Cho Jae-2017-China-5033 ( December 18, 2017)

Whether the use in the construction permit or public register is exempt from the value-added tax of officetels;

The issue of whether the use of the building constitutes "supply of housing smaller than the scale of national housing under the Housing Act, which is a tax-exempt requirement prescribed by the Ordinance of the Restriction of Special Taxation Act" shall be limited to a building constructed for the purpose of the housing with the permission

Article 106(1)4 of the Restriction of Special Taxation Act

2018Guhap542 Revocation of Disposition of Imposition of Value-Added Tax

조@@ 외2

000 director of the tax office

November 30, 2018

December 14, 2018

1. The plaintiffs' claims are dismissed.

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

Cheong-gu Office

The imposition of value-added tax of KRW 357,784,710 on July 10, 2017 by the Defendant against the Plaintiffs on July 10, 2017 is revoked.

1. Details of the disposition;

가. 원고들은 공동으로 @@ @@구 @@평동 1@@-1 지상 10층 건물(이하 '이 사건 건물'이라 한다)에 관하여 1층은 주차장, 2층부터 6층까지 20호는 업무시설(오피스텔, 이하 '이 사건 오피스텔'이라 한다), 7층부터 10층까지 16세대는 주택(으로 건축허가 및사용승인을 받아 신축ㆍ분양한 사업자들이다.

B. The Plaintiffs: (a) sold the instant building in the first taxable period of the value-added tax in 2014; and (b) reported and paid the first taxable period of the value-added tax in 2014; (c) deemed that the instant officetel with respect to the sales revenue is exempt from value-added tax as a national housing, and excluded

C. The Defendant, on July 10, 2017, notified the Plaintiffs of KRW 357,784,710 of the value-added tax for the first period of July 10, 2014 in relation to the supply value of the instant officetel (hereinafter “instant disposition”).

D. The Plaintiffs were dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on September 29, 2017, but was dismissed on December 28, 2017.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 11, and 13, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

1) Since the instant officetel was newly built for a residential purpose from the beginning and is actually used for a residential purpose, it constitutes subject to VAT exemption pursuant to the principle of substantial taxation. Therefore, the instant disposition on a different premise ought to be revoked in an unlawful manner.

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 in the instant exemption provision. Considering the fact that the Plaintiffs trustedly did not report and pay value-added tax on the supply of the instant officetel, and that the interpretation of the tax law or the practice of national tax administration, which the supply of a residential officetel constitutes the subject of the exemption of value-added tax as stipulated in the instant exemption provision, was already established prior to the instant disposition, and thus accepted by the taxpayers, the instant disposition was unlawful as it violates the good faith principle and the prohibition of retroactive taxation.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) Organization of issues

There is no dispute between the parties that the instant officetel’s construction permit and the public record constitutes business facilities. Accordingly, the issue of the instant case is whether the instant officetel’s public record constitutes business facilities, but its structure is designed for residential purposes, and if the occupants actually use it for residential purposes, it constitutes “housing below the scale of national housing under the Housing Act” under the Enforcement Decree of the Restriction of Special Taxation Act and whether the supply should be exempted from value-added tax.

2) Relevant legal principles

A) According to Article 106(1)4 of the Restriction of Special Taxation Act, Articles 51-2(3) and 106(4)1 of the Enforcement Decree of the same Act, and the main sentence of Article 2 subparag. 3 of the former Housing Act (wholly amended by Act No. 12989, Jan. 6, 2015; hereinafter the same): ① Value-added tax shall be exempted on the supply of national housing and its housing construction services prescribed by Presidential Decree; ② “construction services for national housing and its housing prescribed by Presidential Decree” refers to housing below the scale of national housing under the Housing Act; ③ The term “scale of national housing” refers to housing the area of which used exclusively for residential purposes does not exceed 85 square meters per house or household (referring to housing the exclusive residential area of which does not exceed 100 square meters per Eup/Myeon area other than the Seoul Metropolitan area under Article 2 subparag. 1 of the Seoul Metropolitan Area Readjustment Planning Act).

Meanwhile, according to subparagraphs 1 and 1-2 of Article 2 of the former Housing Act and Articles 2 and 2-2 of the former Enforcement Decree of the Housing Act (wholly amended by Presidential Decree No. 27444, Aug. 11, 2016; hereinafter the same), “house” means all or part of a building with a structure in which members of a household can live an independent residential life for a long time, and land annexed thereto; and “house” is divided into detached houses and multi-unit houses; and “quasi-housing” means buildings other than a house and land annexed thereto, which are usable as a residential facility, and includes officetels under subparagraph 14 (b) of Article 3-4 [Attachment Table 1] of the former Enforcement Decree of the Building Act (amended by Presidential Decree No. 25786, Nov. 28, 2014; hereinafter the same shall apply).

In addition, according to Article 3-4 [Attachment 1] subparagraph 14 (b) of the former Enforcement Decree of the Building Act and Article 2 of the "Building Standards for Officetel", the Ministry of Land, Infrastructure and Transport (No. 2013-789, Dec. 13, 2013), an officetel is a kind of general business facility, and an officetel is mainly engaged in business, and is allowed to board and lodge a board in a part of the division, and where the exclusive area by office subdivision is 85 square meters or less, a floor heating may be installed using hot-water, hot-water, hot-water, or electric heat.

