Early High Court Decision 2014J325 (Law No. 11, 2014)

Where the rent is not received separately after only management expenses for the amount of actual expenses, it constitutes free supply of services.

Management fees received from the occupant enterprise shall be limited to those received under the name of compensation for actual expenses, but it falls under the provision of services without any rent, and thus is subject to non-deduction of input tax amount.

2014Guhap53545 Disposition of revocation of Disposition of Imposition of Value-Added Tax

AA Promotion Foundation, a foundation

Head of the tax office

April 1, 2015

April 29, 2015

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The imposition of value-added tax and corporate tax on October 1, 2013, which the Defendant notified to the Plaintiff of correction, shall be revoked, respectively.

1. Details of the disposition;

A. The Plaintiff is a non-profit corporation that has established a comprehensive and systematic support project for small and medium enterprises and venture businesses in accordance with the establishment and operation ordinance of the AA Promotion Foundation.

B. As part of the support project for small and medium enterprises and venture businesses, the Plaintiff established six centers within the Sungnam-si as follows, and leased offices to small and medium enterprises and venture businesses at rent lower than the market price.

The First Center

(B)(B).

2Centers

(CCC Building)

3 Center

(1 business center)

4Centers

(2 business center)

5 Center

(B) Global Game hub)

6 Center

(Mob-game hub center)

Location

OOO-gu OO-dong 25-1

OO-si O1 O1 Dong 587

OO-gu OO-dong 190-1 O-frequency

OO-gu OO-dong 135-5 O-factory

OOOO-gu OOO-dong 263 Osuaker

Date of Establishment

August 29, 2005

November 15, 2000

February 1, 2007

April 8, 2009

June 9, 2009

August 9, 2011

Occupancy

Enterprise

22.Handies

24 Mags

12. Multiple yarns

14. Mangies

19 Mags

22.Handies

Jinay

The first and second centers shall operate the administrative property of Sungnam-si, the third center shall be the property owned by the plaintiff, and in the case of the fourth, fifth, and six centers, the building leased by the plaintiff to the occupant enterprises.

C. With respect to revenues and expenses incurred in the above resident support project, the Plaintiff reported and paid the value-added tax by calculating the rent received from the occupant enterprise as the sales tax base, ② the rent and related expenses paid by the Plaintiff to the lessor of the building 4, 5, and 6 center as the purchase tax base, and ① the above amount as the gains accrued from the profit-making business of a non-profit corporation as prescribed by the Corporate Tax Act, and ② the corporate tax has been reported and paid by treating the above amount as the

D. The Defendant: (a) on the ground that the Plaintiff received only a part of the management expenses from the occupant enterprises at the Center No. 5 (OBB Center; (b) and the Center No. 6 (OBB Center; hereinafter the same shall apply; and (c) the rest of No. 1 through No. 4 shall be referred to as the "OB Center"; (d) and operated without receiving rent, it shall be deemed that the Plaintiff is a free supply of services under Articles 7(3) and 17(2)6 of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter the same shall apply) and the input tax amount related to the value-added tax (the amount equivalent to 50% of the rent and management expenses that the Plaintiff paid to the lessor at issue) from the output tax amount; and (d) it shall be deemed that the input tax amount related to the above center is deductible expenses for business activities, and shall be included in the disposition of the value-added tax for 20 years from 200.10.

E. On December 24, 2013, the Plaintiff filed an appeal with the Tax Tribunal against each of the instant dispositions, but the Tax Tribunal dismissed the Plaintiff’s claim on April 11, 2014.

Facts that there is no dispute over the basis of recognition, entry in Gap evidence 1, 2, 3, and 5 (including branch numbers for those with additional numbers; hereinafter the same shall apply), the purport of the whole pleadings.

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

1) As to the imposition of value-added tax of this case

A) In imposing the value-added tax in this case, the Defendant stated the reason for the disposition in the disposition only as the "non-deduction of input tax amount related to the high-purpose business", and the term "high-purpose business" is not used in the Value-Added Tax Act, and thus the Plaintiff cannot identify the reason for the disposition by itself. This is against Article 23 (1) of the Administrative Procedures Act that "when an administrative agency conducts the disposition, it shall present the basis and reason to the party concerned".

