Busan District Court-2014-Gu Partnership-23100 ( October 23, 2015)

National subsidies and public subsidies paid directly related to the supply of goods or services shall be included in the tax base.

The subsidies of this case are those paid by the government agencies or local governments for the provision of exhibition services, such as the selection and management of participating companies in exhibition events, and are included in the tax base with subsidies directly related to the provision of services.

Article 13 of the Value-Added Tax Act

2015Nu23687 Revocation of Disposition of Imposition of Value-Added Tax

AAA, Inc.

BB Director of the Tax Office

on January 30, 2016

October 28, 2016

1. Revocation of a judgment of the first instance;

2. The Defendant’s disposition of imposition of value-added tax for the second term of 208 against the Plaintiff on October 7, 2013 (including additional tax; hereinafter the same shall apply), for the first term of 2009 (including additional tax), for the value-added tax of 201,391,050 won, for the second term of 209 (105,96,900 won, for the second term of value-added tax for 2009 (171,303,150 won, for the first term of 2010 (261,267,430, for the second term of 2010 (2,272,950 won, for the second term of 1,2011 (169,295, for the second term of 295, for the second term of 2009, for the first term of 205, for the first term of 2012, for 3415 won.

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

The same shall apply to the order.

1. Details of the disposition;

A. On December 5, 1995, the Plaintiff is a taxable entrepreneur who established by joint investment of DD Metropolitan City,CCCC Corporation, and private enterprises in order to efficiently carry out exhibition and convention projects. On the land owned by DD Metropolitan City, 1500, Do Do 1500, Do Do 1507, the Plaintiff is a taxable entrepreneur who established the first exhibition and convention hall, an international exhibition facility, and holds domestic and overseas exhibitions, fairs, and conventions.

B. The Plaintiff received subsidies from DD Metropolitan City and EEE division (hereinafter referred to as “City subsidies”) while holding exhibitions, etc. during the period from 2008 to 2012 as follows, and returned subsidies from EE division to DD Metropolitan City and EEE division (hereinafter referred to as “State subsidies”). After the settlement of project costs, the Plaintiff returned the subsidies remaining after EE division to DD Metropolitan City and EE division. With respect to some of the subsidies, the Plaintiff filed a value-added tax return after issuing a tax invoice for exhibition rent as the recipient of the DD Metropolitan City, and the remainder of the subsidies was not included in the tax base under Article 13(2)4 of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter referred to as the “former Act”).

C. As a result of the Plaintiff’s regular tax investigation from July 8, 2013 to July 26, 2013, the Defendant: (a) deemed the subsidies not included in the tax base pursuant to Article 13(2)4 of the former Act; (b) rather than the subsidies granted to the Plaintiff for the services provided to the D Metropolitan City, EEE Ministry, etc.; (c) subject to value-added tax; and (d) deemed the subsidies that the Plaintiff issued a tax invoice under the name of the rent and the remaining subsidies that were returned to the DD Metropolitan City, etc. after deducting the amount returned to the DD Metropolitan City, etc., as the tax base, on October 7, 2013; (d) KRW 10,368,756,270; (e) KRW 276,453,700; (e) value-added tax for the 1201, KRW 209, KRW 391, value-added tax for the 2050; and (e) KRW 16365, 2016,2016.

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal following the procedure for filing an objection, but was dismissed on September 17, 2014.

[Ground of recognition] Facts without dispute, Gap evidence 1, 3, 4 (including each number; hereinafter the same shall apply), Eul evidence 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Article 13(2)4 of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013; hereinafter “former Enforcement Decree”) provides that “National subsidies and public subsidies under Article 13(10) of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013; hereinafter “former Enforcement Decree”) shall be national subsidies and public subsidies not directly related to the supply of goods or services that are excluded from the tax base of value-added tax, thereby adding new requirements that are not prescribed by Acts with respect to subsidies that are not included in the tax base. This Enforcement Decree of the former Enforcement Decree of the Value-Added Tax Act is null and void due to lack of the grounds for delegation

2) In relation to each exhibition project held by the Plaintiff, a person who actually performed the work is not the Plaintiff, but the Plaintiff. The instant subsidy is a non-governmental event subsidy, not a cost for providing exhibition agency services to the D Metropolitan City or the State. In addition, even though the State or a local government did not expect the Plaintiff to pay value-added tax equivalent to 10% of the subsidy to the Plaintiff, such as the Plaintiff, in the actual process of compiling the subsidy, it is unreasonable to impose subsidies on the Plaintiff

