The early 2014Gu3421

Whether additional taxes may be exempted in view of national housing construction services in proportion to the construction ratio of national housing among the construction services for the site for multi-family housing.

The Housing Site Development Project Corporation in the Housing Site Development Project District shall not be deemed to be the incidental services of housing construction, so it shall not be deemed to be the duty-free services, but it shall be revoked on the ground that there is a justifiable reason for not being able to cause any negligence due to an obligation

Article 106(1) of the Restriction of Special Taxation Act

2015Guhap22174 Revocation of Disposition of Imposing Value-Added Tax

AA Construction Corporation

O Head of tax office

December 16, 2015

January 27, 2016

1. The Defendant’s imposition of additional tax on November 25, 2013 and January 16, 2014 against the Plaintiff is entirely revoked.

2. The plaintiff's remaining claims are dismissed.

3. Three-five of the costs of lawsuit are assessed against the Plaintiff, and the remainder is assessed against the Defendant, respectively.

Cheong-gu Office

Disposition No. 1 and the Defendant’s disposition of imposition of value-added tax on November 25, 2013 and January 16, 2014 against the Plaintiff is revoked in entirety.

1. Details of the disposition;

A. On December 31, 2007, the Plaintiff, along with the △△ industry, was awarded a contract for the construction of a housing site (hereinafter referred to as “instant construction contract”) with the construction cost of KRW 22,288,357,000 for the construction cost of the site for the housing site development project in the ○○○○○○○○○-dong Project site (hereinafter referred to as “instant project district”). The instant construction site subject to the instant construction project includes the construction site of KRW 151,840 square meters, the construction site of the national housing site of KRW 40,114 square meters, and other 103,571 square meters.

B. As a result of reviewing the current status of payment of value-added tax on national housing construction service projects implemented by ○○○○ Corporation and improvement plans, “value-added tax corresponding to the ratio of national housing construction site area to the total supply area of national housing among value-added tax on all construction services is exempted.” In relation to national housing construction projects for which the amount equivalent to value-added tax has not yet been paid to ○○○ Corporation, the ○○○○○○ ordered the reduction of construction price to be withdrawn through design change with the contractor.

C. As a result, ○○○ Construction Co., Ltd.: (a) related to the instant construction project, only the construction cost corresponding to the ratio of construction sites exceeding national housing scale (48.62%) among the entire construction sites of apartment houses (48.62%); and (b) deemed that construction cost corresponding to the ratio of construction sites of national housing (51.38%) is subject to value-added tax exemption; and (c) paid KRW 26,397,00,000 for construction cost corresponding to the ratio of construction sites exceeding national housing scale to the Plaintiff, including value-added tax 1,186,830,677 for construction cost corresponding to the ratio of construction sites exceeding national housing scale; and (d) the Plaintiff reported and paid the said KRW 1,186,830,67 as value-added

D. As a result of a corporate regular investigation into ○○○○ Corporation, the director of the regional tax office: (a) deemed that the service supplied to ○○ Corporation by the Plaintiff does not constitute a national housing construction service exempt from value-added tax on the grounds that the entire service was related to national housing construction service; and (b) notified the Defendant of relevant taxation data; (c) on November 25, 2013 and January 16, 2014, the Defendant issued a notice of correction and notification of value-added tax (including additional tax) from 208 to 102 as shown in the attached disposition list of attached Table 1 to the Plaintiff (hereinafter “instant disposition”); and (d) imposed additional tax on the Plaintiff.

E. The Plaintiff appealed and filed an objection on February 17, 2014, but received a decision of dismissal on April 2, 2014, and again filed an appeal on June 9, 2014, but the Tax Tribunal dismissed the appeal on February 25, 2015.

Facts that there is no dispute over the basis of recognition, entry of Gap evidence 2 through 7, 9, Eul evidence 1 through 4 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The Plaintiff’s housing site development services must be supplied first prior to the construction of national housing. Thus, it constitutes “national housing construction services exempt from value-added tax” under Article 106(1)4 of the Restriction of Special Taxation Act and Article 106(4)2 of the Enforcement Decree of the same Act.

2) Among the instant construction works, the construction works for building sites of national housing fall under services provided naturally incidental to supply of construction services of national housing, which is a major transaction under the Value-Added Tax Act, and thus constitutes subject to exemption from value

3) The Plaintiff was a small and medium construction company that was jointly awarded a contract with ○○○ Construction, a public enterprise under the ○○ City, and did not have any position to refuse the instant construction request or raise an objection under the terms and conditions of the contract, and did not have any choice to trust opinions on the ○○ Construction and the ○○ City. Therefore, the Plaintiff’s imposition of the penalty tax in this case was unlawful on the ground that there was a justifiable ground that it could not be an error in its duty when reporting and paying value-added tax on the national housing construction service

(b) Related statutes;

Attached Form 2 is as shown in the relevant statutes.

