Seoul Administrative Court 201Guhap19390 ( December 23, 2011)

Cho High Court Decision 2010Du2172 ( October 22, 2011)

If a landowner bears the cost of building a building, the input tax amount is not the lessor’s input tax amount even if the building was registered under the lessor’s name

If a lessee of land constructs a building on the ground and uses the land as a site and pays a rent for the use of the land at his/her own expense, if the lessee is to deliver the building without compensation to the Plaintiff at the expiration of the period of the land lease, the input tax amount for new construction costs

Article 16 of the Value-Added Tax Act and Article 17 of the Value-Added Tax Act

2011Nu37543. Revocation of the imposition of value-added tax

XX

The head of Yangcheon Tax Office

Seoul Administrative Court Decision 2011Guhap19390 decided September 23, 2011

July 10, 2012

August 10, 2012

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked.

The Defendant’s imposition of value-added tax of KRW 000 on March 5, 2010 against the Plaintiff on March 5, 201 shall be revoked.

1. Value-added tax;

In full view of the purport of the entire pleadings, the following facts are recognized in each entry of Gap evidence Nos. 1 through 4, 8, Eul evidence Nos. 2, 6, and 13 (including paper numbers):

[1]

On April 7, 2007, the Plaintiff entered into a contract (hereinafter referred to as the “instant lease contract”) with Austria to lease 1290-2 large 1,991 square meters (hereinafter referred to as “instant land”) of Yangcheon-gu Seoul Metropolitan Government, Yangcheon-gu, Seoul.

O agreed in the instant lease agreement as follows.

∎ 원고는 이 사건 토지를 오AA에게 임대하고, 오AA는 주차장 및 점포(건축 후)로 사용 한다.(제2조)

∎ 오AA는 월세조로 000원을 익월 5일까지 원고에게 지급한다.(제3조) • 임대차 기간은 계약일로부터 60개월로 한다.(제5조)

∎ 건축허가서부터 건축 완공시까지 이에 소요되는 제반비용(취득세 및 등록세 포함) 일체를 오AA가 부담하고, 모든 시설 및 허가 사항 모루를 오AA가 책임을 지고 득하기로 한다.(단서 1호)

∎ 건축물 및 시설물 일체룰 계약만료 후 원고에게 무상으로 인도하기로 한다 (단서 2호)

∎ 원고는 오AA의 건축행위에 따른 제반 사항 및 영업 목적상 필요한 인허가(테라스, 간판 등)를 득하도록 적극 협조한다.(단서 4호)

[2]

After the conclusion of the instant lease agreement, the contract was concluded on July 18, 2007 with the construction of a new parking lot and the second floor building (hereinafter referred to as the “instant building”) on the instant land in the name of each Plaintiff, under which the contract was concluded to request the OOO office to conduct supervision of the said new construction on July 18, 2007 at the OOOO office. The contract was concluded on July 18, 2007 with the construction of the said new construction in the name of each Plaintiff.

As between June 30, 2007 and December 27, 2007, the Plaintiff received a tax invoice of KRW 000,000,000,000 from the △△ OOO office, and received a tax invoice of KRW 00,000,000, in total, supplied value from △△ corporation Y. (hereinafter referred to as “instant tax invoice”).

O, however, the total value of the tax invoice of this case (=00 won +000 won) was paid to OO certified architect office and Y corporation with the burden of OA.

In 2007, the Plaintiff reported the second value-added tax in 2007, and deducted the input tax amount of KRW 000 based on the instant tax invoice.

[3]

After the construction of the building in this case, the OA used the building in this case, and on January 9, 2009, the registration of ownership preservation was completed in the name of the plaintiff.

As to the deduction of the Plaintiff’s input tax amount, the Defendant determined that the pertinent building belongs to the Plaintiff on the condition that the Plaintiff used it for a certain period, and thus, the instant tax invoice is different from the private tax invoice, and thus, the said input tax deduction was not possible.

Pursuant to O, the defendant, on March 5, 200lO, deducted the above input tax amount of KRW 000,000, and imposed a disposition of KRW 000 on the plaintiff for the imposition of the value-added tax of KRW 200 in 2007 (hereinafter referred to as "instant disposition").

2. The plaintiff's assertion

The Plaintiff acquired the instant building at the time by receiving advance payment of rent from the Plaintiff, and disbursed it for the construction cost of the instant building. The instant tax invoice was received by the Plaintiff while paying the construction cost of the instant building as above. Therefore, the instant tax invoice is not a false tax invoice. Accordingly, the Plaintiff’s input tax amount based on the instant tax invoice ought to be deducted from the Plaintiff’s output tax amount.

On the other hand, the Defendant recognized that the Plaintiff received the said new construction cost from OrA as the rent, and imposed value-added tax and income tax on the Plaintiff. Thus, if the Plaintiff did not deduct the input tax amount of KRW 00 based on the instant tax invoice, it constitutes double taxation.

Therefore, the instant disposition imposing the value-added tax for the second period of 2007 on the Plaintiff by deducting the input tax amount of KRW 000 based on the instant tax invoice from the input tax amount.

3. Determination

A. The instant lease agreement

(1) Under the instant lease agreement, the Plaintiff agreed to lease the instant land to the Lao, and set the rent at KRW 000 per month, and used it as a parking lot or store after construction with the burden of all the expenses incurred in the construction. The Plaintiff decided to transfer all the buildings and facilities and deliver them to the Plaintiff free of charge after the expiration of the lease agreement.

