Market price calculation method of services serving as the tax base for land lease services; and

In the case of land lease service in light of the substance over form principle, the proper market price as the supply price of the concerned land shall be determined based on the price formed in the normal transaction with the supplier and the unrelated party, and in the absence of such actual transaction, the land category, location, surrounding environment, utilization status, and the proper transaction price of similar land in neighboring and similar areas shall be determined based on the determination of whether the rent of the concerned land is an unreasonably low price under Article 13 (1) 3 of the Value-Added Tax Act and Article 52 (1) of the Enforcement Decree of the same Act.

Articles 13(1)3, 50(1) and 52(1) of the Enforcement Decree of the Value-Added Tax Act

Supreme Court Decision 86Nu863 Decided May 12, 1987, 87Nu236 Decided September 8, 1987, 87Nu510 Decided October 28, 1987, 87Nu523 Decided November 24, 1987 (Dong)

[Judgment of the court below]

Head of Central Tax Office

Seoul High Court Decision 86Gu146 delivered on October 20, 1986

The appeal is dismissed.

The costs of appeal are assessed against the defendant.

We examine the grounds of appeal.

According to Article 13(1)3 of the Value-Added Tax Act, and Articles 50(1) and 52(1) of the Enforcement Decree of the same Act, the tax base of value-added tax on the supply of a service means the market price of the service supplied by the supplier in a case where the supplier receives or does not receive any price unfairly lower than the price, and the unfair lower price refers to the price which is considerably lower than the market price that is acknowledged to unfairly reduce the tax burden on the supply price of the service in the transaction with the person in a special relationship with the supplier. The market price of the service means the price formed in the ordinary transaction with the person without a special relationship with the entrepreneur. Since the provision does not stipulate the method of calculating the market price of the service in light of the substance over form principle, the reasonable market price of the lease price of the service in question is to be determined based on the price formed in the normal transaction with the person without a special relationship with the supplier. In the absence of such precedent, the reasonable market price of the service in question should be determined in consideration of the land category, location, surrounding environment, surrounding use, and similar area.

In the same view, the court below is just in holding that the rent rate of the land of this case calculated by the defendant according to the formula under the National Tax Service's service order is based on the total rent for the building constructed on the land of this case by the non-party Bolim Unemployment Co., Ltd., which is a related party with the plaintiff, and according to the formula above, the rent of the building of this case would be increased or decreased according to the size of the building constructed by the non-party Co., Ltd., the lessee of the land of this case, and in proportion thereto, the rent of the land of this case would also be increased or decreased. Therefore, the court below's determination that the tax disposition of this case was unlawful on the ground that it cannot be seen as the rent price formed in the normal transaction with the plaintiff and the unrelated party, and there is no error in the misapprehension of legal principles or incomplete deliberation. In addition, in light of the records, the court below's fact finding that the rent of the land of this case received from the above non-party Co., Ltd. is not remarkably low compared with the rent of neighboring land

Therefore, the appeal is dismissed and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Choi Jae-ho (Presiding Justice)