Article 22 of the Enforcement Decree of the Value-Added Tax Act

2. The costs of appeal shall be borne by the Plaintiff.

The defendant's imposition of 1,041,50 won of corporate tax of 2001, which was made on July 19, 2004 against the plaintiff, and the imposition of 40,564,360 won of value-added tax of 2002 as of April 7, 2006 shall be revoked.

2. Purport of appeal

The judgment of the first instance shall be revoked. The imposition of value-added tax of KRW 40,564,360 against the plaintiff on April 7, 2006 by the defendant shall be revoked.

In the first instance court, the Plaintiff sought to revoke both the imposition of KRW 1,041,50 of corporate tax of 2001 and the imposition of KRW 31,025,950 of corporate tax of 2000 as of April 7, 2006 and the imposition of KRW 40,564,360 of value-added tax of 2002. The first instance court revoked the imposition of KRW 31,025,950 of corporate tax of 2000 against the Plaintiff on April 7, 2006, and dismissed the remainder of the Plaintiff’s claim.

Accordingly, among the judgment of the first instance court on June 22, 2006, the plaintiff dismissed the plaintiff's claim on value-added tax of 2002. On April 7, 2006, the defendant appealed to the effect that "the defendant revoked the disposition of imposition of value-added tax of 40,564,360 won against the plaintiff (the disposition of imposition of corporate tax of 2001 was not appealed)" (the defendant did not appeal against the disposition of imposition of corporate tax of 2001), and the defendant appealed to the effect that "the plaintiff will revoke the judgment of the first instance and dismiss all the plaintiff'

However, on December 8, 2008, when the appellate court was in progress, the plaintiff withdrawn the lawsuit on the imposition of corporate tax in 2000 from the date of preparatory pleading, and the defendant litigation performer consented thereto.

Therefore, the appellate court's decision on this case is limited to whether the defendant's imposition of value-added tax of 40,564,360 won against the plaintiff on April 7, 2006 is legitimate or not.

2. Details of the disposition;

A. On June 13, 200, 200, ○○○ Construction Co., Ltd. (hereinafter “○○ Construction”) concluded a contract for construction of ○ Parking Building in KRW 5,616,05,00 (hereinafter “the instant construction”) on the land located on the ○○○○○○○○○-dong ○○○○○○○○○○○○○○○○, a contractor for construction of 5,616,05,00 (hereinafter “the instant construction”).

B. Accordingly, the ○○ case loaned KRW 75,00,000 on June 27, 200 to the contractor for the instant construction work, plus KRW 75,00,000 on July 24, 200 (hereinafter the loan of this case) for the total amount of KRW 71,00,000 on the part of the contractor for the instant construction work (hereinafter the loan of this case). The ○○ case discontinued the instant construction work with the contractor for a dispute between the contractor and the contractor for the construction work and the contractor for the construction work on January 15, 201.

C. The court rendered a civil lawsuit against the contractor for the return of the above loan and the compensation for damages in the case of 2001Kahap6159 (hereinafter referred to as the “instant judgment”) where the contractor incurred damages due to the construction cost, etc. up to the time of the discontinuance of the instant construction work. The court rendered a final judgment of the court below that the contractor paid the Plaintiff the total amount of KRW 347,100,000 + KRW 255,100,000 + KRW 255,100 + KRW 170,000 + KRW 170,000 + KRW 170,000 and delay damages due to the suspension of construction work (hereinafter referred to as the “instant judgment”). The above judgment became final and conclusive around March 22, 2002.

D. Meanwhile, ○○ building included KRW 110,074,687 as the instant construction revenue in the gross income in the business year of 2000 and reported it to the tax authorities.

E. From March 22, 2004 to April 2, 2004, the Defendant conducted a tax investigation on ○○ case, and imposed corporate tax and value-added tax on ○○ case on ○○ case for the reason that ○○ case reported the omission of revenue amount, loan, etc. related to the instant construction project, respectively, on ○○ case for the reason that ○○ case reported the omission of revenue amount, loan, etc. related to the instant construction project. Since ○○ case was closed and failed to pay the tax after closing ○○ case, the Plaintiff, an oligopolistic shareholder, was designated as the secondary taxpayer and imposed the said corporate tax and value-added tax on the Plaintiff, respectively.