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether Article 48(10) of the former Enforcement Decree of the Value-Added Tax Act is invalid

The Enforcement Decree or the Enforcement Rule of the Act cannot change or supplement the contents of rights and obligations of an individual or set new contents that are not prescribed by the Act, unless otherwise delegated by the Act. However, even if the contents of the Enforcement Decree or the Enforcement Rule of the Act are not clearly and systematically examined the legislative purport of the parent law and the entire provisions of the relevant provisions, it cannot be deemed as going beyond the scope of the parent law's regulation, or if it is intended to embody them based on the purport of the parent law's provision, it cannot be deemed as null and void (see Supreme Court Decision 2008Du13637, Jun. 11, 2009).

Article 13 of the former Act provides that the price for the goods or services provided in relation to the project shall be the base of value-added tax, while Article 2 subparagraph 1 of the Subsidy Management Act provides that a subsidy means a subsidy granted by the State for the purpose of creating the affairs or services provided by a person other than the State or for providing financial assistance, such as a subsidy, charge, and other benefits that are granted without receiving any corresponding consideration. Article 13 (2) of the former Act excludes a subsidy from the base of value-added tax. The reason why Article 13 (2) of the former Act excludes a subsidy from the base of value-added tax is that the government or a public organization grants a subsidy as a policy to promote or promote a specific project without being directly supplied with the goods or services, and therefore,

In other words, since the public subsidy is paid free of charge to the beneficiary of the subsidy due to its nature, even if Article 48(10) of the former Enforcement Decree of the Act provides that the subsidy and the public subsidy not included in the tax base shall be the national subsidy and the public subsidy not directly related to the supply of the goods or services, it is nothing more than what is possible in the interpretation of Article 13(2)4 of the former Act, which is the mother corporation, or it shall not be deemed to be a modification or supplement of the contents of the individual's rights and duties or a new provision that is not prescribed by the law, and thus, it shall not be deemed to be beyond the scope of the regulation of the mother law.

Therefore, the plaintiff's assertion that the above enforcement decree is invalid because it violates the principle of statutory reservation is without merit.

2) Part of the national subsidy

In full view of the following circumstances that can be recognized by comprehensively considering the evidence mentioned above, evidence No. 11, evidence No. 53, and evidence No. 53, and evidence No. 66 of this Court, and the purport of the entire pleadings as to the EEE division, State subsidies received from the EE division shall not be included in the tax base as subsidies not directly related to the provision of the Plaintiff’s exhibition event services. Therefore, the instant disposition calculated by including State subsidies in the tax base is unlawful, and the Plaintiff’s claim for this part is justified.

A) The State subsidy granted by the Plaintiff from the EE EE Association (EE Ministry shall be granted a subsidy to the FFFF Promotion Association, which is an institution entrusted with the support of domestic exhibitions, in accordance with the guidelines for supporting domestic exhibitions in support of the National Treasury, and the FFFF Promotion Association shall grant to the organizer of the support exhibition) is granted according to the “Plan for the Selection of the Project Eligible for the Support of Domestic Exhibitions” publicly notified by the EEE Association (GG Ministry) or the “Plan for the Selection of the Project Eligible for the Support of Overseas Trade Exhibitions”.

B) The purpose of the EE Association’s selection of “project subject to support for holding domestic exhibitions” is to provide effective export marketing opportunities to small and medium enterprises by supporting the holding of promising domestic exhibitions in accordance with Article 21 of the Exhibition Industry Development Act and Article 14 of the Enforcement Decree of the same Act, to encourage the advancement and activation of domestic exhibition industry through fostering of brand exhibitions at an international level, and to foster exhibitions with international competitiveness derived from the buyer abroad as an area for international business and exchange, and the subsidized project subject to the grant of the national subsidy granted by the EE Association is the exhibition event operated by the Plaintiff.

C) The eligibility requirements for the projects eligible for support by the EE Association shall be limited to those registered as the exhibition organizer pursuant to Article 7 of the Act on the Development of Exhibition, which are Korean nationals, and accordingly, the Plaintiff applied for a project and received a national subsidy. In other words, the beneficiary of the national non-subsidized subsidy granted by the EE Association is the Plaintiff.

