[1] Whether the Korea Industrial Complex Corporation, a non-profit corporation established under the Industrial Cluster Development and Factory Establishment Act, is subject to the corporate tax: admission fees and common charges collected from the enterprises located in the Corporation (negative)

[2] Whether the Korea Industrial Complex Corporation, a non-profit corporation established under the Industrial Cluster Development and Factory Establishment Act, is subject to value-added tax on admission fees and common charges collected from the enterprises located in the Corporation (affirmative)

[1] The Industrial Complex Management Corporation, a non-profit corporation established under the Industrial Cluster Development and Factory Establishment Act, receives the amount of money in the nature of compensation for actual expenses by collecting membership fees and joint charges from the occupant enterprises in the Corporation in order to raise funds for the necessary expenses for the management affairs entrusted under the above Act. Since the business conducted by the above Corporation itself cannot be deemed profit-making or profit-making, the membership fees and joint charges collected as above shall not be subject to corporate tax.

[2] The contents of business conducted by the Industrial Complex Management Corporation, which is a non-profit corporation established under the Industrial Cluster Development and Factory Establishment Act for the enterprises located in the Corporation, fall under the provision of services under the Value-Added Tax Act, and the above Corporation is an independent business entity separate from the enterprises. Therefore, it is reasonable to view that the above Corporation's admission fees and common charges collected from the enterprises located in the Corporation as part of the goods

[1] Article 3 of the Corporate Tax Act; Article 2 of the Enforcement Decree of the Corporate Tax Act; Articles 31 and 38 of the Industrial Cluster Development and Factory Establishment Act / [2] Articles 1(1)1, 2, and 7(1) of the Value-Added Tax Act; Article 2 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 18207 of Dec. 30, 2003); Articles 31 and 38 of the Industrial Cluster Development and Factory Establishment Act

Seoul High Complex Industrial Complex Management Corporation (Attorney Park Jong-sung, Counsel for defendant-appellant)

Head of Guro Tax Office

may 22, 2006

1. The Defendant’s imposition of corporate tax on the Plaintiff as of March 21, 2005 No. 1 listed in the [Attachment No. 1] as of March 21, 2005, and the imposition of each corporate tax listed in the [Attachment No. 2-6] as of June 1, 2005, shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. Two minutes of the lawsuit shall be borne by the plaintiff, and the remainder shall be borne by the defendant.

The judgment as referred to in Paragraph (1) of this Article and the disposition of each value-added tax imposed by the defendant against the plaintiff on June 1, 2005 is revoked, respectively.

1. Details of the disposition;

A. The Plaintiff is a corporation established on August 31, 1978 under the Industrial Cluster Development and Factory Establishment Act (hereinafter “Act”) with the aim of creating an industrial complex for public use in the machinery industry and contributing to the development and development of the machinery industry by establishing a reasonable operating system of the machinery industry.

B. The Defendant: (a) deemed that the Plaintiff’s total amount of KRW 54,105,00 and the total amount of joint charges of KRW 969,800,000 as the revenue amount of non-profit-making business during the period from 1999 to 2004 was the accounting of the membership fees collected from the occupant enterprise; and (b) deemed the payment for the provision of services and the revenue amount generated from the profit-making business, and imposed and notified corporate tax listed in the [Attachment Table No. 1] No. 1 of the attached Table No. 2 to 6 of the attached Table No. 1 on June 1, 2005 (hereinafter “instant disposition imposing corporate tax”), and imposed and notified each of the value-added tax listed in the attached Table No. 7 to 16 on the same day (hereinafter “instant disposition imposing value-added tax”).

[Evidence] Facts without dispute, Gap 2's evidence 1 to Gap 3's evidence, Eul 1-1 to Eul 16's evidence 5-5

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) As to the disposition of imposition of corporate tax of this case

(A) The Plaintiff’s membership fees and joint contributions are collected from members for the management of the industrial complex, and they cannot be deemed income earned from the business for the purpose of earning profits. Therefore, the disposition imposing the corporate tax of this case is unlawful.

