National High Court Decision 2007west3512 ( October 22, 2008)

Whether the input tax amount for removal expenses for the lease of land acquired is deducted.

If a building is removed to lease land after the acquisition of the land, the construction cost required for the removal falls under the capital expenditure for the creation of the land under the provisions of the Value-Added Tax Act and it cannot be deducted from the input tax amount.

The contents of the decision shall be the same as attached.

1. The Defendant’s disposition of imposing corporate tax of KRW 4,346,270 against the Plaintiff on June 1, 2007 shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. Of the costs of lawsuit, 90% is borne by the Plaintiff, and 10% is borne by the Defendant, respectively.

The disposition of imposition of KRW 10,920,620 against the plaintiff on June 1, 2007, value-added tax of KRW 10,920,620 for the first term of 200, value-added tax of KRW 4,746,310 for the first term of 203, value-added tax of KRW 13,892,380 for the second term of 2005, and the disposition of imposition of KRW 1,406,195,590 for the second term of 204 against the plaintiff on November 6, 2008 (hereinafter "each disposition of this case").

1. Circumstances of the disposition;

(a)the corporation tax of 200, the first half of 2000 value added tax, and the first half of 2003 value added tax;

(1) 원고는 1997. 3.경 문@@, 신&&에게 ○울 ##구 ##동 1258 중앙유통단지 내 상가 20개 점포에 대한 분양계약을 체결하고, 2000. 3.경 이들로부터 총 1,463, 034,254원을 지급받고 점포를 분양하였으며, 이들은 다시 같은 달 14. 이○수 외 9명 에게 위 20개 점포 중 107R 점포를, 2003. 3. 황&& 외 9명에게 나머지 107R 점포를 매도하였다.

(2) 원고는 위 상가분양과 관련하여 분양의 직접 상대방이었던 문@@, 신&& 대신 이들로부터 점포를 매수한 매입자들에게 세금계산서를 교부하였는데, 2000. 3. 14. 이 정수 외 9명에게 건물분 546,031,000원(공급가액), 토지분 434,627,000원(공급가액) 상당의 세금계산서를, 2003. 3.경 황&& 외 9명에게 건물분 237,315,500원, 토지분 188,898,000원 상당의 세금계산서를 각 교부하였다

(3) On June 1, 2007, the Defendant: (a) applied Article 76(9)1 and 2 of the former Corporate Tax Act (amended by Act No. 6558 of Dec. 31, 2001; (b) Article 76(9)1 and 2 of the former Corporate Tax Act (amended by Act No. 6558 of Dec. 31, 2001; hereinafter “former Corporate Tax Act”); (c) corporate tax of KRW 4,346,270 equivalent to 1% of the supply value; and (d) additional tax of KRW 10,920,620 equivalent to 2% of the supply value; and (e) imposition of additional tax of KRW 4,746,310 for the portion for the business year 1, 2003, respectively, by applying Article 22(3)1 of the Value-Added Tax Act.

(b)the corporate tax and special rural development tax of 2004.

(1) 원고는 2004. 3. 3. 서울특별시 교육감과 공익사업을 위한 토지 등의 취득 및 보상에 관한 법률 제17조에 따라 ○울 ##구 ##동 620-32 대지 476㎡를 포함한 14 필지(이하 '이 사건 각 토지'라고 한다)에 대한 매매계약을 체결하고, 2004. 12. 30. 서 울시 교육감에게 위 각 토지 중 2필지(같은 동 625-25 대지 1,743㎡, 같은 동 625-89 대지 2,287㎡)를 제외한 나머지 12필지에 대하여 2004. 3. 3.자 매매를 원인으로 한 각 소유권이전등기를 경료하여 주고, 2005. 1. 5. 서울시교육청으로부터 매매대금 9,208, 632,000원을 일시불로 수령하였는데, 위 토지 거래로 인한 양도차익금 6,784,000,000원에 대하여 위 매매대금을 수령한 날이 속하는 2005년도를 익금의 귀속시기로 보아 법인세 및 농어촌특별세를 신고 ・ 납부하였다.

