△△△△ District-2017-Gu Partnership-10777 (2018.08)

Whether the balcony expansion construction of national housing scale apartment housing supplied by the City Corporation to the implementation company is exempt from value-added tax and whether the recovery delay claim against a person with a special relationship is a provisional payment in office.

The balcony Corporation is subject to value-added tax because it falls under a separate transaction separate from the National Housing Project in this case, and the calculation of the amount of tax in this case is justifiable, and there is no justifiable reason to reduce additional tax, and it is reasonable to view that the amount receivable in this case falls under the "provisional payment paid without any relation to the business of the Plaintiff as delayed its recovery

Article 19 of the Corporate Tax Act; Article 106 of the Enforcement Decree of the Corporate Tax Act

2018Nu4396 Disposition of revocation of Disposition of Imposition of Value-Added Tax

AA

a) the Director of the Tax Office

October 11, 2018

November 1, 2018

1. The part against the defendant in the judgment of the first instance shall be revoked;

2. The plaintiff's claim corresponding to the above revoked part is dismissed.

3. The plaintiff's appeal is dismissed.

4. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The value-added tax indicated in the separate sheet No. 1, attached to the Plaintiff on June 1, 2016, as stated in the Disposition Statement.

(including additional taxes) and the imposition of corporate tax (including additional taxes) shall be revoked.

2. Purport of appeal

A. The plaintiff

Of the judgment of the first instance court, the part against the plaintiff shall be revoked. Attached Form 1 that the defendant against the plaintiff on June 1, 2016 is attached to the plaintiff.

The imposition of corporate tax (including additional tax) entered in the list of "the details of the disposition" shall be revoked.

B. Defendant

See paragraphs 1 and 2.

1. Reasons for the disposition, and the plaintiff's assertion;

The court's explanation on this part is the same as the reasons for the judgment of the court of first instance, and thus, citing this in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

3. Relevant statutes;

It is as shown in the attached Form.

4. Determination

A. Determination as to whether the imposition of value-added tax in this case is illegal

1) Whether the supply of the instant service constitutes value-added tax exemption

A) Article 106(1)4 of the former Restriction of Special Taxation Act (amended by Act No. 7003, Dec. 30, 2003) and Article 106(1)1 of the Restriction of Special Taxation Act; Articles 106(4)1 and 51-2(3) of the Enforcement Decree of the Restriction of Special Taxation Act; Article 2 subparag. 3 of the former Housing Act (amended by Act No. 12989, Jan. 6, 2015; Act No. 13782, Jan. 19, 2016) cited national housing with an exclusive residential area of not more than 85 square meters per household, as one of the objects of value-added tax exemption.

Meanwhile, Article 1(4) of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013) provides that “the supply of goods or services essential for the supply of goods or services, which are the main transaction, shall be deemed to be included in the supply of goods or services, which is the main transaction.” Article 12(3) provides that “the supply of goods or services essential for the supply of exempt goods or services shall be deemed to be included in the supply of goods or services.” Article 3 subparag. 2 of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013) provides that “The supply of goods or services, which is the main transaction, shall be deemed to be included in the supply of goods or services, shall be deemed to be ordinarily included in the supply of goods or services.” Article 14(1)2 of the Value-Added Tax Act provides that “The supply of goods or services, which is ordinarily included in the supply of goods or services.”

