Plaintiff (Law Firm Sejong, Attorney Lee Dong-hwan, Counsel for plaintiff-appellant)

Head of Sungnam Tax Office

October 12, 2011

1. The Defendant’s imposition of value-added tax of KRW 243,249,960 against the Plaintiff on January 16, 2010 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. (1) On June 24, 2008, the Plaintiff purchased six commercial buildings (hereinafter “instant building”) of ○○○○○○○ (No. 1, number 2, number 3, number 4, number 5, number 5, number 6 omitted) located in the area of Sung-nam City Branch of Subdivision ( Address omitted) from the development of this industry on June 24, 2008.

(2) In order to pay the purchase price of the instant building, the Plaintiff entered into a trust agreement with the Korea Mutual Savings Bank (hereinafter “Korea Mutual Savings Bank”) on June 30, 2008 with respect to the instant building to borrow and secure KRW 4.2 billion, and entered into a trust agreement on the instant building until June 30, 201, the trust period was until June 30, 201; the first beneficiary of the trust principal was the Korea Mutual Savings Bank, the Korea Mutual Savings Bank, the Korea Mutual Savings Bank, and the Korea Mutual Savings Bank, and the real estate security trust agreement to designate the trust amount as KRW 5.8 billion as the beneficiary certificate (hereinafter “instant trust agreement”).

(3) According to the instant trust agreement, the Plaintiff continuously occupied and used the instant building and shall bear the expenses incurred in managing the building, and the case trust may perform management activities necessary for preserving and disposing of the value of the said building. In the case where the Korea Mutual Savings Bank, which is the first beneficiary, and the Plaintiff violated the credit transaction agreement concluded with the Plaintiff, or the instant trust agreement, or it is impossible to secure the claim of the first beneficiary due to the change in economic conditions, etc., the instant building may be liquidated and settled at the request of the first beneficiary at the request of the beneficiary, and the amount calculated by deducting the expenses incurred in relation to the trust agreement and the disposal procedure, the trust fees, the lease deposit protected under the Housing Lease Protection Act, the secured claim of the senior mortgagee, etc. from the proceeds of realization and settlement, and if there is a balance, the truster shall pay to the Plaintiff, as the truster

(4) On July 1, 2008, on the instant real estate, the registration of transfer of ownership in the Plaintiff’s name and the registration of trust of case trust was completed respectively.

B. As the Plaintiff failed to repay the above principal and interest debt, Korea Mutual Savings Bank requested the realization of the instant building to the KF Trust, and the KF Trust promoted the public sale of the instant building but failed to do so several times, the Korea Mutual Savings Bank acquired the ownership of the instant building in KRW 4,517,05,143, which is the same amount as the above principal and interest debt, by a private contract on February 23, 2009.

C. (1) On January 15, 2009, the Plaintiff filed an application for refund of value-added tax of KRW 326,638,350 with the input tax amount as KRW 345,274,713, and the output tax amount as KRW 18,181,818, while filing a return of value-added tax for the second half-yearly value-added tax on 2008, the Plaintiff filed an application for refund of KRW 326,638,350 with the input tax amount as KRW 18,818,00. The Defendant deemed that the instant trust constitutes another profit trust for which the actual ownership of the instant building belongs to the priority beneficiary as of July 1, 2008, the date of the supply of the goods was deemed as the date of the trust registration, and did not issue sales tax invoices on the sales revenue amount, and imposed KRW

(2) On September 8, 2009, the Plaintiff asserted that the instant trust was supplied on February 23, 2009, which was the date of sale of real estate through a free contract by the so-called collateral trust, and that there was no obligation to deliver a tax invoice on the trust date as it cannot be deemed that the substantial control right has been transferred on the trust date. The Defendant accepted it and subsequently refunded the amount of application for refund after fully cancelling the imposition of value-added tax for the second period of 2008.

(3) On January 16, 2010, the Defendant deemed the Plaintiff, the truster of the instant trust contract, as the person liable to pay value-added tax on the transfer of the instant building, and imposed value-added tax 243,249,960 won on the Plaintiff on January 16, 2009 (hereinafter “instant disposition”).

D. The Plaintiff filed an objection on April 5, 2010 with the Tax Tribunal on June 21, 2010, but was dismissed on March 2, 2011.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1, 2 and 3 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Since the instant trust constitutes a so-called trust for other interests, and the person liable to pay value-added tax following the disposition of the instant building is Korea Mutual Savings Bank, a priority beneficiary, to the extent that the right to benefit is exercised, the disposition of the said building cannot be deemed as the supply of goods subject to value-added tax, on the ground that both the supplier and the recipient of the instant

B. Determination

Generally, value-added tax is imposed on a person who supplies goods or services independently for business (Article 2(1) of the Value-Added Tax Act). On the other hand, trust under the Trust Act has a trustee manage and dispose of the property rights for the purpose of trust by transferring a specific property right to a trustee or taking any other disposition (Article 1(2) of the Trust Act). If a trustee supplies or is supplied with goods or services while managing and disposing the trust property, the trustee himself/herself becomes a party to the trust, or the benefits and expenses incurred from the management and disposal of the trust property are ultimately attributed to the truster, and the trust under the Trust Act is also based on the calculation of the truster. Thus, trust under the Trust Act is also imposed on the truster, as if it is a consignment under one’s own name (trustee). Thus, it is reasonable to view that the truster and the person liable to pay value-added tax should, in principle, be attributed to the beneficiary within the scope of the trust property (see Article 90 of the Trust Act).

Therefore, as seen earlier, the Plaintiff and the trustee, the truster, entered into the instant trust agreement with the purport that the Korea Mutual Savings Bank is the first beneficiary of the Korea Mutual Savings Bank, which constitutes a collateral trust, and thus, the taxpayer of value-added tax arising from the transfer of the instant building is the Korea Mutual Savings Bank, which is the beneficiary of the instant trust agreement (as seen earlier, as the Korea Mutual Savings Bank acquired the ownership of the instant building and thus, no value-added tax can be imposed on the same person as the supplier of the goods). The instant disposition is against the person who is not the taxpayer, and is unlawful (as for the legal principles of the foregoing precedents, criticism that it is not inconsistent with the taxation structure of value-added tax, etc.), but the above legal principle seems to be an inevitable interpretation in light of the provisions of the Corporate Tax Act and the Income Tax Act (Article 5) that stipulate the beneficiary of the income accrued to the trust property as well as the provisions of Article 46(4) of the Income Tax Act, etc. that stipulate the real principle of attribution of the taxable property.

3. Conclusion

If so, the plaintiff's claim shall be accepted for the reasons of the judgment as per Disposition.

Judges Kim Jong-chul (Presiding Judge)