2015Guhap401 Disposition to revoke the imposition of value-added tax

Gyeonggi-do

The representative of the Do Governor shall be reappointed

Attorney Park Jong-chul et al., Counsel for the defendant

Head of Suwon Tax Office

The Gangwon-do of the litigation performer

Seoul High Court Decision 201Na1448 delivered on May 1, 201

July 21, 2015

September 1, 2015

1. On July 2, 2014, the Defendant revoked each disposition of imposition of value-added tax of KRW 523, 767, 840 on the first term portion for the year 2009 against the Plaintiff, and value-added tax of KRW 508, 059, and 930 on the second term portion for the year 2009 against the Plaintiff.

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

The order is as set forth in the text.

1. Details of the disposition;

A. On June 17, 2002, the Plaintiff, a local government, concluded a concession agreement on private investment facilities projects of ○○ school (hereinafter referred to as “non-party company”) between ○○ school Co., Ltd. (hereinafter referred to as “non-party company”) which is a project executor, under the Private Investment Act (hereinafter referred to as “Public Investment Act on January 27, 2005”) on the part of the private investment facilities of ○ school (hereinafter referred to as “non-party company”) located in the Dong-gu, Seog-gu, U.S. and from Kimpo-dong, and the main contents thereof are as follows:

A person shall be appointed.

A person shall be appointed.

A person shall be appointed.

A person shall be appointed.

A person shall be appointed.

B. After that, on July 22, 2003, the Plaintiff entered into a concession agreement that reflects the changes in the road section B from four to six lanes, which reflects the changes in the road structure (hereinafter referred to as "the concession agreement on July 22, 2003"). ② On December 31, 2007, the Plaintiff entered into a concession agreement on December 31, 2007, reflecting changes in the total project cost, such as increase in the consumer price index, change in the consumer price index, adjustment of the commencement date of operation, and amendment of statutes. ③ On November 26, 2009, the concession agreement that reflects the re-financing of funds as a result of changes in the capital structure and the investors of the ○○○ Private Infrastructure Project. The major changes in the concession agreement are as follows.

A person shall be appointed.

C. On December 2007, the non-party company completed the instant facilities, and on April 18, 2008, pursuant to Article 5 of the above concession agreement, donated the said facilities to the Plaintiff on May 16, 2008, and commenced the management and operation of the said facilities upon receiving a notification of confirmation of donation from the Defendant on May 16, 2008.

D. On July 2, 2014, the Defendant issued a revised and notified the Plaintiff of KRW 523, 767, 840, and value-added tax for the first period of 2009, including penalty tax, for the second period of 2009, KRW 508,059, and KRW 930, respectively, for the second period of 2009 (hereinafter “the instant disposition”).

E. The Plaintiff was dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal, but the said claim was dismissed on November 20, 2014.

[Grounds for Recognition] Facts without dispute, Gap evidence Nos. 1 through 3, Eul evidence Nos. 1 through 4 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The lease agreement between the plaintiff and the non-party company on the instant facilities is deemed to have been concluded by the concession agreement on June 17, 2002 or July 22, 2003. Thus, the defendant's disposition of this case imposing value-added tax on the plaintiff is unlawful on the premise that the above lease agreement was concluded after January 1, 2007, under the proviso to Article 2 of the Addenda of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 1930, Feb. 9, 2006; hereinafter the same shall apply).

(b) Relevant statutes;

As shown in the attached Form.

C. Determination

1) Article 12(1)17 of the former Value-Added Tax Act (amended by Act No. 9915, Jan. 1, 2010) provides that the value-added tax shall be exempted for goods or services supplied by the State, a local government, or a local government association, as prescribed by the Presidential Decree. However, the former Enforcement Decree of the Value-Added Tax Act, which was amended by Presidential Decree No. 1930, Feb. 9, 2006, excludes “real estate lease business” under Article 38 subparag. 3 from the object of value-added tax exemption. The proviso of Article 1 of the Addenda provides that “The amended provisions of Article 38 subparag. 3 of the Value-Added Tax Act shall enter into force from January 1, 207, and Article 12(1)17 of the former Value-Added Tax Act (amended by Presidential Decree No. 19892, Feb. 28, 2007) provides that the first provision on real estate rental business shall apply from Article 38(3).

