Busan High Court 2008Nu488 ( October 10, 2008)

National Trial 2006bu 2985 (2007.04.09)

The legitimacy of the assertion that the contact facility construction cost included in the total construction cost is not subject to an additional tax with the asset acquisition cost.

Since the contact facility that acquired ownership appears to have been settled and acquired as consideration for industrial complex development project services, including the contact facility construction work, to the State, the contact facility construction cost shall be included in the service provided to the State and included in the value-added tax base.

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

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

The records of this case and the judgment of the court below and the grounds of appeal were examined. However, the grounds of appeal by the appellant are not included in the grounds prescribed in each subparagraph of Article 4(1) of the Act on Special Cases Concerning the Procedure for Appeal, and the appeal is dismissed under Article 5 of the same Act. It is so decided as per Disposition by the assent of all participating

[Supplementary High Court Decision 2008Nu488 ( October 10, 2008)]

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The defendant's rejection disposition against the plaintiff on July 13, 2006 against the second return of value-added tax of 2004 is revoked.

2. Purport of appeal

The same shall apply to the order.

1. Details of the disposition;

A. On February 13, 2001, the Plaintiff is a corporation established for the purpose of storing, storing, transporting, and selling liquid cargo with the location of its principal office ○○○○○-12, Ulsan-gun, Ulsan-gun, Ulsan-do.

B. On December 13, 2001, the Plaintiff was designated as a project implementer of a development project for ○○ National Industrial Complex (○○○ Industrial Complex Construction Project) pursuant to Article 16 of the Industrial Sites and Development Act, which was in force at the time by the Ulsan Metropolitan City Mayor (hereinafter “Industrial Sites Act”).

C. After that, on April 25, 2002, the Plaintiff filed an application for authorization to revise an implementation plan pursuant to Article 17 of the Industrial Sites Act, and performed construction work on May 17, 2002 with the approval from the Commissioner of the Ulsan Coast Guard from May 10, 2003 to November 22, 2004, and completed the reclamation site and the contact site facilities as of November 22, 2004 and obtained authorization of completion on December 13, 2004. At the time, the Plaintiff acquired the Plaintiff from the rear 36,427 square meters of reclaimed public waters and the contact facilities 7,922 square meters of reclaimed public waters and reverted to the State with the rear 5,631 square meters of surface and the seaside 1,158 square meters of surface.

D. On January 25, 2005, the Plaintiff reported and paid KRW 15,242,68,992, including total construction cost, KRW 15,232,032,733, on the basis of the final return of value-added tax for the second half-year period in 2004.

E. On April 20, 2006, the Plaintiff filed a claim for correction to the effect that the Plaintiff would refund tax base of KRW 305,989,585 after deducting the tax base of KRW 305,985,585,00,00, which is included in the above total construction cost, from the Plaintiff’s asset acquisition cost, on the ground that the Plaintiff does not fall under the subject of value-added tax, for the following reasons: (a) KRW 1,232,032,733, which is already paid to the Defendant; (b) KRW 926,989,585, which is the remainder after deducting the tax base of KRW 305,00,00 from the tax base of KRW 5,972,793,140; (c) on June 14, 2006, the Defendant consulted with the National Tax Service on the ground that “in case where the reclamation service is provided pursuant to the Public Waters Reclamation Act of Article 48(6) of the Enforcement Decree of the Value-Added Tax Act, the Plaintiff’s claim for correction.”

[Ground of recognition] Facts without dispute, entry of Gap evidence 1 to 12, purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The plaintiff's assertion

Since the Plaintiff’s reclamation works implemented for the public purpose acquired ownership of part of reclaimed land as a consideration for the provision of reclamation services to the State and acquisition of ownership of part of reclaimed land, there exists a quid pro quo relationship between the provision of reclamation services to the State and the acquisition of ownership of part of reclaimed land, and thus its reclamation works are subject to value-added tax since they constitute a provision of services. However, the contact facilities are acquired by the Plaintiff for the purpose of using it for the purpose of the private construction,

(2) The defendant's assertion

The main purpose of the Plaintiff’s major purpose of the reclamation project of public waters was the acquisition of a tideland facility, i.e., the tideland facility construction and the reclamation project of public waters, and the Plaintiff provided the above construction work to the State, and as a result, the Plaintiff settled and acquired the ownership of the Contact facility and the reclaimed land from the State in accordance with the relevant statutes and the agreement between the parties concerned. Thus, the Contact facility construction also constitutes the supply of services subject to taxation under