F. Accordingly, the Plaintiff filed an appeal against the above disposition with the National Tax Tribunal. On January 11, 2005, the presiding national tax judge decided to reduce the omission income related to the instant construction project from KRW 49,797,052, and the value-added tax for January 2001 to KRW 44,61,510, by reducing the corporate tax in 2001.

G. After that, on February 1, 2006, the Defendant revoked the imposition of value-added tax for the first year of 2001 on the following grounds: (a) KRW 231,90,090 after deducting value-added tax from the cost of KRW 255,100,00 that was paid until the time when the instant lawsuit was pending in the first instance trial; and (b) the tax base for the instant construction project was the first year of 2002 when the payment amount became final and conclusive by the instant judgment, and imposed KRW 45,071,529 for the first year of 202.

H. However, as ○○ case was in arrears, on April 7, 2006, the Defendant determined that investors’ secondary tax liability is 90%, which is the investment share ratio, and imposed KRW 40,564,360, which is equivalent to 90% of the value-added tax for the first time in 2002 on the Plaintiff.

(1) On the same day, the Defendant newly imposed corporate tax of 2000 KRW 31,025,950 on the Plaintiff and corrected the above KRW 49,797,052 as corporate tax of 2001 as KRW 1,041,50, but revoked the full amount of corporate tax of 2000, and revoked the designation of the secondary taxpayer against the Plaintiff on the same day.)

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 5, 6, 9, 10, 25, Eul evidence Nos. 1 through 5, 13, 14, 15 (including various numbers), the purport of the whole pleadings

3. The parties' assertion and the issues of this case

The issues of this case according to the parties' arguments are as follows.

A. On March 22, 2002, 200, ○○ case was decided by the Seoul District Court to pay the Plaintiff the amount of KRW 347,100,000 and the delay damages for the said amount, whether the amount of KRW 255,10,000, out of the judgment amount of this case, 255,100,000, which is subject to value-added tax, is the consideration for the supply of the service subject to value-added tax, i.e., whether the said judgment amount of KRW 255,100,00, is subject to value-added tax (the Plaintiff’s assertion), or whether it is subject to value-added tax (the Defendant’s assertion)

(b) Where the value-added tax is levied as consideration for the services 255,100,000 won or more; and

(1) The time when the liability for the payment of value-added tax on the instant construction project is established is when or when, that is, when the period of the establishment of the liability for the payment of value-added tax is finalized, whether the liability for the payment of value-added tax has been established between ○○ case and the contractor, and not yet have been supported due to the settlement of accounts for the instant construction project (Plaintiff’s assertion) and whether the liability for payment of value-added tax was established when the instant judgment

(2) Whether the value-added tax imposed on ○○ building, the first taxpayer of the value-added tax due to the instant construction work, was finalized, namely, whether the Defendant sent a notice of value-added tax by registered mail on February 7, 2006, and whether the Defendant’s notice of tax payment was legally delivered due to the failure to return the notice (the Defendant’s assertion) or whether the value-added tax imposed on ○○ building, the first taxpayer of the instant construction work was finalized (the Defendant’s assertion) or not, on the grounds that the Defendant’s registered mail service on ○○ building, was not a lawful delivery, and thus the first taxpayer’s first tax liability becomes final and conclusive (the Plaintiff’s assertion)

4. Determination on each issue

For Class B, as to the issue

(1) Relevant statutes, etc.

Article 9(2) of the Value-Added Tax Act provides that the time of supply of services is determined by the Presidential Decree and necessary matters concerning the time of supply under paragraph (4) shall be determined by the Presidential Decree. Article 22 of the Enforcement Decree of the same Act so delegated shall apply to the ordinary supply of services (Article 1). Article 22 of the Enforcement Decree of the same Act provides that where the provision of services is completed in the case of ordinary supply, where services are supplied in completion standard, interim payment, long-term installment or on other terms, or where services are continuously supplied in an indivisible unit (Article 2). Where the provisions of subparagraphs 1 and 2 are not applicable, the time of supply of services is determined in the case where the provision of services is completed and the supply price is determined (Article 3). Accordingly, where the normal supply price of services is determined at the time of completion of services, the time of completion of the provision of services shall be determined at the time of supply of services, and the person who has been supplied with services shall be deemed to have an independent payment of value-added tax on the basis of services at least 196.7.

