It is difficult to see that there is a justifiable reason for misunderstanding that the instant service is subject to value-added tax exemption.

Inasmuch as justifiable grounds falling under the grounds for preventing the imposition of penalty tax are deemed grounds for exemption from penalty tax, barring special circumstances, taxpayers are responsible to prove that justifiable grounds exist.

Article 48 of the Framework Act on National Taxes

2013Guhap13823 Revocation of Disposition of Imposition of Value-Added Tax

○○○ Construction Works

○ Head of tax office

June 18, 2015

July 9, 2015

1. All of the plaintiff's claims are dismissed.

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

On January 9, 2013, the imposition of additional tax on the value-added tax for the second period of 2007 against the Plaintiff by the former Defendant on January 9, 201 shall be revoked.

1. Details of the disposition;

A. In 2007, the Plaintiff supplied an apartment building on a national housing scale (hereinafter “instant apartment”) at ○○○○-1 block in the taxable period of value-added tax for the second half of 2007, the Plaintiff performed balcony expansion work upon the choice of buyers (hereinafter “instant service”).

B. The Plaintiff determined that the supply of the instant service constitutes services incidental to the supply of the instant apartment that is exempt from value-added tax, and declared the value-added tax exemption for the instant service.

C. However, the Defendant, on January 9, 2013, determined that the instant service was supplied separately from the supply of the instant apartment, and determined that it constitutes an object of value-added tax, imposed on the Plaintiff the value-added tax ○○○○○○○○ (this tax ○○○○, the penalty tax for failing to issue the tax invoice, the penalty tax for underreporting KRW 00, the penalty tax for failing to pay, and the penalty tax for failing to pay (hereinafter “instant disposition”).

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on April 2, 2013, but was dismissed on June 19, 2013.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 7, Eul evidence Nos. 1 through 3, 5, the purport of the whole pleadings

2. Whether the disposition of imposing additional tax is legitimate among the dispositions in this case

A. The plaintiff's assertion

1) Under Article 48(1) of the Framework Act on National Taxes, there are justifiable reasons to believe that the instant service constitutes an object of value-added tax exemption in light of the following: (a) there was no value-added tax for a considerable period of time on the balcony extension service; (b) there was a case where the Tax Tribunal rendered a decision that the balcony extension service constitutes an object of value-added tax exemption because it is naturally incidental to the supply of apartment units on a national housing scale; and (c) there were some opinions among lower courts courts, there were justifiable reasons for the Plaintiff to believe that the instant service constitutes an object of value-added tax exemption.

Therefore, it should be revoked because the Defendant’s imposition of additional tax on the grounds that the Defendant violated the obligation to report and pay value-added tax on the supply of the instant service.

2) The tax amount of penalty tax and the grounds for its calculation cannot be identified solely on the basis of the written notice of the instant disposition (proof No. 7). Thus, there are procedural defects in the duty payment notice.

3) In accordance with Article 32(1) of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter the same shall apply), Article 79-2(1)7 of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013; hereinafter the same shall apply), and Article 25-2 subparag. 3 of the former Enforcement Rule of the Value-Added Tax Act (wholly amended by Ordinance of the Ministry of Strategy and Finance No. 269, Feb. 28, 2012; hereinafter the same shall apply), the Plaintiff may issue a receipt in lieu of issuing a tax invoice for the instant service. As such, the penalty tax portion on the ground of a failure to issue a tax invoice in the instant

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Determination as to the existence of justifiable grounds

A) In order to facilitate the exercise of a taxation right and the realization of a tax claim, penalty tax under tax law is an administrative sanction imposed on a taxpayer who violates various duties, such as a return and tax payment, as prescribed by the Act without justifiable grounds, and does not constitute a justifiable ground that does not cause the taxpayer’s intentional and negligent breach of such duties (see, e.g., Supreme Court Decision 2008Du12986, May 13, 201). Moreover, justifiable grounds constituting grounds for preventing the imposition of penalty tax are deemed grounds for exemption of penalty tax, and thus, a taxpayer is responsible to prove that there exists a justifiable reason, barring special circumstances.

B) In light of the above legal principles, considering the following circumstances, it is difficult to view that the Plaintiff had justifiable grounds for believing that the instant service constitutes a value-added tax-free object even if considering all the circumstances alleged by the Plaintiff, even if considering the entirety of the circumstances asserted by the Plaintiff, the Plaintiff’s assertion is without merit. Accordingly, the Plaintiff’s assertion is without merit.

