[1] Whether a business operator’s completion of reclamation of public waters and acquisition of part of the reclaimed land’s ownership constitutes supply of services subject to value-added tax (affirmative)

[2] The meaning of market price of services that serve as the tax base for value-added tax where a business operator supplies public waters reclamation services

[1] If a business operator obtained ownership of part of the land created by reclamation in accordance with the relevant statutes and the agreement between the parties after obtaining a license from the State with another business operator under the Public Waters Reclamation Act and obtaining the authorization of the completion thereof, it is reasonable to view that the business operator has an economic and substantial payment relationship between the business operator's provision of service and acquisition of ownership of part of the reclaimed land as the price for providing the above land reclamation service to the State and acquiring ownership of part of the reclaimed land. As such, the reclaimed land creation corporation constitutes a supply of service

[2] If a business operator provides services for reclamation of public waters and acquires ownership of part of reclaimed land as a price for such services, the tax base shall be the market price of the services, i.e., the total construction cost, and value-added tax included in the total construction cost shall be included in the market price of the services provided to the State.

[1] Articles 1 and 7(1) of the Value-Added Tax Act, Article 14(1) of the former Public Waters Reclamation Act (amended by Act No. 5337 of Apr. 10, 1997) (see current Article 26(1)) / [2] Article 13(1)2 of the Value-Added Tax Act, Article 14(1) of the former Public Waters Reclamation Act (amended by Act No. 5337 of Apr. 10, 1997) (see current Article 26(1))

[1] Supreme Court Decision 90Nu727 delivered on March 12, 1991 (Gong1991, 1199), Supreme Court Decision 90Nu9247 delivered on August 27, 1991 (Gong1991, 2459), Supreme Court Decision 95Nu15308 delivered on March 12, 1996 (Gong1996, 1298), Supreme Court Decision 98Du9301 delivered on July 4, 200 (Gong2009, 1840, 1840), Supreme Court Decision 2002Du1799 delivered on October 25, 202 (Gong1979, 209, 209Du17950 delivered on March 28, 2003)

Seoul High Court Decision 200Na1448 delivered on May 1, 2000, which held that the court below erred by misapprehending the legal principles on the permission of the court below.

Head of Three Tax Office

Seoul High Court Decision 2000Nu16144 delivered on April 11, 2002

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

We examine the grounds of appeal.

1. As to the grounds of appeal Nos. 1 and 2

According to the reasoning of the judgment below, the court below acknowledged that the reclamation work of this case was jointly executed by three companies, such as Hando Energy Co., Ltd. (hereinafter referred to as " Hando Energy"), Hando Steel Co., Ltd. (hereinafter referred to as " Hando Steel Co., Ltd.") and Hando Steel Co., Ltd. (hereinafter referred to as " Hando Steel"), and three companies, such as Hando Energy, etc. after completion of the construction, acquired the ownership of part of the reclaimed land of this case in proportion to the ratio of the construction cost which they shared. After completion of the construction, Hando Energy merely did not constitute a title truster or Hando Steel Co., Ltd. who lent the reclamation business license of this case to Hando Steel Co., Ltd., but was entrusted with the ownership of the land of this case. Thus, the disposition imposing the value-added tax on the plaintiff cannot be deemed to violate the principle of substantial taxation or the principle of basis taxation.

Examining the relevant evidence in light of relevant Acts and subordinate statutes and the records, we affirm the fact-finding and judgment of the court below as just, and there is no error in the misapprehension of facts against the rules of evidence or in the misapprehension of legal principles as to the principle of substantial taxation or the principle of basis taxation, as otherwise alleged in the ground of appeal.

