National High Court Decision 2007Gu337 (No. 12, 2008)

Whether an underground structure for the construction of a new building constitutes goods subject to value-added tax.

The relevant structure shall be deemed taxable goods subject to value-added tax due to the fact that the construction cost is required for the higher amount and there is a value to dispute over ownership between the parties, and that there is a possibility to be used for completing the building through additional construction works.

The contents of the decision shall be the same as attached.

Article 1 (Taxable Objects)

Article 1 (Scope of Goods)

1. The plaintiff's claim is dismissed.

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

The disposition of imposition of value-added tax of KRW 75,606,530 on February 5, 2003 imposed by the Defendant on the Plaintiff on December 5, 2006 shall be revoked.

1. Details of the disposition;

A. On March 28, 2003, the Plaintiff: (a) registered the business to carry on bathing business (hereinafter “instant business”); (b) with the name of ○○○○○-1, 869 square meters; (c) with the same Ri ○○-6, 238 square meters; (d) registered the business to carry on bathing business (hereinafter “the instant business”); (d) with the head of Si/Gun/Gu’s 200, 200, 300 square meters of 5 square meters of 5 square meters of 20; and (e) reported the reduction of 612,050,000 won as an input tax amount; and (e) reported the reduction of 60,000 won as the remaining 60,000 won of 20,000 won of 30,000 won of 20,000 won of 5,000 won of 20,000 won of 60,000 won of 7.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant structure cannot be deemed as having property value because it is merely a structure completed only with the foundation foundation construction, and it cannot be deemed as having been realized since it is merely a constituent part of the land that makes it impossible to separate and restore. Therefore, the instant structure does not constitute goods subject to value-added tax, and thus, the instant disposition is unlawful.

(b) Related statutes;

Article 1 (Taxable Objects)

Article 1 (Scope of Goods)

Article 48-2 (Method of Calculating Tax Base under the former Enforcement Decree of the Value-Added Tax Act)

Article 49 (Calculation of Tax Base for Self-Supply, etc.)

Article 50 (Standards for Market Price)

C. Determination

Comprehensively taking account of the purport of the arguments in Gap evidence 2 and evidence 4-1, 2, 9-1, 2, and 9-2, the plaintiff obtained a building permit to construct the building of this case on or around January 21, 2003 for the project of this case. Meanwhile, the plaintiff entered into a contract with ○ Construction Co., Ltd. on or around January 4, 2003 and started construction of the building on or around March 2003. The above construction was interrupted only after completion of temporary construction, soil construction, and underground shipbuilding construction on or around April 2003. After completing the registration of transfer of ownership with the bid price after completing the registration of ownership transfer on May 13, 2005, it cannot be deemed that ○○ was entitled to ownership of the building of this case against the plaintiff on the ground that the building of this case was owned by ○○ District Co., Ltd.

However, pursuant to the Value-Added Tax Act, goods, products, raw materials, machinery, buildings and all other tangible goods [including Article 1(1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 1930 of Feb. 9, 2006; hereinafter the same shall apply]. When calculating the tax base of value-added tax, the value of the supply of buildings as well as buildings built on land shall be included in the tax base (Articles 48-2(4) and 49(1) of the former Enforcement Decree of the Value-Added Tax Act), and the Plaintiff’s new construction for the business of this case requires a large amount of construction cost of 612,050,000 won at the purchase price and maintains its value until the discontinuance of construction. Since there is a dispute over the ownership of ○○ and ownership, it cannot be deemed that the structure of this case is not worth the value of the building of this case, and there is sufficient room for the Plaintiff to use the additional construction for completion of the building of this case.

3. Conclusion

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