Where value-added tax imposed on attorney fees is included in litigation costs, the case holding that it is reasonable to regard all of the attorneys fees included in litigation costs as being included in litigation costs in case attorney fees including value-added tax are paid.

In a case where value-added tax imposed on attorney fees is included in litigation costs, the case holding that it is reasonable to view all of the value-added tax as included in litigation costs, in light of the legislative intent and content of Article 109(1) of the Civil Procedure Act and the Rules on the Inclusion of Litigation Costs (hereinafter “Rules”), the handling of value-added tax imposed on attorney fees under the Rules on Remuneration, the relationship between the appointment of attorney and the burden of value-added tax, etc., in a case where attorney fees including value-added tax are paid, insofar as they are within the amount prescribed in the Rules on Remuneration

Article 109(1) of the Civil Procedure Act, Article 3 of the Rules on the Inclusion of Litigation Costs for Attorney Fees, Articles 2 and 15 of the Value-Added Tax Act

Applicant

Respondent

Seoul Central District Court Order 2012Kaoba1798 dated September 7, 2012

1. The respondent's appeal is dismissed.

2. Costs of appeal shall be borne by the respondent.

1. Facts recognized;

According to the records, the following facts are recognized.

(a) Progress of a case subject to the final determination of litigation costs;

The respondent filed a claim against the applicant for the lease deposit against the Seoul Central District Court 2010Kahap56963. On November 3, 2010, the above court ordered the respondent to bear the litigation costs when the respondent rendered a favorable judgment ordering the respondent to pay KRW 110,00,000 and the delay damages therefor. The Seoul High Court appealed to 2010Na119090 on April 15, 201, and the appellate court declared that the respondent revoked the first instance judgment and dismissed the respondent’s claim and rendered a judgment ordering the respondent to bear the total costs of the lawsuit. The respondent appealed to Supreme Court 201Da36046 on August 25, 201, but the dismissal of the appeal became final and conclusive on August 25, 2011.

In the first instance court and the appellate court, the applicant appointed the non-party to the attorney-at-law as the attorney-at-law, and paid the attorney-at-law fees of the first instance court on June 23, 2010 and the attorney fees of the appellate court on January 14, 201, respectively.

(b) Calculation of litigation costs;

As to this part, the decision of the first instance is quoted (Article 110(3), Article 443, Article 420 of the Civil Procedure Act).

2. Judgment on the argument that the respondent made in the trial

A. The assertion

Since the amount equivalent to value-added tax should be paid by the State among the amount that an applicant paid as attorney fees, it cannot be deemed that an attorney's fees have been paid. The first instance judgment that calculated the amount of litigation costs that the respondent has to pay, including attorney fees, is unlawful

B. Determination

A receipt submitted by an applicant as data for attorney’s fees is only stated in the amount, and there is no indication as to whether the amount includes value-added tax. It cannot be readily concluded that the above amount is included in value-added tax.

Even if value-added tax was included in the amount stated in the above receipt, as long as the attorney’s remuneration including value-added tax is within the scope of the amount stipulated in the Rules on the Inclusion of Costs of Litigation (hereinafter “Rules on Remuneration”), it is reasonable to view the entire amount as a part of the litigation cost. The reasons are as follows.

① On March 1, 1981, the attorney’s fees are not recognized as litigation costs (amended by Act No. 4203, Jan. 13, 1990) Article 16(2) of the former Act on Special Cases Concerning the Promotion, etc. of Legal Proceedings (amended by Act No. 4203, Jan. 13, 1990) and the remuneration rules enacted based thereon were recognized as litigation costs only upon the enforcement of the former Civil Procedure Act. Article 109(1) of the former Act on Special Cases Concerning the Promotion, etc. of Legal Proceedings (amended by Act No. 109(1) of the Civil Procedure Act) and the remuneration rules were adopted to the effect that the attorney’s fees actually paid by the parties are recognized as litigation costs, but it is possible to predict the scope of litigation costs to be repaid by the parties, and that the right holder excessively excessive payments or causes the other party to pay the attorney’s fees to be borne beyond a reasonable scope is unreasonable.

② Under the Value-Added Tax Act, attorney fees, which were enforced at the time of the enactment of the fee rules, were exempt from the VAT, but imposed value-added tax on attorney fees in accordance with the enforcement of the Value-Added Tax Act amended by Act No. 5585 on December 28, 1998. The fee rules do not contain any special provisions regarding the handling of value-added tax imposed on attorney fees after the amendment of

(3) The attorney’s fees paid or to be paid by a party to a lawsuit to an attorney who represents the lawsuit are acknowledged as litigation costs within the scope prescribed by the Supreme Court Regulations (Article 109(1) of the Civil Procedure Act), and the attorney’s fees included in litigation costs shall be calculated based on the value of subject-matter of lawsuit at each instance within the scope of remuneration paid or to be paid by the party under a contract for remuneration (Article 3(1) of the Remuneration Rules). As long as the total amount of remuneration paid or to be paid by the party to the lawsuit is within the scope of amount calculated in accordance with the standards set forth in Article 109(1) of the Civil Procedure Act and the Remuneration Rules, regardless of the pretext thereof (see Supreme Court Order 200

(4) A person who independently supplies goods or services for business purposes is liable to pay value-added taxes pursuant to the Value-Added Tax Act (Article 2 of the Value-Added Tax Act). If a business entity supplies goods or services, the value-added taxes calculated by applying the tax rate to the tax base shall be collected from the person who receives the supply thereof (Article 15 of the Value-Added Tax Act). In cases where an agreement is made between a transaction party to impose value-added taxes, the business entity has a private right to claim a payment equivalent to value-added taxes from the person who receives the supply pursuant to the agreement (see Supreme Court Decision 2002Da3838, Nov. 22, 2002). In cases where a party delegates a legal representation to an attorney and receives a personal service called a litigation agent from a lawyer, the party shall bear value-added taxes to be paid by the attorney. Where the party agrees to include value-added taxes to be paid to an attorney, an attorney-at-law may not be separated from the burden of value-added taxes on attorney fees.

⑤ A party who paid attorney fees, including value-added tax, shall be refunded only when the purchaser’s value-added tax exceeds the sales value-added tax during the taxable period of the value-added tax, as an entrepreneur liable to pay the value-added tax. However, even in such cases, the refundable amount is not the value-added tax itself paid to an attorney, unless there are special circumstances. From the standpoint of the party concerned, the value-added tax is also a cost that does not differ from other fees paid to an attorney in connection with a lawsuit. Even if an attorney’s fees, including value-added tax, are paid by the party concerned, the attorney does not have the duty to immediately pay the value-added tax or keep the value-added tax separately from other fees. An attorney is able to keep the amount equivalent to value-added tax in combination with other fees or spend it for various

3. Conclusion

The decision of the first instance court is legitimate, and the respondent's appeal is dismissed.

Judges Kim Jong-dae (Presiding Judge)