Review Division 2013-144 ( December 31, 2013)

A corrected tax invoice shall be issued within the limit of the value of supply actually supplied.

If any value not supplied is included in the revised tax invoice issued by reason of termination of contract, etc., the portion on the value not supplied shall not be included in the value of the revised tax invoice.

Article 16 (Tax Invoice)

2014Guhap4311 Revocation, etc. of Disposition Rejecting Value-Added Tax Refund

AA Construction Corporation

BB Director of the Tax Office

August 28, 2015

November 6, 2015

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s refusal to apply for the refund of value-added tax of KRW 82,171,300 against the Plaintiff on May 30, 2013 and the imposition of penalty tax of KRW 35,88,70 against the Plaintiff on February 2, 2012 shall be revoked.

1. Details of the disposition;

A. On February 22, 2012, Nonparty CCC Co., Ltd. (hereinafter “CC”) awarded a contract for a new construction work of 00,000 - 00 - 00 - 00 -00 - 000 - 000 - 000 - (hereinafter “new construction work of this case”).

B. From the DD Integrated Construction on May 20, 2012, the Plaintiff concluded a contract to reduce the contract amount of reinforced concrete construction to KRW 5,367,678,50 (including value-added tax) and soil construction (including contract amount of KRW 2,059,200,000, value-added tax) among the instant new construction works. On June 4, 2012, the Plaintiff concluded a contract to reduce the contract amount of reinforced concrete construction to KRW 5,367,678,50 (including value-added tax).

C. On December 28, 2012, the Plaintiff and DD General Construction agreed to terminate each of the instant subcontracting contracts and to issue tax invoices as amended for the amount of KRW 2,806,801,00 for each of the instant subcontracting agreements, and KRW 1,673,878,50 for the amount payable prior to the construction agreement.

D. The Plaintiff, while carrying out construction projects under each of the instant subcontracting agreements, issued sales tax invoices as follows, and applied for refund of KRW 325,729,934 at the time of filing a return of the value-added tax for the second period of value-added tax in 2012.

E. The Defendant conducted on-site verifications with respect to the Plaintiff, and notified the Plaintiff of the pre-announcement of taxation prior to imposing penalty tax on the reduction of sales revenue and the imposition of penalty tax on the sales tax invoice for the first period of employment in 2012, ② the reduction of excess sales revenue and the increase in sales revenue for the second period of employment in 2012, ③ the decision to deny the revised tax invoice. On March 29, 2013, the Defendant notified the Plaintiff that KRW 24,545,455, and KRW 207,69,934 for the second period of employment in 2012.

F. On April 26, 2013, the Plaintiff dissatisfied with the notice prior to the imposition of value-added tax, and filed a request for pre-assessment review with the Defendant on April 26, 2013. On May 30, 2013, the Defendant rejected the application for refund of KRW 82,171,30 from among the applications for refund of value-added tax for the second period of value-added tax in 2012, the Plaintiff refused the application for refund of KRW 35,88,70 from among the applications for refund of value-added tax in 2012 (hereinafter “the application for refund of KRW 82,171,30 and the imposition of additional tax amount of KRW 35,88,70 from the application for refund of value-added tax in 35,88,934”).

G. On August 14, 2013, the Plaintiff dissatisfied with the instant disposition, filed a request with the National Tax Service for review, but was dismissed by the National Tax Service on December 31, 2013.

[Ground of recognition] Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 through 4 (including paper numbers), dispute-free facts, the purport of the whole pleadings

2. The plaintiff's assertion

A. On June 30, 2012, the Defendant deemed that the Plaintiff received advance payment prior to the actual commencement of construction works as a tax invoice, and subsequently reduced the first sale in 2012 equivalent to the supply value under the said tax invoice, and recognized it as the second sale in 2012, and increased the second sale in 2012. However, the Plaintiff filed a return on the receipt of payment of construction price equivalent to the first sale in 2012, beginning with the construction before the date of the preparation of the instant subcontract agreement, and thus, was erroneous for the Defendant’s reduction of the first sale in 2012 and the imposition of penalty tax on the second sale in 2012.

B. For the following reasons, the Defendant reduced the amount of sales set forth in the second year in 2012, and denied the total amount of the returned tax invoice issued by the Plaintiff.

1) DD Integrated Construction agreed with CCC to include the construction cost payable to the construction company that had been performing the existing new construction work (hereinafter referred to as “unredeemed construction cost”) in the construction cost of the new construction work.