(b) Related statutes;

Article 1 (Taxable Objects)

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

C. Determination on the lawfulness of the instant disposition

If a person who acquired the Plaintiff’s ownership acquires it, the construction does not constitute a provision of services subject to value-added tax because there is no other party to the provision of services, but if it is settled for the Plaintiff to provide industrial complex development services including the contact facility construction services to the State, the contact facility construction corporation shall be included in the services provided to the State and the construction cost shall be naturally included in the market value of services provided by the Plaintiff as a basis for value

Based on these legal principles, in order to determine whether the cost of the contact facility construction is included in the value-added tax base, it is examined whether the part of the contact facility that the Plaintiff acquired the ownership was settled as the price for the industrial complex development project service provided by the State and whether the Plaintiff acquired ownership from the State or acquired it regardless

(1) Facts of recognition

The following facts can be acknowledged in light of the overall purport of arguments in the descriptions of Gap evidence 7-1, Gap evidence 9-4, Eul evidence 10-1 through 7, Gap evidence 12-1, 2, 3, 4, Eul evidence 4-1, 2, Eul evidence 5-1, 2, and Eul evidence 6.

① On May 17, 2002, the Ulsan Regional Maritime and Fisheries Office approved the Plaintiff’s application for modification of the implementation plan for the development project of a mountain national industrial complex submitted by the Plaintiff pursuant to Article 17 of the Industrial Sites Act, on the condition that the Plaintiff shall undergo guidance and management by the Ulsan Regional Maritime and Fisheries Office in creating the contact facilities and hinterland sites, enter into a supervision contract under the provisions of the Act on Contracts to Which the State is a Party, and submit a completion report accompanied by documents, etc. for determination of total project cost to the Ulsan Regional Maritime and Fisheries Office for confirmation of completion.

(2) In addition, the Ulsan Regional Maritime Affairs and Fisheries Office stated that the Plaintiff, a project implementer, shall liquidate and acquire the facilities (such as the walls and surrounding facilities) created by the relevant construction in accordance with the Industrial Sites Act, and the surrounding roads shall gratuitously be reverted to the Ministry of Maritime Affairs and Fisheries.

③ After completion of the final construction work on November 23, 2004, the Plaintiff filed an application for authorization of completion with the Ulsan Marine and Fisheries Office on the following day, and obtained approval by submitting a plan for disposal of developed land, facilities, etc. to the effect that, pursuant to Article 38 of the Industrial Sites Act, the Plaintiff settled and acquired the reclaimed land of 36,427 square meters and the wharf (APRN) 7,922 square meters, which is a landing facility, pursuant to the conditions for approval of the implementation plan, the remainder of the surrounding 5,631 square meters and the seaside 1,158 square meters shall be reverted to the State

④ As a result of examining the Plaintiff’s application for the authorization of completion and the disposal plan for developed land, facilities, etc., the Ulsan Regional Maritime Affairs and Fisheries Office: (a) on the other hand, the average appraised value of the reclaimed land and landing facilities, which the Plaintiff intended to obtain by settlement, was at least KRW 5,920,591,00; and (b) on the other hand, it is apparent that the total project cost of the development project at issue is equal to KRW 15,266,10,000; and (c) on December 13, 2004, approved the above disposal plan and publicly announced the completion on December 17, 2004.

(2) Determination

As above, in light of the circumstances where the Ulsan Regional Maritime Affairs and Fisheries Office (hereinafter “Ulsan Regional Maritime Affairs and Fisheries Office”) conducted thorough supervision and supervision over the contact facilities and their hinterland reclaimed land created by the Plaintiff, it is difficult to view the part of the construction of the contact facilities as the Plaintiff’s pure private service irrelevant to the State. ② The Plaintiff offered ○○ National Industrial Complex Development Service to the State on the condition that the Plaintiff acquires the above contact facilities and their hinterland reclaimed land from the beginning on the beginning on the condition that it would acquire the settlement from the State; ③ thereafter, the Plaintiff settled the entire construction cost including the contact facilities, surrounding reclaimed land, and the appraisal of the surrounding reclaimed land in the process of actual settlement with the Ulsan Regional Maritime Affairs and Fisheries Office (hereinafter “Ulsan Regional Maritime Affairs and Fisheries Office”) by comparing the construction cost of the contact facilities and their hinterland facilities, and the appraisal of the surrounding reclaimed land, it is reasonable to view that the Plaintiff acquired the ownership of the surrounding reclaimed land and its surrounding industrial complex development project, not the Plaintiff acquired the part of the contact facilities and its surrounding reclaimed land.