(2) As a result of the tax investigation conducted by the Plaintiff, the Defendant deemed the time when the transfer margin accruing from the said land transaction reverts to the Plaintiff as 204 year, and included the Plaintiff’s gross income in the business year 2004, and applied Article 118(4)4 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 19891, Feb. 28, 2007) by applying the provision on unfair under-reported penalty tax under Article 118(4)4 of the former Corporate Tax Act (amended by Presidential Decree No. 19891, Feb. 28, 2007), imposed and notified the Plaintiff of the imposition of corporate tax of KRW 1,071,90 (including under-reported penalty tax of KRW 371,084,641), special rural development tax of KRW 192,725,730, and notified the refund of the national tax refund.

(3) Accordingly, on August 27, 2007, the Plaintiff filed an appeal with the Tax Tribunal on the imposition of various corporate tax, etc. including the above imposition disposition. The Tax Tribunal rejected the Plaintiff’s assertion on the portion of imposing corporate tax in 2004 of the instant case without accepting the Plaintiff’s assertion, but it decided that the period of attribution of KRW 943,00,000 for three parcels, other than Guro-gu, Seoul Metropolitan Government No. 620-30, which was deemed to belong to the business year 2003, was 204 and determined to rectify the tax base and tax amount in 204.

(4) Accordingly, according to the purport of the above decision on November 6, 2008, the defendant corrected corporate tax for the business year 2004 to KRW 1,185,156,996, and special rural development tax to KRW 221,038,610, respectively. The defendant imposed and notified corporate tax for the year 204 to KRW 113,251,50,50, and special rural development tax for the year 2004 to KRW 28,312,870 (hereinafter referred to as the "special corporate tax for the year 1,185,156,90 (1,071,905,490 + 113,251,500, + 221,600, agricultural village special tax for the year 2038,60 (129,25,730,2838,207, etc.).

(c)the value added tax for the second period of 2005;

(1) 원고는 원고의 소유인 ○울 ##구 ##동 620-34 일대를 나대지 상태로 임대하여 임대수익을 올릴 목적으로 개경건설주식회사와 공사계약을 체결하고 지장물철거 및 울타리 설치 공사를 시행하였는데, 원고는 위 개경건설주식회사로부터 공급가액 337,000,000원 상당의 세금계산서 1장을 교부받은 다음, 2005년도 2기분 부가가치세 예정신고를 하면서 위 세금계산서상의 매입세액 중 건축물 철거와 관련한 209,000,000원을 매출세액에서 공제하였다.

(2) On June 1, 2007, the Defendant deemed the above cost of removal of a building as the input tax amount related to capital expenditure for the creation of land, and deducted the input tax amount. Moreover, on June 1, 2007, the Defendant corrected and notified the Plaintiff of KRW 13,892,380 in value added tax for the second time in 2005.

[Ground for recognition: Gap evidence 2-1 through 6, Eul evidence 4-1 through 1, 2, 3, Eul evidence 7, Eul evidence 10, Eul evidence 1-1 through 9, Eul evidence 2-1 through 10, Eul evidence 3-1 through 10, Eul evidence 4-1 through 9, Eul evidence 5-1 through 6, Eul evidence 6-1 through 6, Eul evidence 7-1 through 7, Eul evidence 8-1 through 10, Eul evidence 9-1 through 10, Eul evidence 10, Eul evidence 11, Eul evidence 13, Eul evidence 14-14, Eul evidence 15-1 through 9, Eul evidence 1-2, Eul evidence 1-1 through 4, Eul evidence 1-2, Eul evidence 1-1 through 4, Eul evidence 1-2, Eul evidence 1-4, Eul evidence 1-1 through 2-4, Eul evidence 1-2, respectively.

2. Whether the dispositions of this case are proper; and

(a)the master of the plaintiff;

(1) Corporate tax in 200, value-added tax in 2000, and value-added tax in 2003;

Article 76 (9) of the Corporate Tax Act and Article 22 (3) of the Value-Added Tax Act are not applicable before the revision of 2001 that provides that where a corporation fails to deliver an invoice for the supply of real estate, such as land and buildings, or fails to submit an invoice for each customer within a fixed period of time, the additional tax shall not be applied to the failure to issue an invoice or the aggregate invoice for each customer.