2) When entering into each of the instant subcontracting contracts with the Plaintiff, DD Integrated Construction agreed to include the unpaid construction cost in each subcontract price for the existing construction business entity in the same manner as the said new construction contract was entered into.

3) After the termination of each of the instant subcontracting contracts, the Plaintiff filed a revised tax invoice for the total amount of KRW 1,673,878,500 for the said unpaid construction costs under an agreement with DD Integrated Construction Division.

4) Since the unpaid construction price for an existing construction business entity does not constitute the Plaintiff’s sales, the amount calculated by the rate of the fixed rate for the unpaid construction price from the sales amount reported at the time of issuance of each sales tax invoice shall be reduced by the amount equivalent to the amount of the sales amount reported, and the amount reported by the Plaintiff by issuing

However, KRW 70,845,078, out of KRW 1,673,878,50, which the Plaintiff issued a revised tax invoice and reported by the Plaintiff, was increased by adding the profit equivalent to the construction cost of the instant new construction project to the subcontract price of the instant subcontractor, and the Plaintiff and DDDDD Construction agreed to reduce the amount at a certain ratio out of the increase in the construction cost of the said new construction project and each subcontracted construction is terminated. The amount of KRW 903,03,428, which is calculated to be borne by the Plaintiff as at the beginning of each of the instant subcontracting projects. Accordingly, the reduction in KRW 1,673,878,50, which constitutes the decrease in the supply value and thus is subject to a revised tax invoice report.

3. Determination

(a) Facts of recognition;

1) The CCC, as the executor of the instant new construction project, selected EE Mutual Savings Bank (hereinafter referred to as “FFF”) as a lender and selected the FFFF as a contractor and performed the instant new construction project. CCC concluded a sale management trust contract with GG Trust Co., Ltd. on December 23, 2009 (hereinafter referred to as “GGG Trust”). The first priority beneficiary under the said sale management trust agreement was the mutual savings bank, the second priority beneficiary was the FFF, and the subordinate beneficiary was the CCC. The CCC changed the FF from the FF to the HH Construction (hereinafter referred to as “H Construction”), and on October 27, 201, the CCC changed the FF to the first priority beneficiary of the sale management trust agreement.

2) On February 22, 2012, the CCC entered into a contract for the following (hereinafter referred to as the “instant contract for new construction project”).

【New Construction Project Contract】

○ Construction cost: 14,631,465,000 won (including value-added tax)

○ Construction Period: February 22, 2012 to May 17, 2013

○ Special Conditions for the Construction Contract: AD comprehensive construction shall succeed to the obligation to the existing construction cost and settle the actual input cost, and at this time, it shall not exceed KRW 1.5 billion. The actual expense settlement is to be directly agreed upon by DD comprehensive construction. In this case, the construction cost shall be increased as much as the excess amount exceeds the amount (Article 7(5)).

On March 12, 2012, the CCC changed the first beneficiary of the 2nd priority in the sale management trust agreement to the JJ and the third priority beneficiary to the DD Integrated Construction.After all, the CCC and DD Integrated Construction changed the contract amount of the new construction project in this case to the DD Integrated Construction (including value added tax) on May 8, 2012, and increased each of them to KRW 17,651,556,000 (including value added tax) on July 24, 2012.

3) Between April 2012 and May 2012, DD General Construction paid 1,073,113,000 won to a subcontractor who had been awarded a subcontract for reinforced concrete construction works, civil engineering works, etc. among the instant new construction works from FF or H Construction that had been previously undertaken during the period from April 2012 to May 2012, and agreed on the settlement of construction cost.

4) On May 20, 2012, DD General Construction subcontracted a reinforced concrete construction project among the instant new construction projects to the Plaintiff. The details of the said subcontracting contract for reinforced concrete construction are as follows.

【Contract for Construction Contract for Aggregate Telecommunications Construction Contract】

○ : CCC and principal contract title: 00 00 new construction works

○ Subcontract Construction Name: reinforced concrete construction among 00 000 Newly constructed works

○ Construction Period: From May 20, 2012 to December 31, 2012

○ Contract Amount: 5,860,800.00 won (including value-added tax)

○ The above construction amount includes the payable amount (1,603,580,000) (2). Based on paragraph 12 above, a beneficiary (Plaintiff) shall settle the accounts of the unpaid amount and claim the amount of the already executed construction.

