Where a construction business operator supplies a newly constructed housing exceeding the scale of national housing pursuant to a construction contract concluded between a reconstruction association and a reconstruction association, the relationship between value-added tax and value-added tax.

Where a construction business operator supplies a newly constructed housing unit exceeding the scale of national housing pursuant to a construction contract concluded between a reconstruction association and a reconstruction association, the construction business operator is liable to pay value-added tax, and thus, he/she may collect value-added tax from the reconstruction association of the person who is supplied with the services. However, whether the final enjoyment of value-added tax is possible by an agreement between the construction business operator, reconstruction association, and association members, and it is not different because the reconstruction association does not regard it as a supply of goods subject to value-added tax regardless of the scale of housing when it sells housing units to association members.

Article 105 of the Civil Act, Articles 2, 6, and 7 of the Value-Added Tax Act, Article 100 of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 5584 of Dec. 28, 1998) (Article 106 of the current Restriction of Special Taxation Act)

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Gyeong, Attorneys Park Jae-soo et al., Counsel for plaintiff-appellant)

Plaintiff 1 and 19 others (Law Firm Dong-dong Office, Attorneys Lee Jong-won et al., Counsel for the plaintiff-appellant)

South Mine Construction Co., Ltd. (Law Firm Rate, Attorneys Park Jong-bong et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 99Na1385 delivered on March 24, 2000

The judgment below is reversed and the case is remanded to Seoul High Court.

1. According to the reasoning of the judgment below, the court below acknowledged the facts as stated in its holding, and determined that the plaintiffs, who are members of the non-party 12 reconstruction association (hereinafter referred to as the "non-party 43 square meters of a national housing size, are not legally obligated to pay value-added tax on the sale price, even if they purchase apartment housing exceeding 85 square meters of a national housing size (exclusive use size below 85 square meters), since the plaintiffs were aware that they had the liability to pay value-added tax, they concluded sales contracts on apartment housing of 43 square meters or 44 square meters (per exclusive use size 114.92 square meters) of this case with the defendant 43 square meters and were supplied without compensation to the members of the association, based on the grounds that they cannot be viewed as having supplied goods to the members of the association even if they were in the form of selling housing to the members of the association. Accordingly, the plaintiffs were obligated to pay value-added tax on the sale price of apartment housing of 43 square meters or 444 square meters (per 84.8 square meters of a size).

2. Where a construction business operator supplies a newly-built housing unit in excess of national housing scale pursuant to a construction contract concluded between a reconstruction association and a reconstruction association, the construction business operator bears the obligation to pay value-added tax, and thus, he/she may collect value-added tax from the reconstruction association of the person who is supplied with the service: Provided, That the final burden of value-added tax may be determined by an agreement between the construction business operator, reconstruction association and association members, and the reconstruction association does not regard it as a supply of goods subject to value-added tax regardless of the scale of housing where the housing unit is sold to association members.

3. According to the facts established by the court below, 126 owners of housing units and commercial buildings on the ground of Gwanak-gu in Seoul Special Metropolitan City ( Address omitted) form the non-party association to implement a reconstruction project. On January 13, 1994, the non-party association selects the land owned by its members as a reconstruction project agent. The non-party association provides the land for the non-party association members as a land for the reconstruction project. The defendant constructs appurtenant facilities on its ground with one unit of apartment unit of 84.86 square meters in national housing size and supplies the land for the remaining apartment units and commercial buildings to the members of the association with all construction cost with the proceeds of the apartment unit of 84.86 square meters in national housing size. The plaintiffs are entitled to the priority of the sale to the members of the association to receive the sale price exceeding the above free sale price of the apartment unit of 3, and the plaintiffs are obligated to pay the sale price of the apartment unit of 4,000 square meters after deducting the difference between the above sale price and the sale price of the apartment unit of 4.

4. Therefore, the Defendant, a construction business operator, bears the obligation to pay value-added tax on construction services for each apartment of this case, which exceeds the scale of national housing for which the Plaintiffs applied for parcelling-out, and in view of the content of the provisional contract and the principal contract between the Defendant and the non-party association, and the sales contract between the Defendant and the Plaintiffs, it is reasonable to deem that the Defendant agreed to pay value-added tax on each apartment of this case directly. Therefore, the agreement on the burden of value-added tax among the sales contracts of this case cannot be

5. Nevertheless, the lower court erred by misapprehending the legal principles as to the liability for the payment of value-added tax, mistake in legal act, and unjust enrichment, which the Defendant received from the Plaintiffs on different premise.

Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Son Ji-yol (Presiding Justice)