In addition, the interpretation of tax laws and regulations shall be interpreted in accordance with the text of the law, barring special circumstances, by denying the requirements for taxation or the requirements for non-taxation or tax reduction and exemption under the principle of no taxation without law, and it is not allowed to expand or conceal without reasonable grounds, and in particular, it accords with the principle of fair taxation to strictly interpret the provisions that clearly consider the requirements for reduction and exemption as preferential provisions (see, e.g., Supreme Court Decision 2008Du1594, Oct. 9, 2008)

B) Based on the details and legal principles of the above Acts and subordinate statutes, considering the following circumstances acknowledged by comprehensively considering the overall purport of arguments in Gap evidence Nos. 5 through 9, Eul evidence Nos. 7, 12, and 13 as a whole, it is difficult to view that the service of this case is a transaction practice and thus falls under the supply of the national housing of this case ordinarily incidental to, or naturally incidental to, the supply of the national housing of this case, and it is subject to value-added tax, separate from the supply of the national housing of this case. It does not change even if the plaintiff was awarded a contract for a new apartment construction work and a balcony expansion construction work from the instant enforcement company that had undertaken the business with the entire apartment unit by expanding the balcony, and

(1) The instant national housing is classified into balcony and structurally, and the national housing subject to value-added tax exemption is limited to the instant national housing.

① As a buffer space connecting the inside and outside of a building, a balcony refers to a space installed additionally to the outer wall of the building for the purpose of view, rest, etc. [Article 2 subparag. 14 of the former Enforcement Decree of the Building Act (amended by Presidential Decree No. 24443, Mar. 23, 2013) and Article 2 subparag. 14 of the Building Act]. The Enforcement Decree of the Building Act was amended by Presidential Decree No. 19163, Dec. 2, 2005, and Article 2(1)15 of the Building Act was newly established, the alteration of the balcony structure was legalized (amended by Presidential Decree No. 21098, Oct. 29, 2008). This is not an essential supply of a balcony, which is a buffer space connecting the inside and outside of the building, to improve the convenience of residents and the quality of residence, and thus, it is not a supply of a national housing, even after the expansion of the balcony, to supply national housing for various purposes, such as the balcony.

② A balcony is not included in the exclusive residential area calculated on the basis of the interior line of the outer wall of multi-family housing [Article 3(2) of the former Enforcement Decree of the Housing Act (amended by Presidential Decree No. 18733, Mar. 8, 2005); Article 2 of the former Enforcement Rule of the Housing Act (amended by Ordinance of the Ministry of Land, Infrastructure and Transport No. 427 and Article 353, Aug. 12, 2016)]; considering the size of the expanded balcony part, it is likely that it would exceed the area recognized as a national housing under the Housing Act; rather, it goes against the purport of the Restriction of Special Taxation Act that provides national housing or construction services for the stabilization of ordinary people’s residential stability.

③ According to Articles 2 and 46(4) of the former Enforcement Decree of the Building Act and Articles 2 and 46(4) of the Enforcement Decree of the Building Act, in preparing a building ledger, the exclusive residential area due to changes in the structure of balcony structure shall be the area calculated on the basis of the inside line of the initial outer wall in accordance with the Housing Act and subordinate statutes. This seems to be aimed at enabling the tax benefits, etc. on the original part of national housing scale to be applied without changing the tax benefits, etc. even if a balcony structure changes.

④ Since Article 106(1)4 of the former Restriction of Special Taxation Act and Article 106(1) of the Restriction of Special Taxation Act stipulating that the supply of national housing is exempt from value-added tax has been amended by the Enforcement Decree of the Building Act to legalize the structure of balcony, it is difficult to deem that the said provision is to be exempted from the supply of balcony expansion construction in excess of the supply of national housing

(2) The sales price of the housing in this case is divided into the sales price of the housing in this case and the cost of expanding balcony.

According to the amendment of the Enforcement Decree of the Building Act, the relevant regulations were enacted or amended. ① In the event that a project proprietor changes the structure of balcony, etc., Article 7 of the procedures for the alteration of the structure of balcony, etc. and the installation standards provide that the project proprietor shall submit the expenses incurred in the alteration of the structure of balcony, etc., separate from the sale price in filing an application for approval of supply of balcony, and all of the above expenses shall be disclosed when offering a public announcement for the purpose of supplying housing. ② Article 38(1)3 of the former Housing Act (amended by Act No. 12959, Dec. 31, 2014) and Article 3,4, and 7 of the Rules on the Calculation of Sale Price of Multi-Family Housing (amended by Ordinance of the Ministry of Land, Transport and Maritime Affairs No. 268, Dec. 29, 2015) separately from the sale price of balcony, the project proprietor shall make a public announcement of the alteration of the structure of balcony to 200.