① Under the Housing Act, the Enforcement Decree of the Building Act, balcony, etc., regulations on the procedures for and standards of structural alteration of the structure of the apartment house, calculation of the sales price of the apartment house, and the guidelines for the design and structural alteration of the balcony, etc., the balcony structure alteration is a separate matter from the supply of the housing. The Plaintiff also concluded a balcony extension contract with the buyer separate from the sales contract on the apartment in this case. The Plaintiff’s error that the instant service was naturally incidental to the supply of the apartment on a national housing scale, and thus, constitutes an object of value-added tax exemption, even if it was determined based on the interpretation of the name, it seems that it

② Even if some lower courts determined that the balcony expansion service is naturally incidental to the supply of apartment buildings, it is not a final and conclusive case or legal doctrine. Moreover, there is no evidence to prove that the Plaintiff filed a report on the supply of the instant service with trust at the time of the Plaintiff’s report on value-added tax, and there is a conflict of precedents regarding whether the balcony expansion service is naturally incidental to the supply of apartment buildings, the Plaintiff would have to dispute the legality of the disposition after filing a return on value-added tax.

③ Even if the National Tax Service asked questions to the effect that the receipt may be issued instead of the tax invoice for the “balcon extension service,” it is difficult to view that the tax authority granted the Plaintiff trust that the obligation to issue the tax invoice was exempted and that the penalty tax would not be imposed due to the non-issuance of the tax invoice because of the exemption of the obligation to issue the tax invoice in the instant service through a direct speech

2) Determination as to the existence of defects in the procedure of the notice of additional duty payment

A) Relevant legal principles

When both principal tax and additional tax are to be imposed by a tax payment notice, the individual tax amount and the basis for calculation thereof shall be stated in the tax payment notice separately. In addition, where multiple types of additional tax are to be imposed, in principle, by classifying the tax amount and the basis for calculation thereof into different types, and by making the taxpayer know the details of each tax assessment in itself, the imposition of additional tax is unlawful (see Supreme Court Decision 2010Du12347, Oct. 18, 2012). Provided, That even if there is a defect in the omission of the matters required by the relevant statutes, if it is evident that the taxpayer is not at all hindered in the determination of objection against the disposition and appeal, the defect of the tax payment notice may be supplemented or recovered (see Supreme Court Decision 201Du9039, Mar. 27, 2001).

(1) The notice of the instant disposition is indicated as follows with regard to the basis of calculation of additional tax.

(2) The Plaintiff filed a revised return of value-added tax on two occasions prior to the instant disposition, and filed a return on and paid the penalty tax for nonperformance of payment and the penalty tax for nonperformance of payment as indicated in the following table.

(unit: original) Revised Date.

Target Amount

Impossibility of Report

Additional tax (won)

The aggregate of penalty taxes for insincere payment;

February 25, 2009 1,673,221,507 150,589,936 188,739,386 339,329,3222 December 25, 2009 2,190,035,534 197,103,103,247,026,008 444,129,206 3,863,257,257,0413,693,1345,765,3947,483,458,528

[Reasons for Recognition] The non-contentious facts, Eul's entry (including each number), the whole purport of pleading

In light of the above legal principles and the above facts, it is reasonable to see that the amount of penalty tax and the grounds for its calculation can be sufficiently known by the notice for tax payment of this case. Thus, the plaintiff's assertion on this part is without merit.

(1) In the case of an additional tax to be issued without a tax invoice, the basis for calculation (the subject amount, tax rate) and amount of tax are all indicated in the tax notice.

(2) In the case of under-reported and under-paid additional taxes, the amount of penalty taxes imposed at the time of the instant disposition is not separately stated in the notice for tax payment. However, the total amount of penalty taxes for the second term in 2007 is stated in each type, and the amount of penalty taxes for the second term in 2007 already paid by the Plaintiff can be easily calculated if the Plaintiff deducts both the amount of penalty taxes for the under-reported and under-reported penalty taxes for the failure to report, which are imposed at the instant disposition, and the Defendant also could have sufficiently known

(3) Article 47-3(1) of the Framework Act on National Taxes provides that the amount equivalent to 10/100 of the underreported amount of tax shall be the amount equivalent to 10/100 of the underreported amount of tax. Since the tax notice also states 10/100 in the tax rate column, it does not seem difficult to grasp the fact that under-reported amount of tax is 10/100. Furthermore, the Plaintiff voluntarily declared the amount subject to the under-reported tax amount as KRW 3,881,536,946 and 3,863,257,041 as stated in the notice of tax payment of the instant disposition, it appears that the amount at the time of the instant disposition could have been known that the amount subject to the under-reported tax amount is KRW 3,881,536,946 and KRW 3,863,279,90,041, which is the difference between the under-reported amount of tax and the under-reported amount of penalty tax can be sufficiently calculated.

