption

Global income amount;

2013

The First House of this case

2,076,400

185,091

10,473

40,608

2015

The second house of this case

1,739,285

149,584

10,964

27,449

C. The director of the Seoul Regional Tax Office, upon conducting a personal consolidated investigation against the plaintiff, notified the defendant of taxation data that "the plaintiff shall start the business at the time of new construction and sale of each house of this case and be a new business operator on the basis of each relevant taxable period. Since the amount of income exceeds the standard amount under Articles 143 (4) 1 and 208 (5) 2 of the former Enforcement Decree of the Income Tax Act, the standard amount of income calculated by applying standard expense rate is calculated and revised, and the plaintiff cannot be deemed to have run the construction business, and therefore, it is necessary to deny the special reduction and exemption of small and medium enterprise

D. On August 10, 2017, the Defendant issued a correction and notification of the Plaintiff’s global income tax of KRW 130,848,540 for the year 2013, and global income tax of KRW 111,148,250 for the year 2015 as follows (including additional tax):

(unit: 1000 won)

Taxation Period

(Reversion) Year of Reversion

Classification

Revenue amount

Amount of income;

Tax reduction or exemption

Total final tax amount

Notice Tax Amount

2013

The First House of this case

2,076,400

405,713

0

171,456

130,848

2015

The second house in this case

1,739,285

358,960

0

138,597

111,148

E. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on April 6, 2018, but was dismissed on September 6, 2018.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 3, Eul evidence Nos. 1 through 3 and 6 (which include each 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

For the following reasons, the Plaintiff asserts that the instant disposition is unlawful, and thus, it should be revoked within the same scope as stated in the purport of the claim.

1) Simplified expense rate (related to housing of this case)

Since the Plaintiff filed a return on rent of KRW 1,250,00 for the instant housing site in 2012 as the revenue amount, it shall be deemed that the Plaintiff commenced the Housing Construction and Sales Business on the instant housing No. 1 around 2012. Thus, in calculating the income accrued to the Plaintiff in 2013, as long as the previous year’s income falls short of the standard amount under Article 143(4)2(b) of the former Enforcement Decree of the Income Tax Act, it shall be deemed that the amount of income falls under the subject of the application of the simple expense

2) Reduction of and exemption from special tax on small and medium enterprises (related to each of the instant houses)

Although the Plaintiff did not hold a specialized construction business license, since each of the instant buildings was constructed under the Plaintiff’s financing, management, and supervision, it shall be deemed that the Plaintiff was engaged in “construction business” under Article 7(1)1 (g) of the former Restriction of Special Taxation Act, and the special tax reduction or exemption under the said provision shall be applied.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Determination on the application of simple expense rate (related to the first house of this case)

A) Under the principle of no taxation without law, a tax law shall be interpreted in accordance with the text of the law, and shall not be extensively interpreted or analogically interpreted without a reasonable reason, barring any special circumstance. However, even according to the language and text of the tax law itself, if its meaning is unclear, or if it appears that it is contrary to or conflicting with other laws and regulations, the court must naturally indicate the true meaning of the language and text at issue through harmonious interpretation between 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 legal stability and predictability pursued the principle of no taxation without law (see, e.g., Supreme Court Decision 2007Du4438, Feb. 15, 2008)

Article 1-2(1)5 of the former Income Tax Act (amended by Act No. 1358, Dec. 15, 2015; 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 shall apply mutatis mutandis to a business operator who registers his/her business in accordance with the Income Tax Act, and Article 168(3) of the Income Tax Act provides that Article 8 of the Value-Added Tax Act shall apply mutatis mutandis to a business operator who registers his/her business in accordance with the Income Tax Act; and Article 6 of the Enforcement Decree of the Value-Added Tax Act does not expressly provide for the provisions that clearly determine the date of business commencement or apply mutatis mutandis to the "business income" in accordance with Article 6 of the Enforcement Decree of the Value-Added Tax Act. Therefore, it is necessary to examine when the business of the former Income Tax Act

Therefore, in full view of the language, structure, and purport of the relevant laws such as the former Income Tax Act and the Value-Added Tax Act, the starting date of the business of the business of the business income under the former Income Tax Act shall be also based on the time stipulated in each subparagraph of Article 6 of the Enforcement Decree of the Value-Added Tax Act, which provides for the starting date of the business under Article 5(2)