§ 13).

Since June 4, 2012, D comprehensive construction and the Plaintiff changed the subcontracting contract for reinforced concrete construction as follows.

[Contents of Amendment to the Contract for the Construction Contract for the Construction Contract]

○ Contract Amount: 5,367,678,500 won (including value-added tax)

(Contract Amount before modified: 5,860,800,000 won)

○ (Change) The above construction amount includes the amount payable for the work (a change of KRW 1,110,458,50).

(H) The above amount of construction includes the amount payable at the beginning of 1,603,580,000 won per month.

5) On May 20, 2012, DD Integrated Construction subcontracted to the Plaintiff a sub-construction among the instant new construction works. The terms and conditions of the said sub-construction subcontract are as follows.

【Terms and Conditions of the Subcontract Agreement for Small and Medium Projects】

○ : CCC and principal contract title: 00 00 new construction works

○ Subcontract Project Name: 00 000 New Construction Works

○ Construction Period: From May 20, 2012 to December 31, 2012

○ Contract Amount: 2,059,200,000 won (including value-added tax)

○ The above construction amount includes the payable amount (563,420,000 won) (Article 12).

Based on paragraph 12 above, the recipient (Plaintiff) shall settle the amount of the unpaid payment and claim the amount of the already constructed construction (Paragraph 13).

6) The Plaintiff received the progress payment for each of the instant subcontracting contracts from DD Construction, and issued the sales tax invoice as follows.

【Written Claim for Construction of Aggregate Telecommunications Construction and Issuance of Tax Invoice】

Gu Sector

Details of issuance of tax invoices

Date of the Request for Gender Equality

Fair Rate

Date of Preparation

Total

Value of Supply

Amount of tax:

progress payment (one-time payment)

July 31, 2012

241,200

219,272

21,927

July 30, 2012

4.49%

The progress portion (two times)

August 31, 2012

66,000

60,000

6,000

August 30, 2012

5.72% by mass

The progress portion (three times)

September 27, 2012

3,493,600

3,176,000

317,600

September 25, 2012

70.81%

60 60 60

3,800,800

3,455,272

345,527

(unit:,000 won)

【Written Requests for Construction and Issuance of Tax Invoices】

Gu Sector

Details of issuance of tax invoices

Date of the Request for Gender Equality

Fair Rate

Date of Preparation

Total

Value of Supply

Amount of tax:

Advance Payments

June 30, 2012

300,000

272,727

27,273

progress payment (one-time payment)

July 31, 2012

396,880

360,800

36,080

July 30, 2012

19.27%

The progress portion (two times)

August 31, 2012

90,000

81,818

8,182

August 30, 2012

23.64%

The progress portion (three times)

September 27, 2012

50,000

500,000

50,000

September 25, 2012

50.35%

Consolidateds

1,336,880

1,215,345

121,535

(unit:,000 won)

7) On December 28, 2012, the CCC and DD Integrated Construction drafted a settlement agreement with the effect that the instant new construction contract will be terminated and settled as follows. On January 4, 2013, Chuncheon District Court’s Crossing registry issued a fixed date in the said settlement agreement.

【Settlement Agreement on the Termination of Contract for New Construction Works】

○ Amount claimed: 7,724,813,725 won

○ Account Payable before a construction contract: 1,308,000,000 won

* At this time, the payable amount is the existing debt of the CCC, and the DD Integrated Construction is issued to the CCC with a revised tax invoice equivalent to the above amount, and the CCC accepted it.

○ Payment for the Time Limit: 1,582,558,100 won

○ Final Agreeds: 4,834,255,615 won

The CCC and DD General Construction enter into settlement agreement on the balance (4,834,25,625 won) after deducting the amount payable (1,582,558,100 won) incurred prior to the construction contract from the claim amount (7,724,813,725 won) incurred during the construction project and the amount paid prior to the claim amount (1,58,100 won).

8) On December 28, 2012, the Plaintiff drafted a settlement agreement with DD General Construction to terminate each of the instant subcontracting contracts and settle the said agreement as follows. On January 4, 2013, the Chuncheon District Court’s Crossing registry office obtained a fixed date in the said settlement agreement.

