[1] A business operator under the Value-Added Tax Act and a taxpayer of value-added tax for the management and disposal of trust property under the Trust Act (=trustee)

[2] In the case of a trust of another person designated by a beneficiary other than a truster under a trust contract, a person liable to pay value-added tax (=beneficiary)

[3] Whether the amount equivalent to the value-added tax collected by a trustee from a purchaser upon the disposal of trust property belongs to trust property (affirmative)

[1] Generally, value-added tax is an independent supplier of goods or services for business (Article 2(1) of the Value-Added Tax Act). On the other hand, a trust under the Trust Act has a trustee manage and dispose of the property right for the purpose of trust by transferring a specific property right to a trustee or taking any other disposition (Article 1(2) of the Trust Act). If a trustee supplies or becomes to be supplied with goods or services in managing and disposing of trust property, the trustee becomes a contracting party and the trustee is ultimately attributed to the truster, and the profits and expenses incurred from the management and disposal of trust property are ultimately attributed to the truster. Thus, trust under the Trust Act is also subject to the truster’s calculation. Thus, trust under the Trust Act is also subject to a consignment under the same Article 6(5) of the Value-Added Tax Act. Accordingly, a trustee and a person liable to pay value-added tax in managing and disposing of trust property shall be deemed as a matter of principle.

[2] In the case of another profit trust where a beneficiary other than a truster is designated under a trust contract and the proceeds of the trust accrue preferentially to the beneficiary, the profits and expenses incurred by the management, disposal, etc. of trust property are ultimately attributed to the beneficiary to the extent within the scope within which the right of preferential benefit is affected by the calculation of the beneficiary in substance. In this case, the business operator and the person liable to pay value-added tax

[3] The sales price received by a trustee by disposing of trust property pursuant to a trust contract is deemed trust property (Article 19 of the Trust Act). Meanwhile, the amount equivalent to the value-added tax received by an entrepreneur from the supply of goods is not temporarily kept in order to fulfill the obligation to pay value-added tax, but is reverted to the entrepreneur’s ownership in combination with the sales price. Since an entrepreneur fulfills his/her liability for value-added tax payment under his/her responsibility, regardless of whether or not the amount of output tax accrued during a certain period after the end of a certain taxable period and the amount of output tax, the amount equivalent to value-added tax collected by a trustee from a purchaser pursuant to the disposal of trust property shall be deemed as part of the sales price, and it shall not be deemed that the amount equivalent to value-added tax

[1] Articles 2(1) and 6(5) of the Value-Added Tax Act, Article 1(2) of the Trust Act / [2] Articles 2(1) and 6(5) of the Value-Added Tax Act, Article 1(2) of the Trust Act / [3] Article 19 of the Trust Act

[2] Supreme Court Decision 99Do1969 delivered on November 26, 199 (Gong2000Sang, 102)

Dongyang General Financial Securities Co., Ltd. (Law Firm Mayang & Yang, Attorneys Seo Gyeong-sung et al., Counsel for the plaintiff-appellant)

Korea

Seoul High Court Decision 99Na23668 delivered on September 15, 1999

The appeal is dismissed. The costs of appeal are assessed against the defendant.

1. Summary of the judgment of the court below

A. The facts duly admitted by the court below based on the evidence produced are as follows.

(1) On March 3, 1997, the Korean Real Estate Trust Co., Ltd. (hereinafter referred to as the "Korean Real Estate Trust") entered into a trust agreement for real estate management and disposal (hereinafter referred to as the "trust agreement of this case") with the Korean Real Estate Trust Co., Ltd. (hereinafter referred to as the "Korean Real Estate Trust") to secure the total amount of 18.5 billion won of the principal and interest of the loan that new Co., Ltd paid to the Plaintiff, and the trust period is from March 4, 1997 to the termination date of the trust, the first beneficiary of the trust principal is the Plaintiff, and the beneficiary of the trust principal is the beneficiary of the trust money, and the premium was the beneficiary of the real estate in trust (hereinafter referred to as the "trust agreement of this case"), and accordingly, the registration of ownership transfer in Korea Real Estate Trust was completed on the ground of the trust agreement of this case.