(2) Corporate tax and special rural development tax of 2004

The purchase and sale contract of each of the instant lands concluded between the Plaintiff and the Seoul Metropolitan Office of Education is unclear as to whether the right to collateral security established in part of the land is cancelled, and there is a possibility that the entire contract for each of the instant lands may be cancelled by examining the change of school site inside Guro-gu Office. Therefore, even if the ownership transfer registration for part of each of the instant lands has been completed, it cannot be deemed that the transfer margin has

(3) Value-added tax for the second period of 2005

The Plaintiff’s removal of the building is merely about raising the rent revenue on the instant land, and the cost of removing the building does not actually increase the value of the land. Therefore, the cost of removing the building cannot be deemed capital expenditure on the instant land, and thus, the input tax amount should be deducted.

B. Determination

(1) Corporate tax in 200, value-added tax in 2000, and value-added tax in 2003

(A) Corporate tax portion of 2000

In light of the purport of Article 76 (9) 1 and 2 of the Corporate Tax Act prior to the amendment in 2001, which provides that where a corporation fails to deliver invoices, etc. in supplying goods, the purpose of imposing additional tax is to clarify the taxation data. In the case of supplying land or buildings, the provision of Article 76 (9) 1 and 2 of the Corporate Tax Act is to ensure that transaction data are sent to the tax authorities by the registration office or the inspection seal authority under the Registration of Real Estate Act or the Act on Special Measures for the Registration of Real Estate, it is against the principle of excessive prohibition to compel the corporation to submit a list of accounts by sale and purchaser or impose additional tax on the corporation without submitting a list of accounts by sale and purchaser (see, e.g., Supreme Court Decisions 202HunBa80, Jun. 29, 2006; 2003Du12820, Oct. 13, 2006; 2003Du1256, Oct. 26, 2006).

Therefore, the Defendant’s imposition of corporate tax in 2000 imposed pursuant to Article 76(9)1 and 2 of the Corporate Tax Act prior to the amendment of 2001 on the grounds that the Plaintiff did not issue a tax invoice or submit a list of total sales invoices. This part of the Plaintiff’s assertion is with merit.

(B) Value-added tax for the first term of 2000, and value-added tax for the first term of 2003

The plaintiff asserts that the provision of penalty tax based on the failure to submit a list of total tax invoices under the Value-Added Tax Act should be interpreted as applicable only to the case of goods, not land or buildings, as in the Corporate Tax Act prior to the amendment

As seen earlier, the legislative purpose of the Corporate Tax Act provisions prior to the amendment in 2001 is to establish based taxation and to train tax bases by comparing the transaction details between a supplier and a supplier. Therefore, it is not necessary to issue tax invoices, etc. even in the case of real estate transactions in which the tax authority can identify the transaction details by receiving transaction data from a registry office or an inspection authority under the Registration of Real Estate Act or the Act on Special Measures for the Registration of Real Estate, and to force the submission of a separate transaction sheet.

On the other hand, the Value-Added Tax Act (Article 22 of the Framework Act on National Taxes, Article 10-2 of the Enforcement Decree of the Framework Act on National Taxes, and Article 19 of the Value-Added Tax Act) adopts the principle of tax payment that the tax is determined by the taxpayer’s return (Article 22 of the Framework Act on National Taxes, Article 10-2 of the Enforcement Decree of the Framework Act on National Taxes, and Article 19 of the Value-Added Tax Act) provides that the main legislative purpose of the Value-Added Tax Act is to ensure the sincere implementation by imposing administrative separate sanctions on the taxpayer’s nonperformance of obligation. As such, the necessity of securing such implementation is not only general goods, but also transactions related to the supply of land or buildings. In addition, it cannot be said that the disadvantages suffered by the imposition of additional taxes are significantly higher than the public interest or excessively harsh compared

Therefore, the defendant's imposition of the value-added tax in 201 and the value-added tax in 2003 are legitimate on the ground that he did not issue a tax invoice related to the supply of a store. The plaintiff's assertion in this part is without merit.

