Incheon District Court 2010Guu4548 (2011.06.09)

National Tax Service Review Division 2010-0034 (Law No. 12, 2010)

Where the value of land and buildings is unclear, and there is an appraisal corporation's appraised value, it shall be calculated in proportion to such value.

Where land, buildings, etc. are supplied together with other land, buildings, etc., the distinction between the value of land and the value of buildings, etc. is unclear, and where there exists an appraisal corporation’s appraised value during the period from the immediately preceding taxable period to the

Article 13 (Tax Base of Value-Added Tax Act)

Article 48-2 (Method of Calculating Tax Base)

2011Nu21296 Revocation of Disposition of Imposition of Value-Added Tax

XX Industry Corporation

The director of the Southern Incheon District Office

Incheon District Court Decision 2010Guhap4548 Decided June 9, 2011

November 10, 201

December 22, 2011

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 imposition of value-added tax for the first period of December 4, 2006 against the plaintiff on December 4, 2009 by the defendant shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a company that was established on April 1, 2002 and engages in the business of construction work, such as Buddhist decoration and waterproof, real estate leasing business, etc.

B. On April 25, 2006, the Plaintiff entered into a sales contract with 00,000,000, 000,000,000,000 won (hereinafter referred to as "the land and buildings of this case"; hereinafter referred to as "the above land and buildings of this case") to purchase 600,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,00,000,00,00,00.

C. The Plaintiff filed a final return on the value-added tax for the first period of 2006 with the value-added tax of KRW 2,590,909,09 (including value-added tax of KRW 10%) and deducted the input tax amount. The Defendant deemed that the distinction between the value of the instant land and the building is unclear, and calculated the instant sales price at KRW 2,098,30,680 in proportion to the appraised value, and then deducted the input tax amount for the building of this case from the input tax amount for the first period of 2006 to the Plaintiff on December 4, 2009, and issued the instant disposition that corrected and notified the value-added tax of KRW 72,334,620 for the first period of 206.

D. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the National Tax Service on February 23, 2010, and the National Tax Service dismissed the Plaintiff’s claim on July 12, 201.

[Ground of recognition] Facts without dispute, Gap evidence 1-2, Gap evidence 2-2, Eul evidence 10, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) When the Plaintiff purchased the instant land and buildings from the Nonparty Company, the value of the instant building is KRW 2,850,00,000 (including value-added tax) taking into account the fact that the Nonparty Company newly constructed the 5,6,7th floor of the instant building, and stipulated that the value of the instant land is KRW 1,350,00,000. Nevertheless, the instant disposition based on the premise that the Defendant’s distinction between the instant land and the building is unclear is unlawful.

(2) Although the sales price of this case was KRW 3,940,909,090 (land value of KRW 1,350,000,000, building value of KRW 2,590,09,090) excluding value-added tax, the Defendant erred by mistake of the sales price of KRW 4,200,000,000, building value of KRW 2,850,000,000, and thus, the instant disposition was unlawful since value-added tax was imposed twice.

B. Relevant statutes

It is as shown in the attached Form.

C. Facts of recognition

(1) The relationship between the Plaintiff and the Nonparty Company

(A) On April 1, 2002, the Plaintiff was established with the trade name of XX Construction Co., Ltd., and was changed to the current trade name on March 8, 2006. From March 8, 2006, the sulfur XX became the representative director of the Plaintiff.

(B) On April 7, 1998, the non-party company was established with the trade name of ○ shock machine Co., Ltd. and changed to the trade name on March 22, 2005. On January 29, 2005, the representative director of the plaintiff was registered as a director from January 29, 2005 to April 25, 2006, and from September 13, 2005 to April 25, 2006, the company held office as the representative director of the non-party company from April 25, 2006. After that, the non-party company was registered as a shareholder of the non-party company on June 1, 2006. On the other hand, the above sulfur was registered as a shareholder of 25,000 shares (total shares) on the shareholder registry of the non-party company.

(2) The modification or extension of ownership of the building of this case

(A) On February 21, 1994, the instant building was newly constructed on 4th floor (1,222 square meters, 93.5 square meters, 3 floors, 1,222 square meters, 286 square meters in total, 2,823.5 square meters in total, 286 square meters in 1,67.02 square meters in 200, and GW Industries Company owned ownership of the instant building.

