Where reclamation services are provided pursuant to the Public Waters Management and Reclamation Act, the market price of such services shall be calculated as the total project cost required for reclamation works.

Where reclamation services are provided pursuant to the Public Waters Management and Reclamation Act, the market price of the services shall be calculated by the total project cost required for reclamation works and the price of the services received in return for the provision of the services shall be subject to value-added tax and the total project cost shall be the tax base

Article 12 of the Value-Added Tax Act

2015Guhap6020 Revocation of Disposition Rejecting Value-Added Tax

AAA et al.1

BB Director of the Tax Office

December 10, 2015

January 21, 2016

1. All of the plaintiffs' claims are dismissed.

2. The costs of the lawsuit are assessed against the plaintiffs.

Cheong-gu Office

On October 21, 2014, the part equivalent to the value-added tax OO,OO, andOOOO of the value-added tax imposed on the Plaintiff Company AAA on October 21, 2014, and the part equivalent to the value-added tax levied on September 23, 2014 by the head of the Defendant MM tax office for the refusal to rectify the value-added tax imposed on the Plaintiff Company BBB on September 23, 2014 is revoked.

1. Details of the disposition;

(a) Plaintiff AAAAA (hereinafter referred to as “Plaintiff AAA”) is a company that carries on metal processing and site preparation construction business in KR22-3, KS-Eup, and Plaintiff BBB (hereinafter referred to as “Plaintiff BBB”) is a company that carries on the manufacturing and site construction business in KS-dong 225-1, KS-dong 225-1.” B. The Plaintiffs were to carry on the public waters management and reclamation project. The Plaintiffs were to carry on the public waters reclamation project (hereinafter referred to as the “instant project”), and then to carry out the public waters reclamation project (hereinafter referred to as the “instant project”), the Plaintiff AAABA acquired the ownership of the reclaimed land from the government of KR-gun, the Plaintiff ABAB prior to the completion of the project’s reclamation project, and the Plaintiff’s ownership of the reclaimed land in an area equivalent to the KRW 124,000,000 from the government of KRK-Eup, and the AOABAB24,0124.

D. On October 25, 2011, Plaintiff AA submitted and paid the tax base to O,OO,O,O, orO(including O,O, O,O,O, orO, other than value-added tax, among total project costs required for the instant project) on condition that the tax base was reported and paid to O,O, O,O,O, orO (including O,O,O,O, orO, but also included in the output tax amount required for the instant project) on February 2011, and the Plaintiff BBBB declared and paid the tax base on July 25, 201, including O,O, value-added taxes, O, O,O, 200, O,O, 10,O, or 200 (including the project cost required for the instant project, O, value-added taxes, value-added taxes, O,O, 200, O, or 200, O, 10,0000, or 200,000).

E. On October 14, 2014, the Plaintiffs asserted that the project cost for the area reverted to the State as the instant project constitutes a subject of the exemption of value-added tax, and filed a request for correction with the head of the tax office of Korea on October 14, 2014, that the Plaintiff’s refund of the value-added taxO,OO, OO, OO, and OOO won for the second year of 201, and the Plaintiff’s BBB to the head of the tax office of Korea on July 24, 2014 that the Plaintiff would refund the value-added taxO, OO, OO, OO, and OOO.

(f) The Defendants acquired a part of the instant project site, and thus, constitute the supply of services subject to value-added tax on the grounds that the Plaintiffs’ acquisition of the instant project site constitutes the economic and substantial quid pro quo relationship with the provision of services, and thus, constitutes the supply of services subject to value-added tax. Defendant KSA rendered a disposition to Plaintiff AAA on October 21, 2014; Defendant MFBB made a disposition to refuse each of the said requests for correction against Plaintiff BBB on September 23, 2014 (hereinafter each of the instant dispositions) and (g). The Plaintiffs were dissatisfied with each of the instant dispositions and filed a request for adjudication with the Tax Tribunal on December 22, 2014, but all of them were dismissed on May 13, 2015.