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, it is reasonable to view that a business is based on the premise that a real income is generated under the former Income Tax Act, considering that Article 1-2(1)5 of the same Act defines a resident as a “resident with such business income”. Therefore, it is reasonable to view that a business is based on the premise that a real income is generated. Therefore, it is difficult to simply move forward to the time the preparation for the business, which is the time of providing goods or services

② As a result, it is difficult to objectively specify the starting point of the preparation activity in terms of not only a considerable irregular and broad range, but also a subjective intention or necessity of a business operator, it is difficult to objectively specify the starting point of the preparation activity. If the preparation of a new construction and sale business is completed prior to the starting point of the business or the starting point of the construction or construction of the building at the time of the acquisition of the land or the time of the commencement of the business, the revenue amount of 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, depending on the time of the preparation activity, may vary depending on the time of the preparation activity, and thus, the business operator’s voluntary selection

③ Under Articles 1-2(1)5 and 19 of the former Income Tax Act, a resident with income arising from his/her own calculation and responsibility (in independence) and continuous and repeated activities for profit-making purposes becomes an entrepreneur; under Article 2(3) of the Value-Added Tax Act, a person who supplies goods or services independently for business purposes is an entrepreneur and becomes a person liable to pay value-added tax; and under this context, a person who supplies goods or services independently for business purposes is a person who supplies goods or services independently for profit-making purposes and has the type of business to an extent that a value-added tax can be created (see Supreme Court Decision 98Du16705 delivered on September 17, 199) and who supplies goods or services with continuous and repetitive intent to create a value-added tax (see Supreme Court Decision 98Du16705 delivered on September 17, 199), and there is a need to interpret business income related to one business under the former Income Tax Act uniformly from the date of commencing business under the former Value-Added Tax Act.

(4) From this point of view, the former Income Tax Act imposes an obligation on the head of the competent tax office under Article 168 (1) to make a business registration under the former Income Tax Act while imposing an obligation on the business operator who has made a business registration under Article 168 (2) of the same Act shall be deemed to have made a business registration under the former Income Tax Act, and may be deemed to impose an obligation on the person who has received the supply of goods or services by preparing an invoice or receipt as prescribed by Presidential Decree where the business operator has made a business registration under Article 163 (1) of the former Income Tax Act provides for the obligation to issue a tax invoice to the person who has received the supply of 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 business registration, uses the term "the starting date of business" in relation to business registration, and Article 5 (2) of the Value-Added Tax Act uses the term "the starting date of business" in relation to the first taxable period for a new business operator, and Article 6 of the Enforcement Decree of the Value-Added Tax Act sets the starting date of business under Article 5 (2) of the Value-Added Tax Act as "the starting date of

B) 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, in the case of the Housing Construction and Sales Business Act that the Plaintiff engaged in the instant housing No. 1, the starting date of business shall be deemed the starting date of commencing the sale of the instant housing No. 1, which begins with the supply of goods stipulated in Article 6 subparag.

① Article 143(4)1 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22580, Dec. 30, 2010); Article 143(4)2 of the same Enforcement Decree provides that, “an entrepreneur newly commencing a business in the relevant taxable period, other than a newly commencing one business in the relevant taxable period, shall apply simple expense rates to “an entrepreneur whose total amount of income during the immediately preceding taxable period (including an increased amount of income due to determination or revision) falls short of the standard amount.” Thereafter, Article 143(4)1 of the former Enforcement Decree of the Income Tax Act amended by Presidential Decree No. 22580, Dec. 30, 2010 (amended by Presidential Decree No. 22580, Dec. 30, 2010), in order to prevent the reduction of income tax through simple expense rates, if the relevant taxable period falls under the standard for the application of simple expense rates, and a newly starting one shall be excluded from the date of entry into force of the new construction business (by Presidential Decree No. 210, 30. 10.

In addition, Article 143 (4) of the Enforcement Decree of the Income Tax Act, which applies to the portion of income in the taxable period that begins after January 1, 2019, which was 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 if the income amount in the taxable period concerned falls under the standard amount of double-entry bookkeeping, even if the total amount of income in the immediately preceding taxable period falls short of the standard amount, as well as the business operator (title 1)

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 rule, the legislators seem to be able to understand "construction commencement", "construction business, construction business, and commencement of real estate development and supply business."

