Amount received from a welfare group shall be subject to value-added tax because it has been provided with services.

The amount received from the welfare group shall be the consideration for the services provided by the welfare group for the operation of the profit-making business, and the amount paid directly by the welfare group to its members shall be deemed to have been paid by the welfare group to its members only by changing the method of paying the amount to be paid to its members.

Article 13 of the Value-Added Tax Act;

Seoul Administrative Court-2015-Gu Partnership-7324 (Law No. 29, 2016)

AAAAA Revolution Association

BB Director of the Tax Office

on October 06, 2016

on April 29, 2016

1. Of the instant lawsuit, the part seeking revocation of KRW 16,236,30 of value-added tax for KRW 16,230 shall be dismissed.

2. The plaintiff's remaining claims are dismissed.

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

Cheong-gu Office

The Defendant’s imposition of KRW 00,000,000 on January 20, 2015 and KRW 00,000,000 on July 3, 2010 on the Plaintiff shall be revoked.

1. Circumstances of each disposition of this case;

A. The Plaintiff is an organization of persons of distinguished service to the State, which is composed of wounded persons at the time of the April 19 Revolution under Article 4(1)12 of the Act on the Honorable Treatment and Support of Persons, etc. of Distinguished

B. On May 2005, the Plaintiff obtained approval from the Minister of Patriots and Veterans Affairs for a profit-making business related to environmental disagument services at theCC State’s provision.

C. AAAA Revolution Welfare Association Co., Ltd. (hereinafter referred to as the “Welfare Association”) has paid a certain amount of money to the Plaintiff while carrying out the above-profit business.

D. From January 2009, the Welfare Service Group paid part of the money that it paid to the Plaintiff to the Plaintiff’s members, and paid KRW 00,000,000 to the Plaintiff’s members during the 2009 VAT taxable period. During the 2009 VAT taxable period, the Welfare Service Group paid KRW 00,000,000 to the Plaintiff and KRW 00,000 to the Plaintiff’s members during the 2010 taxable period.

E. The Defendant: (a) reported each of the above money paid by the Welfare Service Group to the Plaintiff and its members during each of the above taxable periods as consideration for providing services subject to value-added tax; (b) issued a disposition to rectify and notify the Plaintiff of KRW 17,492,490 of value-added tax on January 20, 2005 (the Defendant issued a notice of correction and correction of KRW 00,000,000, which was originally paid to the Plaintiff and its members; (c) issued a disposition to rectify and notify the amount of value-added tax other than value-added tax, which was included in each money paid to the Plaintiff and its members (hereinafter “instant disposition 1”); and (d) issued a disposition to rectify and notify KRW 100,000,000 on July 3, 2010 (hereinafter “instant disposition 2”).

F. On March 30, 2015, the Plaintiff filed an appeal on the instant first disposition with the Tax Tribunal, but was dismissed by the Tax Tribunal on June 15 of the same year.

[Reasons for Recognition] No dispute exists, Gap evidence Nos. 1 through 3, Gap evidence No. 6, and the purport of the whole pleadings.

2. Whether the lawsuit against the part seeking revocation of the second disposition among the lawsuit in this case is legitimate

According to Articles 55(1) and 56(2) of the Framework Act on National Taxes, in order for a person subject to an illegal disposition under tax-related Acts, to institute an administrative litigation, it shall undergo either a request for examination to the Commissioner of the National Tax Service or a request for a trial to the Tax Tribunal. As seen earlier, the Plaintiff merely underwent a prior trial procedure against the first disposition, but did not undergo a prior trial procedure against the second disposition.

Although two or more administrative dispositions for the same purpose in tax administration were taken in the process of step-by-step and development, they are related to each other, and the tax authority has changed the taxation disposition subject to such disposition while in the course of tax litigation and the reason for illegality is common, or where several persons are subject to the same administrative disposition due to the same administrative disposition, one of them has given the tax authority and the National Tax Tribunal an opportunity to re-determine the basic facts and legal issues, as in the preceding disposition or when they go through legitimate step-by-case procedures, and where there are justifiable reasons such as where it seems that the taxpayer would be harsh to have caused the taxpayer to undergo further proceedings, the taxpayer may file an administrative lawsuit seeking revocation of the taxation disposition without going through step-by-court procedures (see, e.g., Supreme Court Decision 2005Du10170, Apr. 14, 2006). However, the second disposition of this case is a separate independent disposition different from the first disposition in the course of taxation, which cannot be concluded separately from the costs of the second instance trial procedure and so long as to undergo the second instance procedure.

Therefore, the part seeking revocation of the disposition No. 2 among the instant lawsuit is unlawful.