(4) Article 47-4(1)1 of the Framework Act on National Taxes and Article 27-4 of the Enforcement Decree of the Framework Act on National Taxes provide that "the amount calculated by multiplying the amount of overpaid tax by the period from the day following the due date to the date of the tax payment notice and by 3/10,000." However, there seems to be no difficulty in understanding the rate of penalty tax due to the stated "1810 days x 0.03%" in the tax payment notice column of the instant disposition. In addition, when filing a revised return on value-added tax for the second period of 2007, the Plaintiff voluntarily identified the target amount as 3,881, 536, 946 won and 3,863,257, 041 won as stated in the notice of tax payment of the instant disposition x 18,279,900 won x 1985 won x 1985 won as stated in the notice of tax payment of the instant disposition.

3) Determination as to whether a receipt may be issued in lieu of a tax invoice

A) Article 16(1) of the former Value-Added Tax Act provides that an entrepreneur who registered as a taxpayer shall issue a tax invoice to the supplier for the supply of goods or services. According to Article 32(1) of the former Value-Added Tax Act and Article 79-2(1)7 of the former Enforcement Decree of the Value-Added Tax Act, a person who mainly supplies goods or services to consumers who are not an entrepreneur shall be granted a receipt instead of exempting the entrepreneur from the obligation to issue a tax invoice. Accordingly, Article 25-2(3) of the former Enforcement Rule of the Value-Added Tax Act provides that a person who mainly engages in a business prescribed by Ordinance of the Ministry of Strategy and Finance may issue a receipt (including the case of self-construction of a residential building

B) Comprehensively taking account of the following circumstances revealed by the relevant statutes and the evidence revealed as to whether the supply of the instant service constitutes a business that can issue receipts in lieu of the issuance of the tax invoice, the obligation to issue the tax invoice pursuant to Article 32(1) of the former Value-Added Tax Act and Article 79-2(1)7 of the former Enforcement Decree of the Value-Added Tax Act cannot be deemed to be exempted. Accordingly, the Plaintiff’s aforementioned assertion is without merit.

(1) On December 2, 2005, the alteration of balcony structure was legalized in accordance with the amendment of the Enforcement Decree of the Building Act. This is intended to make the balcony installed in the house, which is a buffer space connecting the inside and outside of the building, to improve the convenience of occupants and the quality of their dwelling available for various purposes, such as the living room, bedroom, storage, etc., where necessary.

(2) According to the amendment of the above statutes, the relevant regulations were enacted or amended. Article 7 of the procedures and standards for the alteration of the structure of balcony, etc. (No. 2005-400 of the Ministry of Construction and Transportation, Dec. 8, 2005) provides that where a project proprietor makes a change in the structure of balcony, etc., he/she shall submit expenses for alteration of the structure of balcony, etc., separate from the sale price in filing an application for approval for housing supply. Article 38 (1) 3 of the former Housing Act (amended by Act No. 8852, Feb. 29, 2008) of the former Rules on the Calculation of Sale Price of Multi-Family Housing (amended by Ordinance of the Ministry of Land, Transport and Maritime Affairs No. 4, Mar. 14, 2008) provides that "the expansion of balcony shall be made by presenting it to occupants in the announcement of the announcement of the recruitment of multi-family housing," separately from the sale price of balcony in accordance with the announcement of the construction project.

(3) Accordingly, the Plaintiff entered into the instant service contract with the buyer separate from the sales contract for the instant apartment, and calculated and received the instant service price separately from the sales price for the instant apartment.

(4) The buyers of the instant apartment can choose whether to expand the balcony in concluding the sales contract, and some of the buyers did not conclude the balcony expansion contract.

3. Conclusion

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

Relevant statutes

Article 48 of the Framework Act on National Taxes

(1) Where penalty tax is to be imposed under this Act or any other tax-related Act, if the ground for such imposition corresponds to that for extending the due date under Article 6 (1) or the taxpayer has any justifiable ground for non-performance of the obligation concerned, the Government shall not impose penalty tax.