Therefore, 9,269,895,000 won is not the Plaintiff’s own service cost, but the Plaintiff’s service cost is included in the market price of ○○ National Industrial Complex Development Service provided to the State. Thus, it is included in the value-added tax base pursuant to Article 13(1)2 of the Value-Added Tax Act.

3. Conclusion

Therefore, since the plaintiff's claim for correction of value-added tax based on the purport that the above entertainment facility construction cost should be excluded from value-added tax base is unfair, the disposition of this case is legitimate. Therefore, the plaintiff's claim for cancellation of the disposition of this case should be dismissed. Since the judgment of the court of first instance is unfair differently from this conclusion, the judgment of the court of first instance is revoked and the plaintiff's claim

[Ulsan District Court 2007Guhap1525 ( December 26, 2007)]

1. The defendant's rejection disposition against the plaintiff on July 13, 2006 regarding the claim for correction of the final return of value-added tax on January 25, 2005 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 February 13, 2001, the Plaintiff is a corporation established for the purpose of storing, storing, transporting, selling, etc. liquid chemical freight oil with ○○○○○-gun 150-12 as its principal office located.

B. On December 13, 2001, the Plaintiff was designated as an executor of an industrial complex development project with the following contents pursuant to Article 16 of the Industrial Sites and Development Act by ○○ Metropolitan City Mayor.

A. L. L. L.I.

- Address, name (trade name and representative) of the project implementer

(a) Address: ○○○○-dong 370-10;

(b) Name: ○○ Stock Company;

- Business name: Construction of ○○ Exclusive Storage Facility

- Location: ○○○○ ○○ ○○ ○○ ○○ ○○ ○○

- Business area: 00 square meters;

- Project outlines: wharf axis (30,000 W.TX 1 10,000 W.TX 1 t.

C. On April 25, 2002, the Plaintiff filed an application for authorization to revise an implementation plan pursuant to Article 17 of the Industrial Sites and Development Act, and completed construction from May 10, 2003 to November 22, 2004 with the authorization from the Commissioner of the ○○○ Maritime Police Agency, and completed construction on May 17, 2002 and completed construction on November 22, 2004, 51,138 square meters of public waters (land) and 405 square meters of a landing facility (one point of 30,00 tons, one point of 10,000 tons) on December 13, 2004. At the time, the Plaintiff at the time settled and acquired a business site of 36,427 square meters and 7,922 square meters, and reverted to the country behind 5,631 square meters and 15,158 square meters of a seaside.

D. On January 25, 2005, the Plaintiff reported and paid KRW 15,242,68,992, including the total construction cost of KRW 15,190,487,000, when filing a final return of value-added tax for the second half-year period in 2004, based on the tax base of KRW 1,232,032,733.

E. On April 20, 2006, the Plaintiff filed a request for correction with the Defendant to refund KRW 926,989,585,585,00 after deducting tax base from KRW 1,232,03,03, which was already paid from KRW 5,972,793,140, which was calculated as KRW 305,00,00 from the Plaintiff’s asset acquisition cost, on the ground that the Plaintiff does not constitute a taxable subject to value-added tax. However, on June 14, 2006, the Defendant filed a request for correction with the National Tax Service for the refund of KRW 926,989,585, which was the remainder after deducting tax base from KRW 305,00,00,00 which was calculated as KRW 5,972,79,793,140 from the Plaintiff’s asset acquisition cost. However, it is reasonable to view that the Plaintiff’s request for correction of facilities includes not purely the total construction cost required for reclamation work calculated under the Public Waters Act.

