In the case of changing neighborhood living facilities into studio, it is deemed to be leased.

Unlike the permission for the construction of neighborhood living facilities, if a residential building in the studio-type is constructed and leased to enable independent residential life, it shall be deemed as a lease of a house exempt from value-added tax

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

1. The plaintiff's claim is dismissed.

2. The plaintiff shall bear the litigation costs.

The Defendant’s disposition of imposition of value-added tax for the second period of 208 against the Plaintiff on April 13, 2009 (including additional tax) shall be revoked.

1. Circumstances of dispositions;

A. On October 16, 2007, 2007, 00 ○○○-dong 302-19 on the ground, the Plaintiff newly constructed ○○○○-dong 302-19, registered the business to engage in the leasing business of the building to be newly built jointly with KimA, the Plaintiff’s wife, and started the construction of the building on October 18, 2007.

B. On December 19, 2007, the Plaintiff leased all of the instant building that was newly constructed to SongB and thisCC, and SongB and thisCC, after obtaining approval for the use of the instant building on September 19, 2008, remodeled the inside of the said building into a studio for residential purposes with the Plaintiff’s permission.

B. The Plaintiff filed an application for refund of value-added tax amounting to 21,872,728 won, which is the input tax amount of value-added tax on goods or services supplied for the construction of the said building upon filing a value-added tax return between February 2, 2007 and February 2008 with the Defendant, and filed an application for refund of 33,581,81818 won, and 28,984,682 won, which is the input tax amount of value-added tax on goods or services supplied for the construction of the said building, for the first term in 2008.

C. From February 2007 to February 2008, the part on application for refund was refunded as declared by the Defendant. As a result of an on-site investigation into the Plaintiff’s place of business regarding the fixed amount of value-added tax for the second period of February 2008, the instant building was converted into a permanent residential building after the approval for use was granted. Accordingly, the Plaintiff’s instant building leasing business was converted from value-added tax exemption business under Article 12(1)12 of the Value-Added Tax Act and Article 34(1) of the Enforcement Decree of the said Act.

D. Accordingly, the Defendant deemed the acquisition value corresponding to the above input tax amount as of February 2, 2008 when the instant building was converted into a tax-free business pursuant to Article 49(2)1 and (3) of the Enforcement Decree of the Value-Added Tax Act and Article 89(1)1 of the Enforcement Decree of the Income Tax Act, as the acquisition value corresponding to the above input tax amount, and deemed as 968,228,090 won. On April 13, 2009, the Defendant adjusted the Plaintiff’s output tax amount to KRW 96,82,809, and notified the Plaintiff of the correction and imposition of KRW 78,157,230 for the said period (hereinafter “instant disposition”).

[Reasons for Recognition] Specifications 2, 3, 4, and 7, and Category B 1, 2, 3, and 6

2. Referral and Determination

A. The plaintiff's assertion

The instant disposition shall be revoked on the grounds that it is unlawful for the following reasons.

(1) The Plaintiff was constructed with the permission of Class 1 and 2 neighborhood living facilities to rent the instant building as well as leased to use the instant building as a residential building in the form of a Gowon which is not a residential building even after the completion of construction. As such, the instant disposition that deemed the instant building as a residential building violates the substance over form principle and the principle of equity.

(2) The Defendant issued the instant disposition on the premise that the Plaintiff’s instant building leasing business is a tax-free business. Although the Plaintiff approved the value-added tax reported and paid from February 2, 2007 to February 2, 2008 on the instant building leasing, deeming the instant building as a residential building and rendering the instant disposition on the premise that the said building leasing business is a tax-free business, it constitutes double taxation for the same goods.

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

(1)The plaintiff designated the first and second floors as Class 1 neighborhood living facilities (retail stores) and 3 through 7 as Class 2 neighborhood living facilities (retail stores, irrigation stores, offices) with respect to the building of this case and obtained the building permit. As seen earlier, the plaintiff completed the building of this case as approved.