(3) Since the instant executor’s extension of balcony to the buyer cannot be deemed as being ordinarily or naturally incidental to the supply of the instant national housing, it ought to be deemed as subject to value-added tax, separate from the supply of the instant national housing, which is a tax-free goods (see, e.g., Supreme Court Decisions 2015Du48617, Jan. 28, 2016; 2014Du40036, Dec. 11, 2014).

① In determining and supplying the entire household of the instant national housing to the buyer in the form of balcony expansion, the instant executor prepared a balcony expansion contract separate from preparing a sales contract for the instant national housing, and calculated and received service charges separate from the sales price.

② If a buyer did not want to purchase and sell the national housing of this case sold in the form of a balcony expansion, he would not conclude a sales contract if he did not want to do so.

③ If the instant executor supplies only the entire apartment units in a specific project district to expand the balcony, the supply of the balcony expansion is exempt from value-added tax, while the supply of the balcony expansion is divided into the balcony expansion type and the balcony expansion type, if the supply of the balcony expansion is not subject to value-added tax exemption, it would result in unfair consequences that the instant executor is subject to value-added tax exemption, if the supply of the balcony expansion is not subject to value-added tax exemption.

(4) Whether the Plaintiff’s balcony expansion service for the instant executor constitutes a taxable object separate from the instant national housing construction service is reasonable as to whether the instant executor’s supply of balcony expansion to the buyer constitutes a taxable object separate from the instant supply of national housing.

① Article 106(1)4 of the Restriction of Special Taxation Act and Article 106(1)1 and 2 of the Enforcement Decree of the Restriction of Special Taxation Act provide that “national housing and construction services of the relevant housing,” as one of the objects of value-added tax exemption, shall be equally treated. The purpose of national housing and its construction services is to draw up the housing price by exempting not only the national housing itself, but also the construction services to improve the welfare of ordinary people.

The instant contract between the Plaintiff and the instant executor was concluded by the instant executor for the implementation of the instant national housing supply contract and the balcony expansion supply contract concluded with the buyer, and all of the transaction stages are the same as that for the balcony expanded with the instant national housing. The said provision only deals with the instant national housing (supply) generated by each transaction stage and the construction services of the instant national housing as tax exemption.

② The instant national housing construction services and the instant construction services are classified into separate services. The Plaintiff calculated the construction cost of the instant national housing and the construction cost of the instant construction services, respectively, and determined the construction cost by distinguishing the instant construction cost from the construction cost of the instant construction services, in entering into a contract with the instant executor. It is sufficiently possible to divide the construction cost into a separate method between the construction cost of the instant national housing and the construction cost of the instant balcony construction services, even if the construction cost is entered into a single contract, the separate method between the respective contract cost and the construction cost of the instant balcony construction. The instant construction services are naturally incidental to the instant national housing construction services, and it is difficult to view that the instant construction services and the instant construction services are physically indivisible. The Plaintiff and the instant construction services are classified into a single contract for the instant construction works, and each of the instant construction cost was not received from each of the instant construction costs solely on the grounds that the instant construction works were not received in the form of a single contract and the instant construction costs were not received in the form of a single contract.

③ Under the premise that a buyer of a balcony-type apartment is selected to purchase a balcony-type apartment, the Plaintiff implemented the construction of the instant national housing and the construction of the balcony-type extension construction from the instant executor under the contract. As such, the construction of balcony-type apartment can also be seen as the result of the buyer’s choice. Even if the entire household of the instant national housing is supplied in balcony-type, such circumstance alone does not change in the nature of balcony-type extension service (the instant service) supplied by the Plaintiff.

