Suwon District Court 2015Guhap70530 ( December 06, 2016)

Early High Court Decision 201J 3566 ( October 18, 2015)

Whether it constitutes an investment facility asset subject to temporary tax credit for investment

It is reasonable to deem that the intrinsic nature of the investment in the instant facilities is to request another person to construct large-scale machinery and equipment or production facilities. Therefore, the time of starting investment in the instant facilities shall be deemed to be the time of starting the “the commencement of construction” under Article 23(11)5 of the former Enforcement Decree of the Act on Special Cases Concerning Taxation.

Restriction of Special Taxation

Seoul High Court 2017Nu30070 ( November 08, 2017)

L**** Company

○ Head of tax office

Suwon District Court Decision 2015Guhap70530 Decided December 16, 2016

October 18, 2017

November 08, 2017

1. The judgment of the first instance court (except for the portion invalidated by the reduction of claims in this court) shall be revoked.

2. On July 15, 2011, the Defendant issued a disposition of imposition of corporate tax of KRW 2,862,986,310 against the Plaintiff for the business year 2009, in excess of KRW 822,928,994, and the disposition of imposition of corporate tax of KRW 461,670,030 for the business year 209.

3. All costs of the lawsuit are borne by the Defendant.

same as the disposition (the plaintiff reduced the purport of the claim in this court).

1. The reasoning of the judgment of the court of first instance is as stated in the reasoning of the judgment of the court of first instance (excluding the part of '5. conclusion') except for the modification of the pertinent part of the judgment of the court of first instance as follows 2. Thus, it is acceptable to accept it as it is in accordance with Article 8(2) of the Administrative Litigation Act and the main sentence of Article

2. Revised parts

“3,324,656,340 won (including additional tax 1,475,53,697 won)” for 4 pages 1 shall read “2,862,986,310 won and additional tax 461,670,030 won”

○ 4th 2th 2th 2th 2th 2th 2th 2th 2th 2th 2th 2th 2th 4th 4th 5th 5th 5th 5th 5th 5th 5th 5th 6th 6th 2th 2th 4th 4th 4th 4th 2th 86th 862th 92,928,994th 2th 862,986,310-2,057,316th 200th 5th 5th 5th 5th 2th 5th 2th 5th 4th 4th 4th 2th 4th 4th 4th 4th 4th 4th 4th 6th 4th 4th 4th 4th 4th 4th 6th 6th 6th 6th 6th 2nd 5th 6th 2th 6th.

○5. Following the following 7." Even if an order for machinery, etc. under a domestic or foreign production contract (paragraph 1) and a construction (paragraph 5) is concurrently made by another person, the time when investment commences shall be the time falling under any of the following subparagraphs. Thus, the time when the order for machinery, etc. for the first time is sent by the ordering person and the construction is actually commenced shall be deemed to fall under any of the following subparagraphs."

○ 6. From 1 to 9.5 to 5. Pursuant to Article 23(11) of the Enforcement Decree of the Restriction of Special Taxation Act, the following changes are made.

In light of the language, amendment process and reason of Article 23(11) of the former Enforcement Decree of the Restriction of Special Taxation Act, the language, text, and evidence No. 45, etc., if the above provision is interpreted systematically, it is reasonable to regard the above provision as a provision to determine the commencement time of investment by applying subparagraphs 1 through 5 respectively depending on which the essential nature of the investment in question is in question, and therefore, in cases where the pertinent investment is requested to another person (large machinery, equipment, industrial equipment, etc.) if the essential nature of the investment in question falls under “where the construction is requested to another person”, it shall be deemed as the commencement time of investment, not the time when the actual construction

- Article 23(11) of the former Enforcement Decree of the Restriction of Special Taxation Act provides for the time of commencement of investment as follows:

(11) In the application of paragraphs (1) through (10), the starting time of investment shall be the time falling under any of the following subparagraphs:

1. Where an order is placed under a domestic or foreign production contract, when the person placing the order first dispatchs it;

2. Where the facilities are purchased by means of a sales contract without an order given under subparagraph 1, and part of the down payment or price is paid (where the facilities concerned are acquired by transfer before the payment of the down payment or price is made, when the actual acquisition is made);

3. In a case where he imports the facilities concerned and has to obtain the approval, when he has obtained the approval for import notwithstanding the provisions of subparagraphs 1 and 2.

4. The time when the construction or manufacturing has actually commenced in case where he directly constructs or manufactures. In this case, the feasibility of the project and the preparatory preparation shall not be included when the project has been commenced.

5. Where a construction is entrusted to another person, when the construction has actually commenced. In such cases, the matters for feasibility of a project and preparatory preparation shall not be included when the commencement has commenced.

Article 57-2(7)4 of the Enforcement Decree of the Regulation of Tax Reduction and Exemption Act (Presidential Decree No. 12750) newly established and added a new provision, subparagraph 5 of the latter part of Article 23(11)1 of the Enforcement Decree of the Regulation of Tax Reduction and Exemption Act (amended by Presidential Decree No. 21064), which was amended on October 7, 2008 (Presidential Decree No. 21064), that "the existing "production contract" under Article 23(11)1 of the Act should be changed to "domestic and foreign production contract" and "in this case, it shall not be included in the commencement of the preliminary preparation and feasibility of the project" and the first part and the second part of Article 57-2(7)4 of the Enforcement Decree.The reason for amendment of the Enforcement Decree (Presidential Decree No. 21064) clearly stated that "the improvement and supplementation of part of defects arising from the current system will be excluded from the date of commencement of the project," and "the first part of the revised tax law for 2008 years and last.

