Article 17 (2) 4 of the Value-Added Tax Act

2. Litigation costs shall be borne by the plaintiff.

Cheong-gu Office

The Defendant revoked the disposition of imposition of value-added tax against the Plaintiff on July 2, 2005, of KRW 60,144,090 for the first term of 200, KRW 178,186,120 for the second term of 200, KRW 44,761,760 for the second term of 201, KRW 477,110 for the second term of 2001, KRW 41,821,910 for the first term of 202, KRW 40,575,40 for the second term of 202, KRW 254,86,640 for the first term of 203, KRW 82,307, KRW 430 for the second term of 203, KRW 1510 for the second term of 204, and each disposition of imposition of KRW 1630 for the second term of 200 for the second term of 203.

(a) Land-related input tax deduction regulations, etc.;

(1) According to Article 17(1) of the Value-Added Tax Act, an entrepreneur shall report and pay as value-added tax the amount calculated by deducting the amount of tax (purchase) on the supply of goods or services used or to be used for his/her own business from the amount of tax on the goods or services supplied by him/her.

(2) Meanwhile, under Article 12(1)12 of the Value-Added Tax Act, the supply of land is exempt from value-added tax, and Article 17(2)4 of the Value-Added Tax Act provides that input tax amount related to the business of supplying goods or services exempt from value-added tax and land-related purchase tax amount as prescribed by the Presidential Decree shall not be deducted from the output tax amount.

(3) Furthermore, according to Article 60(6) of the Enforcement Decree of the Value-Added Tax Act, the above land-related purchase tax amount is an input tax amount related to capital expenditures for land creation, etc. such as acquisition and alteration of the form and quality of the land, the purchase tax amount related to the construction of a factory site and a housing site (No. 1), the purchase tax amount related to the acquisition and removal cost of the removed building (No. 2), and the input tax amount (No. 3) related to the cost that constitutes the acquisition cost of the land by increasing the real value of the land (hereinafter referred to as “the part concerning the land-related purchase tax in Article 17(2)4 of the Value-Added Tax Act concerning the land-related purchase tax amount in this case, and the Enforcement Decree and the two provisions in this case collectively).

(b) Reporting and payment of golf course development works and value-added tax;

(1) The Plaintiff Company operated a golf course at the ○○○○○○○○○○○○○○○○○○○○○○○, and had landscaping works, trees works, and turfing works, etc. to create a golf course on the said land from around 200 to around 2003 (hereinafter the said construction work is called the instant construction work).

(2) The Plaintiff reported and paid value-added tax from the first half to the fourth half of 2004, and deducted the input tax amount included in the construction cost of the instant case from the output tax amount (the input tax amount of the instant case, which was deducted as above).

C. Disposition of this case

On July 1, 2005, the Defendant issued the instant taxation disposition imposing the value-added tax (including additional tax) on the Plaintiff Company, as stated in the purport of the claim on July 1, 2005, on the grounds that the instant input tax amount cannot be deducted from the output tax amount.

[Grounds for Recognition] Unsatisfy, Gap evidence 1, Eul evidence 1-3 (including each number), all the arguments

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) The land-related input tax amount stipulated in the instant legal provision as the object of the non-deduction of input tax amount refers to the land-related input tax amount related to the business subject to the exemption of value-added tax, and the instant input tax amount should be deducted from the output tax amount because the golf course business is not subject to the exemption of value-added tax. Therefore

(2) Since the instant provision is unconstitutional for the following reasons, the instant disposition is also unlawful. ① The instant provision against the basic principle of the Value-Added Tax Act (Article 17(1) of the Value-Added Tax Act), which provides that the amount of land purchase tax shall not be deducted from the amount of the output tax for the following reasons. ② The instant provision is inconsistent with the principle of equality or the principle of guaranteeing property rights under the Constitution, since it is impossible to determine what is the amount of the land purchase tax, which only has the legal provision of the instant case, can not be determined and thus, the tax authority can impose arbitrary tax disposition. ③ Since value-added tax is imposed on the area (area) under the Value-Added Tax Act, the instant provision goes against the principle of clear taxation requirements.

(b) History of the relevant statutes;

(1) According to Article 17(2)4 of the Value-Added Tax Act at the time of enactment, the input tax amount related to the business that supplies goods or services exempt from value-added tax (including the input tax amount related to investment) was not deducted from the output tax amount. As Article 60(6) of the Enforcement Decree of the Value-Added Tax Act was newly established on December 31, 191 by Presidential Decree No. 13452, Dec. 31, 1991, the input tax amount related to capital expenditures for land creation, etc. is included in the input tax amount subject to non-deductible under

(2) After that, the tax authority imposed a tax disposition by not deducting the input tax amount related to landscaping construction, etc., which was paid by the golf course proprietor in the course of developing the golf course from the output tax amount.

