Whether the zero-rate Tax Rate is applied to infrastructure

The supply of buildings, etc. based on the Local Finance Act is not subject to zero tax rate because only zero tax rate is applied to infrastructure facilities under the Act that are supplied by an executor under the Private Investment Act by the same Act.

Article 105 of the Restriction of Special Taxation Act, applicable to zero-value tax rate 3-2

1. The plaintiff's appeal is dismissed.

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

1. Details of the disposition;

A. The Plaintiff newly constructed a ○ integrated bus terminal building (including all terminal facilities, such as automobile depots, cargo handling stations, maintenance stations, gas station offices, guard rooms, getting on board and a vice president, etc.; hereinafter referred to as the “instant building”) with a total floor area of 12,082.01 square meters, building area of 5,388.5 square meters on the ○○○○○-dong, ○○○○-dong, ○○○○-dong, and 34,900 square meters on the land owned by ○○○-si, ○○○○-si, and ○○○○-dong, ○○○○○○-si, and 34,900 square meters on September 14, 2001.

B. On December 18, 2001, the Plaintiff, upon completion of the instant building, donated the instant building to ○○ Metropolitan City pursuant to the initial construction permit condition, and pursuant to Article 75 of the former Local Finance Act (amended by Act No. 7663 of Aug. 4, 2005) and Article 82 of the former Enforcement Decree of the Local Finance Act (amended by Presidential Decree No. 1926 of Dec. 30, 2005), the Plaintiff completed the registration of ownership transfer under the name of ○○ Metropolitan City as to the instant building on December 21, 2001, and the ○○○○ Metropolitan City grants permission to use the instant building, which is public property, for a period from September 201 to 19, 201, pursuant to Article 82 of the Enforcement Decree of the former Local Finance Act.

C. On December 21, 2001, the Plaintiff issued two copies of the tax invoices consisting of 16,548,850,100 supply value of the instant building and its parking lot facilities (hereinafter “instant building, etc.”) which were donated to ○○ Metropolitan City as above. In filing a return of the second-year value-added tax in 2001, the Plaintiff reported and paid value-added tax by adding the total amount of KRW 1,654,885,010 to the output tax amount of each of the said tax invoices.

D. After that, on June 19, 2003, the Plaintiff submitted to the Defendant a written request for correction of the amount of reduction of KRW 1,654,885,010 as value-added tax on the donation of the instant building, etc. on the ground that the donation of the instant building, etc. is not subject to zero tax rate under Article 105 subparagraph 3-1 of the former Restriction of Special Taxation Act (amended by Act No. 6538, Dec. 29, 2001; hereinafter referred to as the “former Act”). Accordingly, on October 24, 2003, the Defendant rejected the Plaintiff’s request for correction on the ground that the donation of the instant building, etc. does not fall under zero-rate tax rate under the above provision (hereinafter referred to as the “instant disposition”).

(In fact that there is no dispute, Gap evidence Nos. 1, 2, and 3-1, 2, Gap evidence Nos. 4 and 5-3, Gap evidence Nos. 6 and 7, and the purport of the whole pleadings.

2. Whether the disposition is lawful;

A. The parties' assertion

(1) The defendant asserts that the donation of the building, etc. of this case is not subject to zero-rate tax under Article 105 subparagraph 3-2 of the former Act, since the plaintiff is not a project implementer designated by the competent authority pursuant to Article 13 of the former Public-Private Partnerships Act (amended by Act No. 7386 of Jan. 27, 2005; hereinafter referred to as the "Public-Private Partnerships Act"). The building of this case, etc. of this case is not a private proposal project or infrastructure established according to the annual plan, and it is not a supply of the building, etc. of this case by the method under the Public-Private Partnerships Act, and therefore, the disposition

(2) As to this, the Plaintiff asserts that the instant building constitutes an infrastructure, and that the Plaintiff’s supply of the instant building, etc. to Busan Metropolitan City by the mode of Article 4 subparag. 1 of the Private Investment Act constitutes zero-rate tax under the former Act, and that the Plaintiff, who is the supplier, is not a concessionaire under Article 13 of the Private Investment Act, or was not established according to the private proposal project or the annual plan under the Private Investment Act in the supply method, and that the instant disposition is unlawful.

B. Relevant statutes

Gu Act

With respect to the value-added tax on the supply of goods or services falling under any of the following subparagraphs, zero tax rates shall apply under the conditions as prescribed by the Presidential Decree. In this case, the provisions of subparagraphs 5 and 6 shall apply only to the portion supplied not later than December 31, 200:

3-2. Infrastructure facilities which are supplied to the State or a local government by the mode as prescribed in subparagraph 1 or 2 of Article 4 of the Act on Private Participation in Infrastructure, or construction services of such facilities;

Private Investment Act

Article 2 (Definitions) The definitions of terms used in this Act shall be as follows:

1. The term "infrastructure" means fundamental facilities which are the foundation of production, increase the efficiency of such facilities, accommodate the convenience of the users and the public, and which fall under any of the following items:

(s) Bus terminals under subparagraph 5 of Article 2 of the Passenger Transport Service Act;