Meanwhile, the Framework Act on the Construction Industry defines construction business as "construction business" (Article 2 subparag. 2) and defines construction business as "construction business" (Article 2 subparag. 2). Article 2 subparag. 4 main sentence), Article 8-3 of the Framework Act on the Construction Industry, Article 7 of the Enforcement Decree of the same Act and attached Table 1 of the Enforcement Decree of the Foreign Trade Act provide that "construction business" refers to construction business for installation, maintenance, and repair of facilities, machinery, equipment, and other structures, regardless of the names, such as civil engineering work, construction work, industrial equipment installation work, landscaping work, environmental installation work, and other construction business regardless of the names (Article 2 subparag. 4 main sentence). Under Article 2 subparag. 4, Article 8-3 of the Framework Act on the Construction Industry and Article 7 of the Enforcement Decree of the same Act, an industrial and environmental facility construction business, such as industrial production facilities, environmental installation work, power plant installation work, etc., which are one of the construction businesses performing specialized construction work, falls under USD 1 and No. 50. 1 of the Enforcement Decree of the Foreign Trade Act.

- "Commencement commencement" means commencement of a construction work by a contractor, and in civil engineering or construction, it generally refers to commencement of a ground-breaking construction work, and in Article 2 (3) of the Enforcement Rule of the Statistical Research for Building (Ordinance of the Ministry of Land, Infrastructure and Transport) of the Enforcement Rule (Ordinance of the Ministry of Land, Infrastructure and Transport), "Commencement of commencement of construction work" means commencement of a excavation work for the construction of a building (or construction of a building where excavation is not necessary by expansion or remodeling).

According to the language and text of Article 23(11) of the former Enforcement Decree of the Act on Special Cases concerning Taxation Restrictions, subparagraph 1 is related to the case where the relevant investment is ordered under a domestic or foreign production contract, subparagraph 2 is related to the case where the relevant investment is purchased under a sales contract instead of an order, and subparagraph 3 is related to the case where it is required to obtain approval when it is imported, and subparagraph 4 is related to the case where it is directly constructed or manufactured by itself, and the last new subparagraph 5 is related to the case where the construction is requested to another person, and it seems that subparagraph 5 of Article 23(1)

- In general, in the case of a supply contract that manufactures, installs, and completes large-scale industrial facilities, plants, etc. so that they can work in an organic manner, a contract for the manufacture of individual facilities is accompanied. In such a case, if interpreting that subparagraph 1 should be applied on the basis of the contract for the manufacture of such individual facilities, most of the cases of a contract for the entrustment of construction such as large-scale industrial facilities are applied subparagraph 1 and the significance of newly

- In the established rules of the Ministry of Strategy and Finance (A evidence No. 45, 3.695, July 31, 2012), the Ministry of Strategy and Finance sent a reply to the time when the investment commences to "the time when the construction of the project related to the fixed facilities of the party branch was commenced in accordance with subparagraph 5." In full view of the facts acknowledged in the judgment of the first instance court cited by the court at the time of commencing the investment of the facility of this case, the statements and the overall purport of arguments in the records and videos No. 2, 3, 9, 43, and 47, the facility of this case consists of an organic combination of multiple machinery and equipment performing each process in order to produce a large 32.4 billion won in the investment of the machinery and equipment, and each machinery and equipment and building are systematically combined with each other and functioned as the land pipe production facilities or the subsequent plants, and the fact that the construction of the facility of this case was commenced in 209.

According to this, it is reasonable to view that the intrinsic nature of the investment in the instant facilities is the entrustment to another person for the construction of large-scale machinery and equipment or production facilities, and therefore, the timing of commencing investment in the instant facilities should be deemed to be 209 as the time of the commencement of the "Commencement of construction" under Article 23(11)5 of the former Enforcement Decree of the Act on Special Cases Concerning Taxation (it is reasonable to deem that an order for the manufacture of individual facilities, such as Ege Miling, is for the preliminary preparation of the business). Therefore, among the principal tax of the instant disposition, 862,928,994 won (=2,862,986,986, 310 won (=2,862,986, 986, 310 won-2,040,057, 316 won) is unlawful and revoked.

D. Whether the part of additional tax is lawful

When both a principal tax and a penalty tax are to be imposed based on a single tax payment notice, the relevant tax amount and the basis for calculation of the principal tax shall be stated in the tax payment notice separately; and where multiple types of penalty taxes are to be imposed, the relevant tax amount and the basis for calculation thereof shall be divided into two different types of penalty taxes so that the relevant taxpayer can per se know the details of each tax disposition. Therefore, the relevant tax imposition disposition cannot be exempt if only the total amount of penalty taxes are stated without disclosing the type thereof and the basis for calculation of penalty tax (see, e.g., Supreme Court en banc Decision 2010Du12347, Oct. 18, 2012).

According to the statement in Gap evidence No. 7, the defendant can recognize the fact that the defendant did not disclose the type, amount, and calculation basis, etc. of additional tax, such as additional tax on negligent return and additional tax on negligent return, etc., while rendering the disposition in this case. As such, 461,670,030 won of the disposition in this case should be revoked illegally. The plaintiff's assertion

3. Conclusion

Therefore, it is reasonable to accept the Plaintiff’s claim as to the remaining portion that has been reduced in this court due to its reason. As such, the first instance court’s decision different from this conclusion is unfair, and it is so decided as per Disposition by the assent of all to revoke the part exceeding KRW 822,928,94 of the principal tax of the instant disposition and the additional tax.