2. Whether the disposition of this case is lawful or not, and the purport of the whole pleadings is as follows: (a) there is no dispute over recognition; (b) Gap evidence Nos. 1 through 4; and (c) Eul evidence Nos. 1 through 3 (including any number number); and (c) the purport of the whole pleadings.

The plaintiff AAA provides services equivalent to the value of supply,OO,OO,OO, or won without compensation, and takes over the ownership of reclaimed land equivalent to the cost of O,O,O,O, orOO. The plaintiff BBBB provided services equivalent to the cost of O,O,O,O,O, orO, and the plaintiff BBB provided services equivalent to the value of the supply and the price of such services and the price of such services shall be exempted from the value-added tax (the plaintiff AAAO,O,O,O,O, orO's ownership). The plaintiff BBB shall be exempted from the value-added tax (the plaintiff's prior provision of the Value-Added Tax Act) although it received the ownership of the land of the party under the above AAO,O,O,O, orO's ownership, and thus it shall be exempted from the value-added tax (the plaintiff's prior provision of the Value-Added Tax Act, Article 129(1) of the former Value-Added Tax Act).

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Relevant legal principles;

If a business operator obtained ownership of part of the land created by the reclamation in accordance with the relevant statutes and the agreement between the parties after obtaining a license for the reclamation project from the State with another business operator and obtaining authorization for the completion of the construction project, it is reasonable to deem that the business operator has an economic and substantial compensation relationship between the provision of the service and the acquisition of ownership of part of the reclaimed land, since the business operator acquired ownership of a part of the reclaimed land in return for providing the above land reclamation project to the State and acquiring the ownership of a part of the reclaimed land. Therefore,

Furthermore, if a business operator provides services for reclamation of public waters and acquires ownership of a part of reclaimed land as a consideration for such services, this constitutes a case of receiving compensation other than money and thus the additional tax base is the total amount of construction cost, and the value-added tax included in the total construction cost is also included in the market price of the services provided to the State (see, e.g., Supreme Court Decision 2002Du4051, Sept. 5, 2003).

2) Determination

Article 12(1)19 of the former Value-Added Tax Act provides that the value-added tax shall be exempted for the supply of goods or services that are supplied free of charge to the State, local governments, and local governments or public organizations prescribed by Presidential Decree. However, in full view of the following circumstances, the Plaintiffs’ transfer of ownership of reclaimed land in return for the implementation of the instant project appears to have been based on a single quid pro quo relationship, and only a part of the land is removed and supplied free of charge, and the corresponding value-added tax shall not be exempted. (1) If the Plaintiffs acquired the ownership of part of the earth created by the instant project in return for the implementation of the instant project and the acquisition of ownership of part of the land created by the instant project, it is reasonable to view that there is substantial quid pro quo relationship between the Plaintiffs’ provision of services and the acquisition of ownership of part of the reclaimed land.

② Article 1(1)2 of the former Value-Added Tax Act provides that the market price of services provided by a person who receives any consideration other than money shall be deemed the market price of services provided as the tax base. Furthermore, Article 48 subparag. 6 of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013) provides that where reclamation services are provided pursuant to the Public Waters Management and Reclamation Act, the market price of services shall be calculated as the total project cost required for the reclamation works in question. The purport of such provision is that, in cases of any consideration other than money, it is difficult to uniformly calculate the value because the value can vary depending on the appraisal or evaluation method, and it is difficult to estimate the market price of services in comparison with the market price of services again, deeming such portion as free supply is contrary to the purport of the above provision.

③ Since the value of the services required for the implementation of the instant project exceeds the value of the land received in return for the implementation of the project, the Plaintiffs are deemed to have provided services as a whole and received in return for consideration. However, such difference is deemed to constitute a cost supply as it constitutes the provision of services as a whole and the payment of consideration, and it cannot be deemed as a compensatory contract only where there exists any benefit by converting the

Therefore, each of the dispositions of this case is legitimate.

3. Conclusion

Therefore, the plaintiffs' claims against the defendants are dismissed in its entirety as it is without merit, and it is so decided as per Disposition.