(In fact that there is no dispute, entry in Gap evidence 1 through 12, the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The parties' assertion

(i)The plaintiff's assertion

The Plaintiff’s reclamation of public waters, which was implemented for the public purpose, acquired ownership of a part of reclaimed land as a price for the acquisition, and thus constitutes subject to value-added tax on the ground that there exists a quid pro quo relationship between the provision of reclamation services to the State and the acquisition of ownership of a part of reclaimed land. However, the instant disposition rejecting Plaintiff’s request for correction on the ground that the Plaintiff’s acquisition of ownership of part of reclaimed land and the instant harbor facility construction is in a quid pro quo relationship, notwithstanding that the Plaintiff’

(2) The defendant's assertion

The main purpose of the Plaintiff’s major purpose of the reclamation project of public waters lies in the acquisition of a bridge facility, i.e., the reclamation project and the reclamation project of public waters, so that the Plaintiff’s major purpose of the reclamation project is to provide construction projects, such as a landing facility and reclamation project for public waters, and thereby acquiring the ownership of a landing facility and reclaimed land, are acquired in accordance with the relevant Acts and subordinate statutes and the agreement between the parties, and thus, the Plaintiff’s reclaimed land is in an economic and substantial quid pro quo relationship with the entire construction project for landing facility and reclamation. Therefore, the total construction cost invested

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

In full view of the following circumstances, the Plaintiff’s ownership of reclaimed land in relation to the ownership of reclaimed land acquired by the Plaintiff and the ownership of the Port Facility Corporation in relation to economic and material prices, and the Plaintiff’s ownership of reclaimed land in relation to the supply of services subject to value-added tax, it is acknowledged that there is an economic and substantial price relationship with the reclamation of public waters and the construction of the Port Facility in relation to the supply of services subject to value-added tax. However, it

① According to Article 21 (19) of the Industrial Sites and Development Act, the Plaintiff’s permission for the execution of harbor works under paragraph (2) and the approval for the implementation plan under paragraph (2), the authorization for the implementation plan under paragraph (2), and the consultation or approval under paragraph (3). According to paragraph (3), if the management agency publicly notifies matters concerning the implementation of harbor works or matters concerning the permission under paragraph (3), it shall be deemed that the reclamation license and the permission for the execution of harbor works under paragraph (2) have been obtained through consultation or approval with the Minister of Oceans and Fisheries under Article 38 (1) of the same Act, but the Public Waters Reclamation Act does not stipulate that the permission for the execution of harbor works under paragraph (2) and the approval for the implementation plan under paragraph (2) have been obtained.

(2) Where the Harbor Act and the Public Waters Reclamation Act provide reclamation services under a separate Act different from the purpose of legislation and subject matters thereof, the total project cost required for such reclamation works computed under the Public Waters Reclamation Act shall be the tax base, and the provisions of paragraph (6) shall not apply to harbor facilities under the Harbor Act.

(3) Even if reclamation works under the Public Waters Reclamation Act and the harbor facilities construction works under the Harbor Act have been carried out simultaneously, this is conceptually distinguishable, and there is no reasonable ground to evaluate the Plaintiff’s reclamation works and the harbor facilities construction as a whole, so it is necessary to determine whether to impose taxes

④ According to the above provision, a reclamation license holder shall acquire reclaimed land equivalent to the total construction cost (the total amount of research cost, design cost, net construction cost, compensation cost and other expenses) required for the reclamation work. Thus, it cannot be interpreted that reclaimed land acquired by the Plaintiff included the construction cost for the instant harbor facility construction in the reclaimed land.

(5) In accordance with subparagraph 7 and Article 17 (1) of the Act, the tax amount to be paid pursuant to the provisions shall be included in the concept of total project cost for calculating the duration of the right to use harbor facilities, but no provision is provided for the cases in which the land and harbor facilities revert to the non-management authority.

6) In cases where the Defendant vests harbor facilities in the State or a local government, it shall be deemed that the right to use the harbor facilities has been acquired in return for the construction of the harbor facilities and impose taxation on the Defendant, and the non-management authority should not impose taxation if it vests in the non-management authority. However, this is based on the nature of the Value-Added Tax Act that imposes a tax on the supply of goods or services, and under such circumstances, it cannot be deemed that the Plaintiff’s construction of harbor facilities without any transaction between the State and the Plaintiff is a supply of

Therefore, since the construction of the plaintiff at his own expense and the construction of the harbor facilities of this case, the ownership of which is acquired pursuant to the relevant Acts and subordinate statutes, cannot be evaluated as the provision of services to the State, etc., because there is no transaction relation between the state, etc. and the plaintiff, the expenses required for the construction of the plaintiff's harbor facilities shall also be deemed to exist, and the defendant's disposition rejecting the plaintiff's claim for the