(3) On December 21, 1995, the Supreme Court en banc Decision 201Da14499 delivered on December 21, 1995, which held that, upon filing an administrative litigation seeking the revocation of the tax assessment under the above Enforcement Decree, the above Enforcement Decree determined that the input tax amount should not be deducted from the output tax amount because the transactional act in accordance with the land protocol, etc. was conducted for the purpose of carrying on the value-added tax exemption business, and that, inasmuch as the input tax amount related to the capital expenditures for the creation, etc. of land is not uniformly deducted from the output tax amount,

(4) With the amendment of the Value-Added Tax Act (Act No. 4663, Dec. 31, 1993) on December 31, 1993, Article 17(2)4 of the Value-Added Tax Act was changed as of the present date (Article 60(6) of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 14081, Dec. 31, 1993) stipulates that the input tax amount related to capital expenditures for the creation, etc. of land is the land-related input tax amount, but as of December 31, 2001, Article 60(6) of the Enforcement Decree of the Value-Added Tax Act was amended by Presidential Decree No. 17460, Dec. 31, 2001,

C. Whether the land-related purchase tax amount constitutes land-related purchase tax amount

(1) Since land is an element of creating added value with capital and labor, it cannot be subject to value-added tax, as well as its supply is limited except for special cases such as reclamation, etc., and it is inappropriate to impose value-added tax, which is a consumption tax, since the use of land is not consumed or extinguished as a result of such use as goods, buildings, etc. Accordingly, our Value-Added Tax Act is exempt from value-added tax and is subject to value-added tax only for the lease of land. (2) In addition, in general, in the case of supplying tax-free goods for a taxable business, it is subject to value-added tax as an incidental supply of goods under Article 1 subparag. 4 of the Value-Added Tax Act and Article 3 of the Enforcement Decree of the Value-Added Tax Act. In the case of land, due to its nature, it is subject to value-added tax exemption without applying Article 1 subparag. 4 of the Value-Added Tax Act even when the said land is disposed of for a taxable business as well as when it is disposed of for a taxable business.

(2) Even if capital expenditure for the creation, etc. of land is intended to run a taxable business (in this case, the golf course operation business), the related input tax amount shall not be deducted from the output tax amount in accordance with the basic principles of the aforementioned tax exemption system as to the land. This should be recovered by including the cost for acquisition in the acquisition price in the process of calculating the transfer difference at the time of transfer of the relevant land, and the Plaintiff’s assertion that the land-related purchase tax amount should be limited to the case of a tax-free business

[A] Although the Plaintiff Company accounts as separate asset items that distinguish the law of accounting of golf course from land according to the law of accounting of golf course business standards, this does not generally mean fairness, reasonable corporate accounting standards or practices (Article 20 of the Framework Act on National Taxes). Rather, corporate accounting standards that can be seen as fairness and unfair accounting standards, i.e., corporate accounting standards prescribed by the Korea Accounting Institute under the Act on External Audit of Stock Companies, i.e., law regarding the accounting of turd and trees of golf course, should be accounts as a constituent part of land, as it does not stipulate that turd and trees of golf course shall be accounts separately from land. Thus, it cannot be deemed that input tax amount equivalent to turd, etc. of golf course should be deducted from output tax amount

D. Whether it violates the Constitution

(1) Basic principles of value-added tax

As seen above, the Plaintiff’s assertion on the premise that the input tax amount of the value-added tax should be deducted for capital expenditures to create land, etc. under the basic principles of our value-added tax is not reasonable.

(2) The principle of identifying the requirements for taxation

According to Article 60(6) of the Enforcement Decree of the Value-Added Tax Act, the amount of land-related purchase tax under Article 17(2)4 of the Value-Added Tax Act refers to the input tax amount related to capital expenditures for land creation, etc., and according to Article 31(2) of the Enforcement Decree of the Corporate Tax Act and Article 67(2) of the Enforcement Decree of the Income Tax Act, capital expenditures mean repair expenses disbursed to extend the lifespan of depreciable assets owned by a corporation, etc. or to increase the real value of the relevant assets (the same applies to corporate accounting standards that are respected by the Framework Act on National Taxes). Furthermore, since Article 60(6) of the Enforcement Decree of the Value-Added Tax Act provides the specific criteria, the provisions on land-related purchase tax

(3) Principle of tax equality

The constitutional principle of equality, in essence, prevents a person from arbitrarily treating or arbitrarily treating others that are either arbitrarily different or essentially different in essence. In this case, since capital expenditures for the creation, etc. of land are exempted from the output tax amount of value-added tax by constituting the acquisition cost of land, the corresponding input tax amount is not deducted, and thus, it cannot be deemed as arbitrary discrimination on the grounds that there are reasonable grounds for deducting input tax amounts. The Plaintiff’s assertion on the above part is groundless

(iv)to guarantee double taxation and property rights;

Since the land area is different from its nature, even if the land area is subject to value-added tax, and the input tax is subject to transaction as to capital expenditures on the land, it cannot be deemed that the value-added tax is levied twice. Furthermore, with respect to the land (capital expenditure on the land), the value-added tax should not be additionally paid in connection with the transfer of the land. Therefore, even if the land (capital expenditure on the land) is exempted from value-added tax, the land-related tax amount is merely subject to transaction collection, and even if the input tax amount was not deducted, it cannot be deemed that the land-related tax is a double taxation because it is merely subject to double tax collection, and it does not require double tax payment. The land-related purchase tax amount to be deducted from the output tax amount. The land-related tax amount has reasonable grounds as above, and as long as the non-deductible system on the land has no double taxation, it cannot

4. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.