Cho-2017-China-5040 ( December 28, 2017)

If a building permit is obtained as an officetel, even if the size of national housing smaller than that of national housing is sold for residential purposes, it is subject to value-added tax.

If a building permit is obtained as an officetel, even if the size of national housing smaller than that of national housing is sold for residential purposes, it is subject to value-added tax.

Article 106 of the Restriction of Special Taxation Act

Incheon District Court-2018-Gu Partnership-559 ( November 29, 2018)

RedO et al. 4

O Head of tax office

October 25, 2018

November 29, 2018

1. The plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

1. Details of the disposition;

A. New construction and sale of officetels by the plaintiffs

On May 20, 2014, the plaintiffs registered the business of new construction and sale of buildings with the trade name of ○○○○○, and on November 2014, the plaintiffs newly constructed an aggregate building of 1st underground floor and 10th ground (office 36) in the second taxable period of value-added tax in 2014 with the name of 'Maritime○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○,

B. Plaintiffs’ failure to report value added tax and Defendant’s imposition of value added tax

1) The Plaintiffs did not file a value-added tax return on the supply of the instant officetel in 2014 on the ground that the instant officetel constitutes a house with an exclusive residing area of 85 square meters or less per household, and thus, the instant officetel is exempt from value-added tax pursuant to Article 106(1)4 of the Restriction of Special Taxation Act (hereinafter “the instant exemption provision”).

2) As a result of conducting a tax investigation with respect to the Plaintiffs from April 20, 2017 to May 30, 2017, the director of the regional tax office of ○○○○ Regional Tax Office notified the Defendant that the instant officetel supply does not constitute a national housing under the instant exemption provision and thus, the instant officetel supply does not constitute a national housing subject to value-added tax exemption.

3) On July 10, 2017, the Defendant issued a revised and notified the Plaintiffs of KRW 601,123,560 (including additional taxes) of value-added tax No. 201,123,560 (hereinafter “instant disposition”).

[Ground of recognition] Class 3, 4, 10, 11, Eul evidence 1-1, Eul evidence 2-2, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiffs' assertion

1) The instant officetel was granted a building permit for business facilities to meet the building permit requirements under the Building Act, and was designed and constructed from the beginning for residential purposes with rooms, kitchens, living rooms, bathing rooms, floor heating facilities, etc., and falls under substantial houses, such as residential buildings sold for residential purposes and used for residential purposes by occupants. As such, the instant officetel constitutes “national housing prescribed by Presidential Decree,” and the supply of the instant officetel constitutes the object of value-added tax exemption, and thus, the instant disposition was unlawful.

2) The Tax Tribunal decided to revoke the imposition of value-added tax on the ground that the supply of a residential officetel constitutes the subject of the exemption of value-added tax as stipulated under the instant exemption provision, and considering the fact that the Plaintiffs trusted this and did not report and pay value-added tax on the supply of the instant officetel, the instant disposition is unlawful as it violates the good faith principle.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Whether the instant officetel supply is not subject to value-added tax exemption

The instant exemption provision and Articles 106(4)1 and 51-2(3) of the Enforcement Decree of the Restriction of Special Taxation Act provide that one of the objects of value-added tax exemption refers to the supply of housing below the scale of national housing under the Housing Act. Article 2 subparag. 3 of the former Housing Act (amended by Act No. 12989, Jan. 6, 2015) provides that “The main sentence of Article 2 subparag. 3 of the former Housing Act (amended by Act No. 12989, Jan. 6, 2015) refers to the housing whose area used only for the purpose of residence is not more than 85 square meters per house or household (the residential area of Eup/Myeon other than the Seoul Metropolitan area under Article 2 subparag. 1 of the Seoul Metropolitan Area Readjustment Planning Act is less

Article 2 of the former Housing Act defines "house" as a whole or in part of a building with a structure in which members of a household can live an independent residential life for a long time as well as land annexed thereto, and classify it into detached houses and apartment houses. Article 1-2 of the Enforcement Decree of the Building Act defines "quasi-housing" as a building other than a house and a facility available as a residential facility, etc. as land annexed thereto. Article 2-2 subparagraph 4 of the former Enforcement Decree of the Housing Act (wholly amended by Presidential Decree No. 27444, Aug. 11, 2016) provides officetels under subparagraph 14 (b) of the Enforcement Decree of the Building Act as one of quasi-housing. Article 2(2) of the Building Act, Article 3-4 [Attachment Table 1] of the former Enforcement Decree of the Building Act (Amended by Presidential Decree No. 25786, Nov. 28, 2014); Article 3-5 [Attachment 1] of the Enforcement Decree of the Building Act and Article 3-5 [Attachment 1]