Furthermore, for the reasons that it is difficult for the defendant to strictly distinguish the scope of revocation of the rejection disposition of the request for correction of value-added tax of this case, it is unfair to calculate the market price of the average construction cost calculated by the two appraisal agencies for the reclaimed land acquired by the plaintiff (such as the plaintiff's assertion) on the ground that it is difficult for the plaintiff to strictly distinguish the expenses for reclamation work and the cost for port facilities. It is also unfair to calculate the construction cost at the market price calculated by the two appraisal agencies for the reclaimed land acquired by the plaintiff. The defendant's response to the request for confirmation of the statement of settlement of total project cost (Evidence A No. 5) is calculated only by a notarized act.

3. Conclusion

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

Related Acts and subordinate statutes

Value-Added Tax Act

Article 1 (Taxable Objects)

(1) Value-added tax shall be imposed on the following transactions:

1. Supply of goods and services; and

Enforcement Decree of the Value-Added Tax Act

Article 48 (Calculation of Tax Base)

(6) Where reclamation services are offered under the Public Waters Reclamation Act, the total project cost required for the relevant reclamation works computed under the same Act shall be the tax base.

Industrial Sites and Development Act;

Article 16 (Operators of Industrial Complex Development Projects)

(1) An industrial complex development project shall be implemented by a person determined in a development plan by designation as the authority designating industrial complexes from among the following persons:

1. The State, local governments, government-invested institutions, local public enterprises, or persons who may perform industrial complex development projects under other Acts;

2. The Small and Medium Business Corporation or the Korea Industrial Complex Corporation established under Article 45-3 of the Industrial Cluster Development and Factory Establishment Act with rare amount of the Promotion of Small and Medium Enterprises and Encouragement of Purchase of Their Products Act;

3. A person who intends to install facilities suitable for the development plan and move in, or who is deemed capable of developing the industrial complex suitable for the development plan, and who satisfies the requirements as prescribed by the Presidential Decree.

4. A corporation established by a person falling under any of subparagraphs 1 through 3 by making investments for the development of an industrial complex, which meets the requirements prescribed by Presidential Decree.

5. A real estate trust company which concludes a trust contract for an industrial complex development under a project operator falling under subparagraph 3 and Article 20-2.

6. Owners of land in the industrial complex, or the association established by them for the development of industrial complex.

Article 21 (Legal Fiction, etc. of Authorization or Permission under Other Acts and Subordinate Statutes)

(1) In granting approval of an implementation plan pursuant to Articles 17 through 19, the authority designating industrial complexes or the Minister of Oceans and Fisheries (hereinafter referred to as the "person approving implementation plans") shall be deemed to have already consulted with or obtained approval from the head of the relevant administrative agency pursuant to paragraph (2) with respect to the following permission, decision, authorization, license, consultation, consent, approval, cancellation, disposition, etc. (hereinafter referred to as "authorization, permission, etc.") in advance, and when the approval of an implementation plan is publicly notified pursuant to Article 19-2, the authorization, permission, etc. under the following relevant Acts shall be deemed publicly notified or announced:

5. Permission for execution of harbor works under paragraph (2) and approval for implementation plan under paragraph (2);

19. License for reclamation, publication referred to in the provisions of the Act, authorization and publication of an implementation plan, and consultation or approval referred to in the provisions of the Act;

Harbor Act

Article 9 (Executor, etc. of Harbor Works)

(1) The Minister of Oceans and Fisheries shall implement harbor works concerning designated harbors, among construction works concerning construction, remodelling, maintenance, repair, dredging, etc. of harbor facilities (hereinafter referred to as "harbor construction works u300"), and the Mayor/Do Governor shall implement the harbor works concerning local harbors: Provided, That where special provisions exist in this Act or other Acts concerning harbor works, such provisions shall apply.

(2) If a person who is not a managing authority (hereinafter referred to as "non-managing authority") intends to implement a harbor project, he/she shall prepare a plan for the harbor project and obtain permission from the managing authority, as prescribed by Presidential Decree: Provided, That the same shall not apply to works for the maintenance and repair of harbor facilities which are not subject to belonging to the State

(3) Where a managing authority executes a harbor project directly or grants permission to a non-managing authority, it shall give public notice thereof.