(B) On January 15, 2002, the instant building transferred its ownership to the Donam-gu, Seoul Special Metropolitan City (Representative AA), and on May 1, 2003, GN Engineering Co., Ltd (Representative A; hereinafter “GN”) transferred its ownership to GN on September 25, 2003.

(C) On March 19, 2004, GN Co., Ltd., owned the ownership of the instant building, the auction procedure was initiated for the instant land and buildings. However, at the time, the instant building was under construction for extension of the 5,6, and 7th floor of the previous 4th floor building.

(D) On February 22, 2005, H system industry corporation, which was determined as a successful bidder in the above auction procedure (hereinafter “H system industry”), paid KRW 1,720,000,000 as the successful bidder, and acquired the instant land and buildings.

(E) On February 25, 2005, H system industry obtained approval for the extension of the building of this case with steel framed reinforced concrete, the 7th floor roof of the Panel Location Panel (1675.42m2m2, 93.5m2, 1818.25m2, 375.49m2, the 599.52m2, the 599.52m2, the 7th floor, the 599.52m2m2, the 599.52m2m2m2, the 599.2m2m2m2, on February 25, 2005, and registered the details of extension of the 5,6 and 7m2m2 of the building of this case.

(3) Sales contract between H system industry and the non-party company

(A) On February 25, 2005, the non-party company purchased the instant land, buildings (the area stated in the sales contract is 5,761.22m2m2, including the extension portion of the instant building), and machinery equipment in total, KRW 2,678,852,593 (excluding value-added tax) with the price for the land, KRW 92,565,308, the price for the building, KRW 1,423,456,915, and KRW 262,830,370, and the price for the machinery and equipment was determined as KRW 1,423,456,915, and KRW 262,830,370 on April 8, 2005.

(B) The value of the instant land on the balance sheet in 2005 of the Nonparty Company stated KRW 1,016,386,560, and the value of the instant building is KRW 1,416,319,737.

(4) The plaintiff sales contract with the non-party company

(A) In a sales contract (Evidence A No. 2) prepared by the Plaintiff and the Nonparty Company on April 25, 2006, the sales price of the instant real estate is KRW 4.2 billion (land 1,350,000,000, building 2,850,000), and the payment method is KRW 235,50,000 on the date of the contract, and the intermediate payment is paid KRW 3,350,000 on the date of the contract, and the intermediate payment is paid KRW 3,50,000 on the date of the contract, and the remainder payment is paid by June 30, 2006.

(B) The Plaintiff had appraised the instant land and buildings in the process of receiving a loan from the Han Bank in order to pay the above purchase price. The appraisal value of the instant land, which was based on the appraisal result by the Central Appraisal Corporation as of April 24, 2006, is KRW 1,918,14,000, the appraisal value of the instant land; the appraisal value of the instant building is KRW 2,127,42,400, and the machinery and equipment is KRW 259,715,000.

(5) The value ratio of the instant land and building

(A) The standard market price of the instant land by the National Tax Service in 2006 is KRW 1,33,344,00, and the standard market price of the instant building is KRW 1,501,479,980.

(B) On February 25, 2005, when the non-party company purchases the land and building of this case to H system industry, the value of the land and building of this case on the balance sheet in 2005 of the non-party company, the value of the land and building of this case on April 24, 2006, the appraised value of the land and building of this case on April 24, 2006, the standard market price in 2006, and April 25, 2006, prepared by the plaintiff and the non-party company on April 25, 2006, are as follows.

[The following table omitted]

[Ground of Recognition] Facts without dispute, Gap evidence 2, Eul evidence 4-1, 2, 5-2, 3, Gap evidence 7 through 11, Gap evidence 12-1, 2, Eul evidence 1, 2-2, Eul evidence 3-1, 3-3, Eul evidence 4-1 through 11, and the purport of the whole pleadings

D. Determination

(1) First, we examine whether the distinction between the value of land and the value of a building under the instant sales contract is unclear. The main sentence of Article 48-2(4) of the Enforcement Decree of the Value-Added Tax Act provides that where an entrepreneur supplies land and a building fixed on such land together, the value of supply of such building, etc. shall be based on the actual transaction price. The proviso provides for a method of calculating the value of a building subject to value-added tax in proportion to its value, if there is a appraised value by an appraisal corporation under the Act on Publication of Real Estate Prices and Appraisal and Evaluation from the commencement date of the immediately preceding taxable period to the end date of the taxable period to which the time of supply belongs, in cases where the distinction between the value of land and the value of the land subject to value-added tax is unclear (see, e.g., Supreme Court Decision 200Nu16969, Dec. 26, 198).

