Suwon District Court 2007Guhap1508 ( November 28, 2007)

National High Court Decision 2007J0579 (No. 28, 2007)

Method of processing the value of supply following the cancellation of sales contract.

Since the validity of a sales contract is retroactively lost due to the retroactive effect of cancellation when a sales contract for a building is terminated, the supply of a building subject to value-added tax shall be deemed not to have existed from the beginning.

The contents of the decision shall be the same as attached.

Article 48-2 (Method of Calculating Tax Base under the former Enforcement Decree of the Value-Added Tax Act)

Article 3-4 (Types of Buildings by Use)

1. Of the judgment of the court of first instance, the part concerning the imposition of two years in 2002 and one year in 2003 shall be modified as follows:

A. The Defendant’s imposition of value-added tax of KRW 306,031,530 on December 12, 2005 against the Plaintiff in excess of KRW 306,031,530 on the same day and the imposition of value-added tax of KRW 313,894,470 on the same day shall be revoked.

B. The plaintiff's remaining claims are dismissed.

3. Of the litigation costs, 40% is borne by the Plaintiff, and the remainder is borne by the Defendant, respectively.

1. Purport of claim

Each disposition of the Defendant imposed value-added tax of 458,330,640 won on the Plaintiff for the second period of 2002 on December 12, 2005 and value-added tax of 313,894,470 won for the first period of 2003 on the Plaintiff, and each disposition of 109,465,420 won for the first period of 2005 on January 9, 2007 (if the Defendant appears to be a clerical error in the amount of 74,081,610 won for the second period of 2002 (752,148,820 won) shall be revoked.

2. Purport of appeal

The part of the judgment of the court of first instance against the plaintiff falling under one of the following cancellation orders shall be revoked. Each disposition taken by the defendant against the plaintiff on December 12, 2005 by KRW 430,95,351, value-added tax for the second term of 2002 against the plaintiff, and value-added tax for the first term of 294,634,404 for the first term of 203 shall be revoked.

1. Scope of judgment of party members;

On December 12, 2005, the Plaintiff filed the instant lawsuit seeking revocation of the imposition of value-added tax on the two-years of 2002 and one-years of 2003 as well as the part of the imposition of value-added tax on January 9, 2007. The court of first instance partly accepted the Plaintiff’s claim on the imposition of value-added tax on the two-years of 2002 and one-years of 2003. The Plaintiff’s claim on the imposition of value-added tax on the first year of 2005 was entirely dismissed. However, the Plaintiff filed an appeal only against the Plaintiff on the imposition of value-added tax on the two-years of 202 and one-years of 203 among the judgment of the first instance court. As such, the scope of adjudication on the party member’s claim is limited to this part.

2. Details of the disposition;

A. The plaintiff (the plaintiff corporation prior to the change on December 26, 2003) sold "○○ City 153 ○○○dong 153, Sungnam-si" (the title prior to the change of trade name: the title prior to the change of trade name; hereinafter the same shall apply) from October 2002, and filed a value-added tax return on the part of the building (the land is subject to value-added tax exemption) by dividing the sale price into the part of the land and the part of the building (the land is subject to value-added tax exemption). The sales contract was cancelled on December 6, 2004 due to the unpaid balance, etc. of the purchaser, and the value-added tax return was filed by subtracting the sale price from the tax base for the period of 2005 1,000,000 won after deducting the sale price from the return of the sale price due to the cancellation of the contract, while the remainder of the sale price per 200,000 won after deducting the sale price from the profit amount (the penalty).

B. The Defendant deemed that the distinction between the value of the land and the value of the building in the sale price of the instant commercial building is unclear. On the other hand, on December 12, 2005, the said amount of KRW 2 billion should be reverted to the year 2005, and on December 12, 2005, value-added tax was KRW 458,330,340 for the second term of 202, and KRW 313,894,470 for the first term of 203, and KRW 402,710 for the second term of 203, and KRW 90,650 for the first term of 204, and KRW 392,707,50 for the second term of 204, KRW 298,352,520 for the first term of 205, KRW 207, KRW 207, KRW 2008 for the second term of 2007, 2007.

C. On November 16, 2006, the National Tax Tribunal rendered an erroneous determination of the standard market price by applying the usage index 1.1, which falls under officetels or the financial business establishment, to the Plaintiff’s defect in a national tax appeal, and the date of cancellation of the sales contract as to the part of the commercial building of this case as of December 6, 2004.

