Whether a disposition of non-deduction of land-related tax amount is legitimate

Since the part of the "land-related purchase tax amount" under the Value-Added Tax Act cannot be considered as unconstitutional provisions, and the value of the land has been practically increased, it shall not be deducted from the output tax amount because it constitutes the input tax amount related to the cost constituting the acquisition cost

Article 17 of the Value-Added Tax Act

Article 60 of the Enforcement Decree of the Value-Added Tax Act

1. The plaintiff's claim is dismissed.

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

The defendant's disposition rejecting the correction of value-added tax against the plaintiff on April 21, 2006 is revoked.

1. Details of the disposition;

A. The Plaintiff, a business operator operating a golf club business from ○○○-si, ○○○-si, ○○○-si, in 20-2, reported and paid the value-added tax within the statutory period from 1st to 1st, 2004 as indicated below.

B. On February 21, 2006, the Plaintiff filed a claim for correction of the tax base return amount on the following grounds that the non-deductible input tax amount should be deducted at the time of the return of value-added tax for each of the above taxable periods, claiming that the Defendant would refund the total of KRW 812,317,350 as indicated in the following table, but the Defendant rejected the claim for correction of the tax base return amount on April 21, 2006 (hereinafter “instant disposition”).

Taxation Period

Tax amount payable for a fixed amount of tax

(A)

Details of request for reduction correction

Additional B Refund Claim Amount

(B)

After rectification

(A-B)

1, 2003

-829,526,566 won

451,945,238 won

-1,280,812,204

203

-935,278,316 won

311,997,269 won

-1,247,275,586

1, 2004

-1,359,134,435

48,374,843 won

-1,407,509,278

Total

-3,123,939,317

812,317,350 won

-3,936,256,567

C. On July 11, 2006, the Plaintiff filed a request with the National Tax Tribunal for a national tax trial, but the National Tax Tribunal dismissed the request on September 25, 2006, and the Plaintiff received a notice of the said decision of dismissal on October 12, 2006.

Evidence Nos. 1 through 7, No. 1, and the purport of the whole pleadings, based on recognition;

2. Determination on the legitimacy of the instant disposition

A. Summary of the plaintiff's assertion

Since the latter part of Article 17(2)4 of the Value-Added Tax Act, which is the basis of the instant disposition, provides that “the input tax amount related to land as prescribed by the Presidential Decree” is unconstitutional in violation of the fundamental rights guaranteed by the Constitution, such as the principle of equality, the guarantee of property rights, and the principle of no taxation without law

(b) Related statutes;

○ Tax amount paid under Article 17 of the Value-Added Tax Act

(1) The amount of value-added taxes payable by an entrepreneur (hereinafter referred to as "paid tax amount") shall be the amount computed by deducting the tax amount under the following subparagraphs (hereinafter referred to as "purchase tax amount") from the tax amount on the goods and services supplied by him/her (hereinafter referred to as "sales tax amount"): Provided, That where an input tax amount exceeds the output tax amount, it shall be a refundable tax amount (hereinafter referred to

1. The tax amount for the supply of goods or services used or to be used for his own business;

2. The tax amount for the import of goods used or to be used for his own business; and

(2) The following input taxes shall not be deducted from the output tax amount:

4. The input tax amount related to the business of supplying goods or services exempt from the value-added tax (including the input tax amount related to investments) and the land-related input tax amount as prescribed

Article 60 of the Enforcement Decree of the Value-Added Tax Act

(6) The term "land-related input tax amount prescribed by the Presidential Decree" in Article 17 (2) 4 of the Act means the input tax amount falling under any of the following subparagraphs, which is the input tax amount related to capital expenditures to create land, etc.

1. An input tax amount related to the acquisition and alteration of the form and quality of land, the development of factory sites and housing sites;

2. Where a parcel of land on which a building is located is acquired, and the building is removed and only land is used, the input tax amount on the cost of acquisition and removal of the removed

3. An input tax amount related to the expenses forming the acquisition cost of land by practically increasing the value of land.

C. Determination

(1) Legislative history of the relevant provisions

1) Before the amendment of the law on December 31, 1993

In calculating the tax amount of value-added tax, Article 17 (2) 4 of the former Value-Added Tax Act (amended by Act No. 4663 of Dec. 31, 1993) provides that "the input tax amount related to the business of supplying goods or services exempted under Article 12 (including the subsequent input tax amount related to the person)" should be deducted from the input tax amount. However, the former Enforcement Decree of the Value-Added Tax Act amended by Presidential Decree No. 13452 of Dec. 31, 191 as Article 60 (6) provides that "the input tax amount related to the capital expenditure related to the creation, etc. of land shall be included in the input tax amount for the capital expenditure related to the supply of goods or services exempted under Article 12."

However, the Seoul High Court Decision 93Gu11915 delivered on December 2, 1993 revoked a tax disposition based on the non-deductible theory from the perspective of the theory of mutual aid, and the majority opinion of the Supreme Court en banc Decision 94Nu1449 delivered on December 21, 1995, which was the final appeal of the Supreme Court, dismissed the final appeal of the tax authority from the viewpoint of the theory of mutual aid.

(ii)after the amendment of the law on December 31, 1993;

On the other hand, Article 17 (2) 4 of the Value-Added Tax Act was amended by Act No. 4663 on December 31, 1963 as "the input tax amount (including the input tax amount related to investment) related to the business of supplying goods or services exempt from value-added tax and the land-related input tax amount as prescribed by the Presidential Decree". Accordingly, Article 60 (6) of the former Enforcement Decree of the Value-Added Tax Act was amended by Presidential Decree No. 14081 on December 31, 1993 as "the land-related input tax amount as prescribed by the Presidential Decree" under Article 17 (2) 4 of the former Enforcement Decree of the Value-Added Tax Act.