In this case, ① an officetel is one of the objects of exemption of value-added tax under the Housing Act, and the scope of “house” under the Housing Act does not have any separate definition as to “house”. Thus, the scope of “house” under the provisions of this case should be interpreted in accordance with the purport and purpose of the provisions. On the other hand, it is not allowed to extend or analogicalize the requirements for taxation or exemption from taxes under the principle of no taxation without the law unless there are special circumstances. In particular, it conforms to the principle of no taxation. It is difficult to objectively interpret that it is difficult to view that the area of the building of this case can only be used for the purpose of the building of this case as the standard of no taxation without the specific housing size as the standard of no taxation. It is difficult to view that the area of the building of this case can be used for the purpose of the building of this case as the standard of no taxation for the purpose of no taxation without the specific housing size.

Therefore, the supply of the instant officetel does not constitute the supply of housing below the scale of national housing under the Housing Act, which is subject to the exemption of value-added tax as stipulated in the instant exemption provision.

2) Whether the instant disposition violates the principle of good faith

The mere fact that the Tax Tribunal’s decision was made to revoke the disposition imposing value-added tax on the ground that the supply of a residential officetel constitutes an object of exemption from value-added tax as prescribed by the provisions of this case’s exemption, the Defendant cannot be deemed to have made a public statement of opinion that the instant officetel’s supply constitutes an object of exemption from value-added tax. Thus, the instant disposition cannot be deemed to violate

3) Whether the instant disposition is lawful

The instant disposition is legitimate in view that the supply of the instant officetels is not subject to value-added tax exemption.

3. Conclusion

The plaintiffs' claims are dismissed as it is without merit. It is so decided as per Disposition.

Related Acts and subordinate statutes

Value-Added Tax Act

Article 4 (Taxable Objects)

Value-added tax shall be levied on the following transactions:

1. Supply of goods or services by an entrepreneur;

Restriction of Special Taxation

Article 106 (Exemption, etc. of Value-Added Tax)

(1) The supply of any of the following goods or services shall be exempted from value-added tax:

4. National housing prescribed by Presidential Decree and the services for constructing such housing (including remodeling services prescribed by Presidential Decree);

Enforcement Decree of the Restriction of Special Taxation

Article 51-2 (Special Taxation on Self-Managed Real Estate Investment Company, etc.)

(3) "Scale prescribed by Presidential Decree" in Article 55-2 (4) of the Act means the size of national housing under the Housing Act (referring to the area based on the exclusive use area per household in cases of multi-family houses prescribed by Ordinance of the Ministry of Strategy

Article 106 (Exemption, etc. of Value-Added Tax)

(4) "National housing prescribed by Presidential Decree and construction services for the housing" in Article 106 (1) 4 of the Act means the following:

1. Houses not more than the size under Article 51-2 (3);

Gu Housing Act (Amended by Act No. 12989, Jan. 6, 2015)

Article 2 (Definitions)

1. The term "housing" means all or part of a building with a structure wherein members of a household may carry on an independent residential life for a long time as well as the land attached thereto, and it shall be classified into detached housing and collective housing;

1-2. The term "quasi-housing" means buildings other than housing, and facilities, etc. annexed thereto, which are available as residential facilities, and the scope and type thereof shall be prescribed by Presidential Decree;

2. The term "multi-family housing" means housing with a structure wherein each household that jointly uses all or part of the walls, hallways, stairs, and other facilities, etc. of a building, can carry on an independent residential life respectively within one building; its kind and scope shall be prescribed by Presidential Decree;

2-2. The term "multi-household-type multi-family housing" means a housing constructed in compliance with construction standards, area standards, etc. prescribed by Presidential Decree, in which part of the inner space of a multi-family housing is divided into a structure that makes it possible for each household to live separately;