(3) If the sales contract is cancelled, the supply of goods shall not have existed from the beginning, and even if the corresponding value-added tax should be reduced, such measures have not been taken.

(b) Related statutes;

Article 48-2 (Method of Calculating Tax Base under the former Enforcement Decree of the Value-Added Tax Act)

Article 3-4 (Types of Buildings by Use)

C. Determination

(1) Whether the value of the land and the partition of the building are unclear

(A) Facts of recognition

Gap evidence Nos. 3, 4, and 5-1, 2, 6, 2, 5-2, 5-2, 5-2, 5-2, 5-1, 5-2, 9-1 through 19, 11-2, 12-1, 12-6, and 12-1 through 6 can be acknowledged as follows in light of the whole purport of the pleadings.

1) 원고가 세무조사시 제출한 이사건 상가 102, 103, 110, 201, 205, 207, 208, 209, 210, 302, 309, 311, 312, 302, 403, 404, 612호에 관한 각 공급계약서(을 제9호증의 1, 2, 5 내지 19) 에는 수기로 토지대금과 건물대금이 구분 기재되어 있으나, 그 부분에 원고 대표이사의 인장만 날인되어 있고, 매수인의 인장은 날인되어 있지 아니하며, 110, 309호에 관한 각 공급계약서(을 제9호증의 5, 13)의 경우, 수기부분에 날인된 원고 대표이사의 인장과 말미의 매도인란에 날인된 원고 대표이사의 인장이 상이하다 (전자는 ★ 표시, 후자는 ♦ 표시), 또한 원고가 함께 제출한 이 사건 상가 105호에 관한 공급계약서(을 제9호증의 3)에는 토지대금과 건물대금이 구분 인쇄되어 있으나, 위 계약서에 작성일이 2003.3.17.로 기재되어 있음에도, 계약금 및 1, 2차 중도금의 각 납부일은 그보다 이른 날, 즉 계약금은 계약시 1차 중도금은 2002.12.15. 2차 중도금은 2003.3.15.로 기재되어 있다. 한편, 이 사건 상가 102, 103, 302, 309, 311, 312호의 각 매수인 등이 원고를 상대로 수원지방법원 2006가합8095호 계약금반환청구소송을 제기하면서 제출한 위 각 호실에 관한 각 공급계약서(을 제12호증의 1 내지 6)에는 토지대금과 건물대금이 구분 기재되어 있지 않고, 원고가 세무조사시 제출한 이 사건 상가 108호에 관한 공급계약서(을 제9호증의 4)에도 토지대금과건물대금이 구분기재되어 있지 않다.

2) Although the Plaintiff’s trade name was changed from “○○ City Construction” to “○○ City Construction” on December 26, 2003, the Plaintiff’s total invoice for each source of sale (Evidence A 3-1, 2, 2002) submitted by the first instance court and from January 1, 2002 to December 31, 2002, the Plaintiff’s trade name was changed to 30.3 billion won from January 1, 2003 to March 31, 203 (Evidence A 5-1, 203-1, 200.3 billion won from February 27, 2002 to December 31, 201, respectively, and the amount of sales recorded on the aggregate of the sales prices by each source of sale from February 1, 2002 to February 31, 201 to 30.3 billion won from each of the above contract deposit was entered.

3) The advertisement for sale in lots (No. 6) submitted by the Plaintiff at the trial is written on the daily trading price of the commercial building in this case as KRW 12 million for the first floor, KRW 4.1 million for the second floor, KRW 3.5 million for the third floor, KRW 4.1 million for the fourth floor, and KRW 4.1 million for the fourth floor. Among them, the sale price of the building is written on the upper floor level 2 million for the first floor, but it is written on the (main) construction, the trade name of the Plaintiff was changed, and on the ○○land Construction, the name of the commercial building in this case was changed.

4) From the value of the instant commercial building, the ratio of the building covering up to the value of the said commercial building is ① 16.66% of the first floor, ② 2 and 4-8% of the second floor, and 57.14% of the third floor, based on the acquisition value of land and the estimated construction cost, ② 64.4% of the base construction cost, based on the initial contract cost, and 71.7% of the increased construction cost, based on the standard market price in 2002, and ③ 69.74% of the base market price in 2002, based on the standard market price in 2002, based on the standard market price in 65.97%, and 53.73% of the base market price in 204.

