Whether liability for value-added tax is established even in cases where new construction of a building is suspended under an interim payment condition and an intermediate payment is not received (affirmative)

According to Article 9 (1) 1 of the Enforcement Rule of the Value-Added Tax Act, where goods are supplied under interim payment condition, the payment obligation of value-added tax shall be established upon arrival of the time of supply when the contract is terminated or terminated, unless there are circumstances that lose its validity in the middle due to cancellation or termination, etc., even if the goods are not completed at the rate equivalent to each price, contrary to the condition of completion limit payment under Article 21 (1) 4 of the Enforcement Decree of the Value-Added Tax Act, even if the goods are paid in installments prior to the delivery of the goods or prior to the availability of the goods, and the period from the date of payment of the down payment to the date of payment of the balance is not less than 6 months. In addition, whether the payment has been actually received does not affect the conclusion of the liability for value-added tax

Articles 2(1) and 9 of the Value-Added Tax Act, Article 21(1)4 of the Enforcement Decree of the Value-Added Tax Act, Article 9 subparag. 1 of the Enforcement Rule of the Value-Adde

Supreme Court Decision 86Nu110 Decided August 19, 1986 (Gong1986, 1243) Supreme Court Decision 87Nu863 Decided April 25, 1989 (Gong1989, 822) Supreme Court Decision 94Nu1146 Decided November 28, 1995 (Gong196Sang, 272)

Co., Ltd. (Attorney Suh Chang-soo, Counsel for the plaintiff-appellant)

Head of the District Tax Office

Seoul High Court Decision 2001Nu11429 delivered on March 8, 2002

The part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the Seoul High Court.

1. According to the reasoning of the judgment below, the court below held that the Plaintiff’s liability to pay value-added taxes is not established on the ground that: (a) the time when the goods are supplied under interim payment conditions stipulated in Article 21(1)4 of the Enforcement Decree of the Enforcement Decree of the Value-Added Tax Act (hereinafter “Enforcement Decree”) was premised on the completion of the goods corresponding to the cost of installment payments; (b) thus, it cannot be deemed that the goods corresponding to the cost of the goods are completed at the time of receiving each part of the cost of the goods; and (c) where there are circumstances that cannot be anticipated that the supply of the goods would take place in the future, there is no supply of the goods under the principle of substantial taxation; (d) the Plaintiff’s obligation to pay value-added taxes was not satisfied on the ground that the Plaintiff could not be deemed to have received the intermediate payment from the third underground floor and the 12th floor unit of the ground that was scheduled to be newly constructed on the ○○ Building (hereinafter “○○ Complex”) and the Plaintiff could not be deemed to have received the intermediate payment at the 197th floor.

2. According to Article 9 subparagraph 1 of the Enforcement Rule of the Value-Added Tax Act, the case of supplying goods under interim payment condition refers to the case where the payment of the price other than the down payment is made in installments before the goods are delivered or before the goods are made available, and the period from the date when the payment of the down payment is made to the date when the balance is paid is not less than 6 months from the date when the down payment is made. Thus, unlike the condition of the base payment for completion under Article 21 (1) 4 of the Enforcement Decree, even if the goods are not completed at the rate equivalent to each one of the respective payments, barring any circumstance that the contract loses its effect due to cancellation or termination, etc., it shall be deemed that the liability for value-added tax liability is established upon the arrival of the time when the goods are received, and the actual payment of the price shall not affect the conclusion of the liability for value-added tax payment (see, e.g., Supreme Court Decision 94Nu1446, Nov

In light of these legal principles, in this case where there is no circumstance that the Plaintiff lost its validity in the middle due to the cancellation or cancellation of the sales contract for ○ ○ Contac which the Plaintiff agreed to supply as an interim payment condition, the lower court cannot be deemed as not establishing liability for value-added tax solely on the basis that the goods equivalent to the consideration have not been completed or that the lower court was required. Therefore, the lower court erred by misapprehending the legal principles on the supply of goods subject to interim payment condition, which affected the conclusion of the judgment.

3. Therefore, the part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yoon Jae-chul (Presiding Justice)