Article 1 (Taxable Objects) of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013)

(1) Value-added tax shall be imposed on the following transactions:

1. Supply of goods or services; and

2. Import of goods.

(3) The term "services" in paragraph (1) means all services and activities that have property value other than goods. (4) The supply of goods or services essential for the supply of goods which are the main transaction shall be deemed included in the supply of goods, which is the main transaction, and the supply of goods or services essential for the supply of services which is the main transaction shall be deemed included in the supply of services.

Article 12 (Exemptions)

(1) The supply of any of the following goods or services shall be exempted from value-added tax (3) The supply of goods or services essential for the supply of goods or services exempt under paragraph (1) shall be deemed included in such supply of goods or services exempted from value-added tax:

Article 16 (Tax Invoice)

(1) Where an entrepreneur registered as a person liable for tax payment supplies goods or services, he/she shall issue an invoice stating the following matters (hereinafter referred to as "tax invoice") to the person who receives the supply, as prescribed by Presidential Decree, at the time specified in Article 9 (where Presidential Decree prescribes otherwise, referring to the time specified otherwise by Presidential Decree). In such cases, a tax invoice may be revised and issued, as prescribed by Presidential Decree, if any ground prescribed by Presidential Decree, such as error

Article 32 (Receipt)

(1) Notwithstanding Article 16 (1) and (2), where any business operator prescribed by Presidential Decree supplies goods or services, a receipt shall be issued, as prescribed by Presidential Decree.

Article 3 (Scope of Incidental Goods or Services) of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013)

The goods or services deemed to be included in the supply of goods or services which are the main transaction pursuant to Article 1 (4) of the Act, shall be those as provided in the following subparagraphs:

1. Goods or services that are ordinarily included in the proceeds from supply of goods or services, the price of which is the main transaction; and

2. Goods or services which are generally deemed incidental to the supply of goods or services which are the main transaction, in light of transaction practices.

3. Goods or services supplied contingent or temporarily in connection with the main business.

4. Goods produced naturally incidental to the production of the main goods in connection with the main business.

(1) A business operator running any of the following business among general taxable persons and a business operator prescribed in Article 25 of the Act shall issue a receipt pursuant to Article 32 (1) of the Act:

7. Business prescribed by Ordinance of the Ministry of Strategy and Finance, which mainly supplies goods or services to consumers other than entrepreneurs.

Article 25-2 (Scope of Business Issuing Receipts) of the former Enforcement Rule of the Value-Added Tax Act (Amended by Ordinance of the Ministry of Strategy and Finance No. 269, Feb. 28, 2012)

The term "those determined by Ordinance of the Ministry of Strategy and Finance" in Article 79-2 (1) 7 of the Decree means the following business:

3. Residential building supply business (including self-residential building construction);

10. Other businesses similar to those under subparagraphs 1 through 9, for which the issuance of tax invoices is impossible or considerably difficult.

Article 106 of the Restriction of Special Taxation Act (Exemption, etc. from Value-Added Tax)

(1) The supply of any of the following goods or services shall be exempted from value-added tax. In such cases, subparagraphs 1 through 3, 4-5, 9, 9-3 and 12 shall apply only to the supply made no later than December 31, 2015, and subparagraphs 4-2, 9-2 and 11 shall apply only to the supply made no later than December 31, 2017, and subparagraphs 8 and 8-2 shall apply only to the supply made no later than December 31, 2014:

4. National housing prescribed by Presidential Decree and the services for constructing such housing (including remodeling services prescribed by Presidential Decree);

Article 51-2 of the Enforcement Decree of the Restriction of Special Taxation Act (Special Taxation for Self-Managed Real Estate Investment Company)

(3) The size prescribed by Presidential Decree in Article 55-2 (4) of the Act means the size of national housing under the Housing Act (in cases of multi-family houses prescribed by Ordinance of the Ministry of Strategy and Finance, referring to the area based on the exclusive area per household)

Article 106 (Exemption, etc. of Value-Added Tax)

(4) "National housing prescribed by Presidential Decree and construction services for the housing" in Article 106 (1) 4 of the Act means the following:

1. Houses not more than the size under Article 51-2 (3);

/ Housing Act

The definitions of terms used in this Act shall be as follows:

3. The term "national housing" means housing constructed or improved under a support of funds from the National Housing Fund under Article 60, the area of which used exclusively for residential purposes (hereinafter referred to as "exclusive residing area") is not more than 85 square meters per house or household (referring to housing the exclusive residing area of which is not more than 100 square meters per house or household in an Eup/Myeon area that is not an urban area, with the exception of the Seoul Metropolitan area under subparagraph 1 of Article 2 of the Seoul Metropolitan Area Readjustment Planning Act; hereinafter the same shall apply);