B) The rectification and notification of the value-added tax is a violation of the principle of no taxation without the law, on the ground that the input tax deduction related to the high-purpose business not stipulated in the Value-Added Tax

C) The Plaintiff received some of the management expenses from the enterprise located in the key center and paid them to the Plaintiff to the lessor of the building in the key center. Since the lease services provided by the Plaintiff to the enterprise located in the key center and the management expenses paid by the Plaintiff to the Plaintiff, it shall not be deemed as free supply of services.

D) Both the key and the key and other centers are the Plaintiff’s lease to the occupant enterprises at a price lower than the market price in order to support the occupancy of small and medium enterprises and venture businesses. Although the operation form is essentially the same and there is no reason to view that only the input tax amount related to the key center is a discriminatory disposition for the same, it is unlawful.

2) As to the disposition of imposition of the corporate tax of this case

Although the Plaintiff gains income through the operation of the key center, the expenses incurred in the operation of the center did not accrue by making profits from the opening of the revenues. Since the business form of the key center and the center other than the key issues are identical, the Plaintiff’s operation of the key center shall also be deemed as a profit-making business under the Corporate Tax Act. However, the disposition imposing the corporate tax of this case

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

1) According to the 'global Game hub Business Guidelines' and the 'Detailed Operating Guidelines for Ebbba Games Center' prepared by the Plaintiff with respect to the key center, enterprises located in the key center are entitled to 50% of the full amount of rents (in the case of the Center 5, the full amount of rents provided by the Plaintiff in the case of the Center 5, and the 6 Center, the Plaintiff and the Gyeonggi Content Agency shall each provide 50% of rents

2) The Plaintiff, in fact, has received 50% of the management fees from the occupant enterprises in the key center, but did not collect rent, while the Plaintiff has received the agreed rent from the occupant enterprises in the center outside of the key issue.

3) The Defendant stated in the notice of the imposition of value-added tax in this case that the input tax deduction related to the high-purpose business is the basis for calculating the amount of tax, and the notice of the imposition of the corporate tax in this case stated that the “non-deductible of expenses related to the high-purpose business”

Facts that there is no dispute over the basis of recognition, entries in Gap evidence 1, 6, and 7, the purport of the whole pleadings

D. Determination

1) As to the imposition of value-added tax of this case

A) First, we examine the argument that an administrative procedure violates the procedure stipulated in Article 23(1) of the Administrative Procedures Act. According to Article 3(2)9 of the Administrative Procedures Act and Article 2 subparag. 5 of the Enforcement Decree of the same Act, the Administrative Procedures Act does not apply to matters concerning the imposition and collection of taxes pursuant to tax-related Acts and subordinate statutes. Thus, each of the dispositions of this case, which is a tax imposition disposition, does not apply

Meanwhile, Article 9(1) of the National Tax Collection Act, which provides for the procedure for the notice of tax payment, provides that "period, items, amount of tax, basis for calculating the amount of tax, payment deadline, and place of tax payment" shall be stated in the notice of tax payment. Since the basis for calculating the amount of tax, among the necessary matters to be stated in the notice of tax payment under Article 9(1) of the National Tax Collection Act, constitutes the core of the notice of tax payment, as the basic materials that can be determined by the taxpayer to determine and determine whether or not the taxpayer is dissatisfied therewith, the omission or basis for calculating the amount of tax shall be deemed unlawful. However, the basis for calculating the amount of tax shall not be deemed unlawful if it is possible to recognize the content or method of taxation in light of the purpose of legislation of the notice of tax payment, etc., or the degree of omission is minor (see, e.g., Supreme Court en banc Decision 94Nu9696, Jul

According to the health account and evidence No. 1 of this case, the defendant stated the tax base amount, tax rate, and calculated tax amount in the imposition of the value-added tax in this case, and stated the "non-deduction of input tax amount related to the high-purpose business" as the basis for the calculation thereof. The plaintiff appears to have been able to determine the grounds for the disposition through the statement of the tax base amount and the calculation basis, and even if the term "high-purpose business" is not provided for in the Value-Added Tax Act, it is difficult to view that the above circumstance alone is insufficient to state that the plaintiff's appeal is to the extent that it impedes the determination and determination of whether to appeal. Accordingly,

B) We examine the argument that the Plaintiff violated the principle of no taxation without representation. The Defendant deemed that the lease of the key center constitutes a free supply of services under Articles 7(3) and 17(2)6 of the former Value-Added Tax Act, and thus, deducted the pertinent input tax amount from the output tax amount. Thus, the instant disposition was made pursuant to the former Value-Added Tax Act, and the Plaintiff used the expression “the purpose business” in the disposition form, and cannot be viewed as a violation of the principle of no taxation without representation.

