National Tax Service Review Division 2011-0181 ( October 26, 2012)

In the absence of additional construction after the completion date of the building, the completion date shall be deemed the time of supply.

The service supply of this case is deemed to have been completed on the date of completion and the value of supply is determined. Thus, even if the contract was to pay the construction price on at least three occasions, as long as the provision of the service is completed and the supply price is to be paid after the completion of the contract, the date of completion shall be deemed the time of supply.

Article 9 of the Value-Added Tax Act, Article 22 of the Enforcement Decree thereof

Article 9 of the Enforcement Rule of the Value-Added Tax Act

2012 disposition of revocation of the imposition of value-added tax

XX Construction Co., Ltd.

The director of Busan District Office

December 14, 2012

January 11, 2013

1. The plaintiff's claim is dismissed.

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

On April 14, 2011, the Defendant’s imposition of value-added tax (additional tax) for the second term portion of 2010 against the Plaintiff and the imposition of value-added tax for the second term portion of 200 on March 13, 2012 against the Plaintiff shall be revoked, respectively.

1. Details of the disposition;

A. The Plaintiff was a construction company with the aim of building construction business, etc., and entered into a construction contract with the XX industry (hereinafter referred to as the “P industry”) on September 10, 2009.

B. The above contract was modified on August 31, 2010 following the reduction of the construction amount due to a design modification and extension of the construction period.

C. The Plaintiff issued and issued a sales tax invoice for KRW 000 among the above construction cost (amount supplied) of KRW 000, and subsequently filed a normal return on the value-added tax for the second period of February 2, 2009, and completed a completion inspection on November 2, 2010, but did not issue and deliver a sales tax invoice for the remainder of KRW 000 (=00 -000) on the basis of the amount receivable for the construction cost, and omitted at the value-added tax return for the second period of February 2010.

D. Meanwhile, around January 201, the XX industry issued a purchaser-issued tax invoice (new construction of major trading items on November 2, 201, 201), and received input tax deduction at the time of filing a final return on value-added tax for 2 years 2010. On February 17, 2011, the Defendant notified the Plaintiff of the content of transaction confirmation (supplier) as above.

E. On April 14, 2011, the Defendant filed a request with the Commissioner of the National Tax Service for a review on October 26, 201, on the following grounds: (a) the Plaintiff issued a correction and notification of value-added tax of KRW 000 (principal tax of KRW 000 + penalty tax of KRW 000) (hereinafter “instant disposition imposing value-added tax”); and (b) the Plaintiff filed a request for a review against the Plaintiff on January 26, 201, but was dismissed on January 26, 2012.

F. On November 29, 2012, the Defendant revoked ex officio only the portion of the additional tax on the grounds that the above additional tax imposition disposition was not specified in the type and the grounds for calculation, and on December 3, 2012, the Defendant again imposed and notified the Plaintiff of the additional tax of KRW 00 (i.e., over-reported amount of KRW 000 + the amount of KRW 000 that has not been issued a tax invoice + the amount of KRW 000 that has not been faithfully paid).

[Reasons for Recognition] Facts without dispute, Gap evidence 2 to 5, Eul evidence 1 to 6 (including each of the sub-paragraphs (a) and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) Illegal assertion in the imposition of value-added tax of this case

The time of supply for the instant construction project shall be deemed to be the time of each supply for each service, where each portion of the price is to be paid in installments on three or more occasions. On August 31, 2010, the Plaintiff received 000 won out of the unpaid balance from the XX industry and agreed to receive the remaining amount within 60 days after completion of the construction work, and not only failed to comply with the P industry but also undergo the completion inspection on November 2, 2010 for convenience when the construction work is not completed. Accordingly, the time of supply for the service equivalent to 00 won out of the supply price is January 1, 201. Accordingly, this part does not fall under the taxable period of value-added tax for the second period of February 20, 2010, and thus, the instant disposition of value-added tax on different premise is unlawful.