D) As examined below, the DD Metropolitan City was provided with exhibition services from the Plaintiff while holding HH source shocks, etc. Even if the EE division grants State subsidies to the Plaintiff in relation to the event of display, such as HH source shocks, and the DD Metropolitan City gains profits equivalent to State subsidies, this does not constitute a direct quid pro quo relationship with the provision of exhibition services, but merely an indirect quid pro quo relationship, and is not included in the tax base under the Value-Added Tax Act.

E) With respect to the third PP environment and energy industry (ENTH III), the Plaintiff and the FFFFF Promotion Association or the CJJ entered into an agreement on the implementation of the 'Agreement on the Implementation of the Overseas Exhibitions Support Project', and the Plaintiff and CJJ entered into the 'Agreement on the Implementation of the Overseas Exhibitions Support Project' in relation to the KK TPP Environmental Technology Complex (ENVITRTX). The FFF Promotion and the CJJ appears to have entered into the said agreement in order to jointly supervise the overseas exhibition events with the Plaintiff or to support and manage the overseas exhibition events, and it is not deemed that the FFFFF Promotion Association, the CJJ or the EEEEM Ministry entered into the said agreement with the Plaintiff to provide the exhibition services from the Plaintiff.

3) Part of the Si subsidies

A) In full view of the following circumstances, the City subsidy shall not be deemed a national subsidy and a public subsidy that was paid by the DNA Metropolitan City to the Plaintiff in return for the supply of exhibition services, such as the selection of a participant in an individual exhibition, management, etc. by the Plaintiff, and that was not directly related to the supply of the services set forth in Article 48(10) of the former Enforcement Decree of the Act, based on the evidence and evidence set forth in the evidence set forth in Articles 3 through 59, 62, 64, 65, 67, and 68, excluding the Seoul PP Environment and Energy Industry Complex (ENTH III), D International Contacs, Raer Facilities Industry Complex, and the remaining exhibition events except for the DD International Atomic Energy Industry Complex in 2012, and the overall purport of the arguments set forth in the evidence set forth in Articles 3 through 59, 6

Therefore, the plaintiff's claim for this part is without merit.

(1) Article 2 subparag. 1 of the Subsidy Management Act defines the term "subsidies" as "subsidies, charges, and other benefits that are granted without receiving any corresponding consideration from the State to create or provide financial assistance with respect to affairs or projects conducted by a "person other than the State". Article 2 subparag. 1 of the Local Subsidy Management Ordinance of DD Metropolitan Cities also defines "local subsidies" as "funds that are granted to create a market price or provide financial assistance in accordance with the needs of public interest and policy measures with respect to affairs or projects conducted by a "person other than the DD Metropolitan City". According to the definition of subsidies, the definition of subsidies cannot be deemed as excluded from the tax base that is paid in return for the provision of services, etc. from the State or D Metropolitan City with respect to affairs or projects conducted by the State or D Metropolitan City.

(2) In each exhibition event, the D Metropolitan City externally represents the D Metropolitan City as its organizer, and the Plaintiff as its main supervisor (DD Metropolitan City sent to financial institutions related to the D International Financial Exhibitions, etc. a letter of public notice that the D Metropolitan City holds the above exhibition event). In the world, D Metropolitan City is the organizer of each exhibition event agreement or its business plan, and it is subject to a business agreement or business plan on the premise that the Plaintiff is a person in charge of it.

In other words, each exhibition event work agreement and each business plan are agreed and planned as follows with respect to the roles of the D Metropolitan City and the plaintiff, and the D Metropolitan City has the authority to take overall control of the project as the host organization, to finally determine the major matters of the exhibition event. The plaintiff as the host organization has been in practical affairs such as preparation and operation of the exhibition event.

① In 2005, LLiic Puic Pest was held as a joint agenda by Korea D, Anam-do, BBnam-do, C and Japan eocar, e, e, e, e, e, and e in Japan. In 2007, ee, e, e, and e, D Metropolitan City was held as a host organization. At the event held by DD Metropolitan City in 2008, the Plaintiff was a working-level organization with the hh character design Association and a joint manager. In addition, DD Metropolitan City established the Organizing Committee (the Organizing Committee was in charge of the organizing committee at the time of 2009) in relation to the kkic Pot EXPO, and entered into a joint management agreement with the Plaintiff as an exercise planning organization.