Meanwhile, a lease takes effect when one of the parties agreed to allow the other party to use and take profits from an object, and the other party agreed to pay rent for it (Article 618 of the Civil Act). A lease agreement is concluded by a lessor to allow the lessee to use and take profits from the object of the lease and the lessee to pay rent as consideration to the lessee. In this case, detailed matters, such as the lease period and rent, etc., are not necessarily required to be specified at the time of the conclusion of the contract, and there is sufficient methods and standards to determine the object physically even after the conclusion of the contract (see, e.g., Supreme Court Decision 200Da51650, Mar. 23, 2001).

2) In full view of the following circumstances, based on the above legal principles, it is reasonable to view that the lease agreement between the Plaintiff and the non-party company with respect to the instant facilities was concluded at the time of the agreement on June 17, 2002, taking into account the following circumstances revealed by the purport of the entire pleadings as to the instant facilities, based on the foregoing legal principles, the Defendant’s disposition of imposing value-added tax on the Plaintiff, a local government-based organization, on the premise that the said lease agreement was concluded after January 1, 2007 is unlawful.

① On June 17, 2002, with respect to the lease of the instant facilities, the concession agreement includes both the right to construct the instant facilities and contribute them to the Plaintiff, who is the lessor, and to make profits from the use of and benefit from the said facilities for a certain period from the original height. In addition, in Articles 14 (Right to Occupy and Use the Site) through 33 (Inspection of Completion), the above concession agreement specifically provides for all matters concerning the construction of the instant facilities (construction cost, construction method, construction period, etc.) which are the leased object, and Article 4 (Free Use Period) Paragraph (1) provides that the period of use of the instant facilities of the non-party company, i.e., the date of commencement of operation of the lease period, i., the date of commencement of operation of the lease period, i.e., the date of commencement of the lease and the date of commencement of the lease and the date of commencement of operation and operation of the instant facilities, which are the object of the lease and the date of commencement of the lease.

Therefore, through the concession agreement on June 17, 2002, it should be deemed that an agreement was reached between the plaintiff and the non-party company on the criteria and method for specifying the important matters of the lease agreement on the water of this case in the future.

② On July 22, 2003, the concession agreement was partially amended by the Plaintiff and the Nonparty Company on June 17, 2012 in order to amend the road portion among the instant facilities from four to six lanes, and to reflect it in the existing contract. Moreover, each amendment made on December 31, 2007 and November 26, 2009 between the Plaintiff and the Nonparty and the non-party company, concluded on June 27, 2002, to reflect changes in the construction cost incurred inevitably in the course of the implementation of the existing contract, such as an increase or decrease in the total project cost, consumer price index, statutory amendment, and capital structure change, etc., and thus, it is merely a part of the existing concession agreement that was concluded on June 17, 2002, which was concluded on June 20, 2007 by the first day of operation under the said concession agreement.

③ The Defendant asserts that the lease contract for the instant facilities is concluded after January 1, 2007, when the Plaintiff created management and operation rights for the instant facilities to the non-party company, a project implementer, pursuant to Article 26(1) of the Act on Private Participation, and the Plaintiff established management and operation rights for the instant facilities by notifying the non-party company of the determination of donation on May 15, 2008. As such, the lease contract for the instant facilities should be deemed to have been concluded after January 1, 2007, which is the enforcement date under the proviso of Article 1 of the Addenda of the former Enforcement Decree of the Value-Added Tax Act.

However, the right to manage and operate the infrastructure under Article 26 (1) of the Private Investment Act is a right which a concessionaire who executes the infrastructure project completes the construction of the infrastructure and maintains and manages it for the period of use and profit-making under the existing concession agreement, and collects the user fee from the user of the infrastructure. The right to manage and operate the infrastructure of this case as a right which can be actually used and profit-making according to the terms of the lease agreement concluded at the time of the concession agreement concluded on June 17, 2002. The right to manage and operate the infrastructure of this case, which is the object of lease, has already been expected to have already occurred at the time of the concession agreement. The plaintiff established the right to manage and operate the infrastructure of this case on May 15, 2008 and caused the non-party company to actually use and profit-making the infrastructure of this case, even if it is merely the fulfillment of the obligation under the existing lease agreement and thus it cannot be seen as the establishment of the above management and operation right.

