1. Article 4(5) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 22043, Feb. 18, 2010; hereinafter the same) under delegation by Article 4(4) of the former Value-Added Tax Act (amended by Act No. 8142, Dec. 30, 2006; hereinafter the same) provides that “in the case of a nonresident or a foreign corporation, the place prescribed in Article 120 of the Income Tax Act or Article 94 of the Corporate Tax Act shall be the place of business.” Furthermore, Article 94(1) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010) provides that “if a foreign corporation has a fixed place for performing all or part of its business in the Republic of Korea, the place of business in Korea shall be deemed to include one of the following places for which services continue to be provided for a period exceeding 2 months and 16 months in total [the place where services are provided for more than 2 months (2 months).

In addition, Article 22 of the former Enforcement Decree of the Value-Added Tax Act upon delegation under Article 9(4) of the former Value-Added Tax Act provides for “when the provision of services is completed in the case of ordinary supply” (Article 1) and “where the provision of subparagraphs 1 and 2 is not applicable, when the provision of services is completed and the value of supply is fixed” (Article 3).

Meanwhile, according to Article 34 of the former Value-Added Tax Act, where a person who receives a service from a foreign corporation with no domestic place of business under Article 94 of the former Corporate Tax Act receives a service from the foreign corporation with no domestic place of business under Article 94 of the former Corporate Tax Act (excluding the case of providing the relevant service to taxable businesses), such foreign corporation is not obligated to collect and pay value-added tax on behalf of the supplier. However, where a foreign corporation with a domestic place of business under Article 94 of the former Corporate Tax Act provides a service in Korea, the foreign corporation is obligated to collect and pay value-added tax at the location of its domestic place of business. In addition, where a business operator transfers a service payment claim to another business operator and the supply price is determined only after transferring the service payment claim with no final amount of supply, the completion of the service payment does not affect

2. The lower court: (1) on December 23, 1999, the Plaintiff, a Canadian corporation, established a special purpose Cococo-development corporation (hereinafter “Co-development”) to promote the Incheon Bridge construction project with the shares of 51:49 on December 23, 199; (2) from December 1999 to March 2003, the Plaintiff provided the Plaintiff with services such as consultation, structure, technology and other engineering services related to the cco-development project, planning and preparation of project plans; (3) on the ground that the Plaintiff did not report the price of the instant services to the Plaintiff at the time of its domestic place of business on May 2003, 200, the Plaintiff provided the 10-year AMF development project at the 20-year office (Seoul Seocho-gu Office omitted); and (5) on the ground that the 20-year domestic place of business was not the result of the Plaintiff’s actual inspection at the time of its transfer to the Plaintiff.

In addition, the lower court rejected the Plaintiff’s assertion that: (a) the head office of Cda Development is the place where the Plaintiff had continuously and repeatedly engaged in the business management services for the Incheon Diplomatic Construction Project for more than 6 months through employees or similar services for more than 2 years; and (b) Cda Development, a special purpose corporation, cannot be deemed as having an independent human and material facilities that can substantially promote the Incheon Dda Construction Project at the time the Plaintiff provided the instant service; (c) the Plaintiff did not hold the business place with the authority to dispose of or use it in Korea; or (d) Cda Development’s head office is merely the Cda Development’s head office, and (e) in light of the circumstances stated in its reasoning, the Plaintiff should be deemed as the actual owner of the service claim, not the title owner, but the Plaintiff as the actual owner of the service claim under the principle of substantial taxation.

Of the judgment of the court below, the part on which the office of Cda Development’s head office is deemed the Plaintiff’s domestic business place is justifiable in accordance with the above provision and legal principles, and there is no error of law by misunderstanding the legal principles as to domestic business place of foreign corporations as stipulated in Article 4(5) of the former Enforcement Decree of the Value-Added Tax Act. Meanwhile, even if the Plaintiff transferred the service payment claim by transferring the ownership of the result of the instant service to APIL under the condition that the supply price at the time of the service was not determined, the service supplier of this case still becomes the Plaintiff. While the judgment of the court below on this part was erroneous in the reasoning of the judgment below,

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Sang-hoon (Presiding Justice)