② In the PP environment and energy industry fields, DD health and food exhibition, DD International Trade X-ray, DD International Trade Organization, DD International Organization and HH hex shock, etc., administrative and financial support, such as solicitation for participation of participants, etc. so that the Plaintiff, a host institution, can play a role smoothly, and the Plaintiff, a host institution, as well as the Plaintiff, agreed with DD Metropolitan City, to frequently dispatch public officials to the Plaintiff, with DD Metropolitan City, when planning and executing the design of printed materials, display devices, and related business, he/she shall use the name of DD Metropolitan City, the host institution, and obtain prior approval from DD Metropolitan City, and when selecting a joint host institution and establishing detailed execution plan, he/she may dispatch public officials from DD Metropolitan City to the Plaintiff, and the Plaintiff agreed with DD Metropolitan City, etc. from time to time.

③ At each exhibition event, the Plaintiff, as a general manager or joint manager, performed the event together with other general managers, and played a role of formulating a comprehensive plan, participating companies, attracting Baduk, etc., or of granting subsidies from D Metropolitan Cities to each general manager.

④ Under the PP environment and energy industry promotion agreement, DIC X-type agreement, DD international trade and textile exhibition agreement, DD international agreement, DDA X-type agreement, etc., DD Metropolitan City agreed to allow the Plaintiff to terminate the agreement in cases where it is deemed inappropriate to continue the operation of the business due to the Plaintiff’s waiver of the business, lack of completion of the business, serious violation of the agreement, and unfaithful performance of the business, etc. In particular, DD international trade X-type development plan promoted by DD Metropolitan City in relation to DD international trade, DD international trade X-type development plan, which is promoted by DD Metropolitan City, may not be reconvened with the Plaintiff in accordance with the Plaintiff’s performance of the business, and when DD Metropolitan City changes the general manager of DD Metropolitan City, the Plaintiff agreed to comply therewith.

⑤ In the HHHE Joint Promotion Agreement, the Plaintiff agreed to pay the performance fee for the joint promotion to the Plaintiff, and the Organizing Committee agreed to pay the performance fee for the event agency to the Plaintiff under the KK K KK EXPO Work Agreement. In other words, the Plaintiff was paid the performance fee in the PP environment and energy industry, DD International Trade X-S, DD International New Information and Textiles Exhibitions, etc., and the Plaintiff was paid the performance analysis report on the result of the event after the completion of the DD international financial EXPO event, and received the performance analysis fee.

(4) The DD Metropolitan City established its own implementation plan with respect to the holding of DD International Trade X-E and DD International New and Fiberization Exhibitions. The plan includes the details of the Plaintiff’s selection as the responsible manager, and the work division and required budget by each competent manager. In addition, the DH HH type promotion committee and the secretariat are included in the DD Metropolitan City’s public officials.

(5) The purpose of granting subsidies to the Plaintiff is, as seen in the Plaintiff’s assertion (the preparatory brief dated May 31, 2016) and the implementation plan established by the DD Metropolitan City, it appears that DD Metropolitan City directly aims at fostering the automobile industry of DD, fostering the environmental and energy industry, facilitating new trade in marine products, fostering the textile industry, etc. rather than directly promoting the display and convention industry operated by the Plaintiff (DD Metropolitan City is jointly invested with the CCCC, etc. to efficiently carry out exhibition and convention projects, and it appears that the purpose of fostering the exhibition and convention project operated by the Plaintiff is secondary and indirect in relation to each individual exhibition event is to foster the Plaintiff’s automobile industry, activation of fishery products trade, etc.). In other words, DD Metropolitan City is to provide the Plaintiff with the relevant subsidy program, which is not directly or indirectly provided by the Plaintiff to the Plaintiff, as consideration for the provision of the subsidy program, such as HHHHD foreign trade, promotion of new trade in marine products, etc., as the Plaintiff’s subsidy is not provided to the Plaintiff’s exhibition and the E program.