(2) Meanwhile, the Korean Real Estate Trust shall preserve and manage the instant real estate between the times and the Korean Real Estate Trust; however, at the request of the Plaintiff who is the priority beneficiary, New Co., Ltd., the said real estate did not repay the principal and interest of loan, or at the request of the Plaintiff who is the priority beneficiary, agreed to pay the balance after deducting the expenses incurred in relation to the trust contract and the disposal procedure, the trust fees, the lease deposit protected under the Housing Lease Protection Act, and the secured claim of the senior mortgagee, etc. from the proceeds of realization and settlement of the instant real estate.

(3) As the Plaintiff was unable to pay the above principal and interest debt, the Plaintiff requested realization of the instant real estate to Korea Real Estate Trust. On July 20, 1998, the Korea Real Estate Trust sold the instant real estate to 18,131,93,68 won (land price of 3,806,697,116 won, building price of 13,02,96,884 won, value-added tax of 1302,29,299,688 won, and value-added tax of 18,131,93,68 won from the above sales price of 18,131,93,68 won after deducting 105,353,651 won from the trust remuneration and disposal cost of trust affairs of the Korea Real Estate Trust and 86,363,250 won from the senior bonds (amount in arrears) and the remaining amount of value-added tax from 197,1976,29767,79767,797,797,797.

(4) On October 26, 1998, the Korean Real Estate Trust received a notice from the Defendant (the director of the competent tax office: the director of the competent tax office) on the delinquent tax claims of KRW 145,769,80 for the times of real estate production of KRW 145,769,80 for the Defendant’s 22th of the same month, that the Korean Real Estate Trust seized the total amount of the delinquent amount among the 1,302,29,688 won and interest accrued therefrom from the 1,328,130,68 won and the 25,831,271,328,130 won calculated by deducting KRW 759,200 for the deposit-related expenses from the 1,327,371,759 as the Plaintiff or the Defendant for the reason of creditor’s uncertainty.

(5) On July 22, 1998, the Korean Real Estate Trust made and issued a tax invoice stating its business registration number after stating the following amount of the price of the building and the 10% of the price of the building at the bar shopping, supply price, and tax as the truster, the supplier of the instant real estate. In making the preliminary return of the value-added tax on the second quarter of 1998, the return of the value-added tax on the building paid to the Korean Real Estate Trust upon the purchase of the instant real estate was filed as the input tax amount to be deducted from the output tax amount.

(6) On November 7, 1998, the Defendant: (a) premised on the premise that a person liable to pay value-added tax following the transfer of the instant real estate to a lot shopping, is an era of real estate; (b) preserved the remainder remaining after deducting the amount already seized from the amount of the instant deposit, in order to preserve a taxation claim of KRW 1,692,98,59,594, including value-added tax on the inheritance of the times following the transfer of the instant real estate.

B. Based on the above facts, the lower court determined that the amount equivalent to the value-added tax, out of the sales amount received by the Korean Real Estate Trust on a lot shopping, shall be paid to the Plaintiff, who is the first beneficiary, on the ground that the value-added tax, which is subject to transfer of trust property, belongs to the beneficiary since all profits accrued from the management and disposal of the trust property specified by the beneficiary are attributed to the beneficiary, should be imposed on the beneficiary who is not the trustee or truster, and thus, on the premise that the taxpayer of value-added tax is not the trustee or truster, but the taxpayer of value-added tax, when selling the instant real estate in lot shopping, is the beneficiary, the amount equivalent to the value-added tax imposed on the Plaintiff as a beneficiary upon the sale of the instant building among the instant real estate

2. Judgment on the grounds of appeal

(a) First point:

Generally, value-added tax is imposed on a person who supplies goods or services independently for business (Article 2(1) of the Value-Added Tax Act). On the other hand, a trust under the Trust Act has a trustee manage and dispose of the property right for the purpose of trust by transferring a specific property right to a trustee or taking any other disposition (Article 1(2) of the Trust Act). If a trustee supplies or is supplied with goods or services in managing and disposing of trust property, the trustee himself/herself becomes a party to the trust business, or the profits and expenses incurred from the management and disposal of the trust property are ultimately attributed to the truster, and the trust under the Trust Act is also based on the calculation of the truster. Thus, trust under the Trust Act shall also belong to the truster, as if it is a consignment under Article 6(5) of the Value-Added Tax Act. Therefore, it is reasonable to see that the trustee and the person liable to pay value-added tax in handling trust affairs, such as the management and disposal of trust property, are a truster in principle.