B) In light of the principle of no taxation without the law, or the requirements for tax exemption or tax exemption, the interpretation of tax laws and regulations shall be interpreted as the text of the law, barring any special circumstance, and shall not be extensively interpreted or analogically interpreted without reasonable grounds to taxpayers. In particular, the strict interpretation of the requirements for tax exemption and exemption that can be clearly viewed as the preferential provisions accords with the principle of fair taxation (see, e.g., Supreme Court Decisions 2003Du7392, May 28, 2004; 2007Du21242, Feb. 14, 2008). In addition, national housing exempt from value-added tax under Article 106(1)4 of the Restriction of Special Taxation Act constitutes a national housing if it falls under the category of national housing, at least a building constructed for the purpose of housing with the construction permission lawfully obtained, and if it is remodeled without obtaining the permission for use after obtaining the construction permission from an officetel, even if it constitutes a national housing exempt from value-added tax (see, e.g., Supreme Court Decision 198Nu6.

3) Whether the instant officetel supply is subject to value-added tax exemption

In light of the contents and legal principles of relevant laws and regulations as seen earlier, the instant officetel cannot be deemed to fall under the “national housing” under Article 106(1)4 of the Restriction of Special Taxation Act due to the following reasons.

A) Article 2 of the former Housing Act sets a different definition of a house and a quasi-housing containing a detached house, an apartment house, and an officetel, which are its subordinate concepts. The former Enforcement Decree of the Building Act sets a different definition of a house and an officetel which is a business facility, and the term “house” and “quasi-housing” are also different from the relevant laws and regulations setting the building requirements and standards. Therefore, as long as the Enforcement Decree of the Restriction of Special Taxation Act clearly prescribes a house smaller than national housing size under the Housing Act as an object of value-added tax exemption, it is not allowed to expand or analogically interpret that the term “quasi-housing” is also included in the above “house” or analogical interpretation in violation of the principle of no taxation without law and the principle

B) The introduction of the concept of quasi-housing into the Housing Act amended by Act No. 10237, Apr. 5, 2010 is merely for facilitating the supply of facilities usable for residential purposes without being classified as a house in response to the changed housing demand conditions, and it does not aim at facilitating the supply of facilities available for residential purposes, including officetels as the concept of a house, thereby supporting the stability of ordinary people and tax benefits.

In particular, quasi-housing stipulated in Article 2-2 of the former Enforcement Decree of the Housing Act includes dormitories and communal living facilities. This building is related to housing supply for residential stability of ordinary people, which is the legislative purpose of Article 106(1)4 of the Restriction of Special Taxation Act.

C) An officetel is a building that can board and lodging in a part of the subdivisions in sale or rent pursuant to the Building Act, and it cannot be deemed as a “house under the Housing Act” solely on the ground that it was simply constructed for the purpose of residence or is currently being used for the purpose of residence. In addition, according to Article 2 of the former Officetel construction standards, an officetel is prohibited from the installation of a strip for each office subdivision, and it cannot be deemed that an officetel is installed in the same structure as that of multi-family housing.

D) Meanwhile, value-added tax is subject to the “supply of goods” (Article 4 of the Value-Added Tax Act). Therefore, the objective type or use of a building at the time of the supply, and the entry in the public account book, in particular, should be determined based on the standard. Although the occupants of the instant officetel have used most of them for residential purposes, it is merely a situation that occurred after the supply of the instant officetel, and the owners and occupants of the instant officetels may use them as general business facilities at any time according to their original purpose. Therefore, construing that the taxation of value-added tax on goods subject to the supply of goods vary depending on the circumstances after the supply, as such, would seriously undermine the legal stability of tax law, and thus, it is unreasonable to interpret that the taxation of value-added tax on the instant officetel differs each time depending on the circumstances after the supply (Article 4 of the Value-Added Tax Act, even if based on the fact-finding results with respect to the head of Bupyeong-gu Incheon Metropolitan City, 504 subparagraph and 6018 of the instant officetel is also subject to property tax in 2018).

E) Ultimately, barring any special circumstance, whether the supply of a house below the national housing scale under the Housing Act, which is a tax-exempt requirement under the Restriction of Special Taxation Act, constitutes “supply of a house below the national housing scale under the Housing Act” ought to be objectively determined according to the purpose of public record, such as building permission, approval for use, building management ledger, real estate register, etc., and “house below the national housing scale under the Housing Act” constitutes only a building constructed by obtaining a building permit lawfully for the purpose of use of a house as a business facility, such as officetels, and the building management ledger and real estate register are also stated for the same purpose, but only a subjective circumstance that the current status is suitable for the purpose of residence and is actually used by many occupants, does not constitute “house below the national housing scale under the Housing Act” (see, e.g., Supreme Court Decision 2007Du21242, Feb. 14, 2008).

4) Whether the instant disposition violates the principle of good faith and the principle of prohibition of retroactive taxation

The mere fact that there was a part of the Tax Tribunal’s revocation of the disposition imposing value-added tax on the grounds that the supply of a residential officetel constitutes an object of the exemption of value-added tax as stipulated in the instant exemption provision, the Defendant cannot be deemed to have issued a public statement to the Plaintiffs that the supply of the instant officetel constitutes an object of the exemption of value-added tax, or that the practice of national tax administration with such content was established. Therefore, the instant disposition cannot be deemed to violate the principle of good faith

5) Sub-decisions

Therefore, the instant disposition is lawful where the Defendant’s supply of the instant officetel is not subject to value-added tax exemption.

3. Conclusion

Therefore, the plaintiffs' claim is dismissed as it is without merit, and it is so decided as per Disposition.