5. The term “private investment project” means a private proposal project under Article 9, or an infrastructure project implemented by a concessionaire under subparagraph 7 in accordance with the instruction for proposal under Article 10;

7. The term "project implementer" means a corporation, other than the public portion, which is designated as a concessionaire under Article 13 and which conducts a private investment project;

Article 4 (Method of Conducting Private Investment Projects) A private investment project shall be implemented in any of the following manners:

1. The ownership of the infrastructure shall revert to the State or a local government upon the completion of construction, and the concessionaire recognizes the rights to manage and operate such infrastructure for a specified period;

2. The ownership of the infrastructure shall be recognized to the concessionaire for a certain period after the completion of the infrastructure project and the ownership shall revert to the State or a local government upon the expiration of such period;

C. Determination

(1) Under the former Act, the infrastructure supplied to the State or local governments in accordance with Article 4 subparagraph 1 or 2 of the Act on Private Participation shall be subject to zero tax rate (Article 105 subparagraph 3-2).

The purpose of the Public-Private Partnerships Act is to contribute to the development of the national economy by promoting the investment of the private sector in infrastructure in a creative and efficient manner (Article 1). In order to promote private investment, the State or local governments (amended by Act No. 6045 of Dec. 28, 199) exempted the value-added tax on the supply of goods or services rendered using the infrastructure that belongs to the State or local government in a manner prescribed by the Public-Private Partnerships Act (Article 106(1)5). While value-added tax was imposed at the stage of donation and at the stage of use and profit-making, Article 105 subparag. 3-2 of the former Act was newly established in order to reduce the initial burden of the project implementer to the maximum extent possible, and to enable taxation at the stage of operating profits.

The purport of the above provision is to alleviate the burden of value-added tax on the supply of infrastructure by a concessionaire under the Private Investment Act, and to promote private investment projects, and to apply zero-rate tax in all cases of supplying infrastructure.

(2) To be subject to zero tax rate under the former Act, it shall be an infrastructure supplied to the State or a local government by the method prescribed in Article 4(1) or (2) of the Private Investment Act. Article 4(1) of the Private Investment Act provides that “The ownership of the infrastructure shall belong to the State or a local government and the project implementer shall be granted the right to manage and operate the infrastructure for a certain period of time.”

The Plaintiff’s donation of the instant building at the time of completion is based on the method that the ownership of the relevant facility belongs to the local government and the Plaintiff recognizes the right to manage and operate the facility for a certain period of time. However, inasmuch as the Plaintiff’s donation of the instant building is based on the concept of “project executor” under the Private Investment Act (Article 2 subparag. 7), it is difficult to deem that the foregoing method has been violated solely on the ground that the registration of ownership preservation in the name of the Plaintiff was completed when the ownership preservation was completed after completion of construction in accordance with the construction permit that is to be donated simultaneously with the completion of construction of the building and the Plaintiff belongs to the Busan Metropolitan City and the Plaintiff obtained permission for free use. Therefore, the foregoing provision is not all applicable to all cases of supplying the building by donation under the interpretation of the foregoing law, but it shall be applied at zero tax rate only to the light area supplied by the “project executor” under the Private Investment Act

(3) In addition, in order to be subject to zero tax rate under the former Act, the "infrastructure" that is supplied to the State or a local government in such a way as prescribed by the Public-Private Partnerships Act. In light of the fact that the private investment law provides for the definition of infrastructure, especially the infrastructure that is the foundation of production, enhances the utility of the infrastructure, enhances the convenience of the users, and enhances the convenience of the lives of the people, which is prescribed by the Public-Private Partnerships Act, the "infrastructure" refers to the infrastructure under the Public-Private Partnerships Act, not the "public-Private Partnerships Act", which is generally considered as an infrastructure. In this regard, it is more clear that Article 105 subparagraph 3-2 of the former Restriction of Special Taxation Act (amended by Act No. 7322 of Dec. 31, 2004) amended on December 29, 2001, which is defined as the "infrastructure under the same Act supplied to the State or a local government in a way as prescribed by the Public-Private Partnerships Act."

(4) Meanwhile, Article 105(1)3-2 of the Restriction of Special Taxation Act (amended by Act No. 7322 of Dec. 31, 2004) provides that "construction services for infrastructure facilities or facilities under the same Act that are supplied to the State or local governments by the method prescribed in subparagraph 1 or 2 of Article 4 of the same Act for the purpose of running a business subject to the imposition of value-added tax, by a project implementer under subparagraph 7 of Article 2 of the Private Investment Act," which is subject to the application of zero-rate tax. In light of the fact that prior to the amendment, the above provision is deemed zero-rate tax only in the same case, it seems to have been clearly confirmed

(5) In full view of the above various points, the zero-rate tax rate under Article 105 subparagraph 3-2 of the former Act shall be applied only to the infrastructure under the same Act, which is supplied by a project implementer under the same Act in the manner under the same Act. Thus, the instant disposition is lawful, provided that the Plaintiff, not a project implementer under the Public-Private Partnerships Act, under the former Local Finance Act, did not qualify as the zero-rate tax rate under the former Local Finance Act.

3. Conclusion

Therefore, the plaintiff's claim of this case shall be dismissed as it is without merit, and the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed. It is so decided as per Disposition.