As seen in the instant case, the Plaintiff asserted that, as seen earlier, he received rent from OrA in advance and disbursed it as the cost of new construction of the instant building. In addition, the Plaintiff asserted in the first instance trial that the Plaintiff had to pay all the expenses incurred in connection with the instant building was to use it for all the expenses incurred in relation to the construction with a lower rate of rent and with a lower rate of rent calculated.

In addition, comprehensively taking into account the purport of the entire arguments in the statements in Eul 3 and 4, the plaintiff filed a lawsuit against the plaintiff on April 17, 2009 by the Seoul Southern District Court 2009Gahap8131, and it is recognized that the plaintiff leased the land of this case to the plaintiff and the building of this case was occupied and used by the plaintiff, and the plaintiff terminated the lease contract of this case because the plaintiff did not pay the rent, and the plaintiff asserted that the plaintiff was obligated to remove the building of this case and deliver the land of this case to the plaintiff as the restoration of the original state, and that the plaintiff and the plaintiff agreed on June 23, 2009 by the plaintiff and the plaintiff on June 23, 2009 that the plaintiff paid the overdue rent in lump sum to the plaintiff and did not exercise the right to purchase the building.

(2) In light of the above circumstances, the contractual relationship between the Plaintiff and the Plaintiff is that: (a) the Plaintiff leased the instant land to the Plaintiff; (b) the △△△△ used the instant land for the construction of the instant building at its own expense; and (c) paid rent of KRW 000 per month to the Plaintiff in return for the use of the instant land; (b) without the Plaintiff’s obligation to transfer the instant building to the Plaintiff free of charge at the expiration of the instant lease agreement; and (c) without exercising the right to purchase the instant building and to restore the instant building to its original state at the expiration of the instant lease agreement; and (d) the Plaintiff bears the obligation to revert the ownership of the instant building to the Plaintiff, thereby acquiring the ownership of the instant building.

Therefore, the Plaintiff’s acquisition of ownership of the building of this case is part of the price that the Plaintiff acquired by leasing the land of this case to OA under the instant lease agreement, and is part of the price that the Plaintiff supplied OA with the services of leasing the land of this case, and is part of the profit that the Plaintiff gains from the instant lease agreement.

(3) Meanwhile, according to the above, on January 9, 2009, prior to the expiration of the term of the instant lease agreement, the registration of ownership preservation was completed with respect to the instant building in the Plaintiff’s name. This is merely a pre-performance of the obligation to revert the ownership of the instant building to the Plaintiff at the expiration of the term of the instant lease agreement as seen earlier. As such, the instant lease agreement that the Plaintiff leases the instant land to OA is maintained as it is, and the relationship that the Plaintiff leases the instant building to OA with or without compensation is not newly formed due to the registration of ownership preservation.

(b) Deduction of input tax amount;

(1) According to the Value-Added Tax Act, the tax amount payable at △△△ is the amount calculated by deducting the input tax amount from the output tax amount, and the input tax amount deducted from the output tax amount at △△△△ is the tax amount for the supply of goods or services used or to be used for one’s own business (Article

According to the above, the Plaintiff acquired ownership by constructing and using the instant building at its own expense and bearing the obligation to revert the ownership of the instant building to the Plaintiff at the expiration of the term of the instant lease agreement. Such acquisition of ownership is part of the value of supplying the instant land to the Plaintiff, and is part of the profit accrued to the Plaintiff under the instant lease agreement, and registration of preservation of ownership of the instant building was completed in the name of the Plaintiff before the expiration of the term of the lease agreement for the instant case. As such, Ora performed the obligation of the Plaintiff to revert the ownership of the instant building to the Plaintiff at the expiration of the term of the instant lease agreement. As such, it is only the Plaintiff’s performance in advance at the expiration of the term of the instant lease agreement, and the relationship of the instant lease agreement that the Plaintiff leases the instant land to Ora is maintained.

(2) Thus, while the plaintiff bears the new construction cost of the building of this case and acquires the ownership of the building of this case, the amount equivalent to the above new construction cost of △△ shall be calculated based on the amount of output tax included in the value of supplying the land of this case to Austria, and the above new construction cost of △△ is not equivalent to the value of supplying the goods or services used or to be used by the plaintiff for the supply of the land of this case to Austria, and thus the tax amount for the above new construction cost cannot be recognized as the plaintiff's input tax amount, and it shall not be deemed as the double taxation amount.

In addition, the Plaintiff’s acquisition of ownership of the instant building as above is part of the profit derived from the instant lease agreement that the Plaintiff leased the instant land to OraA, and thus, income tax may be imposed thereon, and such income tax cannot be deemed as a double taxation in relation to the value-added tax that calculates the output amount as seen above.

(3) According to the facts found earlier, the instant tax invoice is a tax invoice for which the OO architect office and Y corporation provided services for design, interest, and new construction of the instant building. The total value of the instant tax invoice was paid to OO architect office and Y corporation with the burden of OO architect office and Y corporation.

Therefore, since the input tax amount based on each of the tax invoices of this case cannot be acknowledged as the Plaintiff’s input tax amount as seen earlier, it would be lawful to deduct such input tax amount from the Plaintiff, and the instant disposition imposing the value-added tax for the second period of 2007 on the Plaintiff is lawful.

4. Conclusion

Therefore, the plaintiff's claim seeking the revocation of the disposition of this case shall be dismissed as it is without merit, and the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed as it is so decided as per Disposition.