Whether the association of this case is the subject of independent tax liability as a resident

The association of this case is not a corporation, because the method of distributing profits or the ratio of distributing profits is determined or actually distributed to its members. Therefore, it is liable to pay income tax according to the income amount distributed to each person as a joint business proprietor.

Article 13 of the Framework Act on National Taxes, Article 2 of the Income Tax Act

Seoul Administrative Court 2017Guhap7372 global income and revocation of disposition

○ Kim

AA Head of the Tax Office

December 12, 2017

January 11, 2018

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The imposition of global income tax of KRW 43,568,321 and global income tax of KRW 26,357,939 on March 1, 2017 imposed by the Defendant on the Plaintiff on March 1, 2017 is revoked in entirety.

1. Details of the disposition;

A. 23 persons including the Plaintiff, etc. (hereinafter referred to as "members") who were owners of ○○○dong, Jung-gu, Seoul, and 2,775 square meters of land (hereinafter referred to as "the instant land") were jointly established on September 20, 1996 for the purpose of constructing a new commercial building on the instant land and selling in lots and leasing business.

B. On December 30, 200, the instant association newly constructed a building consisting of 1,878 stores on the instant land (hereinafter “instant commercial building”) and completed the registration of ownership preservation in the name of the instant association on January 11, 2001. The instant association, when selling more than 1,60 stores around 200 and the instant land was registered in the name of 23 persons, including the Plaintiff, was registered in the name of 23 persons including the Plaintiff. The instant association, between the buyer and the buyer, granted the right to use the instant land for 30 years and received land usage fees in advance from the buyer (hereinafter “the instant land use contract”), and received land usage fees for 1,1410 million won from the buyer (hereinafter “the instant commercial building”). Since the instant association is an organization that deemed to have distributed 1,600 stores and did not actually belong to the Plaintiff for the reason that it did not allocate the Plaintiff’s interest to the Plaintiff for 20 years of global income tax or 160 billion won (hereinafter “the instant use fees”).

D. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on May 4, 2017, but was dismissed on July 20, 2017.

[Reasons for Recognition] Unsatisfy, Gap evidence 1 to 6, Eul evidence 1, whole pleadings

Purport

2. Relevant statutes;

It is as shown in the attached Form.

3. Whether the disposition is lawful;

A. Whether the Plaintiff is liable to pay income tax

1) Summary of the Plaintiff’s assertion

Inasmuch as the method of distributing profits or the ratio of distributing profits was not determined for an unincorporated association and actually did not distribute profits to its members, the association becomes the subject of independent tax liability as a single resident under Article 2(1) and (2) of the Enforcement Rule of the Income Tax Act. Therefore, the Plaintiff, who is a member of the instant association, is not liable to pay income tax on the pertinent royalty reverted to the instant association.

2) Determination

A) Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 201; hereinafter the same)

Article 13 (1) provides that "unincorporated associations, foundations, or other organizations which are incorporated with permission or authorization from the competent authorities or which are unregistered as associations, foundations, or other organizations registered with the competent authorities pursuant to Acts and subordinate statutes, or which have basic property contributed for the purpose of public interest and do not distribute profits to their members, shall be deemed a juristic person and thus, this Act and tax-related Acts shall apply." Paragraph (2) of the same Article provides that "The entity shall appoint a representative or manager with the provisions concerning the organization and operation of unincorporated associations, foundations, other than other organizations, which are deemed juristic persons pursuant to paragraph (1) of the same Article, or unincorporated associations, foundations, or other organizations, other than organizations, and shall independently own and manage profits and property in its own account and name, and shall not distribute profits to its members, and the representative or manager shall be deemed a juristic person and shall be subject to the application of this Act and tax-related Acts."

Article 2 (3) of the Income Tax Act (amended by Act No. 11611, Jan. 1, 2013; hereinafter the same shall apply) provides that "any association, foundation or other organization, other than a corporation under Article 13 (1) of the Framework Act on National Taxes, which is deemed a corporation under paragraph (4) of the same Article, shall be deemed a resident or a nonresident and shall be subject to this Act." Article 2 (1) and (2) of the 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 shall apply) provides that "any association or foundation that is deemed a resident or a nonresident under Article 2 (3) of the Income Tax Act and any other organization whose method of distributing profits or ratio of distributing profits is not determined shall be deemed a resident or a nonresident, and Article 2 (2) of the Income Tax Act provides that a joint business owner shall be deemed a joint business owner or a nonresident that actually distributes profits or profits."

In full view of the contents and legislative intent of the above provisions, where an unincorporated association, foundation or other organization is not a juristic person under Article 13 (1) of the Framework Act on National Taxes, and is not an organization deemed a juristic person under Article 13 (4) of the same Act, income tax shall be imposed pursuant to the Income Tax Act. If a non-profit organization does not distribute profits to the members, such organization shall be deemed as one resident who is liable for tax payment, and if it is a profit-making organization that distributes profits to the members, such organization shall not be deemed as one resident who is liable for tax payment, and as prescribed in Articles 87 (1) and 43 (2) of the Income Tax Act, income tax shall be imposed on the income distributed to each of the members (see Supreme Court Decision 2010Du19393, Jan. 27, 2012).