(2) On November 11, 2008, the Plaintiff issued a certificate of safety to verify that the entire building of this case was properly equipped with fire extinguishing, evacuation, and warning equipment, etc. as publicly-used establishments, after obtaining approval for the use of the building of this case, the entire building of this case was entirely remodeled into 43 rooms with a size of 15 square meters and installed 43 square meters, and each room was installed with a kitchen and a toilet, a water tank, and a kitchen, etc. to enable independent dwelling.

(3) After remodeling the instant building as above, SongB, etc. leased the entire building from the Plaintiff, each room of the instant building was leased to KRW 1 million, monthly rent, and KRW 300,000. The tenants of the instant building resided in the instant building and moved their resident registration to the instant building.

(4) On December 12, 2008, the head of ○○○○○○○ issued a notice to the Plaintiff by detecting that the entire building was changed without permission from Class 1 and Class 2 neighborhood living facilities to residential facilities without permission.

(5) On December 31, 2009, the Plaintiff obtained permission from the head of ○○○○○○○ on the first floor or fourth floor of the instant building from Class 1 and 2 neighborhood living facilities to Class 2 neighborhood living facilities. On the fifth to seventh floor of the instant building, the Plaintiff remains in a state where the use of the instant building was altered without permission without permission.

(6) On March 2, 2009, the Plaintiff registered the change of the type of business in its business as operating the lodging business in the instant building. Accordingly, the Plaintiff reported and paid the value-added tax for the first and second years in 2009 to the Defendant.

[Reasons for Recognition] The Evidence Nos. 1, 5, 7 and No. 4, 5, 7

D. Determination

(1) Determination as to the Plaintiff’s assertion as described in paragraph (1)

According to Article 12(1)12 and Article 17(2)6 of the Value-Added Tax Act, and Article 34(1) of the Enforcement Decree of the same Act, the lease of a building used as a house or a regular residence is exempted from value-added tax, and accordingly, the input tax amount related to the building does not be deducted from the output tax amount related to the lease of the building. Whether it constitutes a lease of a building used as a house or a regular residence subject to an exemption from value-added tax shall be determined depending on whether a lessee actually uses the building as a permanent residence based on the objective usage in which the lessee actually uses the building. Whether it falls under the lease of a building used as a house or a regular residence shall be determined based on the latter (see Supreme Court Decision 91Nu12707 delivered on July 24, 192).

According to the above facts, the plaintiff constructed and leased a studio-type residential building so that it can be independent residential life, unlike the building permit of this case, and since tenants actually used it for residential purpose, the plaintiff's lease business of this case constitutes a lease business of a house exempt from value-added tax or a building for regular residential purpose. Therefore, the plaintiff's assertion on this part is without merit.

(2) Determination as to the Plaintiff’s assertion as described in paragraph (1)(2)

(a)According to the facts of the above recognition, it is evident that the value-added tax paid by the Plaintiff after filing a declaration from February 2, 2007 to January 2008 cannot be deemed double taxation on the grounds that the disposition in this case and the taxable year are different.

(b)In addition, value-added tax may be determined or corrected after investigating the tax base of value-added tax for the taxable period and the amount of tax payable or the amount of tax payable for the pertinent taxable period if there is any error or omission in the details of the final return by the taxpayer's return (Article 21, Paragraph 1, Item 2 of the Value-Added Tax Act). Since the Plaintiff was exempted from value-added tax for the purpose of residence from February 2, 2008, which was used exclusively for the purpose of residence of the instant building, and thus unjustly declared value-added tax for the second period of February 2008, because the Plaintiff was not entitled to receive the refund, it is clear that the Defendant cannot be subject to double taxation, including the value-added tax for the second period of 208, additional tax for return return, and additional

(c)Therefore, the plaintiff's assertion of this part is without merit.

3.In conclusion

Thus, the plaintiff's claim of this case seeking revocation on the ground of illegality of the disposition of this case is dismissed as it is without merit.