[2] Where a local government removed a building after receiving compensation for losses from Gap et al. due to the Central Land Expropriation Committee's ruling on expropriation of land and building owned by Gap et al., and the tax authority imposed the disposition imposing value-added tax on Gap et al. by deeming the compensation for losses from the above building as the receipt of the price for the supply of goods, the case holding that the above compensation for losses excluded from the supply of goods pursuant to Article 14 (4) of the former Enforcement Decree of the Value-Added Tax Act, and thus

[2] Where a local government removed a building after receiving compensation for losses from Gap et al. due to the Central Land Expropriation Committee's ruling on the expropriation of land and building owned by Gap et al., and the tax authority imposed value-added tax on Gap et al. on the land that did not report and pay value-added tax on the compensation for losses from the above building by deeming the compensation for losses to be the receipt of the price for the supply of goods, the case held that the above compensation for losses should be excluded from the sale of the building on the ground that a local government was planned to remove the building in an urban planning project aimed at constructing a bridge, and the building was actually demolished, and accordingly the general building ledger of the above building was cancelled, and the compensation for losses was set equivalent to the appraised value of the building was determined. In light of the fact that the above compensation for losses was the ultimate purpose of acquiring the building site rather than the value of the building in question, because the building in question is physically impossible or economically impossible, and thus, the relevant building should be excluded from the sale of the building on the condition of removal.

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

A. On April 13, 2005, the plaintiff and the non-party 1 (hereinafter "the plaintiff et al.") completed the registration of transfer of ownership for each of 1/2 shares of the building (hereinafter "the building of this case") of Gangseo-gu, Busan and 941 square meters of land and the 1/2 shares of the ground and the 6th above ground (hereinafter "the building of this case"), and completed the registration of transfer of ownership for each of the above land and the building of this case. Since that time, the plaintiff and the non-party 1 (hereinafter "the plaintiff et al.") closed on July 13, 2009.

B. At around 2008, Busan Metropolitan City (hereinafter “instant urban planning facility project”), which is an urban planning facility project to construct a master zone in Gangseo-gu, Busan, including the instant real estate, in order to implement a master zone construction private investment project (hereinafter “instant urban planning facility project”), and obtained authorization for an implementation plan pursuant to Article 88 of the National Land Planning and Utilization Act, and publicly announced each of them on March 26, 2008 and May 7, 2008.

C. On July 2008, Busan Metropolitan City consulted with the Plaintiff, etc. to acquire the instant real estate to be incorporated into the instant urban planning facility project, but failed to reach an agreement, the Central Land Expropriation Committee filed an application for adjudication with the Central Land Expropriation Committee. On April 9, 2009, the Central Land Expropriation Committee rendered a ruling on expropriation of the instant real estate on June 2, 2009, with the date of commencement of expropriation as of June 2, 2

D. On April 29, 2009, the Plaintiff et al. received the money indicated in the table below the amount deposited as compensation for losses under the above expropriation ruling. Among them, value-added tax on the total amount of compensation for the instant building KRW 1,025,689,640 (hereinafter “instant compensation for losses”) was not reported and paid.

Non-party 1’s total land 477,792,750 won 477,792,750 won 95,585,500 won 512,844,820 won 512,844,820 won 1,025,689,640 won business losses of 10,500,000 won 21,000,500 won 7,875,775,000 won for the relocation of facilities, KRW 7,875,00 won 15,750,000 won in total, of KRW 1,09,009,012,570 won in total, KRW 1,009,570,000 in total, KRW 1,570,09,012,570 won in total, 2018,015,25140 won in this case.

E. Considering that it is difficult to relocate the instant building to another place, the instant compensation for losses was determined by adding the appraised value calculated by multiplying the unit price per 1 square meter per each floor by the area pursuant to Article 75(1)1 or 2 of the Act on Acquisition of and Compensation for Land, etc. for Public Works Projects (hereinafter “Public Works Act”), and the said compensation amount does not include the output amount of value-added tax.

F. On May 11, 2009 by the above expropriation ruling, Busan Metropolitan City removed the instant building on or around September 201, 2010 after completing the registration of transfer of each co-owned share of the Plaintiff, etc. with respect to the instant real estate. Accordingly, on September 6, 2010, the general building ledger of the instant building was cancelled.

G. On September 6, 2012, the Defendant: (a) deemed that the instant compensation for losses constituted receipt of payment for the supply of goods prescribed in the Value-Added Tax Act; and (b) imposed the Plaintiff et al. a penalty of KRW 152,939,640 (24,510 + 59,695,130 + 59,695,130) on the first term portion of the Value-Added Tax Act as the person jointly and severally liable for tax payment.