B) First, we examine whether the instant association constitutes an organization, other than an organization deemed a corporation under Article 13(1) of the Framework Act on National Taxes, among non-corporate organizations under Article 13(4).

① The instant association was established on September 20, 196 for the purpose of joint development, sale in lots, lease, management, operation, etc. of commercial buildings with the land owners as part of the instant land owners and newly constructed 'xx building' on the instant land and completed registration of ownership preservation in its name, including sale in lots or lease of a store. ② The instant association was established under the articles of association for this purpose and formed an independent organization such as a general assembly decision-making institution and the head of the association, the executive organ, etc. based on the articles of association, and formed an independent organization such as the head of the association. The result of the association’s execution was conducted in accordance with the principle of majority, regardless of the change of members due to expulsion or withdrawal. ③ Although the instant association did not register the establishment under the corporate register and reported corporate tax, the association did not report the name of the association on the rental fee, etc. from 201 to 2008, nor did it be acknowledged that there was no dispute or dispute among the parties to the pertinent tax office’s establishment approval as a whole.

According to the above facts, the association of this case is an unincorporated association that has been engaged in profit-making business with its own purpose of conducting joint development, sale and lease of commercial buildings, and management and operation of commercial buildings with its articles of association and organization for such purpose, and has been engaged in profit-making business with independent entity from its members. It constitutes an unincorporated organization, other than an organization deemed a corporation under Article 13 (1) of the Framework Act on National Taxes.

C) Next, it is deemed that the method or proportion of distribution of profits has been determined or is actually distributed to partners.

It is reasonable to view that the association of this case has a distribution method or distribution ratio of profits of this case, based on the fact that the association of this case reported and paid comprehensive income tax on the rental fee of this case (30 years) and the amount calculated in proportion to the share of the union members, and the association of this case did not have reported and paid income tax on the use fee of this case (3.50%, the United StatesA 38.16%, the United StatesB 22.15%, the United StatesA 1.08%, etc.) and the association of this case.

D) Therefore, members of the instant association, including the Plaintiff, shall be liable to pay income tax according to the income amount distributed to each person with respect to the instant usage fees as joint business operators pursuant to Article 2(3) of the Income Tax Act and Article 2(1) and (2) of the Enforcement Rule of the same Act.

B. Whether the Plaintiff’s business income exists

1) Summary of the Plaintiff’s assertion

Even if the association of this case is not the subject of independent tax liability under the Income Tax Act, the user fee of this case constitutes the amount of income of the association of this case and its members. Since the entire user fee of this case was used for construction expenses of the commercial building of this case and was disbursed as necessary expenses, there is no business income of the association of

2) Determination

In full view of the following facts and circumstances, it is reasonable to view that there exists the Plaintiff’s income for the year 201 due to the advance payment of the instant usage fee, based on the following facts and circumstances that can be acknowledged by comprehensively taking account of the respective descriptions of evidence Nos. 5, 7, 8, and 7 through 10 and the purport of the entire pleadings.

A) Article 39 of the Income Tax Act provides that the year to which the total amount of income and necessary expenses are reverted shall be the taxable period to which the date when the total amount of income and necessary expenses are determined, and Article 51(3)1 of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 23588, Feb. 2, 2012) stipulates that the total amount of the rent for the rent for the rent of real estate is the total amount of the taxable period calculated by dividing the rent by the number of months during the contract term. Thus, the fee of this case shall be reverted to the revenue of each year to which each year belongs, in proportion to 30 years. On the other hand, the amount disbursed for the construction cost of the commercial building of this case may be attributed to the necessary expenses around 200 years after the construction work of the commercial building of

As can be seen, the time when the instant usage fee was reverted to the revenue amount and the time when the construction cost was reverted to the necessary expenses cannot be seen as the same (it is only possible to make a carryover deduction for five years for losses incurred before 2008 pursuant to Article 45(2) of the Income Tax Act). The Plaintiff’s assertion is premised on the fact that all the pertinent usage fee was reverted to the revenue amount and was disbursed as the necessary expenses

B) Members, including the Plaintiff, filed and paid the comprehensive income tax for the year 2008 and the year 2009 on the premise that the Plaintiff had business income from the instant royalty.

C. Nature of the instant usage fee

1) Summary of the Plaintiff’s assertion

The nature of the instant usage fee is "business income". Nevertheless, the Defendant considered the instant usage fee as "real estate rental income" and thus was illegal.

2) Determination

Article 4 (1) 1 (c) and Article 19 (1) 12 of the Income Tax Act stipulate "income generated from the real estate business and the rental business" as one of the business income, so the prior plaintiff's above assertion is without merit on different premise.

4. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

Relevant statutes

director Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 201)

Article 13 (Organization Deemed a Juristic Person)

(1) A corporation (referring to a domestic corporation and a foreign corporation under subparagraphs 1 and 3 of Article 1 of the Corporate Tax Act; hereinafter the same shall apply).

An unincorporated association, foundation, or other organization (hereinafter referred to as “organization which is not a juridical person”) which falls under any of the following subparagraphs:

this Act and this Act by deeming it as a corporation, which does not distribute profits to the members.