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 business commencement at an objective and practical time of the supply of housing subject to sale rather than the commencement date that can be determined by the business operator's intent

② The commencement of a business of the Housing Construction and Sales Business shall be substantially determined at the time when the preparation for a business is completed and the preparation for the original business is conducted or is able to be conducted (see, e.g., Supreme Court Decision 94Nu15905, Dec. 8, 1995). The initial housing construction and sales business is included in real estate sales business given its nature (see, e.g., Supreme Court Decision 2008Du21768, Jul. 22, 2010). The purpose of the business is to sell a house, and it is difficult to view that the fact that a house has been completed

③ Whether a business income under the Income Tax Act falls under business income shall be determined according to social norms, taking into account whether business activities are continuously and repeatedly conducted in light of the business profit purpose, the scale, frequency, mode, etc. of the business (see, e.g., Supreme Court Decision 91Nu6559, Nov. 26, 1991). However, there is no evidence to deem that the Plaintiff, prior to commencing the sale of the instant first house, there is no objective intent to engage in the housing construction and sales business for the purpose of profit, and the Plaintiff purchased and leased the instant housing site. The fact that the Plaintiff purchased and leased the instant housing site, or that the Plaintiff started the construction of the instant first house, solely on the sole basis of the fact that the Plaintiff continuously and repeatedly conducted activities for profit-making purposes, it is difficult to deem that the Plaintiff

C) Therefore, the Plaintiff’s business of newly building and selling the instant housing units No. 1 ought to be deemed to have commenced in 2013, when the approval for the use of the instant housing units No. 1, which was commenced. Thus, the Plaintiff’s income amount in 2013 exceeds the standard amount under Articles 143(4)1 and 208(5)2 of the former Enforcement Decree of the Income Tax Act, and the Plaintiff is not subject to the application of simple expense rate, and the amount of income should be estimated by applying the “standard expense rate” under Article 143(3) of the former Enforcement Decree of the Income Tax Act.

2) Determination as to whether to reduce or exempt special tax on small and medium enterprises (related to each of the instant houses)

A) Articles 2(3), 7(1)1(g) and 7(2)2 of the former Restriction of Special Taxation Act provide that an amount equivalent to the tax amount calculated by multiplying the income tax on income generated from the relevant workplace by 20/10 shall be reduced or exempted for a company running a construction business among small and medium enterprises, and the classification of the type of business used in the relevant Act shall be in accordance with the Korean Standard Industrial Classification publicly notified by the Commissioner of the Statistics Korea pursuant to Article

However, according to the former Korean Standard Industrial Classification (amended by the Statistics Korea Notice No. 2017-13, Jan. 13, 2017; hereinafter the same) which applies to the disposition of this case in the taxable period of global income tax, "it refers to industrial activities of constructing, enlarging, reconstructing, or remodelling a building by contract or comprehensive construction contractor, and includes construction activities of a prefabricated-type building by contract or comprehensive construction contractor," and "as a whole construction works are contracted to another construction company to build a building in a lump sum and then sell or sell it (No. 6812)" is excluded from the construction business.

B) In light of the following circumstances, Gap evidence Nos. 2 and 3, and Eul evidence Nos. 6, which are acknowledged as being comprehensively considered the overall purport of pleadings, i.e., ① the construction executor’s building ledger of each house of this case not the plaintiff but the "○○○ Construction Co., Ltd.", and "○○○○○○○○", and ② the plaintiff did not hold a construction business license, and the plaintiff did not submit any specific data to deem that each house of this case is equipped with human resources, physical facilities, or ability to construct each house of this case under the overall responsibility. ③ According to the data submitted by the plaintiff at the time of the personal integration investigation, the plaintiff directly disbursed some expenses such as personnel expenses related to the construction of each house of this case, but it appears that the plaintiff could not considerably fall short of the sales revenue amount of each house of this case, it is difficult to view that the business of this case is a sub-classified of "real estate development and supply business" under the Korean Standard Industrial Classification (Classification No. 6812). 6812).

3. Conclusion

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