④ If the Plaintiff received a contract for the construction of the instant national housing and the construction of the balcony expansion from the instant construction company and determines the construction cost in a lump sum without distinguishing each other, if the construction work cost is subject to value-added tax exemption, and if the construction work of the balcony expansion falls under the category of goods subject to value-added tax exemption, if the construction work of the balcony expansion does not fall under the category of goods subject to value-added tax exemption, it would result in unfair consequences that the Plaintiff’s intent or choice would depend on whether the construction work of the

⑤ Even if the Plaintiff’s provision of the services for the expansion of balcony to the buyers of this case is subject to tax exemption, the cumulative effect may lead to an increase in the burden of value-added tax on buyers (final consumers) by the cumulative effect. In the event that the intermediate stage of the entire transaction is exempted and the final stage is taxed, the tax-exempt entrepreneur is not entitled to the value-added tax paid at the entire transaction stage. As such, the tax-exempt entrepreneur is not entitled to the amount of the value-added tax paid at the purchase cost, and the subsequent taxable entrepreneur supplies the above supply cost including the value-added tax at the purchase cost without the input tax deduction to include it in the purchase cost, thereby raising the burden of the final consumer’s value-added tax by again collecting and paying the value-added tax on the whole. Accordingly, the cumulative effect of imposing value-added tax is contrary to the legislative intent of the Restriction of Special Taxation Act, which is to exempt the supply of national housing in order to reduce the burden of the value-added tax on the buyers. This is irrelevant to the legislative intent purpose of the above national tax.

(6) Although the Defendant did not impose value-added tax with regard to the construction work of the balcony expansion of a rental apartment executed by the Plaintiff, the Plaintiff did not receive the extension of the balcony construction cost for the rental apartment, and the Defendant did not impose value-added tax because it did not find any reasonable standard to determine the tax base. Therefore, it cannot be deemed that the Plaintiff’s assertion is against the principle of self-responsibility and the principle of equity.

2) Whether the assessment of value-added tax amount of the instant case is lawful

A) In an administrative litigation seeking revocation of taxation on the grounds of illegality of taxation disposition, the tax authority bears the burden of proving the legality of taxation disposition and the existence of the taxation requirement fact, and thus, the tax authority bears the burden of proving the value of supply of goods, which are the basis of determining taxable income. However, as long as the tax authority imposed tax on the basis of the value of supply of goods reported by the taxpayer, it is necessary for a taxpayer to easily assert and prove the burden of proving that the value of supply is different from the actual value of the goods (see, e.g., Supreme Court Decision 2005Du16406, Apr. 14, 200

B) The Defendant calculated the supply value of balcony expansion service supplied by the Plaintiff to the instant executor by multiplying the total supply value of the national housing and balcony expansion construction by the ratio of the supply value of the balcony extension service to the total supply value of the apartment complex supplied by the instant executor to the buyer (hereinafter “the instant supply value ratio”).

However, the following circumstances acknowledged by the evidence as seen earlier, and ① the instant construction contract was concluded without distinguishing the instant national housing construction and balcony expansion construction, and thus it is impossible to calculate each supply value based on the amount indicated in the contract. ② The instant disposition imposing value-added tax on the premise that the instant supply value ratio is identical to the instant supply value ratio and the Plaintiff’s “original cost ratio” of balcony expansion construction that the Plaintiff received from the instant construction company, unless the Plaintiff filed a value-added tax return and submitted data, can be reasonably recognized (the Defendant presented specific evidence for calculating the supply value at the time when the Plaintiff’s investigation conducted the balcony expansion construction project from October 5, 2018). Therefore, it is reasonable to view that the instant disposition imposing value-added tax differs from the Plaintiff’s assertion that the instant construction cost should be determined without distinguishing the instant construction work from the instant apartment construction project and balcony expansion construction project, as seen in the instant national housing construction contract, and that the Plaintiff’s provision of this case’s construction cost should not be deemed to be unreasonable if the Plaintiff did not submit any value-added construction report or data.