2) Illegal assertion of imposition of additional tax due to non-issuance of the tax invoice

The plaintiff did not deliver a tax invoice because of the dispute over the provision of services and the payment of prices between the XX industry. This is due to the failure of supply for the service, which is not subject to the penalty tax, and if the defendant issued a purchaser tax invoice, then he deprived the plaintiff of the opportunity to file a return by immediately notifying the plaintiff after the lapse of the time limit for filing a return, despite the plaintiff's duty to notify the fact that the transaction was done in the XX industry and the purchaser tax invoice was immediately notified, so the tax invoice is deemed to be issued and the construction cost cannot be paid in full. Therefore, the imposition of penalty tax amount of KRW 00 due to the failure to issue a tax invoice is unlawful (the imposition of penalty tax of KRW 200 for KRW 00 is unlawful) in light of the good faith principle.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Determination on the illegality of the disposition imposing the value-added tax of this case

A) Article 9(2) of the Value-Added Tax Act stipulates that the time of supply for services is determined by the Presidential Decree and necessary matters concerning the time of supply for such services are determined by the Presidential Decree. Article 22 of the Enforcement Decree of the said Act provides that “Where the provision of services is completed in ordinary cases (Article 1); where services are supplied on completion basis, interim payment, interim payment, long-term installment or other terms; or services are continuously supplied via which the unit of supply is indivisible (Article 2(2)); where the provisions of subparagraphs 1 and 2 are not applicable, the time when the provision of services is completed and the price of supply becomes fixed (Article 9(1)1 of the Enforcement Rule provides that “where the time of supply for services is determined by the Presidential Decree as one of the interim payment terms, “where the time of supply for services is paid in installments prior to the completion of the provision of services and the time of supply for services is not less than 6 months from the date when the payment of down payment is made in installments; where the supply price of services is determined by the Presidential Decree 2.”

B) On November 2, 2010, the completion inspection for the new building of this case was conducted on November 2, 2010, and the fact that the XX industry, the owner of the building, issued a purchaser-issued tax invoice with the transaction date as of November 2, 2010, and received input tax deduction from the Defendant, as seen earlier, and there is no evidence to acknowledge that the Plaintiff had been subject to the additional construction since the completion date. Thus, the service supply of this case is deemed to have been completed and the supply price at the time of the above completion date is determined. Thus, even if the Plaintiff and the XX industry agreed to pay the construction price at least three times on August 31, 2010, even if the Plaintiff and the XX industry agreed to pay the construction price at the time of the agreement, as long as the service provision is completed and the supply price is to be paid after the completion date, the unpaid construction price cannot be deemed to constitute a conditional supply under Article 22 subparag. 2 of the Enforcement Decree, and as of the above completion date under subparagraph 1 of the same Article.

2) Determination on the illegality of imposition of penalty tax due to non-issuance of a tax invoice

A) First, under the Value-Added Tax Act, a person who independently supplies goods or services for business purposes is liable to pay value-added tax, and the time when services are supplied or goods, facilities or rights are used. Thus, the payment of value-added tax shall be made and the actual receipt of the payment shall not affect the establishment of the liability to pay value-added tax or the time when the services are supplied to another person (see, e.g., Supreme Court Decision 87Nu863, Apr. 25, 1989). The instant construction service cannot affect the conclusion of the liability to pay value-added tax or the time when the services are supplied to the other person (see, e.g., Supreme Court Decision 87Nu863, Nov. 2, 2010, which is the date of the completion inspection and the supply price became final and conclusive. Accordingly, the Plaintiff is obligated to issue the tax invoice at the above time regardless of whether the payment of the construction price was fully paid. Therefore, this part of the Plaintiff’s assertion is without merit

B) Next, as to the assertion that there is justifiable reason, Article 121-4(8) of the Enforcement Decree of the Restriction of Special Taxation Act provides that "the head of the tax office having jurisdiction over a supplier shall confirm whether a transaction has been made or not by the end of the month following the application date and notify the supplier and the head of the competent tax office of the following classification." On January 201, Article 1211 of the Enforcement Decree of the Restriction of Special Taxation provides that "the supplier shall apply for confirmation of transaction with respect to the remaining supply price of 000 won and issue a purchaser-issued tax invoice and obtain input tax deduction. The defendant notified the Plaintiff of the confirmation of transaction with the above content on February 17, 2011. The defendant's notification procedure is in violation of the above provision, and it cannot be said that there is no error in the law. If the tax office notifies the Plaintiff of the result of the confirmation upon the application of transaction by the purchaser, it cannot be found that there is no reasonable reason or ground to deem that the supplier bears the duty to notify the Plaintiff within 25 days after the ordinary taxable period for taxation, or 97.

3. Conclusion

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