3. Determination as to the legitimacy of the first disposition of this case

A. The plaintiff's assertion

The Plaintiff’s money received from the welfare service group is not the price for the provision of services, but the donation is not the price for the provision of services. Since the Plaintiff’s member’s money received directly from the welfare service group is unrelated to the Plaintiff, each disposition of this case must be revoked in an unlawful manner.

(b) Fact of recognition;

1) On August 23, 2005, the Plaintiff held a board of directors on August 23, 2005 and resolved to establish a welfare organization to carry out the profit-making business approved by the Ministry of Patriots and Veterans Affairs. On September 5, 2005, the Plaintiff held a board of directors on September 138 of the same year, and resolved to receive at least 0.35% of the total amount of money received from the welfare organization as a welfare fund.

2) The Plaintiff was established on October 11, 2005, and written a written statement of performance with the welfare service group. The purport is that, in principle, the Plaintiff shall enter into a service contract with the CC International Airport Corporation in the name of the welfare service group, and the Plaintiff shall be responsible for administrative measures accordingly, and if it is impossible to enter into a service contract under the name of the welfare service group, the Plaintiff shall enter into a contract with the following welfare service group or enter into a subcontract with a third party designated by the welfare service group, and the third party shall be managed by the welfare service group.

3) On June 23, 2006, the Plaintiff transferred 00,000 shares out of 00,000 shares of the welfare group originally owned to the welfare group.

4) On the end of 2006, the Welfare Service Group concluded a contract for environmental beauty services for theCC International Airport Corporation and its facilities by way of a free contract, and from January 2007, paid money as welfare fund to the Plaintiff from January 2009, and began to pay money directly to the Plaintiff’s members. The amount was KRW 70,000 per capita per month, KRW 70,000 per capita’s anniversary of the April 19 Revolution, and KRW 100,000 per Gu administration and memorial.

5) On January 13, 2009, the Welfare Service Group notified the Plaintiff that it would pay the Plaintiff’s direct money to the Plaintiff’s members. On January 16, 2009, the Plaintiff sent to the Defendant postal items indicating the opposing intent.

6) On January 28, 2011, the Welfare Group agreed with the Plaintiff on January 28, 201 that “The Welfare Group shall pay 50% of its monthly profits to the Plaintiff, and the Plaintiff shall pay its members KRW 70,000 per capita.”

[Reasons for Recognition] Nos. 4, 5, 8, 10, and 4 (including paper numbers) of Gap and the purport of the whole pleadings.

C. Determination

According to the above facts, the profit-making business related to the environmental mination services of theCC State provided by the Welfare Service seems to have been scheduled for the Plaintiff to directly conclude a contract with theCC International Airport Corporation. However, the Welfare Service Foundation concluded a contract with theCC International Airport Corporation, which is completely separate legal personality from the Plaintiff, and the Plaintiff only held 2% of its issued stocks, and the Plaintiff did not exercise any influence against the Ministry of Patriots and Veterans Affairs or theCC International Airport Corporation (the above contract was concluded by a negotiated contract and the contract was concluded by the State as a public corporation applicable mutatis mutandis to the contract with the State as a party, which is not qualified for the conclusion of several contracts). The Plaintiff appears to be entitled to administrative support when concluding a contract under the name of the Welfare Service Foundation and the Plaintiff, as well as to pay a certain amount of money to the Plaintiff for the purpose of exercising or maintaining the right to benefit-making services, instead of the so-called “project Administration Foundation’s own authority to provide the Plaintiff with an administrative support.”

Meanwhile, although the Welfare Service directly pays part of the money paid to the Plaintiff to the Plaintiff’s members, the Plaintiff has the nature of a non-profit corporation for the purpose of promoting the welfare of its members as an organization of persons of distinguished service to the State. The Plaintiff paid the amount of money directly paid to its members after the agreement with the Welfare Service on January 28, 2011. Meanwhile, even though the Plaintiff sent to the Welfare Service on January 16, 2009, it is unclear whether the Plaintiff’s expression of intent is the Plaintiff’s representative of its members, and rather, it appears that the Plaintiff received money without raising any objection to the Welfare Service, and it appears that the Plaintiff did not demand the Plaintiff’s return of money received from the Welfare Service to its members. In light of the above, it is reasonable to deem that the Plaintiff paid money to the Plaintiff as the direct payment of money to the Plaintiff’s members and the Plaintiff’s direct payment of money to the Plaintiff’s members can be deemed as having changed only the method of offering the money to the Plaintiff’s members.

D. Sub-committee

Therefore, we cannot accept the plaintiff's above assertion.

4. Conclusion

Therefore, among the lawsuit of this case, the part seeking the revocation of the second disposition of this case is dismissed, and the remaining claims of the plaintiff are dismissed as it is without merit. It is so decided as per Disposition.