[Settlement Agreement upon Termination of each Contract of this case]

○ Subcontract Construction Name: Earth and reinforced concrete construction among 00 0000 Newly constructed works;

○ Amount claimed: 5,137,679,500 won

○ Account Payable before a construction contract: 1,673,878,500 won

○ Payment for the Initial Claim: 657,000,000 won

○ Final Agreement: 2,806,801,000 won

○ At this time, the payable amount is the existing debt of DD General Construction, and the Plaintiff issues a revised tax invoice to D General Construction at the same amount, and D General Construction is accepted.

○○ D General Construction and the Plaintiff settled accounts for the remainder (2,806,801,00 won) after deducting the amount payable (1,673,878,500 won) incurred prior to the construction contract from the claim amount (5,137,679,500 won) incurred during the construction project and the amount paid for the term of claim (657,00,000 won). In this case, the Plaintiff finally agrees to set off the construction cost (80,000,000 won) that shall be paid to D General Construction at the apartment construction site at 000 apartment construction site against the above settlement amount (80,000,000 won).

9) On December 31, 2012, the Plaintiff issued a revised sales tax invoice of KRW 1,673,878,500 for D Integrated Construction, and applied for refund of KRW 325,729,934 when filing a return of value-added tax for 2012.

10) The Defendant conducted on-site inspections on confirmation of the Plaintiff and completed the following tax adjustment.

① Since a tax invoice for subcontracting contracts issued by the Plaintiff on June 30, 2012 was selected without actual sales, the amount of the said tax invoice reduced the sales amount of the first time in 2012 and added it to the second time sales amount in 2012.

② Of the contract amounts under each of the instant subcontracting contracts, the term “prepaid amount (1,10,458,50 won for steel reinforced concrete construction: 563,420,00 won for soil construction: 1,673,878,500 won for soil construction: 563,420,00 won for soil construction: 1,673,878,50 won for soil construction)” is the contract amount to be paid to the existing construction enterprise rather than the cost for service provided by the Plaintiff. Therefore, the sales amount shall be reduced by recognizing only the remaining amount after deducting the amount equivalent to each of the prepaid amount (786,314,00 won for steel reinforced concrete construction: 786,314,00 won for soil construction, and 283,680,000 won for soil construction: 283,68

③ The Plaintiff’s revised tax invoice was also KRW 1,673,878,500 of the revised tax invoice issued on December 31, 2012, and cannot be deemed as the amount of the Plaintiff’s sales reduced, and thus, the said revised tax invoice is denied.

11) The Plaintiff and DD Integrated Construction are in the same location as each other, and the representative director of each company is in the relationship of marriage.

[Reasons for Recognition] Gap's 1 to 8, 19, Eul's 1 to 9.12, each entry (including each number), the non-contentious facts, the purport of the whole pleadings

B. Determination

1) Nature of KRW 1,673,878,500 on the revised tax invoice dated December 31, 2012

With respect to the nature of KRW 1,673,878,50 on the revised tax invoice issued by the Plaintiff, the Plaintiff asserted that the amount agreed to be reduced due to the termination of the new construction project of this case and the amount equivalent to the material cost to be borne by the Plaintiff under the settlement agreement after the completion of the new construction project of this case was increased at the beginning of the subcontract price of the new construction project of this case. The Defendant asserted that the amount indicated as the "amount unpaid" under each contract of this case is the construction cost to be paid to the existing construction enterprise, i.e., the amount payable to the existing construction enterprise. In light of the following circumstances revealed by the fact of the above recognition, it is reasonable to view that the revised tax invoice is the construction cost to be paid to the existing construction enterprise.

① Each subcontract contract of this case explicitly states that "the above construction amount shall include the money payable for the construction (including the money payable for the steel reinforced concrete construction: 1,110,458,500 won, soil construction: 563,420,000 won)."

② Generally, even if there is any error in the terms of the original contract, the two parties’ settlement agreement will be entered in the agreement, irrespective of the original contract, when it prepares the settlement agreement due to the termination of the contract. However, the settlement agreement following the termination of each subcontract of this case includes KRW 1,673,878,500 under the name of the account payable before the contract of construction. Paragraph (1) of the agreement states that the said account payable is an existing obligation of DD comprehensive construction, and the Plaintiff issued a revised tax invoice and accepted D comprehensive construction in the amount equal to the said amount. The Plaintiff and D comprehensive construction obtained a fixed date with respect to the said settlement agreement.

