Abstract

This study presents the problems and improvement of distinction between business income and other income about personal service through practical cases. The personal services income under positive system is stipulated in the current income tax law. Taxpayers are likely to be reported as other income rather than business income because other income has low deduction rate of estimated expense compared to that of business income. If tax authorities impose additional tax by changing into other income from the business income reported by taxpayers, the taxpayer will disagrees with the disposal and frequent tax litigation will decrease the reliability of taxation. This study suggests improvements through tax litigation cases related to personal services business income and other income. First, there is a need to provide specific guidelines for the continuous and repetitive activity in the current Income Tax Act. Also, it is necessary to consider that independent income through commercial activities, even if the income tax law is not listed as business income, is business income. Second, it is necessary to present to taxpayers income distinction ground such as their quantitative amounts or a percentage of the total reported income not to make a subjective decision. Third, practice cutoff guides of other income and business income are presented to the competent tax authorities in order to avoid arbitrary interpretation. Fourth, It needs to mitigate the difference of expenses recognition ratio between the business income and other income.

Keywords

• Personal Service Income
• Business Income
• Other Income
• Estimated Income Taxation

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