H. The Plaintiff et al. filed an appeal with the Tax Tribunal on October 8, 2012 upon filing an objection against the said disposition. However, the Tax Tribunal dismissed the Plaintiff et al.’s claim on December 6, 2012.

I. On November 15, 2012, when the argument in the instant case was pending, the Defendant revoked the part of the penalty tax in the said disposition, and subsequently imposed the same amount by clarifying the type of penalty tax and the basis for calculation (hereinafter “instant disposition”), stating the same as the disposition imposing value-added tax on September 6, 2012 and the disposition imposing penalty tax on November 15, 2012.

[Reasons for Recognition] The facts without dispute, Gap evidence 1 through 4 (including each number), Eul evidence 1 through 8-2 (including each number), the Central Land Tribunal of this Court and the Busan Metropolitan City Construction Headquarters's fact-finding results, the whole purport of the arguments, as a whole.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Claim on the premise that the instant compensation for losses is not subject to value-added tax

First, the instant compensation is merely a consideration for the loss of ownership of the instant building by the Plaintiff, etc., and is not a consideration for the supply of goods, and thus cannot be subject to value-added tax.

Second, since the plaintiff et al. comprehensively accepted the building of this case, it cannot be subject to value-added tax because it constitutes a transfer of business under Article 6 (6) 2 of the Value-Added Tax Act.

2) Prior assertion on the premise that the instant compensation for losses is subject to value-added tax

First, at the time of receiving the instant compensation, the Plaintiff did not hear and pay the reply that the instant compensation was not subject to value-added tax as a result of asking about whether it was subject to value-added tax at Busan Metropolitan City and the National Tax Service’s civil petition center, etc., but did not pay the compensation. However, the Defendant was obliged to pay penalty tax due to the instant disposition that was made now by the Defendant, and the Plaintiff was fully responsible for the portion to be borne by Nonparty 1 due to Nonparty 1’s insolvent. Thus, the instant disposition is contrary to the principle

Second, even though the compensation for the loss of the building of this case received by the plaintiff et al. was a total of KRW 988,168,260, the defendant deemed the total of KRW 1,025,689,640, and the disposition of this case was made. Thus, the disposition of this case was erroneous in calculating the

Third, while the Plaintiff intended to collect value-added tax in the course of receiving the compensation for losses from Busan Metropolitan City, and deliver the tax invoice, the Plaintiff did not issue the tax invoice because it was rejected. Therefore, the imposition of additional tax on the ground that the tax invoice was not issued during the instant disposition is unlawful.

Fourth, the Plaintiff did not report and pay the value-added tax according to the interpretation of the precedent at the time of receiving the instant compensation for losses and the statutes, and there is a justifiable reason for this. Therefore, the imposition of penalty tax among the instant disposition is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) First, we examine whether the instant compensation for losses is subject to value-added tax.

According to Article 6(1) of the former Value-Added Tax Act (amended by Act No. 11608, Jan. 1, 2013; hereinafter the same), the delivery or transfer of goods is a supply of goods which are the grounds for the taxation of value-added tax, and in light of the nature of value-added tax, such delivery or transfer is premised on the act of transferring ownership so that goods can be used and consumed (see Supreme Court Decision 98Du1675, Feb. 9, 199, etc.).

Article 14(1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 24359, Feb. 15, 2013; hereinafter the same) provides that “The supply of goods under Article 6(1) of the Act shall be as follows; and Article 6(4) of the Act provides that “the transfer or transfer of goods by means of auction, expropriation, investment in kind, or other contractual or legal causes” shall be construed as “the transfer or transfer of goods by reason of auction, expropriation, investment in kind, or other contractual or legal causes,” and Article 14(4) of the same Act provides that “Notwithstanding Article 1(4) of the Enforcement Decree of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents, Public Works, etc., if the owner of the goods subject to expropriation receives a price for the goods on the condition of removal of

In accordance with the National Land Planning and Utilization Act, which applies mutatis mutandis to the expropriation of the Public Works Act by Busan Metropolitan City, the fact that the instant building was expropriated and the Plaintiff, etc. paid compensation for losses, and removed the instant building. In this case, it is problematic whether the instant provision constitutes “the case where the owner of the goods subject to expropriation receives the price for the relevant goods on the condition of removal,” which provides that the instant provision does not be deemed the supply of goods, and thus, is exempt from the taxation of value-added tax.