However, in the case of another profit trust where a beneficiary other than a truster is designated in a trust contract and the proceeds of the trust accrue preferentially to the beneficiary, the profits and expenses incurred in the management, disposal, etc. of the trust property are ultimately reverted to the beneficiary to the extent that the rights of the priority are affected by the calculation of the beneficiary. Therefore, it is reasonable to view the business operator and the person liable to pay the value-added tax as

In the same purport, the judgment of the court below that the taxpayer of value-added tax following the transfer of trust property in the instant trust, which is another trust, is just and acceptable, and there is no error in the misapprehension of legal principles as to the taxpayer of value-added tax due

(b) Second point:

The sales price received by a trustee by disposing of trust property pursuant to a trust agreement is deemed trust property (Article 19 of the Trust Act). On the other hand, the amount equivalent to the value-added tax received by an entrepreneur due to the supply of goods is not temporarily kept in order to fulfill the obligation to pay value-added tax, but is reverted to the entrepreneur’s ownership in the form of the sales price. Since the entrepreneur fulfills his/her obligation to pay value-added tax under his/her responsibility, regardless of whether or not to collect the output tax accrued during a certain period after the end of a certain taxable period (see Supreme Court Decision 99Do1969, Nov. 26, 199). The amount equivalent to value-added tax collected by the trustee from the buyer upon the disposal of trust property shall be deemed as part of the sales price, and it shall not be deemed that the amount equivalent to value-added tax collected by the trustee accounts as a deposit account, separate

The court below held that the amount equivalent to value-added tax, out of the purchase price received by the Korean real estate trust from the lot shopping, belongs to trust property with the purchase price, is just and acceptable, and there is no error in the misapprehension of legal principles as to the scope of trust property or incomplete deliberation.

The grounds of appeal alleged to the effect that the amount equivalent to the value-added tax should not be treated as trust property, unlike the sale price, and should be paid to the taxpayer who is the beneficiary, on the premise that the liability for the payment of the value-added tax following the disposition of the trust property of this case is the truster of the era, but should not be settled first to the plaintiff who is the beneficiary. However, the premise that the obligation for the payment of the value-added tax of this case is not the beneficiary but the amount equivalent to the value-added tax collected is erroneous

(c) Third point;

According to the facts admitted by the court below and the records, taxes and public charges on the trust property and other charges necessary for the performance of trust affairs in the trust contract of this case shall be borne by the truster and if the truster does not pay the expenses by the due date, the truster may pay them on behalf of the truster. In this case, the trustee may acquire by priority the substitute payment and the damages for delay from among the money or property to be paid by the truster or the preferential beneficiary (Article 15 of the contract). In the case of liquidation of the trust property by realization of the trust property, the order of the expenses incurred in relation to the trust contract and the trust remuneration (Article 22 (1) 1 of the contract), the lease deposit protected under the Housing Lease Protection Act, the debts such as the mortgagee (Article 22 (1) 2 of the contract), the amount of the principal, interest and damages for delay of the beneficiary under the certificate of priority issued by the trustee (Article 15 (1) 3 of the contract), and the trustee is not obliged to pay taxes and public charges on the trust property of this case as stipulated in Article 15 (2 of the trust contract of this case.

The judgment of the court below on the premise that the amount equivalent to the value-added tax of this case should be settled preferentially to the plaintiff who is the first beneficiary as a trust property is just, and there is no error in the misapprehension of legal principles as to the incomplete hearing or interpretation of trust contract

3. Therefore, the appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Ji-dam (Presiding Justice)