(B) Even if the pertinent membership fees and common contributions are deemed to be the revenue amount of profit-making business, the disposition imposing the corporate tax of this case, which did not include the total of 345,206,230 won paid from 200 to 2004, should be included in deductible expenses, is unlawful.

(2) As to the imposition of value-added tax of this case

The membership fees and common contributions cannot be viewed as the cost of an independent nature of consideration received by the Plaintiff for the provision of services to the members of the business, and it is reasonable to view their members as the provision of services at their own expense. Accordingly, the disposition of the value-added tax in this case is unlawful since it cannot be viewed as the provision of services independently for the business.

B. Relevant statutes

Corporate Tax Act

Article 3 (Scope of Taxable Income)

(1) Corporate tax shall be imposed on the following income: Provided, That for non-profit domestic corporations and foreign corporations, it shall be imposed only on income under subparagraph 1:

1. Income for each business year; and

(2) Income of a non-profit domestic corporation for each business year shall be income generated from business or revenue (hereinafter referred to as "profit-making business") in the following subparagraphs:

1. Earnings generated from businesses prescribed by Presidential Decree, such as manufacturing, construction, wholesale or retail sales, consumer product repair, real estate, rental, and provision of business services;

Enforcement Decree of Corporate Tax Act

Article 2 (Scope of Profit-Making Business)

(1) The term “those prescribed by the Presidential Decree” in Article 3 (2) 1 of the Corporate Tax Act (hereinafter referred to as the “Act”) means the generation of profits from each business under the Korea Standard Industrial Classification publicly notified by the Commissioner of the Statistics Korea (hereinafter referred to as the “Korea Standard Industrial Classification”).

Value-Added Tax Act

Article 1 (Objects of Taxation)

(1) Value-added tax shall be imposed on the following transactions:

1. Supply of goods or services; and

Article 2 (Taxpayer)

(1) A person who independently supplies goods (referring to goods prescribed in Article 1; hereinafter the same shall apply) or services (referring to services prescribed in Article 1; hereinafter the same shall apply) on a business basis, regardless of whether it is on a commercial basis or not (hereinafter referred to as "business operator") shall be liable to pay value-added taxes pursuant to this Act.

(2) A taxpayer under the provisions of paragraph (1) shall include an individual or corporation (including the State, a local government, and a local government association), an unincorporated association, foundation, or other organizations.

Article 7 (Supply of Services)

(1) The supply of services shall be either the supply of services or having others use the goods, facilities or rights, pursuant to all contractual and legal grounds.

Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 18207 of Dec. 30, 2003)

Article 2 (Scope of Services)

(1) The services provided for in Article 1 (3) of the Act shall be all services and activities falling under the following subparagraphs:

6. Real estate business and leasing business: Provided, That this shall exclude rice paddy, field field, orchard, stock farm site, forest land, or salt farm lease business;

7. Enterprise service business;

(2) Notwithstanding the provisions of paragraph (1), projects prescribed by the Ordinance of the Ministry of Finance and Economy from among the construction business and real estate business shall be deemed projects supplying goods

(3) Except as otherwise provided in this Decree, the classification of businesses under paragraph (1) shall be based on the Korean Standard Industrial Classification table as of the starting date of the relevant taxable period publicly announced by the Commissioner of the National Statistical Office, and any business similar to the business under paragraph (1) shall be deemed included

The Industrial Cluster Development and Factory Establishment Act;

The purpose of this Act is to contribute to the sound development of the national economy through continued industrial development and balanced regional development, by developing the industrial cluster, supporting the smooth establishment of factories, and realizing systematic management of industrial sites and industrial complexes.

Article 30 (Authorized Administrator, etc.)

(1) The authorized administrator shall be as follows:

2. Mayors/Do Governors for general local industrial complexes and urban high-tech industrial complexes;

(2) The management agencies shall be as follows:

3. The Korea Industrial Complex Corporation or the Korea Industrial Complex Management Corporation entrusted with administrative affairs by the authorized administrator.