In full view of the following circumstances, “Where the owner of goods subject to expropriation receives the price for the relevant goods on condition that the relevant goods are demolished” under Article 75(1)1 of the Enforcement Decree of the instant case refers to the case where the owner of the relevant building pays the price for the relevant goods under the condition that the relevant goods are demolished, not to acquire the value of the relevant building, and the project operator acquires the relevant site. Since it is physically impossible to relocate the building on the site (Article 75(1)1 of the Public Works Act) or economic impossible (Article 75(2)2 of the said Act) and there is no choice but to remove the relevant building, it shall be deemed that there is no relation with the application of Article 75(1) of the Enforcement Decree of the instant case (Article 75(1) of the said Enforcement Decree as amended by Presidential Decree No. 24359 of Feb. 15, 2013, the term “the owner of the relevant goods subject to expropriation” is deleted, and thus, the term “the goods subject to expropriation” at present is not deemed the goods being expropriated.

① The enforcement decree of this case, newly inserted by Presidential Decree No. 19892, Feb. 28, 2007, is anticipated to remove the relevant building due to the implementation of the project, and the part equivalent to the value of the building out of the purchase price is not the price for the supply of goods, but the compensation for losses arising from removal of the building, and it cannot be deemed the supply of goods under the Value-Added Tax Act. In light of the previous precedents of the Supreme Court, it seems to have the legislative purpose of protecting taxpayers by clarifying that the removal of the goods does not constitute the supply of the goods, rather than the acquisition of the value of the goods, if the project implementer removes the goods.

② In ordinary large-scale development projects, such as urban rearrangement projects, usually refer to cases where a project implementer delegates the removal of a project area to a specialized demolition company en bloc. As such, the provision of the Enforcement Decree of the instant case is interpreted only on a literary basis, and only the case where the owner of the goods subject to expropriation becomes the subject of the direct removal of the relevant goods, the provision of the Enforcement Decree of the instant case, newly established to protect taxpayers, is highly likely

③ As seen in this case, the purport of Article 15 of the former Value-Added Tax Act stipulating that the urban planning project implementer shall pay or deposit compensation for losses in addition to the value-added tax on compensation for losses where it pays or deposits compensation for losses following the expropriation ruling by the Land Tribunal is not voluntary, and that Article 15 of the former Value-Added Tax Act stipulating that “in the event that a business entity supplies goods or services, it is required to collect value-added tax from the person who receives the supply of the goods or services, it is ultimately obligated to pay it to the final consumer in sequence, and thus, the person who receives the supply alone cannot be deemed to have the obligation to pay or pay value-added tax on the other party to the transaction or the State (see Supreme Court Decisions 96Da40677, 40684, Apr. 25, 1997; 2003Da49153, Feb. 13, 2004).

2) In light of the above legal principles, the instant building was planned to be demolished in the instant urban planning project aimed at constructing a health zone and a bridge, and in fact Busan Metropolitan City demolished the instant building, and accordingly, the general building ledger of the instant building was cancelled, as the removal of the instant building was deemed impossible, and the instant expropriation compensation was set as equivalent to the appraised value of the instant building. In light of the fact that the instant expropriation compensation was set for the acquisition of the relevant building rather than the usage value of the relevant building, and the ultimate purpose of acquiring the relevant site is to acquire the relevant site. Since the instant expropriation compensation is not a project operator, but it is the ultimate purpose of acquiring the relevant building, and there is any reason such as physical impossibility or economic impossibility, it is reasonable to deem that the relevant building was excluded from the supply of goods under the provision of the Enforcement Decree of the instant case.

Therefore, the disposition of this case on the premise that the compensation for expropriation of this case is subject to value-added tax is unlawful and thus should be revoked (as to the plaintiff's assertion that the expropriation of this case constitutes the transfer of business subject to the exemption of value-added tax, the "transfer of business" which is not deemed the supply of goods under the main sentence of Article 6 (6) 2 of the Value-Added Tax Act and Article 17 (2) of the Enforcement Decree of the same Act refers to the transfer of physical and human facilities, rights, and duties, etc. including business property for each place of business to replace only the managing body while maintaining the identity of the business (see Supreme Court Decision 2006Du17895, Dec. 24, 2008, etc.). In this case, the plaintiff's assertion on this part is without merit, as long as the disposition of this case is revoked on the ground that the compensation for expropriation of this case is not subject to value-added tax on the ground that it is not subject to value-added tax.

3. Conclusion

Thus, the plaintiff's claim is reasonable, and it is decided as per the disposition.

[Attachment] Relevant Statutes: omitted

Judges Kim Sang-hoon (Presiding Judge)