Tax-related Acts shall apply.

1. An association or reconstruction established with permission or authorization of the competent authority or registered with the competent authority under Acts and subordinate statutes;

Provided, That any other organization which has not been registered;

2. Foundations which hold any basic property contributed for the public interest, but not registered.

(2) The following organizations among non-corporate entities, other than associations, foundations, and other organizations deemed corporations pursuant to paragraph (1):

upon application by the representative or the director of the competent tax office that meets all the requirements of this section for approval;

this Act and other tax-related Acts shall also apply to a corporation. In such cases, the relevant association, foundation, or other organization.

the continuity and homogeneity of the corporation shall be deemed to have been maintained.

1. An association, foundation, or any other organization with rules governing its organization and operation, its representative or manager;

have been appointed.

2. It shall independently own and manage profits and property in its own account and name;

3. It shall not distribute its profits to its members.

(4) An organization deemed a corporation pursuant to paragraphs (1) and (2) (hereinafter referred to as "organization deemed a corporation").

The liability for national taxes shall be discharged by the representative or manager thereof.

(1) Income Tax Act (Amended by Act No. 11611, Jan. 1, 2013)

Article 2 (Liability for Tax Payment)

(3) Organizations, other than corporations, under Article 13 (1) of the Framework Act on National Taxes, deemed corporations under paragraph (4) of the same Article.

An organization, other than an organization (hereinafter referred to as "organization deemed a corporation"), shall be a resident or non-resident.

This Act shall apply in the light of this Act.

Article 4 (Classification of Income)

(1) Income of a resident shall be classified as follows:

1. global income u300 excluding income referred to in subparagraphs 2 and 3 from all income subject to taxation pursuant to this Act;

Income that is the aggregate of the following incomes:

(c) Business income:

Article 19 (Business Income)

(1) Business income shall be the following income, generated in the relevant taxable period:

12. Incomes accruing from the real estate business and the lease business: Provided, That acquisition and repair of land, etc. for public works projects shall be made;

A servitude and superficies (in relation to public works under Article 4 of the Act on the Ownership of Land, Infrastructure and Transport)

Income generated by establishing or lending a established right shall be excluded.

Article 27 (Calculation of Necessary Expenses)

(1) When calculating business income, the amount to be included in necessary expenses shall be corresponding to the total income in the relevant taxable period.

shall be the sum of expenses generally accepted and shall be the sum of ordinary amounts.

Article 39 (Accretion Year, etc. of Total Amount of Income and Necessary Expenses)

(1) The year to which the total amount of income and necessary expenses of a resident are reverted, shall be confirmed as total income and necessary expenses.

The taxable period to which the fixed date belongs shall be the taxable period.

Article 43 (Special Cases concerning Calculation of Joint Business Income)

(1) A joint business for jointly running any business containing business income and distributing the profit and loss (participation in the management).

Joint investment business operators prescribed by Presidential Decree (hereinafter referred to as "joint investment business operators") who make an investment without making a contribution.

(iii)in the case of a joint project, the place where the project is operated (including a joint project).

The head of the Gu shall be deemed one resident and the amount of his income shall be calculated by the joint business place.

(2) The amount of income generated in a joint business pursuant to paragraph (1) shall be each resident (investment) who conducts the joint business.

공동사업자를 포함한다. 이하 "공동사업자"라 한다) 간에 약정된 손익분배비율(약정된 손익

Where there is no distribution ratio, it means the ratio of shares; hereinafter referred to as the "distribution ratio of profits and losses");

Each joint businessman shall be distributed according to the income amount allocated or to be distributed.

Article 87 (Special Cases for Joint Business Place)

(1) The tax amount withheld on the income accruing from the joint business place shall be the expenses for sharing profits and losses from joint business places.

The rate shall be apportioned at a rate.

(1) Enforcement Decree of the Income Tax Act (Amended by Presidential Decree No. 23588, Feb. 2, 2012)

Article 51 (Calculation of Gross Amount of Income)

(3) The calculation of the total amount of business income shall be calculated in accordance with the following subparagraphs:

1. For the total amount of the pre-paid tax received after renting a real estate, the number of months during the contract period;

The total amount of each taxable period divided by division shall be the sum of the number of months.

The provisions of this Act shall apply.

(1) Enforcement Rule of the Income Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 323 on February 23, 2013)

Article 2 (Classification of Organizations Deemed Resident or Nonresident)

(1) An association or foundation deemed a resident or non-resident pursuant to Article 2 (3) of the Income Tax Act (hereinafter referred to as the "Act").

Representatives or administrators are appointed from among other organizations (hereafter referred to as "organizations, etc." in this Article)

An organization, etc. whose method of profit distribution or ratio of profit distribution is not specified, shall be one resident or one non-resident.

The Act shall apply by deeming a resident as a resident.

(2) For the purposes of paragraph (1), no clear method or proportion of profit distribution shall be determined.

In cases where the Do de facto profit is distributed, the members of the organization, etc. shall jointly operate the business.

The law shall apply as if it were the end.