3. The term "national housing" means housing constructed or improved under a support of funds from the National Housing Fund under Article 60, the area of which used exclusively for residential purposes (hereinafter referred to as "exclusive residential area") is not more than 85 square meters per house or household (referring to housing the exclusive residential area of which is not more than 100 square meters per house or household in an Eup or Myeon area that is not an urban area, with the exception of the Seoul Metropolitan area under subparagraph 1 of Article 2 of the Seoul Metropolitan Area Readjustment Planning Act; hereinafter the same shall apply). In such cases, the method of calculating the exclusive residential area shall

former Enforcement Decree of the Housing Act (wholly amended by Presidential Decree No. 27444, Aug. 11, 2016)

Article 2-2 (Scope and Type of Quasi-Housing)

The scope and types of quasi-housing defined in subparagraph 1-2 of Article 2 of the Act shall be as follows:

1. Dormitory under subparagraph 2 (d) of attached Table 1 of the Enforcement Decree of the Building Act;

2. Multi-living facilities under subparagraph 4 (o) and subparagraph 15 (c) of attached Table 1 of the Enforcement Decree of the Building Act;

3. A welfare house for the aged under Article 32 (1) 3 of the Welfare of the Aged Act among welfare facilities for the aged under subparagraph 11 (b) of attached Table 1 of the Enforcement Decree

4. Officetels under subparagraph 14 (b) of attached Table 1 of the Enforcement Decree of the Building Act.

Building Act

Article 2 (Definitions)

(2) Each building shall be classified into the following categories, and the detailed uses of each building shall be prescribed by Presidential Decree:

1. Single houses;

2. Apartment houses;

14. Business facilities;

Enforcement Decree of the former Building Act (Amended by Presidential Decree No. 25786, Nov. 28, 2014)

Article 3-4 (Kinds of Buildings by Use)

The types of buildings falling under the uses of each subparagraph of Article 2 (2) of the Act shall be as specified in attached Table 1.

[Attachment 1] Types of Buildings by Use (Related to Article 3-4)

1. Single houses (including homes, child-care centers, communal homes, local children's centers, and welfare facilities for older persons (excluding welfare houses for older persons) which have the form of single houses);

(a) Single houses;

(b) Multi-user housing: Housing that meets all of the following requirements:

(a) things with a structure that makes it possible for many people, such as students or employees to reside for a long time;

(ii)that does not have an independent residential form (a bath room may be installed for each room, but cooking facilities are not installed; hereinafter the same shall apply);

3. Those the total floor area of which does not exceed 30 square meters and the number of floors of which does not exceed three;

(c) A multi-family house: The house that meets all of the following requirements and is not a multi-family housing:

1. The number of floors (excluding underground floors) used for housing shall not exceed three: Provided, That where at least 1/2 of the floor area of the first floor is used as a parking lot with the piloti structure and the remainder is used for purposes other than housing, the relevant floor shall be excluded from the number of floors of housing;

(b) The total floor area (excluding the area of an attached parking lot; hereinafter the same shall apply) used for housing shall not exceed 660 square meters;

(iii) 19 or less households are able to reside;

(d) Diplomatic missions;

2. Multi-family housing (including home childcare centers, communal homes, local centers for children, welfare facilities for older persons (excluding welfare houses for older persons) and studio-type housing under Article 3 (1) of the Enforcement Decree of the Housing Act): Provided, That in calculating the number of floors referred to in items (a) or (b), where all of the first floor is used as a parking lot with a piloti structure, it shall be excluded from the number of floors, and where the remaining part is used as a parking lot with a pen structure of at least 1/2 of the floor area of the first floor when calculating the number of floors referred to in item (c), and where the relevant floor is used as a parking lot for purposes other than housing, the number of floors concerned shall be excluded from the number of floors of the housing,

(a) An apartment house: A house with at least five floors used for housing;

(b) A tenement house: A house with a total floor area (where at least two Dongs are connected to underground parking lots, each Dong shall be deemed respectively) exceeding 660 square meters, and the number of floors of which is four or less;

(c) Multi-household housing: Housing with the total floor area of not more than 660 square meters, and with not more than four floors (where not less than two Dongs are connected to underground parking lots, each Dong shall be deemed respectively);

(d) Dormitory: They shall be used for students or employees of schools, factories, etc., and have a structure for joint cooking, etc., but they shall not have an independent dwelling form (including student welfare housing referred to in Article 27 (2) of the Framework Act on Education);

14. Business facilities;

(b) General business facilities: Business facilities meeting the following requirements:

(b) Officetels (referring to officetels which meet the standards publicly notified by the Minister of Land, Infrastructure and Transport, and allow board and lodging in part of the partitioned land, the main business of which is sold or leased;

Enforcement Decree of the Building Act

Article 3-5 (Types of Buildings by Use)

Types of buildings falling under the uses prescribed in subparagraphs of Article 2 (2) of the Act shall be as listed in attached Table 1.