Article 12 (Relation with Other Acts)

(1) Where a managing authority publicly announces matters concerning or permission for the implementation of a harbor project pursuant to Article 9 (3), it shall be deemed that any of the following permission, authorization, license, approval, consultation, consent, etc. (hereinafter referred to as "authorization, permission, etc.") has been obtained, and authorization, permission, etc. prescribed by the following relevant Acts shall be deemed publicly notified or publicly notified:

5. License for reclamation under this Act and consultation with or approval from the Minister of Oceans and Fisheries under Article 38 (1) of the same Act;

Article 18 (Reversion, etc. of Harbor Facilities)

(1) Land and harbor facilities developed or installed by a non-management authority for a harbor project under Article 9 (2) shall revert to the State or a local government upon completion thereof: Provided, That the same shall not apply to land and harbor facilities specified by Presidential Decree.

(2) Notwithstanding the main sentence of paragraph (1), the Korea Container Terminal Authority established pursuant to the Korea Container Terminal Authority Act may acquire the ownership of the remaining land excluding the harbor facilities from among the land or facilities developed or installed by the harbor works. In such cases, the scope of the ownership acquired shall not exceed the total project cost prescribed by Presidential Decree.

(3) A non-management authority may gratuitously use harbor facilities that have vested in the State or a local government pursuant to paragraph (1), as prescribed by Presidential Decree.

Enforcement Decree of the Harbor Act

Article 17 (Harbor Facilities, etc. Other Than Reversions)

(1) Harbor facilities not reverted to the State or a local government pursuant to the proviso to Article 17 (1) of the Act shall be as follows:

1. Loading and unloading facilities (excluding loading and unloading facilities), transportation facilities for cargo, piping facilities and mooring facilities;

2. Hashes (excluding the case where a non-management authority extends a silo owned by the State), oil storage facilities and auction houses;

3. Facilities installed for the building, etc. of ships or water structures;

4. A mooring facility, navigational aid facility, distribution and sales facility of cargo, ship distribution facilities, and control, publicity and security facilities of harbors determined by Ordinance of the Ministry of Oceans and Fisheries, which are established by a non-management authority for exclusive purposes;

5. Mobile-type and expendable facilities from among facilities for preventing pollution;

6. Support facilities: Provided, That this shall exclude public service business facilities from among harbor-related business facilities; and

7. Infrastructure facilities for marine leisure among water-friendly harbor facilities, and facilities for marine culture and education;

8. Other facilities which the management agency deems not necessary to revert to the State or local governments.

(2) Land which is not reverted to the State or a local government under the proviso to Article 17 (1) of the Act means land satisfying the following requirements:

1. It shall not fall under the scope of land under the provisions of the attached Table 3;

2. The land value shall be within the scope of the total project cost under Article 18.

Article 18 (Scope of Total Project Costs)

The total project cost under Article 17 (2) and (3) of the Act shall be the total amount of various costs calculated according to the following standards related to the relevant harbor project on the basis of the date of confirmation of completion of the relevant harbor project:

7. The term “value-added tax” means the tax amount paid pursuant to the provisions of Article 17 (1) of the Act in cases where the land and harbor facilities revert to the State or local governments.

Public Waters Reclamation Act

Article 26 (Acquisition, etc. of Reclaimed Land's Ownership)

(1) The State, a local government, or a reclamation licensee shall acquire the ownership of reclaimed land according to the following classification on the date authorization on completion referred to in Article 25 is received:

1. Reclaimed land necessary for public or public use as determined by the Presidential Decree is the State or a local government;

2. Reclaimed land partitioned by putting together an area (excluding beachess included in site for facilities for public use or public facilities newly installed due to the execution of the reclamation work from among reclaimed seashores) equivalent to reclaimed seashores to the State. In this case, the location of reclaimed land the ownership of which the State acquires shall be a place other than reclaimed land as determined by the reclamation licensee pursuant to Article 25;

3. Reclaimed land equivalent to the total fishing expenses (referring to the total amount of investigation, design, net construction compensation expenses or other expenses) incurred for such reclamation works as determined by the Presidential Decree from among reclaimed land except reclaimed land, the ownership of which the State or a local government acquired pursuant to subparagraphs 1 and 2 is determined by the reclamation licensee;

4. Remaining reclaimed land except reclaimed land whose ownership the State, a local government, or a reclamation licensee acquired pursuant to subparagraph 1 through 3 (hereinafter referred to as "unclaimed reclaimed land") shall be the State.

