Cho Jae-chul2010 Before 334 (Law No. 1068, 2011)

Where any additional construction works are made by a change in the contract (design), the time of supply for the primary construction works shall be the time when the provision of the primary construction services is completed.

On October 17, 2010, the Plaintiff (the contractor) and the owner of the instant construction project confirmed the completion of the instant primary construction project, and agreed separately on the claim and payment date for the unpaid construction cost, while settling the accounts for the unpaid construction cost. It is reasonable to view that the time of supply for the instant primary construction project is October 17, 2010 when the provision of the service was completed.

Article 9 of the Value-Added Tax Act and Article 22 of the Value-Added Tax Act

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

XX Stock Company

Head of Chungcheong Tax Office

July 12, 2012

September 20, 2012

1. The Defendant’s disposition of imposing value-added tax of KRW 000 on the Plaintiff on June 21, 2010 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On June 7, 2008, the Plaintiff entered into a contract for civil works and construction works for constructing seven units of factory buildings (hereinafter referred to as “the primary construction works in this case”) with KimA, who operates an individual enterprise under the trade name of the XX industry, in written form, at the time of permanent stay, on 516-1 and 3 parcels (hereinafter referred to as “the primary construction works in this case”). The construction contract amount was KRW 000 (including value-added tax), the commencement date on June 7, 2008, and the completion date on October 31, 2008, the completion date on October 31, 2008, and the completion date on October 31, 2008, and completed the 7 construction works of the factory construction in the middle of October 208.

B. However, on January 5, 2009, KimA changed the design to construct three additional factory buildings other than 7 factories that completed the construction as above, and accordingly, on January 20, 2009, entered into an agreement with the Plaintiff on January 20, 2009, on March 19, 2009; and on March 19, 2009; and on March 00, the completion date of the construction project, the additional construction contract amount of KRW 00 (hereinafter “instant additional construction”).

C. From July 31, 2008 to October 31, 2008, the Plaintiff issued three copies of the sales tax invoice of KRW 000 (hereinafter “instant tax invoice”) to KimA in relation to the instant primary construction project, and paid the value-added tax for the second period of 2008 including the sales amount generated during the second taxable period of 2008.

D. Upon completion of the instant primary project and the instant additional project on February 2, 2009, KimA obtained approval for the use of the entire factory (three buildings and seven attached buildings) newly built on March 3, 2009, and filed an application for the refund of value-added tax with the head of a tax office having jurisdiction over the preliminary return of value-added tax for the first period of March 2009.

E. From May 15, 2009 to May 20, 2009, the head of the resident tax office conducted on-site verification according to the application for the refund of value-added tax under KimA ( XX industry). Under the premise that the supply timing of the instant construction service is March 3, 2009, the approval date for use of the factory building, the head of the resident tax office notified the Defendant of the said taxation data on the following grounds: (a) the supply price of the instant tax invoice is KRW 00 (00 won as of July 31, 2008, the supply price of KRW 000 as of August 31, 2008, and KRW 000 as of October 31, 2008, the supply price of KRW 000 as of October 31, 2008, which was not paid the price and was issued prior to the supply time.

F. Accordingly, on June 16, 2010, the Defendant: (a) notified the Plaintiff on June 21, 2010 that the value-added tax for the second term portion of the tax invoice of this case was 000 won (including additional tax 000 won) for the first term portion of the value-added tax in 2009; (b) applied Article 47-4(6) of the Framework Act on National Taxes on May 18, 2012, the Defendant revoked ex officio KRW 000 out of the value-added tax for the first term portion of the value-added tax for the year of 2009 (hereinafter “the disposition of imposition of value-added tax and additional tax for the amount of KRW 000 for the second term portion of the tax invoice of this case remaining after cancellation”) and revoked ex officio the disposition of imposing value-added tax and additional tax for the amount of KRW 000 for the second term portion of the tax invoice of this case.

[Ground of recognition] Facts without dispute, Gap evidence 1, Gap evidence 3 through Gap evidence 6, Gap evidence 12, Gap evidence 16, Eul evidence 21, Eul evidence 1 through Eul evidence 4, Eul evidence 7, Eul evidence 8 (including the number of each point; hereinafter the same shall apply), witness KimA and KimB's testimony, the whole purport of each of the arguments, the whole purport of each of Gap evidence 1, Eul evidence 16, Eul evidence 21, Eul evidence 7, Eul evidence 8

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Defendant rendered the instant disposition on March 3, 2009 on the ground that the time of supply for the instant primary construction service was deemed to have been March 3, 2009, which was the date of approval for the use of the factory building, on which the Plaintiff reported KRW 000,000 for the first term sale in 2009 to the second term sale in 2008, and omitted the first term sale in 2009. However, since the instant primary construction service was completed on October 2008, it was justifiable that the Plaintiff reported KRW 00 in the instant tax invoice as the second term sale in 2008.

Even if the time the provision of the instant primary construction-related service is completed, even if the date of approval for the use of the factory building, the portion of the payment made in 2008 constitutes the time of supply for each service, subject to Article 9(3) of the Value-Added Tax Act, and the issue date of each tax invoice falls under the time of supply for the service. Thus, the said KRW 00 constitutes the second sale in 2008.

Therefore, the instant disposition is unlawful on a different premise.

