Cho High Court Decision 2010Du3937 (Law No. 111.05)

In the light of the book value, the standard market value, and the amount of appraisal, where the classification of the value is unclear because the value of the building is too low.

In light of the book value, standard market price at the time, and appraised value of land and factory buildings, even if the total purchase price stated in the sales contract is reasonable, the corresponding portion of the factory building is excessively low, and thus, the distinction between the value of land and the value of the building is unclear among the actual transaction price, and thus, the calculation method based on

Article 13 (Tax Base of Value-Added Tax Act)

2011Revocation of revocation of the imposition of value-added tax

SUG Co., Ltd.

Head of Donggsan Tax Office

October 5, 2011

November 2, 2011

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of KRW 32,939,50 on June 1, 2010 against the Plaintiff was revoked.

1. Details of the disposition;

A. The Plaintiff was established around November 12, 1997 and operated the manufacturing business of automobile parts in two factories (one story 1,018.10 square meters, two stories 478,10 square meters, two stories 47.10 square meters, and 200,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,00,00,00.

B. On May 1, 2010, the Defendant: (a) conducted on-site verification surveys with respect to the Plaintiff; and (b) deemed that the price of the instant machinery was included in the sales price; and (c) accordingly, calculated based on each appraisal price of the instant factory site and factory building and the instant machinery pursuant to the proviso to Article 48-2(4) of the Enforcement Decree of the Value-Added Tax Act, the Defendant re-calculated the supply price of the instant factory building and machinery to KRW 434,671,403; and (d) on June 1, 2010, the Plaintiff issued a revised notice of KRW 91,04,430 on September 14, 2010, after deducting the Plaintiff’s KRW 52,309,09,091 related to the construction cost of the instant factory building from the Busan Regional Tax Office’s determination on September 14, 2010; and (b) subsequently, issued a revised notice of reduction of the said value-added tax to KRW 32,5393,500.

C. On November 25, 2010, the Plaintiff dissatisfied with the instant disposition, filed an appeal with the Tax Tribunal, and the Tax Tribunal dismissed the Plaintiff’s appeal on April 5, 2011.

[Ground of recognition] A without dispute, Gap evidence Nos. 1 through 3, Eul evidence No. 1 (including additional number), the purport of the whole pleadings

2. Whether the disposition of this case is unlawful

A. Summary of the plaintiff's assertion

In full view of the fact that the sales price of the instant factory building was set at KRW 180,00,000 upon the request of the non-party company that is the transferee at the time of the instant sale, the tax base of property tax on the instant factory building at the time of the instant sale is 237,700,000, and the value of the instant factory building is high from the standpoint of the non-party company that is the transferee, the value-added tax can be refunded on a short-term basis because the interval between the time of issuance of the tax invoice and the time of report of value-added tax is not long, and the corporate tax burden is reduced due to the increase in depreciation cost limit, and thus, the supply price of the instant factory building reported by the Plaintiff is appropriate as the

In addition, the instant machinery and apparatus did not include the price in the sales price in consideration of the cost of dismantling, transportation, re-installation costs, etc.

Nevertheless, it is unclear that the Defendant made the instant disposition on the premise that the price of the instant machinery and equipment was included in the sales price, and that the instant disposition was unlawful.

(b) Related statutes;

The entries in the attached Table-related statutes are as follows.

(c) Fact of recognition;

1) Details of the instant trade, etc.

A) The sales contract (hereinafter “the sales contract of this case”) prepared by the Plaintiff and the Nonparty Company as of November 24, 2009 with respect to the sale of this case is written in KRW 1,110,000 (not including any separate indication as to value-added tax) and the following special terms and conditions (which are corrected and supplemented later) are written in the sales contract of this case.

- The container boxes and containers at the entrance of a factory shall be transferred by the Plaintiff.

- Other facilities (such as rooftops, containers, cranes, and exhausters) shall be in the present state and shall be transferred to the non-party company.

- Value of the factory building of this case: 180,000,000 won

- The value of the factory site of this case: 930,000,000 won

B) On January 29, 2010, the Plaintiff completed the registration of ownership transfer on the instant factory site and factory building on the non-party company’s future. Then, the non-party company established a collateral security on the same day with respect to the instant factory site and factory building as the maximum debt amount of KRW 1,080,000,000, the debtor company, the non-party company, and the Han-mortgage Korea Exchange Bank (SB). The non-party company, along with the instant factory site and factory building, has operated the automobile parts manufacturing business, as it is with the Plaintiff, when it was transferred with the instant machinery and equipment, etc.