(2) Specific determination

On January 15, 200, the Plaintiff entered into a contract for construction work with a contractor and continued the construction work on or before the completion of the construction work, and was sentenced to a favorable judgment on March 22, 2002 at that time, and became final and conclusive around that time. Upon full consideration of the various circumstances shown in the arguments in the instant case, including that the Plaintiff’s KRW 255,100,000 out of the above judgment was related to the expenses paid by the Plaintiff in connection with the instant construction work until the discontinuance of the construction work, the Plaintiff’s payment is subject to value-added tax, namely, the cost of construction work that the Plaintiff provided to the contractor, and the time when the construction work was completed after January 15, 2001, when the construction work was completed due to the suspension of construction work. The Plaintiff’s payment obligation becomes final and conclusive as KRW 255,100,000 by the final and conclusive judgment of this case.

B. On the third issue

(1) Relevant statutes

Article 10 of the Framework Act on National Taxes provides that service of documents under Article 8 shall be made by means of delivery, mail or electronic delivery (paragraph (1)), and service of documents related to notice, demand and disposition for tax payment, or order of the Government under tax-related Acts by mail shall be made by registered mail (paragraph (2)). In the case of paragraph (2) of this Article, if a person to receive documents is not present at the place where the documents are to be served, such documents may be served to his/her employees and other employees or a person living together with the mental capability to make reasonable judgment (paragraph (4) and paragraphs (1) through (4) of this Article, and if the person to receive documents relocates his/her domicile or place of business, such documents shall be confirmed by resident registration card, etc. and served at such relocated place (paragraph (5)).

(2) Facts of recognition

(A) The ○○ case closed on October 30, 2003, and at the time, the ○○○ representative director was ○○.

(B) On March 15, 2005, Jindo had been ordered to suspend prosecution by the prosecution due to the charge of violating the Commercial Act. As of July 18, 2005, the moving-in report was made to ○○-dong 594-O, Seoul Special Metropolitan City, ○○-dong 594-O, and two children, who are his family members, had been the move-in report to her domicile as of March 8, 2002 as of March 8, 2002.

(C) As of February 1, 2006, the Defendant rendered a decision to correct and notify the value-added tax, etc. for 2002 on the ○○ case. On the 7th of the same month, the Defendant served three copies of the notice by registered mail at the address of Jini-gu’s address. It is impossible to directly confirm whether the notice is delivered to the post office as of the 1 year after it.

(D) However, on February 7, 2006, the notice of return, demand notice, documents related to disposition on default, and delivery certificate (Evidence B (Evidence B (Evidence B (18) which the defendant served on the registered mail, the value-added tax and global income tax notice were returned as of February 15, 2006 to the non-party ○○ who served on the registered mail at the same time, but there is no stipulation that the notice of return on the actual ○○ was returned.

[Reasons for Recognition] The entry of Eul Nos. 14 through 19 and the purport of the whole pleadings

(3) Specific determination

On July 18, 2006, the notice was served by registered mail around February 2, 2006 after the suspension of indictment, and on the other hand, on the fact that other notice served by registered mail as of the above notice has not been returned, tax laws such as the Framework Act on National Taxes, etc. do not provide for the taxpayer to serve by public notice for the reason of the suspension of indictment by the prosecutor, and in full view of the fact that other notice was served by registered mail as of the date of the notice was not returned, it is presumed that the notice was served to the principal or the family member of the ○○○○○○ was served by registered mail around February 2, 2006.

C. Sub-decision

Therefore, among the judgment amount of this case, 255,100,000 won shall be subject to value-added tax as consideration for the provision of construction services, and the time when the establishment of liability for payment is established shall be around March 2002 of the judgment of this case, and the notice of value-added tax on ○○ case, a taxpayer of the value-added tax of this case, shall be lawful. Accordingly, the plaintiff's above assertion is without merit.

5. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is justified as it is with this conclusion, and it is so decided as per Disposition by the plaintiff's appeal.