The Supreme Administrative Court rendered the 106-Pan-725 Decision of December 21, 2017 (hereinafter, the “Decision”), holding that for those who continuously and independently engage in specific economic activities for profit-seeking purposes, consolidated income taxes shall still be levied on their income from profit-seeking activities even though they do not have a business license number since they do not apply for business registration.
According to the facts underlying this Decision, the Plaintiff filed his consolidated income tax for 2009. The Defendant assessed his income from profit-seeking activities and rendered the original disposition to request payment of a supplemental tax and to impose a penalty on the ground that the Defendant had operated real estate business without applying for business registration as required and had sold 14 pieces of property at issue in 2009. Dissatisfied, the Plaintiff brought an administrative action.
According to this Decision, the total earning generated by a sole proprietorship owner from business operation shall be included in his/her income as “income from profit-seeking activities” for the filing of the consolidated income tax. For laws involved in tax matters, their interpretation shall be made based on the principle of taxation prescribed by law and in consideration of their legislative objectives and of their significance in economics and the principle of fairness in substantive taxation. Therefore, although a person who continuously and independently engages in specific economic activities for profit-seeking purposes without business registration does not have a registered business license number or location, their activities have the same substantive economic significance as those who engage in the same economic activities with a business license number or location. According to the legislative objectives of the Income Tax Law with respect to income from profit-seeking activities and in view of economic implications and the principle of fairness in substantive taxation, such person shall be treated as a “profit-seeking enterprise” under Article 11, Paragraph 2 of the Income Tax Law with the income from profit-seeking activities included as taxable income for consolidated income taxes.
The original decision found, as further pointed out in this Decision, that the sales contracts for the 14 pieces of property at issue were all established in 2009 and the sales volume and frequency were different from occasional property sale by ordinary people. Therefore, these were not just temporary trading activities but rather were independent and continuous property-selling activities. The selling activities were profit-seeking by nature to a certain extent. Therefore, it was concluded that the economic activities involving the sale of the 14 pieces of property at issue in that year met the reasons for inner conviction by meeting the criteria of profit orientation and continuity, and that sales volume was not the only criterion for determination. Since the original decision was not inappropriate, the Plaintiff’s appeal was rejected.