2. As to the third ground for appeal

If an entrepreneur, who obtained a license from the State under the Public Waters Reclamation Act with another entrepreneur, acquired the ownership of part of the land created by the reclamation in accordance with the relevant statutes and the agreement between the parties after obtaining authorization on the completion of the reclamation work, it is reasonable to deem that the entrepreneur provided the State with the above land reclamation service and acquired the ownership of part of the reclaimed land in return for the provision of the service and the acquisition of ownership of part of the reclaimed land, and that there is an economic and substantial price relationship between the entrepreneur’s provision of the service and the acquisition of ownership of part of the reclaimed land, which is subject to value-added tax (see Supreme Court Decisions 2002Du172, Oct. 25, 2002; 95Nu15308, Mar. 12, 196, etc.

In the same purport, the judgment of the court below is justified in light of the above legal principles, and it is not erroneous in the misapprehension of legal principles as to supply of services under the Value-Added Tax Act with respect to the reclamation of public waters as otherwise alleged in the ground of appeal.

3. As to the grounds of appeal Nos. 4 and 5

The principle of good faith or the principle of retroactive taxation prohibition stipulated in Article 18(3) of the Framework Act on National Taxes shall apply only to cases where there are special circumstances that, even if the principle of legality is sacrificeed, the protection of taxpayer's trust is deemed to conform to the justice. The interpretation of the tax-related Act or the practice of national tax administration generally accepted by taxpayers pursuant to that provision refers to a case of erroneous interpretation or practice, which is accepted by a general taxpayer who is not a specific taxpayer, without objection, to the extent that it is not unreasonable for a taxpayer to trust such interpretation or practice. It cannot be deemed that there was a public opinion on the standard of interpretation of the tax-related Act. The burden of proving such interpretation or practice lies in the taxpayer (see, e.g., Supreme Court Decisions 91Nu13670, Sept. 8, 1992; 2002Du1725, Oct. 25, 2002).

According to the reasoning of the judgment below, the court below determined that the disposition of the value-added tax in this case does not violate the principle of good faith and the prohibition of retroactive taxation, on the ground that the Plaintiff’s view, etc. presented by the Commissioner of the National Tax Service on the grounds that the practice of non-taxation was constituted, cannot be seen as being generally accepted by the taxpayer.

In light of the above legal principles and records, the above judgment of the court below is just, and there is no error in the misapprehension of legal principles as to the principle of good faith or the principle of non-taxation or the principle of prohibition of retroactive taxation, as otherwise alleged in the ground of appeal.

4. As to the grounds of appeal Nos. 6 and 7

If a business operator provides services to reclaim public waters and acquires the ownership of a part of reclaimed land as a price for such services, the tax base shall be the total construction cost, and the value-added tax included in the total construction cost shall be included in the market price of the services provided to the State (see Supreme Court Decisions 90Nu6972 delivered on March 12, 191; 90Nu7272 delivered on April 26, 1991, etc.).

In the same purport, the lower court determined that it was justifiable for the lower court to have determined that the amount calculated based on the total construction cost required for the instant reclamation work rather than the value of reclaimed land acquired after the completion of reclamation work.

Examining the evidence in light of the above legal principles and the records, the above judgment of the court below is just and it is hard to conclude that the construction cost is excessive since it is merely a compromise between the Han Steel and the Republic of Korea that the plaintiff can not be said to have an effect on the plaintiff, even though Han Steel and the Han Steel have a judicial compromise that acknowledges that there was a reorganization claim equivalent to the total amount of the construction cost in this case's lawsuit for confirmation of reorganization claim filed by the Republic of Korea, and that Han Steel has an excessive amount of the total amount of the construction cost in this case's construction cost. Further, in this case, the court below did not err in the misapprehension of legal principles as to the total amount of the construction cost in calculating the total amount of the construction cost in this case's construction cost in accordance with Article 14 (1) of the former Public Waters Reclamation Act (amended by Act No. 5337 of Apr. 10, 1997) and there is no change in the area of reclaimed land acquired in spite of the above reconciliation between the Republic of Korea and the Han Steel Steel.

5. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Shin Shin-chul (Presiding Justice)