[Attachment 1] Types of Buildings by Use (Related to Article 3-5)

1. Single houses (including homes, child-care centers, communal homes, local children's centers, and welfare facilities for older persons (excluding welfare houses for older persons) which have the form of single houses);

(a) Single houses;

(b) Multi-user housing: Housing that meets all of the following requirements:

(a) things with a structure that makes it possible for many people, such as students or employees to reside for a long time;

(ii)that does not have an independent residential form (a bath room may be installed for each room, but cooking facilities are not installed; hereinafter the same shall apply);

3. Those the total floor area of which does not exceed 30 square meters and the number of floors of which does not exceed three;

(c) A multi-family house: The house that meets all of the following requirements and is not a multi-family housing:

1. The number of floors (excluding underground floors) used for housing shall not exceed three: Provided, That where at least 1/2 of the floor area of the first floor is used as a parking lot with the piloti structure and the remainder is used for purposes other than housing, the relevant floor shall be excluded from the number of floors of housing;

(b) The total floor area (excluding the area of an attached parking lot; hereinafter the same shall apply) used for housing shall not exceed 660 square meters;

(iii) 19 or less households are able to reside;

(d) Diplomatic missions;

2. Multi-family housing (including home childcare centers, communal homes, local centers for children, welfare facilities for older persons (excluding welfare houses for older persons) and studio-type housing under Article 3 (1) of the Enforcement Decree of the Housing Act): Provided, That in calculating the number of floors referred to in items (a) or (b), where all of the first floor is used as a parking lot with a piloti structure, it shall be excluded from the number of floors, and where the remaining part is used as a parking lot with a pen structure of at least 1/2 of the floor area of the first floor when calculating the number of floors referred to in item (c), and where the relevant floor is used as a parking lot for purposes other than housing, the number of floors concerned shall be excluded from the number of floors of the housing,

(a) An apartment house: A house with at least five floors used for housing;

(b) A tenement house: A house with a total floor area (where at least two Dongs are connected to underground parking lots, each Dong shall be deemed respectively) exceeding 660 square meters, and the number of floors of which is four or less;

(c) Multi-household housing: Housing with the total floor area of not more than 660 square meters, and with not more than four floors (where not less than two Dongs are connected to underground parking lots, each Dong shall be deemed respectively);

(d) Dormitory: The number of households using the joint cooking facilities under one consent is at least 50 percent of the total number of households, which are used for students, employees, etc. of schools, factories, etc. (including student welfare housing referred to in Article 27 (2) of the Framework Act on Education);

14. Business facilities;

(b) General business facilities: Business facilities meeting the following requirements:

(b) Officetels (referring to officetels which meet the criteria publicly notified by the Minister of Land, Infrastructure and Transport, with the aim of enabling board and lodging in a part of subdivisions in sale or lease);

Officetel construction standards (Public Notice of the Ministry of Land, Infrastructure and Transport No. 2013-789)

Article 1 (Purpose)

Items 3-4 of the Enforcement Decree of the Building Act and subparagraph 14 (b) of attached Table 1;

section 30.

Article 2 (Standards for Construction of Officetels)

An officetel shall meet the following standards:

1. No balcony shall be installed by any office partition;

2. In cases where construction is conducted in combination with other purposes (excluding buildings with a total floor area of 3,00 square meters or less on the ground floor), exclusive entrance exits for officetels shall be separately installed: Provided, That in cases where detached houses and apartment houses are built in combination, the project owner need not install exclusive entrance exits in consideration of the residential functions, etc.;

3. Where the exclusive area by administrative section exceeds 85 square meters, floor heating using hot-water, hot-water and hot-water, electric heat heaters, etc. shall not be installed.

Special Act on Private Rental Housing;

Article 2 (Definitions)

The terms used in this Act shall be defined as follows:

1. The term "private rental housing" means housing provided for rent (including quasi-housing prescribed by Presidential Decree, such as housing constructed on leased land and officetels (hereinafter referred to as "quasi-housing"), and housing leased only part of it prescribed by Presidential Decree; hereinafter the same shall apply), which is registered by a rental business operator under Article 5, and is classified into privately constructed rental housing and buy-to-rent rental housing