(B) III PP Environment and Energy Industry (ENTECH III), D International Contact, Cuter Facility Industry, DD International Atomic Energy Industry, 2012

(1) III PP Environment and Energy Industry (ENECH III)

The following circumstances, which are acknowledged by comprehensively considering the aforementioned evidence, Eul evidence, Eul evidence No. 60 evidence, the whole purport of the argument, i.e., ① the above exhibition is an event held by the Plaintiff, Glbal Expo (K local exhibition organizer), III Energy Preservation Center, and III Trade Promotion Center for the purpose of developing the overseas markets of Korean enterprises in the field of global branding and energy and environment before the existing PPP environment and energy industry, ② the above event was supported by the subsidies of the Seoul Metropolitan City, and the Plaintiff performs public relations activities in Korea, Korean invitation of Korean companies, and Korean companies participating in the exhibition. ③ The Plaintiff concluded an agreement on the implementation of the FFFF Promotion Association or CJJ, which is the management agency of the overseas special support project while holding the above exhibition, and the Plaintiff’s claim for the subsidies of the Seoul Metropolitan City for the promotion of the project is insufficient to recognize that the Plaintiff paid the above portion of the subsidies to the Plaintiff in consideration of the lack of evidence to recognize that the project was jointly conducted by the Plaintiff in accordance with the above agreement.

(2)D international contact, cutting, and rash equipment industry;

In light of the following circumstances, i.e., ① the event is jointly organized and supervised by the Plaintiff and MMnet Korea (specialized media in the field of machinery and metal) for the purpose of information exchange related to contact and the increase in exports through the fostering of international-related exhibitions, etc.: ② there is no evidence to prove that the Plaintiff and MMnet Korea (specialized media in the field of machinery and metal) held or participated in the event in addition to the payment of subsidies for the above event; and ② there is no evidence to prove that the entries in the evidence No. 63 in the evidence No. 63 alone are insufficient to recognize that the subsidies paid to the Plaintiff by the DD Metropolitan City were supplied to the Plaintiff and paid for the above exhibition service from the Plaintiff, and there is no other evidence to support this. Accordingly, the subsidies paid by the Plaintiff in relation to the DD Metropolitan City to the DD International Contac, cut, and Rad Equipment Industry cannot be deemed to be included in the tax base pursuant to Article 13(2)4 of the former Act. Therefore,

(3) the D International Atomic Energy Industry Complex of 2012

According to the evidence No. 69, the host organization of the DD International Atomic Energy Industry is the Korea Atomic Energy Industry Council, and the DD Metropolitan City is the sponsor organization with the Ministry of Science, ICT and Future Planning, EEEE EE division, the Korea Electric Power Corporation, etc. In light of these circumstances, it is insufficient to recognize that the subsidies granted by the DD Metropolitan City to the Plaintiff for exhibition services provided by the Plaintiff and for the payment of such subsidies, and there is no other evidence to acknowledge otherwise. Accordingly, since the subsidies granted by the DD Metropolitan City to the Plaintiff in connection with the DD International Nuclear Energy Industry cannot be deemed to be included in the tax base pursuant to Article 13(2)4 of the former Act, the Plaintiff’s claim for this part is reasonable.

4) Sub-committee

The Plaintiff issued a tax invoice with some of the city expenses and government subsidies received from the DD Metropolitan City and EEE EE Ministry as the recipient of the DD Metropolitan City as the exhibition rent. After the settlement of the project cost, the Plaintiff returned the balance and interest of the subsidy to DD Metropolitan City and EEE Ministry, and the Defendant issued the instant disposition with the subsidy as the tax base for the amount calculated by deducting the subsidies issued in the name of the exhibition hall rent among the city expenses and government subsidies and the subsidies returned to DD Metropolitan City and EE Ministry from the deduction of the subsidies returned to the DD Metropolitan City and EE Ministry.

However, among government subsidies and city subsidies, III PP environment and energy industry (ENECH III), DPE international contact, cutting and Radr equipment industry, and DD International Atomic Energy Industry Complex in 2012 are subsidies not directly related to the supply of goods or services, and thus, they are not included in the tax base, and thus, a legitimate tax amount should be calculated after excluding each of the above subsidies from the tax base. However, even based on all materials submitted to this court, the pertinent disposition of this case cannot be calculated, and thus, the pertinent amount of tax cannot be revoked in its entirety.

3. Conclusion

Therefore, the plaintiff's claim of this case shall be accepted within the scope of the above recognition, and the remaining claims shall be dismissed due to the lack of reasonable grounds. However, since legitimate tax amount cannot be calculated based on all materials submitted to this court, it is decided to revoke both the disposition of this case and the judgment of the first instance court. It is so decided as per Disposition.