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and it is so decided as per Disposition.

The presiding judge's office

Judges' Assistants Office

Judges Lee Jae-han

Relevant statutes

[The Value-Added Tax Act (amended by Act No. 9915 of January 1, 2010)]

Article 12 (Exemption from Customs Duties)

(1) The supply of the following goods or services shall be exempted from value-added taxes:

17. Goods or services supplied by the State, a local government, or a local government association, which are prescribed by Presidential Decree;

[Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 1930 of Feb. 9, 2006)]

Article 38 (Exemption from Customs Duties for Goods or Services Supplied by State, Local Governments, or Local Government Associations)

The term "those prescribed by the Presidential Decree" in Article 12 (1) 17 of the Act means services excluding those falling under any of the following subparagraphs:

1. Services to be delivered by an organization for postal services under the Act on Special Cases concerning the Management of Postal Services after visiting postal items among value-added postal services under Article 15 (1) of the Postal Service Act;

2. Passenger transport services under the High-Speed Railroad Construction Promotion Act;

[Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 19330, Feb. 9, 2006)]

Article 38 (Exemption from Customs Duties for Goods or Services Supplied by State, Local Governments, or Local Government Associations)

The term “those as determined by the Presidential Decree” listed in Article 12 (1) 17 of the Act means services excluding those falling under any of the following subparagraphs:

1. Services that a postal service organization under the Act on Special Cases concerning the Management of Postal Services visits and receives and delivers parcel-post items among value-added postal services under Article 15 (1) of the Postal Service Act;

2. Passenger transport services using high-speed railroads prescribed by the Railroad Construction Act;

3. Real estate leasing business, Do and retail business, food and accommodation business, golf course and skiing ground operating business, and other business operating sports facilities: Provided, That services provided by the State Council or the Armed Forces under the Act on the Organization of National Armed Forces to persons prescribed by Ordinance of the Ministry of Finance and Economy, such as soldiers under Article 2 of the Military Personnel Management Act, civilian employees in the military service under Article 2 of the Act on the Management of Civilian Personnel in the Military Service, and their lineal ascendants and descendants, etc., shall be excluded;

The Presidential Decree No. 1930, February 9, 2006

Article 1 (Enforcement Date)

This Decree shall enter into force on the date of its promulgation: Provided, That the amended provisions of Article 26 (1) 5 and 5-2 shall enter into force on July 1, 2006, and the amended provisions of Articles 38 (3) and 64 (3) 1-3 shall enter into force on January 1, 2007.

Article 2 (General Application Cases)

This Decree shall apply to the portion supplied or supplied for the first time after this Decree enters into force: Provided, That the amended provisions concerning real estate rental business in subparagraph 3 of Article 38 shall apply to the portion which enters into a contract after the enforcement of the said provisions.

【Public-Private Partnership Act on Infrastructure】

Article 4 (Method of Implementing Private Investment Projects)

Private investment projects shall be conducted in one of the following methods:

1. The ownership of the infrastructure shall revert to the State or a local government upon the completion of construction, and the concessionaire recognizes the rights to manage and operate the infrastructure for a certain period;

Article 25 (Use of Facilities)

(1) The concessionaire may use and benefit from the infrastructure which is promoted by the method as prescribed in subparagraph 1 of Article 4 for a certain period after the completion of construction of the infrastructure within the total project cost stipulated in the concession agreement. Article 26 (Rights to Manage and Operate Infrastructure)

(1) Where a project operator who has implemented an infrastructure project pursuant to subparagraph 1 of Article 4 has confirmed the completion of the construction as prescribed in Article 22, the competent authority may grant the project operator the rights to manage and operate the infrastructure facilities and to collect user fees from the users of the facilities (hereinafter referred to as “management and operation rights”) for a certain period for gratuitous use and profit as prescribed in Article 25 (1).