③ Under each of the instant subcontracting agreements, the sum of the “prepaid amount of construction” accounts is 1,673,878,500 won (1,110,458,500 won + 563,420,000 won) and the amount of the “paid amount incurred before the construction contract” under the settlement agreement, and the Plaintiff issued a revised tax invoice for KRW 1,673,878,50.

④ The Plaintiff entered into the instant subcontract agreement on May 10, 2012 with the construction cost of KRW 871,60,000,000. However, in order for the Plaintiff and a related company to distribute profits from the instant new construction project, the Plaintiff concluded a subcontract again on May 20, 2012 by increasing the construction cost to KRW 2,059,20,000. After the termination of the instant new construction project, the Plaintiff asserted that the said subcontract agreement on the said new construction project would be reduced due to the termination of the construction profit, and that it was difficult for the Plaintiff and the Defendant to submit the said subcontract agreement on May 20, 2012 without stating any changes in the contract amount (Evidence A7) and the “prepaid amount”. However, in light of the fact that each of the said contracts was submitted to the Plaintiff and the Defendant, each of the aforementioned comprehensive construction project contracts, each of which was alleged to have been submitted.

⑤ The Plaintiff asserts that part of the amount of the revised tax invoice issued is the amount of reduction in the construction cost as the Plaintiff agreed to pay for the materials cost borne by DD Integrated Construction. However, it is insufficient to recognize that there was a settlement agreement between DD Integrated Construction and the Plaintiff on the burden of material cost, in addition to the fact that DD Integrated Construction bears the cost of the construction cost only by the evidence No. 21-1 to 18 alone.

④ At the time of the conclusion of the instant new construction contract, the Plaintiff asserts that the DD General Construction did not succeed to the existing obligation with the CCC, but did not merely paid the construction cost by the CCC, and only paid the actual act by the Plaintiff, and that the CCC paid the existing construction cost in full from JJ. As such, D General Construction or the Plaintiff did not have any construction cost to be paid to the existing construction company. However, the CCC’s settlement agreement between D General Construction and CCC included approximately KRW 1.3 billion as the amount payable prior to the construction contract. Since D General Construction and CCC are the existing obligations of CCC, D General Construction were to issue a revised tax invoice in proportion to the above amount. In light of the fact that D General Construction and D General Construction made a settlement agreement between April 5, 2012 to the existing construction company, it is difficult to view that D General Construction and D General Construction made a partial payment of construction cost from D General Construction to D General Construction and D General Construction and D General Construction and D General Construction as the first beneficiary of D General Construction and D General Construction to D General Construction and D Special Construction.

Therefore, it is legitimate for the Defendant to reduce the portion related to the amount of accrued construction out of the second sales in 2012, and to deny the Plaintiff’s revised tax invoice.

2) Nature of the issuance of the tax invoice dated June 30, 2012

The Plaintiff asserts that the tax invoice of June 30, 2012, from April 2012 to April 2012, issued the completion payment for each of the subcontracted projects in this case. In light of the following circumstances known by the fact of the above recognition, it is reasonable to deem that the tax invoice of June 30, 2012, issued by the Plaintiff, is not for the progress payment, but for the advance payment, rather for the advance payment.

① The Plaintiff issued a tax invoice on June 30, 2012 and received the payment corresponding thereto on August 2, 2012. According to the evidence No. 6-1 through 5 of the Evidence No. 6-1, each item and amount of the first time written claim, the inspector of the completed portion of the construction work, and the first time electronic tax invoice pursuant to the first claim, and thus, the portion of the tax invoice issued on June 30, 2012 previously requested ought to be deemed an advance payment claim.

② According to the evidence evidence Nos. 9 and 10 (including each number), the fact that part of reinforced concrete construction or civil construction was implemented at the site of the instant new construction project from April 2012 can be recognized. However, there is no evidence to acknowledge that such construction was conducted by the Plaintiff (A evidence No. 19 was left at the site until May 2012 according to each settlement agreement, and DD comprehensive construction was conducted with its settlement agreement for the progress of construction).

Therefore, it is legitimate to determine that the Defendant’s tax invoice as of June 30, 2012 was a tax invoice for advance payment and impose additional tax on the Defendant by deeming the tax invoice as a tax invoice for advance payment pursuant to Article 9(3) of the former Value-Added Tax Act (amended by Act No. 11873, Jun. 7, 2013) and Article 54(2) of the Enforcement Decree of the same Act.

C. Sub-committee

The defendant's disposition of this case is legitimate.

4. Conclusion

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