3) Whether there exists any justifiable ground to believe that the supply of the instant service constitutes an object subject to VAT exemption

A) Penalty taxes under tax law are administrative sanctions imposed, as prescribed by the Act, in cases where a taxpayer violates various obligations, such as a declaration and tax payment, without justifiable grounds, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim. The taxpayer’s intention or negligence is not considered, and the relevant statute’s site, error, etc. does not constitute justifiable grounds that do not cause any breach of such obligations (see, e.g., Supreme Court Decision 2008Du12986, May 13, 2011).

B) Considering the following circumstances that can be seen by comprehensively taking account of the overall purport of the aforementioned evidence’s argument, the Plaintiff’s assertion is without merit, as it is difficult to deem that there exists any justifiable reason to mislead the Plaintiff into being exempted from value-added tax.

① Relevant statutes and guidelines, such as the Housing Act, the Enforcement Decree of the Building Act, the regulations on the procedures for and standards for structural alteration of the balcony, the calculation of the sale price of multi-family housing, and the guidelines for the design and structural alteration of the balcony of multi-family housing, separate from national housing, stipulate that the alteration of the balcony structure is subject to only national housing and the construction services of the relevant housing, and accordingly, the instant executor entered into a contract for the extension of the balcony with the buyer and the instant national housing, on the premise that the extension of the balcony is subject to taxation

② The National Tax Service, through the inquiry meeting, has presented the position that no value-added tax shall be imposed on the construction services for the expansion of balcony that a construction project is en bloc contracted with the national housing construction services. Although there was a case in the Tax Tribunal that the expansion of balcony constitutes a national housing construction services subject to tax exemption, it is not only a final case or legal doctrine, but also a final decision or a decision made by the Tax Tribunal to request an examination by the National Tax Service and the Tax Tribunal. Although there was a different detailed factual basis, Supreme Court Decision 2009Du615 Decided March 10, 201, supra, declared that the provision of balcony expansion services to a buyer in the taxable period of the Plaintiff’s value-added tax was a separate taxation service from the supply of national housing in relation to the supply of the instant national housing, the Plaintiff was already sentenced before the year 2012 in which the Plaintiff filed the first return of value-added tax in relation to the supply of the instant national housing. If such a situation is the Plaintiff’s final and conclusive tax return and payment of value-added tax.

③ As a contractor performing the instant balcony expansion construction, the Plaintiff was entitled to set the construction cost separately from the construction cost of national housing in the instant case. It is determined that the cost of the instant balcony expansion construction was known that the supply price of balcony construction services in comparison with the cost of the construction of national housing in the instant case.

④ Even if the Plaintiff erroneously determined that the instant construction project is incidental to the construction of national housing of this case subject to the exemption of value-added tax based on the interpretation of its name, it constitutes a mere site or misunderstanding of statutes. The instant case is not a doubt as to the interpretation of the provisions of the tax law itself, but is merely an erroneous determination that the tax law included the incidental nature stipulated under the requirements for exemption of value-added tax.

B. Illegality of the disposition of the corporate tax of this case

1) Relevant regulations and legal principles

A) Article 28(1)4(b) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; Act No. 11128, Dec. 31, 201) and Article 28(1)4(b) of the Corporate Tax Act and Article 53(2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010) provide that in calculating the amount of income of a corporation borrowed money from a financial institution, etc. to a person with a special relationship, the provisional payments, etc. that the corporation borrowed money from the financial institution, etc. shall be included in deductible expenses within the scope of the amount calculated as prescribed by Presidential Decree in calculating the amount of income of the corporation for each business year, as well as assets and provisional payments that are not related to the business of the corporation. In addition, Article 34 of the former Corporate Tax Act and Article 28(1)4 of the former Corporate Tax Act provide that the amount shall be included in deductible expenses within the amount of the corporation’s profit.