C) We examine whether it is legitimate to exempt the pertinent input tax amount by deeming the lease of the key center as the free supply of services.

Article 7 (3) of the former Value-Added Tax Act provides that "the supply of services by an entrepreneur to another person without receiving any consideration shall not be deemed the supply of services", and Article 17 (2) 6 of the former Value-Added Tax Act stipulates that "the input tax amount related to the business of supplying goods or services on which the value-added tax is not levied" shall

The management fees that the plaintiff received from the enterprise located in the center at issue are merely paid as compensation for actual expenses (the management fees are paid to only 50% and the remainder is borne by the plaintiff). It is difficult to regard it as compensation for real estate leasing services. As seen earlier, unless the plaintiff did not receive rent from the enterprise located in the center at issue, the lease of the center at issue falls under the supply of services without receiving the compensation under Article 7 (3) of the former Value-Added Tax Act, and it is excluded from the subject of taxation under the Value-Added Tax Act, and the relevant input tax amount is not deducted from the output tax amount pursuant to Article 17 (2) 6 of the former Value-Added Tax Act.

Meanwhile, Article 17(2)6 of the former Value-Added Tax Act (amended by Act No. 11129, Dec. 31, 2011) provides that an input tax amount related to the business of supplying goods or services exempt from value-added tax shall not be deducted from the output tax amount, but does not provide for a separate provision that an input tax amount related to the business of supplying goods or services exempt from value-added tax shall be deducted from the output tax amount. However, the input tax amount for the goods or services, etc. used for the business exempt from value-added tax does not differ from the input tax amount for the goods or services, etc. used for the business exempt from value-added tax (see, e.g., Supreme Court Decision 2004Du13288, Oct. 27, 2006). Prior to the amendment of the Value-Added Tax Act, the issue tax amount related to the value-added tax center’s input tax amount should be deducted from the output tax amount. Therefore, the Plaintiff’s assertion on this part is without merit.

D) We examine the argument that different points between the key center and the key center are discriminatory treatment without reasonable grounds. According to the aforementioned facts and each evidence, the key center and the center other than the key center are different from the building used, and the rent paid by the Plaintiff to the lessor of the building is clearly divided, and the Plaintiff has received rent from the other center than the key issue. Thus, it cannot be said that it is reasonable to view the key center different from the other center operated without compensation by the Defendant without compensation from the other center. This part of the Plaintiff’s assertion is rejected.

E) Therefore, the instant disposition imposing value-added tax is lawful.

2) As to the disposition of imposition of the corporate tax of this case

Article 3(3) of the former Corporate Tax Act (amended by Act No. 11607, Jan. 1, 2013) provides that corporate tax shall be imposed only on income generated from a profit-making business prescribed in each subparagraph of the same paragraph with respect to a non-profit domestic corporation. As such, a non-profit domestic corporation may not impose corporate tax unless income accrues from a profit-making business, even though it is income with respect to a non-profit domestic corporation. Whether a business falls under a profit-making business is not related to the business of a non-profit corporation, such as whether the profit earned from the business is for achieving the proper purpose of the corporation, but in order to constitute a profit-making business, the business itself shall be either profit-making or carried out for profit-making business (see, e.g., Supreme Court Decision 2003Du12455, Sept. 9,

In this case, as seen earlier, insofar as the Plaintiff did not receive any rent, user fee, or other money from the key center as well as some of the management expenses equivalent to the actual expenses from the key center, it can be known that the Plaintiff does not have any income from the lease of the key center. Accordingly, the operation of the key center cannot be deemed as having any profitability, and so, the expenses incurred in response thereto shall not be included in the calculation of losses. Accordingly, the imposition of the corporate tax of this case on such premise is legitimate, and the Plaintiff’s assertion on this is without merit.

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.