After all, the meaning and scope of "capital expenditure for the creation, etc. of land" under the above Enforcement Decree is re-convened, and Supreme Court Decision 98Du15290 Decided November 12, 199 presented its criteria, and based on this, Article 60 (6) of the Enforcement Decree of the Value-Added Tax Act was amended by Presidential Decree No. 17827 on December 30, 202 as of December 30, 2002.

(2) The intent of denying input tax deduction and subsequent processing

As a matter of principle, Korea adopted the so-called ‘the Act on the Deduction of Tax Amount at the pre-stage stage' as a method of imposing value-added tax to ensure that only an entrepreneur's self-production added tax is imposed, and calculates the tax amount to be paid by deducting the input tax amount from the output tax amount. However, the input tax amount to be deducted is not wholly deducted, but the input tax amount to be denied. This is classified as ‘the input tax amount to be deducted' (the input tax amount to be submitted, etc. on tax invoices) and ‘the input tax amount to be deducted due to failure to perform his/her duties or failure to fulfill his/her duties' under Article 17 (2) 1 and 1-2 of the Value-Added Tax Act, ‘the input tax amount to be deducted from the input tax amount to be deducted from the output tax amount.'

The processing of input tax amount, which is the subsidiary input tax amount, is different depending on the reasons for deduction. In the case of subparagraph 4 in this case, if the input tax amount, which is the subsidiary input tax amount, is related to the acquisition of assets or capital expenditures, the cost for acquisition of the assets is included. Therefore, if the assets are fixed assets, the depreciation assets shall be disposed of as cost through depreciation, and the intangible assets shall be recovered by including in the acquisition value in calculating gains on transfer when the assets are transferred, and if the assets are inventory assets, they shall be disposed of as cost through use and consumption. If the input tax amount which is the subsidiary input tax amount is related to the expenditure (profit-making expenditure) of expenses, the cost shall

(3) Special nature of land

Land is an original production factor that creates added value in the sense that it can be used immediately without undergoing a separate production process, and it does not create a new added value due to changes in rights to land, and it does not create a new added value. The supply of land itself is exempted from value-added tax (Article 12(1)12 of the Value-Added Tax Act).

On the other hand, Article 31 (2) of the Enforcement Decree of the Corporate Tax Act and Article 67 (2) of the Enforcement Decree of the Income Tax Act provide that "capital expenditure" means repair cost disbursed to extend the service life of fixed assets owned by a corporation (business operator) or to increase the real value of the relevant assets. However, since it is difficult to present capital expenditure to extend the service life due to the characteristics of permanent nature, capital expenditure for land refers to expenses actually needed to increase the service value of land.

The input tax amount which is denied as capital expenses on land is included in the cost for acquisition of land for tax accounting, and since the land is an emergency asset, it is recovered by the method of including the acquisition value in the calculation of gains on transfer when disposing of the relevant land (Article 97(1)2 of the Income Tax Act and Article 163(3)3 of the Enforcement Decree of the same Act), and it is recovered by the method of including the necessary expenses or deductible expenses in the calculation of the business income (Article 5(1)2 of the Enforcement Decree of the Income Tax Act and Article 19(2)

(4) In the Supreme Court en banc Decision 94Nu1449 Decided December 21, 1995 regarding the issue of this case, the majority opinion is a limited and listed provision of each subparagraph of Article 17(2) of the Value-Added Tax Act concerning non-deduction of the input tax amount. In order to deduct the capital expenditure of the land from the input tax amount, it is possible to do so with express provisions notwithstanding the nature of handling the tax accounts or tax-related Acts. Although there is no express provision, denying the deduction of the input tax amount is in violation of the principle of no taxation without the law (the theory of no taxation without the law). The dissenting opinion argues that the provisions of each subparagraph of Article 17(2) of the Value-Added Tax Act concerning the capital expenditure for the creation, etc. of the land are merely an exemplary provision, and the input tax amount related to the capital expenditure for the creation, etc. of the land should be denied pursuant to Article 12 of the Value-Added Tax Act, which is merely a violation of the principle of no taxation without the law.

The actual difference between the above deduction theory and the non-deductible theory leads to ‘whether the input tax amount for the capital expenditures related to land is recovered at the stage of the payment of the value-added tax or is deferred to the transfer stage of the land in question.' This is, in principle, a matter of taxation policy, which belongs to the area of the legislative discretion.

(5) Therefore, the part of the “land-related input tax amount as prescribed by the Presidential Decree” under the latter part of Article 17(2)4 of the Value-Added Tax Act cannot be said to be unconstitutional in violation of the principle of equality under the Constitution, the principle of guaranteeing property rights

(6) Meanwhile, according to the purport of the entire pleadings, the costs alleged by the Plaintiff as the input tax amount related to the land in this case are deemed to be the costs required for the formation of the golf course. The construction of the golf course is indispensable for the construction of the site for the golf course, and the construction of turd, trees and tur, tur, and mits and mits, which form part of the site for the golf course. The construction is consistent with the land of the golf course, thereby forming part of the site for the golf course, and the value of the land has been actually increased through the improvement of the land. Thus, the costs incurred by the Plaintiff for the construction of the golf course shall be deducted from the output tax amount (Article 60(6)3 of the Enforcement Decree of the Value-Added Tax Act), and the output tax amount shall not be deducted from the output tax amount (Article 204Du1384, Jul. 28, 206).

4. Conclusion

Therefore, the defendant's disposition rejecting the plaintiff's request for correction is legitimate as it is in accordance with the relevant Acts and subordinate statutes. Thus, the plaintiff's claim of this case seeking the revocation is dismissed as it is without merit. It is so decided as per Disposition.