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

Cheong-gu Office

The same shall apply to the order.

A. From January 3, 1997, the Plaintiff was selected as a business operator who is engaged in manufacturing and exercising advertising materials, etc., or providing services, such as events and research services, or as a business operator who comprehensively plans the OOO revitalization project (hereinafter “instant project”) on February 28, 201, under the trade name called OOOOOO research institute, and carried out the said project.

B. On January 25, 2013, when the Plaintiff reported the value-added tax for the second period of 2012 to the Defendant, on March 5, 2012, the Plaintiff reported that the amount of KRW 00 million paid from the National Treasury subsidy was subject to value-added tax for the second taxable period of 2012 with regard to the “OO vitalization project” performed by the Plaintiff, and reported that the amount of value-added tax related to the said business was included in the tax base including the value-added tax amount of KRW 00 million, and the input tax amount related to the said business was also deducted.

C. Since then, the Plaintiff filed a claim for correction with the Defendant for reduction of the amount of value-added tax, OOO, OO, and OOO which are to be paid at the initial return, on the ground that the instant subsidy is not included in the tax base, and the relevant input tax amount is not deducted.

D. On January 28, 2013, the Defendant rendered a disposition rejecting the Plaintiff’s claim for correction (hereinafter “instant disposition”) on the ground that the Plaintiff provided the service that the Plaintiff is implementing the “OO activation project” and received the price, and is not a subsidy that is excluded from the tax base as a subsidy directly related to the supply of the service provided for in the Value-Added Tax Act.

E. The Plaintiff appealed and filed a request for review with the Board of Audit and Inspection, but was dismissed on May 2, 2013.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 1 to 4 (including paper numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

1) The plaintiff's assertion

A) Since the project undertaker of the instant project cannot be deemed to be the state or local government of the Plaintiff’s land, the Plaintiff cannot be deemed to have supplied services to countries, etc. other than the Plaintiff. The Plaintiff did not enter into a contract with the State or local government, and the State or local government only managed and supervised the Plaintiff with respect to the disbursement of subsidies by providing subsidies to support the Plaintiff’s project. Therefore, there is no quid pro quo relationship between the Plaintiff

B) Article 48(10) of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 24359, Feb. 15, 2013) provides that “National subsidies and public subsidies under the above Act shall be national subsidies and public subsidies not directly related to the supply of goods or services without delegation under Article 13(2)4 of the Value-Added Tax Act, which are the mother corporation.” The above Enforcement Decree is in violation of the principle of no taxation without law.

2) The defendant's assertion

Even if the Plaintiff took the form of granting subsidies necessary for the instant project, the substance of the instant project is a contract for the Plaintiff’s execution of the instant project. As such, a direct quid pro quo relationship exists between the instant subsidy and the Plaintiff’s execution of the instant project, the instant subsidy cannot be deemed as a national subsidy excluded from the value added tax base

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) On October 8, 2010, the OOO department planned a pilot project for the promotion of OO(hereinafter “OOO project”) through O on the planning of the program, and on January 31, 2011, established a master plan for the OO project with the following contents.

(Omission)

2) The Guidelines for the Implementation of Subsidies for Projects Vitalization through OO in 201 (hereinafter referred to as the "Guidelines") applicable to OO projects are as follows:

(Omission)

3) On February 8, 2011, the Minister of OOOO department selected 'OOO directors' as one of the model markets for OOO projects on February 8, 2011, and selected the Plaintiff as the general planner for the instant project after deliberation on February 25, 201, for the selection of the general planner (O).

4) On April 21, 201, the Minister of OOOO department decided on April 21, 201 to grant subsidies of KRW 200 million to the subsidized project operator for the instant project (201) to the head of OO Do and OO Gun as "O Do Governor (OO Do Governor)" and approved the implementation plan of the instant project on June 16, 201.

5) On June 22, 2011, the head of theOO determined to pay the Plaintiff subsidies of KRW 50 million (50% of national treasury, 15% of Do treasury, and 35% of military expenses) for the instant project (2011), and paid all of them three times. The Plaintiff submitted a settlement report stating the details of the execution of the said subsidies to the head of OO on February 27, 2012 after the execution of the said subsidies from July 1, 201 to December 31, 2011.

6) The OOOO division assessed the OO business in 201 and decided to be eligible for the OOO business support in 2012. The instant business performed by the Plaintiff was also selected as eligible for the 2012 support. On March 5, 2012, the OO head decided to pay the Plaintiff subsidies of KRW 50 million (50% of the National Treasury, 15% of the Do Treasury, and 35% of the military expenditure) for the instant business (2012).

7) From July 1, 2012 to December 31, 2012, the Plaintiff executed the said subsidy by doing business, such as OO, etc.

8) Around February 2014, OOO also submitted to the Minister of OOOO department a settlement report stating the details of the execution of subsidies KRW 00 million for the instant project (2012) supervised by the Plaintiff.

9) As the instant subsidy was paid to the instant project indirect subsidy program operator (the Plaintiff), a State-subsidized project operator (the Plaintiff) without any consideration, the Minister considers that the instant subsidy is not subject to the issuance of a tax invoice different from the contractual affairs in which the State is a party.

[Ground of recognition] Unsatisfy, Gap evidence 2 to 16, Eul evidence 5 to 9, 12, 14, 15

Each entry, each fact-finding conducted by the Minister of OOO of this Court, the purport of the entire pleadings

D. Determination

In full view of the following circumstances revealed by the above facts, the instant subsidy is not directly related to the goods or services supplied by the Plaintiff and cannot be included in the Plaintiff’s value-added tax base. Thus, the instant disposition on the ground that the instant subsidy was included in the Plaintiff’s value-added tax base is unlawful.

① Although the OOO project was planned by the OOO division and supervised by the local government, the specific plan and implementation of the project in this case for the activation of the OO, an OOO, was led by the Plaintiff. Since the project in this case is performing performances, experience events, lectures, publicity, etc. to revitalize the OOO, it seems difficult to evaluate that the state (OOO), OO directors, and OO groups are directly supplied with any service from the Plaintiff.

② The instant project was supervised by the State (OOO division), OO directors, and OO groups. The instant subsidy cost was borne by the State (OOOO only (50%) by O0, OO00, OO00 (15%) by O, OO0, and OO00,000 (35%) by O0, and if it is deemed that the Plaintiff provided services, it is difficult to specify who is the State (OOOO division), OO directors, andO directors.

③ In light of such circumstances, it is reasonable to view that the instant subsidy was paid as a policy to assist the instant project for the revitalization of traditional markets by the State (OOOO), OOO, and OOO. Therefore, it is difficult to deem that there was a direct quid pro quo relationship with the instant project performed by the Plaintiff.

④ There is no contract between the Plaintiff and the State (OOOO), OOdo, and OO group on the instant project. The instant subsidy is subject to the Act on the Budgeting and Management of Subsidies, the Ordinance on the Management of Subsidies of OO group, the execution guidelines of this case, etc. According to the above provisions, strict management is performed regarding the execution of the instant subsidy by requiring evidentiary data for the execution of subsidies and taking measures for return when it is used for other purposes. Thus, it is difficult to view it as a general contract relationship.

⑤ Paragraph 3.9 of the instant enforcement guidelines provides that “The value-added tax shall be calculated including the amount of execution.” The value-added tax referred to in the above provision appears to mean the value-added tax that the Plaintiff has to undertake and pay for the implementation of the project. The Plaintiff does not receive or issue a tax invoice other than the instant subsidy from the State (OOOO department), OOO, or OO group.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is decided as per Disposition by admitting it.