B. Relevant statutes

It is as shown in the attached Form.

C. Facts of recognition

1) The details of the tax invoice and payment issued and issued by the Plaintiff regarding the instant primary construction and the instant additional construction are as follows.

(2) The following details are omitted:

2) According to the general terms and conditions of the standard contract for private construction works (Notice No. 2004-170 of the Ministry of Construction and Transportation) which are part of the contract for each of the instant construction works, when the Plaintiff completed the construction works, he/she shall notify the KimA of the completion inspection and undergo a completion inspection again by repair or alteration without delay if the Plaintiff failed to pass the inspection (Article 24). The Plaintiff may immediately remove surplus waste materials, waste, temporary materials, etc. after passing the completion inspection and demand the payment of the construction cost. The KimA shall, unless otherwise stipulated, pay the Plaintiff the construction cost (Article 25).

3) The Plaintiff received 000 won in total from KimA for five times as seen in the foregoing Table, depending on the progress of the construction until October 10, 2008, which was around the completion of the instant primary construction, as seen in the foregoing Table.

4) On October 17, 2008, the Plaintiff and KimA confirmed that the Plaintiff actually completed the instant primary construction, and they reserved a claim and payment of KRW 000 out of the construction contract amount of KRW 000 (including value-added tax) until the time of a contract for additional construction in accordance with a design modification, the Plaintiff claims for the remainder of KRW 000 (including value-added tax) on October 31, 2008, and the Defendant agreed to pay the remainder of the construction contract amount in cash until December 31, 2008, and resume the additional construction by determining the additional construction amount on or around January 31, 2009. Accordingly, the Plaintiff issued to KimA a tax invoice of KRW 00 (value-added KRW 00,000,000,000,000) on October 31, 2008, and KimA paid KRW 600 through October 208, 2008 to the Plaintiff, as seen in the said Schedule.

5) In the course of the on-site investigation of the refund of value-added tax in the resident tax book, KimA denied the input tax amount on the remaining KRW 000,000 (excluding KRW 000,000 paid on October 20, 2008, which was delivered by the Plaintiff before October 31, 2008, out of the tax invoice of KRW 000, which was delivered by the Plaintiff prior to the completion date of the instant building, with the actual tax invoice different from the fact, and requested the Plaintiff to re-issuance of the tax invoice that was issued on March 3, 2009, as of the amount denied to the Plaintiff. The Plaintiff accepted it and issued it to KimA on March 3, 2009 (value of KRW 00,000, tax amount of KRW 14).

[Ground of Recognition] A without dispute, Gap evidence 4, Gap evidence 7 through Gap evidence 9, Gap evidence 13, Gap evidence 14, Gap evidence 18, Eul evidence 5, witness KimA's testimony, the purport of the whole pleadings

D. Determination

1) Article 9(2) of the former Value-Added Tax Act (amended by Act No. 11129, Dec. 31, 201; hereinafter referred to as the “Act”) delegates the time when the service is provided to determine necessary matters concerning the time of supply as prescribed by the Presidential Decree under paragraph (4). Accordingly, Article 22 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 22043, Feb. 18, 2010; hereinafter referred to as the “Enforcement Decree of the Act”) provides that in the case of ordinary supply, the time when the provision of service is completed, the payment standard, interim payment, long-term installment or other conditional terms, or the continuous supply of service that makes it impossible to divide the unit of the supply (see subparagraph 2), the time when the provision of service is completed, and the time when the provision of service becomes final and conclusive if the provision of service is not applicable under subparagraphs 1 and 2, the time when the provision of service becomes final and conclusive (see subparagraph 3).

2) According to the scope of provision and the terms and conditions of the instant construction contract, the instant construction project falls under the ordinary supply of services, the supply price of which is fixed at the time of the completion of the service, and the Plaintiff was responsible for obtaining approval for the use of the building newly constructed by the instant construction project under the instant construction contract. Thus, in principle, when the provision of services anticipated under the instant construction contract is completed, it shall be deemed that the use of the building newly constructed by the instant construction project is approved.

However, as seen earlier, the Plaintiff and KimA confirmed the completion of the instant primary construction work as at October 17, 2010, and settled the unpaid construction cost, and separately agreed on the claim for and payment of the unpaid construction cost. This would not be possible due to the additional construction work despite the Plaintiff’s completion of seven new construction works of the instant primary construction contract at the time originally scheduled under the instant primary construction contract. The Plaintiff’s alteration of the initial contract and the completion of the Plaintiff’s provision of the instant primary construction work regardless of the completion inspection, and agreed to pay the price therefrom. Thus, it is reasonable to view that the supply time of the instant primary construction work is October 17, 2010, where the provision of the service was completed (i.e., the Defendant, as seen earlier, issued the revised tax invoice on March 3, 2009, and issued the revised tax invoice to 109, and (ii) it is difficult to view that the Plaintiff’s assertion that the Plaintiff would be subject to the refund of the input tax amount due to the Plaintiff’s breach of the principle of good faith.

3) Therefore, under the premise that the time of supply for the instant primary construction service was March 3, 2009, when the time of supply for the instant primary construction service was approved, the Defendant’s disposition that deemed KRW 00,000, out of the supply value of the instant tax invoice, to be the sale attributable to the Plaintiff in the first taxable period,

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.