(2) Corporate tax and special rural development tax of 2004

(A) Under Article 14(1) of the Corporate Tax Act, the income of a domestic corporation for each business year shall be the amount calculated by deducting the total amount of losses belonging to the business year from the total amount of gross income belonging to the business year. Article 40(1) of the Corporate Tax Act for each business year shall be the business year in which the date on which the gross income and deductible expenses are determined. Article 68(1)3 of the Enforcement Decree of the Corporate Tax Act for the business year of accrual of gross income and deductible expenses shall be the date of settlement of the price: Provided, That where the transfer of ownership, etc. (including the registration) is made before the price is paid, or the other party delivers the relevant assets or uses them for profit, it shall be the date of transfer registration, delivery, or use, whichever is earlier, and it is reasonable to view that the plaintiff made the registration of transfer of ownership with the Seoul Metropolitan City superintendent of education on March 3, 2004 after concluding a sales contract for each of the instant land with the Seoul Metropolitan City superintendent of education on December 30, 2004, 2005.

(B) On the other hand, the plaintiff is likely to cancel the entire sales contract because it is a collateral security established on part of each of the land in the instant case. Therefore, it cannot be said that there was no fixed amount of gains from transfer which is a land transaction at the time of the transfer registration.

Article 40(1) of the Corporate Tax Act adopts the principle of confirmation of rights and obligations with respect to the period to which income is attributed. The principle of confirmation of rights and obligations refers to the period to which income is to accrue if there is an interval of time between the time when a right which is the cause of income is determined and the time when income is realized and the time when income is realized and income is to be assessed based on the time when a right which is not the time when income is realized and income is to be assessed based on the premise that it is realized in the future. In order to prevent a taxpayer from sustaining income which is substantially uncertain in the future, it is significant to ensure that income is realized. In order to realize that income is realized until it is realized, even if income is not necessary until it is realized, it is considerably high and high in the possibility of realizing the right to whom income is generated, and therefore, it cannot be said that there is income that is established only when the right to whom income is generated has not come to such degree. The issue of whether it is mature or finalized can not be uniformly determined by comprehensively taking into account the specific nature of individual rights and the substance of law (see, etc.).

According to the overall purport of the statement and pleading evidence No. 7, Gap evidence No. 7, Gap evidence No. 8, Eul evidence No. 9-1, 2, Eul evidence No. 10, Eul evidence No. 10, Eul evidence No. 11, Eul evidence No. 12, Eul evidence No. 13, and Eul evidence No. 13, each of the land of this case was already selected as school building project site at the time of the sale and purchase contract of this case. The superintendent of Seoul Office of Education established individual compensation for each of the land of this case on March 3, 2004 pursuant to the Act on the Acquisition of Land, etc. for Public Works and the Compensation therefor, and entered into a sale and purchase contract with the plaintiff on 12 parcels for which the right to collateral security has not been established, and completed the registration of ownership transfer on December 30, 204 and paid compensation to the plaintiff on January 5, 2005.

On the other hand, the ownership of two parcels of land of this case is not transferred by way of a consultation procedure with a thickness of 12 parcels of land on which a neighboring mortgage has been created, and in conclusion, the existence of an abnormal mortgage that had been located in the location where the ownership can be transferred by the Seoul City superintendent of education in accordance with the land expropriation procedure and the transfer of ownership can only be cancelled by the existence of an abnormal mortgage that has been located in the location where the ownership can be transferred. In addition, the right on the gains on transfer, which is the land transaction of the land of 12 parcels of land of the plaintiff, has not been finally determined at the time when the transfer registration of ownership on the land of 12 parcels of this case is renewed.