(B) Determination

As above, there is no reason to view the value of a building, which is classified into the documents submitted by the Plaintiff as being written only after the sale in order to file a value-added tax return, and considering the ratio of the value of the building in the value of the commercial building in this case, the Plaintiff’s assertion that the ratio of the value reported by the Plaintiff is considerably lower than the ratio based on the land acquisition price and expected construction cost, or the standard market price, and that the Plaintiff did not specifically explain the difference between the value of the land and the value of the building for any reason. In light of the above, the distinction between the value of the building in the actual transaction value of the commercial building in this case and the value of the building is reasonable by the method of calculating the value of the building in proportion to the value based on the

(2) Whether the application of the usage index is lawful

In full view of the purport of the entire pleadings in the statement Nos. 3-2, 3, and 4, in calculating the standard market price of a building, the use index 1.1 shall apply to officetelss or financial businesses among business facilities and other offices, respectively. However, in calculating the standard market price of the building of this case, the defendant can find the fact that the use index 1.1 is applied to the calculation of the standard market price of the building of this case.

However, according to Article 3-4 of the former Enforcement Decree of the Building Act (amended by Presidential Decree No. 18951 of Jul. 18, 2005), and Article 3-4 [Separate 1] Item 10 (b) of the former Enforcement Decree of the Building Act), an officetel means a building which can carry on business and residence, and is publicly announced by the Minister of Construction and Transportation. There is no evidence that the structure of the commercial building of this case is allowed to carry on business and residence together. There is no evidence that the commercial building of this case constitutes a financial business establishment. Thus, in calculating the standard market price of the commercial building of this case, the use index

(3) Whether the disposition of termination of contract is legitimate

The defendant decided to refund the value-added tax of the same period, which was sold in two or one year of 2002 and 2003 due to the buyer's default on obligations, which was reduced from the value-added tax base for the two years of 2004 by deducting the value of supply of some heading rooms of which the sales contract was cancelled on December 6, 2004 due to buyer's default.

However, if a sales contract on a building is terminated, the validity of the sales contract becomes retroactively null and void due to the retroactive effect of cancellation, so the supply of a building subject to value-added tax shall be deemed not to have existed from the beginning. Accordingly, the imposition of value-added tax is not possible (see, e.g., Supreme Court Decisions 96Nu13841, Mar. 10, 1998; 2001Du5989, Sept. 27, 2002). As above, if part of the commercial building of this case was sold in lots at two or one year in 202 or 203 due to the buyer's default, and the sales contract was cancelled on or before December 6, 2004, the termination of the contract shall not be deducted from the supply price at the base of value-added tax at two or more years in 2002 and 203 from the beginning. Thus, the plaintiff's assertion that this is without merit.

(4) Justifiable tax amount

When applying the usage index 1, the ratio of proportional distribution of the value of the building is calculated [if the standard market value of the building of this case is calculated by applying the usage index 1, and the standard market value of the building so calculated is calculated in comparison with the standard market value of the land and the building in the aggregate supply value of the land and the building, it shall be 69.74% in the case of the contract of 2002 year, 65.97% in the case of the contract of 2003 year, such as the statement in the calculation of proportional distribution ratio in attached Table 1]. If the amount of tax calculated by subtracting the value of the contract termination from the tax base of February 2, 2002 and January 2003, it shall be 306,031,538 won in the case of the value-added tax for the second period of February 2, 2003, the value-added tax amount for the first period of January 2003 shall be 67,137,941 won.

4. Conclusion

Then, separate provisions that increase or decrease of value-added tax for the second period of February 2004 should be set aside, and the part that exceeds 306,031,530 won of the imposition disposition of value-added tax for the second period of February 2002 (hereinafter “30 won”) and the whole part of the imposition disposition of value-added tax for the first period of January 2003 should be revoked as unlawful. Thus, the plaintiff’s claim of this case is justified within the scope of the above recognition, and the remainder of the claim shall be dismissed as it is without merit. Since the part on the imposition disposition of value-added tax for the second period of February 2002 and the first period of January 2003 among the judgment of the court of first instance concerning the imposition disposition of value-added tax for the second period of February 200 and the above part