Enforcement Decree of the Public Waters Reclamation

Article 20 (Acquisition of Reclaimed Land's Ownership and Total Construction Costs)

(1) For the purpose of Article 26 (1) 1 of the Act, the term “ reclaimed land necessary for public or public use as determined by the Presidential Decree” means reclaimed land necessary for roads, bank protection, draft walls, water wharf, breakwater, breakwater, drainage facilities, parks, or other Acts and subordinate statutes. In this case, reclaimed land necessary for the State’s facilities shall revert to the State, and to the local government’s facilities which are necessary reclaimed land.

(2) When a reclamation licensee acquires the ownership of reclaimed land equivalent to the total project cost pursuant to Article 26 (1) 3 of the Act, the price calculation of such reclaimed land shall be calculated at a reasonable price taking into account the transaction price of neighboring similar land, and it shall be based on the arithmetic value of the appraised value appraised by not less than two appraisal business operators (referring to appraisal business operators under subparagraph 9 of Article 2 of the Public Notice of Values and Appraisal of Real Estate Act; hereinafter the same shall apply) designated by the licensing

(4) The term “total project cost required for such reclamation works as determined by the Presidential Decree” in Article 26 (1) 3 of the Act means the total amount of the following expenses related to such reclamation works on the basis of the date of application for the authorization of completion of such reclamation works

1. Survey cost: The cost of survey and other expenses required for the execution of the relevant reclamation project, which is not included in the net construction cost. In this case, the price shall be calculated based on the price criteria for engineering project under the provisions of the Act;

2. Design cost: The cost required for the design for the execution of the reclamation project concerned. In this case, the price calculation shall be based on the price criteria for engineering projects under the provisions of the Act.

3. Net construction cost: Sum of material cost, labor cost, and expenses for the execution of reclamation works. In such cases, the calculation of net construction cost shall be based on the criteria for determining estimated price and the standard pum and unit price (referring to the price publicly notified by the Government, if any) under Article 9 of the Enforcement Decree of the Act on Contracts to which the State is a Party

4. Compensation cost: Installation cost of the actual compensation cost and prevention cost of losses incurred in the execution of the reclamation work in question.

5. Other expenses: The aggregate of the following expenses:

(a) Construction supervision expenses in accordance with the standards for prices of engineering projects as referred to in the provisions of paragraph (1);

(b) Insurance premiums pursuant to the provisions of the Industrial Accident Compensation Insurance Act;

(c) General management expenses in the management activity sector, which is calculated by applying the criteria for determination of projected price under Article 9 of the Enforcement Decree of the Act on Contracts to which the State is a Party. In such cases, general management expenses shall be based on net construction costs under subparagraph

(d) Amount of damage caused by a natural disaster;

(e) The inflation amount computed by applying mutatis mutandis the provisions of Article 64 of the Enforcement Decree of the Act on Contracts to which the State is a Party. In this case, the inflation amount shall be based on the execution period (referring to the period from the commencement date of reclamation works to the date of application for authorization of completion; hereafter in this Article the same shall apply) of the relevant reclamation works publicly notified pursuant to the provisions of Article 16 (3), but the period other than the period for extension of completion recognized as not having any cause attributable to the

(f) Taxes, public imposts and charges under Acts and subordinate statutes;

(g) Expenses for environmental impact assessment, expenses for impact assessment on damage, reclamation license fees, expenses for appraisal of reclaimed land and expenses for performance by the deputy authority for reclamation license referred to in paragraphs (2) and (3); and

6. Construction interest by work progress: Construction interest calculated under the conditions as determined by the licensing authority on the aggregate of the expenses under subparagraphs 1 through 5 (the interest rate shall be the arithmetic mean of the interest rates on time deposits with a maturity of one year in six commercial banks occupying the upper nationwide rankings on the basis of deposit amounts). In this case, interest rates on construction shall be based on the execution period of the relevant reclamation works publicly notified pursuant to Article 16 (3), but it shall not be included in the period other than the extended period for construction completion recognized by the licensing authority as not causes attributable to the reclamation licensee, such

7. Profits: The amount equivalent to 10/100 of the total expenses of subparagraphs 1 through 5.