C) On January 29, 2010, the Plaintiff issued a tax invoice with the supply value of the instant factory building at KRW 538,017,00 in consideration of the market price, etc. of the instant factory site and the factory building, but thereafter, issued a tax invoice with the supply value of the instant factory building at KRW 180,000,000 after entering the special terms and conditions of the initial sales contract as seen earlier, by revising and amending the special terms and conditions of the sales contract.

D) The approval certificate (Evidence No. 5) on the instant sale submitted by the Nonparty Company to Kimhae-si is written that the sales price is KRW 1,110,000,000 in a lump sum without distinguishing the instant land for factory and factory buildings.

2) The value of the instant factory site and factory buildings

A) Under the Income Tax Act, the standard market price under the Income Tax Act on the instant factory site applied around January 29, 2010 is 51,005,000 won (i.e., standard market price of 209,000 square meters x 2,445 square meters), and the standard market price under the Income Tax Act on the instant factory building is 418,650,800 won.

B) The appraised value of the △△ Evaluation Corporation

- In the case of △△ Bank’s principal

- Purpose of assessment: Security

- Price point on December 3, 2009

- The appraised value of the factory building of this case: 398,562,000 won

- The appraised value of the factory site of this case: 609,290,000 won

- The appraised value of the mechanical devices of this case 20,582,000 won

C) The Plaintiff’s price of the instant factory site and factory building in the balance sheet as of December 3, 2009, the appraisal price of the instant factory site, factory building and machinery based on December 3, 2009, the standard market price of the instant factory site and factory building around January 29, 2010, and the sale price of the instant factory site and factory building under the instant sales contract, compared thereto, are as follows.

- Book value: 590 million won for factory, 69,4260,000 won for factory buildings

- Standard market price: 510,000 won for factory, 41,8650,000 won for factory buildings

-Appraisal value: 69290,000 won for factory, 398560,000 won for factory buildings, 20580,050 won for machinery and equipment

- Sales amount: 930 million won for factory and 180 million won for factory buildings

[Ground of recognition] Facts without dispute, Gap evidence 3 to 6, Eul evidence 2 to 6 (including additional numbers), the purport of the whole pleadings

D. Determination

1) The main sentence of Article 48-2(4) of the Enforcement Decree of the Value-Added Tax Act provides that where an entrepreneur supplies land and a building built on such land together, the value of the relevant building, etc. shall be calculated based on the actual transaction value, and the proviso provides that where there is a value appraised by an appraisal corporation under the Act on the Public Notice of Values and Appraisal of Real Estate, etc. from the date of commencing the immediately preceding taxable period to the end of the taxable period to which the time of supply belongs where the distinction between the value of the land and the value of the building, etc. is unclear, the method of calculating the value of the building subject to value-added tax shall be calculated in proportion to its value, or a method of calculating the value of the building subject to value-added tax according to the standard market price (proviso 1). The foregoing proviso is a special provision for calculating the value of the building subject to value-added tax in cases where both is unclear because the value of the building subject to value-added tax and the value of the land subject to non-taxation is different from the value of the land, the building

2) 이 사안의 경우, 다음과 같은 사정을 종합하면, 이 사건 매매계약서에 기재된 매매목적물 및 가액은 원고와 소외 회사가 실제 거래가격과는 다르게 임의로 기재한 것이라고 보기에 충분하다. 오히려 이 사건 매매대금 중 이 사건 공장용지 및 공장건물의 각 해당분이 불분명한데다 그 매매대금에는 이 사건 기계장치의 대가가 포함되어 있다고 볼 것이고, 더 나아가 부가가치세법 시행령 제48조의2 제4항 제1호에서 정한 감정평가가액에 해당하는 위 (주)△△평가법인의 감정평가액에 따라 그 가액에 비례하여 안분계산하면 이 사건 공장건물 및 기계장치의 공급가액은 합계 434,671,403원{≒ 1,110,000,000 x 419,144,000÷(419,144,000 x 1.1 + 609,290,000)}으로 볼 것이다.

① In light of the book value of the factory site and factory building as seen earlier, the standard market price at the time, and the appraised amount, even if the total sales amount stated in the sales contract of this case is reasonable, the corresponding portion of the factory building of this case is excessively low.

② As acknowledged by the Plaintiff himself, the Plaintiff issued a tax invoice for the instant factory building to the Nonparty Company, indicating the supply value of the instant factory building at KRW 538,017,00 in accordance with its market price, and then re-issued the instant factory building by stating the supply value at KRW 180,000,000 thereafter.

③ The Nonparty Company, along with the land for factory and factory building of this case, has been using the machinery and apparatus of this case transferred from the Plaintiff as it is, and has operated the automobile parts manufacturing business like the Plaintiff.

3) Therefore, the instant disposition based on the same premise is lawful.

3. Conclusion

Thus, the plaintiff's claim of this case is dismissed as it is without merit.