In addition, the plaintiff asserts to the effect that there exists another reason for cancellation, such as the review of the change of school site in Guro-gu after the conclusion of the sales contract. However, according to the above facts and the statement in Gap evidence 6, the plan was reviewed to exclude the land of this case from Guro-gu on March 17, 2003 and to establish a new school to the new elim dong-dong where apartment is concentrated. However, the above plan was not accepted, and the conclusion of the sales contract of this case was made under the status that each of the land of this case was finally decided as school site and the plan for public works related thereto was made in detail. Thus, the above assertion is without merit.

(C) On the other hand, the plaintiff asserts that the business year to which profits accrue should be determined in accordance with the corporate accounting standards (No. 4 A33.).

Article 40(1) of the Corporate Tax Act declares the principle of confirmation of right to the business year of accrual of earnings and losses; Article 40(2) of the Enforcement Decree of the Corporate Tax Act and individually lists the period of attribution according to the type of transaction or the method of payment of purchase-price; however, the provisions on the attribution of profits and losses under the tax law pursuant to such type of transaction cannot be deemed to be a provision on the attribution of profits and losses under the complete conclusion of the determination of the ownership of profits and losses because of the prediction of all the various types of transactions in the modern society. Thus, in cases where it is difficult to determine the attribution of profits and losses due to the above listed provisions, unless contrary to the principle of confirmation of right under the Corporate Tax Act, it can be determined by adopting the standards on the accrual of profits and losses under the corporate accounting standards generally accepted as a fair and reasonable accounting practice, and such determination conform

As seen earlier, as long as Article 68(1)3 of the Enforcement Decree of the Corporate Tax Act clearly provides for the business year to which profits and losses accrue due to the transfer of fixed assets, it is unnecessary to adopt the standards for the accrual of profits and losses under the corporate accounting standards and determine the reversion of profits and losses. In addition, even if the corporate accounting standards provide that when the profit-making process has been completed or almost completed, etc. under subparagraph 4 (Ga) of the corporate accounting standards, the time when profits and losses are attributed to the sale of goods, provision of services, interest, dividends, and other profits and losses that cannot be classified as royalties, the same shall apply to the business year to which the land transaction belongs. The Plaintiff’s assertion on this point is without merit.

(D) On the other hand, even if the plaintiff erred in determining the period of attribution of earnings, it is merely erroneous in the misapprehension of laws and regulations, and there is no difference in the amount included in gross income itself even if the plaintiff neglected to perform his/her duties by underreporting corporate tax base, etc. as above, as a result, even if he/she neglected to perform his/her duties, there is a justifiable reason to the effect that the imposition of additional tax on the ground of neglect of duties is illegal. However, under tax law, additional tax is an administrative sanction imposed as prescribed by the law in cases where a taxpayer violates various kinds of without any justifiable reasons, such as a return and tax payment, without justifiable reason, in order to facilitate the exercise of the right to impose taxes and the realization of tax claims, and it does not constitute a justifiable reason that does not cause the taxpayer's intentional negligence or negligence (see Supreme Court Decision 95Nu92, Nov. 7, 195). This part of the plaintiff's assertion is without merit.

(3) Value-added tax for the second period of 2005

Article 17 (2) of the Value-Added Tax Act stipulates the input tax amount (including the input tax amount related to investment) related to the business of supplying goods or services exempt from the value-added tax as one of the input tax amount not deducted from the output tax amount. Article 60 (6) of the Enforcement Decree of the Value-Added Tax Act provides that the input tax amount related to the business of supplying goods or services exempt from the value-added tax is the input tax amount related to the capital expenditure related to the creation, etc. of land, and Article 60 (6) of the Enforcement Decree of the Value-Added Tax Act provides that the following input tax amount is the input tax amount related to the capital expenditure related to the creation,

As seen earlier, as long as the Plaintiff removed the building for lease after acquiring the instant land, the construction cost required for the removal falls under “capital expenditure for the creation of land” under the provisions related to the Value-Added Tax Act, and accordingly, the relevant input tax amount cannot be deducted from the output tax amount. The Plaintiff’s assertion on this part is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified within the scope of the above recognition, and the remaining claim is dismissed as it is without merit. It is so decided as per Disposition.