In the instant case, comprehensively taking account of the factual relationship as seen earlier and the following circumstances recognized, it is sufficient to view that the Plaintiff and the non-party company voluntarily recorded the value of the instant building stated in the sales contract prepared by the Plaintiff and the non-party company in order to be subjected to the reduction of the value-added tax, differently from the actual transaction. It is insufficient to reverse the above determination only on the basis of the Plaintiff’s evidence Nos. 13-1, 2, 14-1 through 4, 15-1 through 5, 16-1 through 3, 17-1 through 17, and 17-3, and the testimony of the first instance court witness JS and GS.

Therefore, the sales contract of this case constitutes a case where the distinction between the value of land and the value of buildings, etc. is unclear among the actual transaction values, and thus, the plaintiff'

① Y, the representative director of the Plaintiff, was holding concurrently the representative director of the non-party company at the time of the instant sales contract, and the non-party company was holding the position of the shareholder of the non-party company. In light of the fact that the non-party company discontinued the pertinent land and building immediately after the transfer thereof to the Plaintiff,

② In light of the purchase price of the instant land and building, the value of the instant land and building on the balance sheet in 2005 of the non-party company, the National Tax Service’s standard market price on the instant land and building in 2006, and the appraisal value based on April 24, 2006 on the instant land and building, etc., even if the Plaintiff and the non-party company’s total purchase price of the instant land and building on April 25, 2006, is appropriate, the entire sale price of the instant land and building on the sales contract prepared by the non-party company is excessively high, and the ordinary building reduces its depreciation value differently from the land.

③ The Plaintiff asserts that it is reasonable for the Plaintiff to purchase the instant land and buildings at a price higher than that of the instant company’s purchase of the instant building by investing approximately KRW 1,400,000,000 in the instant building, as the Plaintiff had extended the instant building around 204, which was the former owner of the instant building, and Jung-A, the representative director of the Do Da Da Da Da Da Da and GN Co., Ltd., and had been the representative director of GN around 204.

On February 25, 2005, the following circumstances are: ① the company entered into a contract for the purchase and sale of the instant building with H system industry on February 25, 2005; ② the H system industry entered into the registration of ownership transfer on April 8, 2005; ② the use approval was granted on February 25, 2005 for the extension of the instant building’s 5,6, and 7th floor; the copy of the register of the building of this case was registered on February 25, 2005; ③ the size of the building after the extension of the H system industry and the sales contract (Evidence 9) of the non-party company was entered into on February 25, 2005; ④ the non-party company had already purchased the instant building by the non-party company’s 25th unit of the building without reporting the extension of the building’s 10th unit of the building.

In addition, even if the plaintiff's assertion was actually made in the process of selling the building of this case to the plaintiff in order to recover the cost of the extension of the building of this case which was previously invested by GN, etc., the extension of the building of this case was extended to the plaintiff as an independent business entity by ASEAN, Inc. and GN, etc., not as an individual, and the H system industry, the non-party company, and the plaintiff sold and purchased the building of this case as an independent business entity. The value of the building of this case should be considered to have been reflected in accordance with the progress of the construction at the time when each company sold the building of this case. The H system industry of this case was successful on February 22, 2005 and sold the building of this case to the non-party company on February 25, 2005 by reflecting the price of the building of this case at the time when the building was sold to the non-party company on February 25, 2005, it is reasonable to deem that the increase in value of the building of this case was reflected from the ownership of the building of the non-party company.

Therefore, the plaintiff's above assertion is without merit.

(2) Next, the Plaintiff asserted that the Defendant erroneously imposed value-added tax by misunderstanding the sales value of the instant land and building KRW 4,200,000,000, and the value of the building KRW 2,850,000,000. However, as seen earlier, it is recognized that the Defendant calculated the sales value of the instant building in proportion to the appraisal value and calculated the sales value of the instant building at KRW 2,098,00,000, as seen earlier, the Plaintiff’s assertion on a different premise is rejected.

3. Conclusion

Therefore, the plaintiff's claim is 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 without merit. It is so decided as per Disposition.