C. Determination

1) Determination on the first argument

Article 106 (1) 4 of the Restriction of Special Taxation Act provides that "National housing prescribed by Presidential Decree and construction services for such housing shall be exempted from value-added tax," and Article 106 (4) of the Enforcement Decree of the same Act provides that "National housing and construction services for such housing prescribed by Presidential Decree" means construction services for housing below the scale of national housing under the Housing Act and those supplied by a person registered under the Act on the Management and Use of Livestock Excreta, Electrical Construction Business Act, Fire-Fighting Business Act, Fire-Fighting Act, Information and Communication Business Act, Housing Act, Housing Act, Sewerage Act, and Livestock Excreta."

The exemption of value-added tax under the above provision shall be construed as referring to the supply of essential construction services, electrical construction services, fire fighting services, etc. to the national housing itself and the construction of the relevant national housing (see Supreme Court Decision 91Nu7040, Feb. 11, 1992). Therefore, it shall not be deemed that the construction of infrastructure facilities for the entire complex independently undertaken prior to the construction of national housing, etc., such as the instant construction project, is not included in the construction of national housing. This part of the Plaintiff’s assertion is without merit.

2) Judgment on the second argument

Article 1 (4) of the former Value-Added Tax Act (Amended by Act No. 11873, Jun. 7, 2013; hereinafter the same shall apply) (Article 1 (4) of the former Value-Added Tax Act) shall be used for the supply of goods

Article 12 (3) of the same Act provides that the supply of goods or services that are essentially annexed to the supply of goods or services exempt from value-added tax shall be deemed to be included in the supply of goods or services that are exempt from value-added tax, and Article 3 (1) and (2) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 24638, Jun. 28, 2013; hereinafter the same shall apply) provides that "goods or services that are considered to be included in the supply of goods or services that are the main transaction" is "goods or services that are ordinarily included in the supply of goods or services that are the main transaction, or goods or services that are generally deemed to be supplied incidental to the supply of goods or services that are the main transaction, in view of transaction practices."

Under the principle of no taxation without law, or the requirements for tax exemption or tax exemption, and the interpretation of tax laws shall be interpreted in accordance with the text of the law, barring any special circumstance, and it shall not be permitted to expand or analogically interpret without reasonable grounds. Thus, the scope of deeming that the supply of goods or services, which are essential to supply the goods or services exempt from value-added tax pursuant to Article 12(3) of the former Value-Added Tax Act, is limited to only the supply of the goods or services, which are essential to the supply of the goods or services without value-added tax, and only the supply of such goods or services, which are essential to the supply of the goods or services, must be limited to the supply of such goods or services (see, e.g., Supreme Court en banc Decision 200Du7131, Mar. 15, 201). The same applies to the goods or services exempt from the former Restriction of Special Taxation Act. The Plaintiff’s execution of the construction of the entire construction of the instant housing or the entire construction of the instant construction project district is no more than 150.

3) Judgment on the third argument

Under the tax law, where a taxpayer violates various obligations, such as a return and tax payment, without justifiable grounds, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, a taxpayer’s intent or negligence is not considered as administrative sanctions imposed as prescribed by individual tax laws. On the other hand, such sanctions cannot be imposed in cases where there are justifiable grounds that make it difficult for the taxpayer to be aware of his/her duty, such as where there are circumstances that make it unreasonable for him/her to be reasonably present or where it is unreasonable for him/her to expect the fulfillment of his/her duty, etc. (see, e.g., Supreme Court Decisions 95Nu10181, Nov. 14, 1995; 2003Du13632, Jan. 27, 2005).

The above facts and evidence No. 1 (each number), which can be known by comprehensively considering the overall purport of the pleadings, are as follows: ① It is difficult to view that the Plaintiff neglected to report and pay value-added tax on the ground that it is subject to tax exemption depending on whether the Plaintiff paid value-added tax on the instant construction project, and thus, the Plaintiff appears to have trusted and complied with the demands made by ○○○○ Construction, a local public enterprise, by appropriately interpreting the relevant statutes; ② In addition, in the instant project district and other urban development districts where ○○ City was promoted not only the instant project district but also other urban development districts where ○○ City was promoted, some construction enterprises appear to have been entitled to receive value-added tax on the same ground; ③ The Plaintiff merely collected the value-added tax amount from ○○○ Construction and is in a position to pay it to the tax authority. Therefore, it is difficult to view that the Plaintiff neglected to report and pay value-added tax on the instant construction project, and thus, it is difficult to expect the Plaintiff to pay the amount equivalent to value-added tax on the instant construction project.

3. Conclusion

Thus, the plaintiff's claim is reasonable within the above scope of recognition, and the remainder is accepted.

The claim is dismissed as it is without merit, and it is so decided as per Disposition.