B) “Calculation of wrongful acts” under the former Corporate Tax Act and Article 52 of the Corporate Tax Act refer to an act of a taxpayer to reduce or exclude the tax burden incurred when a taxpayer takes an ordinary business form without reasonable business form, such as bypassing, multi-stage act, or any other abnormal business form. Determination of whether such economic rationality exists shall be based on whether the transaction lacks economic rationality in light of sound social norms or commercial practice (see, e.g., Supreme Court Decisions 2002Du1479, Feb. 13, 2004; 2006Du125, Nov. 106). It shall not be deemed that a corporation’s calculation of the amount of construction work performed by a person with a special relationship under Article 52 of the former Corporate Tax Act without justifiable grounds has been made for the purpose of collecting the amount of construction work performed by the person with a special relationship within the time limit for performing its contractual obligation, and thus, it shall not be deemed that the amount of construction work performed by the person with a view to Article 28(1)3) of the former Corporate Tax Act or its related provisions.

2) Whether the Plaintiff’s delay in recovering the outstanding amount in the instant case is subject to non-Inclusion of interest paid in the calculation of losses and inclusion in gross income

In light of the above legal principles, considering the facts acknowledged earlier and the following circumstances revealed in Gap evidence Nos. 19, 23, Eul evidence Nos. 3, 4, and 5, the plaintiff delayed the collection of the outstanding amount from ○○ Housing and ○○○ Agriculture without justifiable grounds. Thus, it is reasonable to view that the delay in the collection of the outstanding amount constitutes "the provisional payment paid without relation to the business under Article 28 (1) 4 (b) of the former Corporate Tax Act" as "the act of unreasonably reducing the tax burden due to lack of economic rationality." The plaintiff's assertion on other premise is rejected.

① The Plaintiff has a special relationship with ○○ City and ○○ Housing. In particular, ○○ Housing holds 100% of the Plaintiff’s issued shares.

② The Plaintiff was awarded a contract for the new construction of the Agricultural and Fishery Product Center from ○○○ Agriculture, and completed the construction on February 2, 201 x 201 x December 30, 201, the Plaintiff did not receive KRW 0,000,000 out of the total construction cost of KRW 00 billion after December 30, 200. ○○ Housing guaranteed the payment of the outstanding amount.

③ ○○ Housing reported KRW 201,000,000 in net income 】 200,000,000 in the business year 】 201 】 200,000,000 in the business year 】 201 】 201 】 200,000,000 in the business year 】 201 】 200,000,000 in the business year 】 201 】 200,000,000 in the business year 】 200,000 in the business year 】 201 】 200,000 in the business year 】 200,000 in the business year. ○ Housing appears to have been capable of performing the guaranteed obligation to the outstanding amount. Nevertheless, the Plaintiff did not request the performance of the guaranteed obligation to recover the outstanding amount.

④ The Plaintiff recovered the construction cost due to the government-funded construction and the general subcontracting construction of ○ Housing, etc. from 90 days to 155 days after the completion of the ordinary construction work. However, the Plaintiff did not recover the outstanding amount from 201 x 201 x 30 days after December 30, 196 until the closing date of the argument in this case.

⑤ On November 28, 198, 201, 00 ○○○○○○○○○○, ○○○○○○○○, ○○○○○○, etc. purchased 00,000 parcel of land, including KRW 00,000,000, and no separate security is established on each parcel of land. Nevertheless, the Plaintiff did not take measures to secure the claim for the collection of the outstanding amount, such as provisional attachment of each of the above parcels of land.

5. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. Since the judgment of the court of first instance is unfair with some different conclusions, the defendant's appeal is accepted and the part against the defendant in the judgment of first instance is revoked and the plaintiff's claim corresponding to the cancellation part (the part on the imposition of value added tax of this case) is dismissed, and the plaintiff's appeal