Article 31 (Industrial Complex Administrative Corporation)

(1) In order to ensure the efficient management of the industrial complex, the authorized administrator may delegate or entrust all or part of the administrative affairs to a management agency pursuant to the provisions of Article 30 (2), as prescribed by the Presidential Decree.

(2) A person who intends to establish an industrial complex administrative corporation (hereinafter referred to as "administrative corporation") or a council comprised of occupant enterprises (hereinafter referred to as "council of occupant enterprises") to be entrusted with the administrative affairs of industrial complex shall obtain authorization from the administrative authority in accordance with the requirements for establishment prescribed by

(3) The Foundation and the Consultative Council of Occupant Enterprises (hereinafter referred to as the "Agency, etc.") shall be a juristic person established by registering its establishment at the seat of its principal office.

Article 38 (Contracts, etc. for Occupancy)

(1) A person who conducts or intends to conduct manufacturing business within an industrial complex shall conclude a contract for occupancy (hereinafter referred to as "contract for occupancy") with a management agency under the conditions as prescribed by the Ordinance of the Ministry of Commerce, Industry and Energy: Provided, That the same shall not

(2) Where occupant enterprises and support institutions intend to modify matters determined by the Ordinance of the Ministry of Commerce, Industry and Energy among occupancy contracts, they shall conclude a new modification contract

(4) Where an occupancy contract or a modified contract is concluded by the Management Corporation or the Consultative Council of Occupant Enterprises among management agencies pursuant to the provisions of paragraph (1) or (2), it shall report it to the head of Si/Gun/Gu.

Article 42 (Termination, etc. of Contract for Occupancy)

(1) Where an occupant enterprise or support institution falls under any of the following subparagraphs, a management agency may issue a corrective order within the period prescribed by the Presidential Decree, and where it fails to comply with such order, it may terminate the occupancy contract:

1. Where an occupant enterprise fails to commence construction of a factory, etc. within the period prescribed by the Ordinance of the Ministry of Commerce, Industry and Energy without justifiable grounds;

2. When the completion of a factory, etc. is deemed practically impossible.

3. When he fails to commence his business within one year after the completion of a factory, etc. without any justifiable grounds or discontinues his business for not less than one year on end;

4. Where he has altered matters as prescribed by the Ordinance of the Ministry of Commerce, Industry and Energy without concluding a modified contract under Article 38 (2) (including the case where it is applicable mutatis mutandis under Article 38 (3));

5. Where he leases or disposes of an industrial site and factory in violation of the provisions of Article 38-2 or 39 (1);

6. Where the contract for occupancy as referred to in Articles 38 and 38-2 is breached;

(4) When a management agency has terminated an occupancy agreement under paragraph (1), it shall report the details thereof to the head of a Si/Gun/Gu.

C. Facts of recognition

(1) The articles of incorporation of the Plaintiff are as follows.

Article 6 (Members) Members shall be comprised of regular members, associate members and special members who moved within the Plaintiff Corporation.

1. A regular member shall be a person who owns a factory and housing site within a complex (and omitted);

2. Associate members shall be those who leased and moved in part of the factories and sites owned by regular members;

Article 7 (Attendance at Membership) Members shall submit an application for admission at the same time as the occupancy contract of the Corporation to the Corporation to the Corporation, and shall attend the prescribed procedure of entry.

Article 8 (Duties of Members)

1. Members shall be liable to pay membership fees, membership fees, common contributions, etc. imposed on them, as prescribed by the board of directors;

2. The Corporation shall refuse to use public facilities for any member who fails to fulfill his/her obligations, and impose the late payment charge of 3% per month on any person who fails to pay his/her membership fees and common contributions within the time limit. After that, 1% of the late payment charge per month shall be added to the late payment charge: Provided, That if special grounds exist, all or part of the late payment charge may be reduced through a resolution of the board of directors;

3. If a member moves to an area other than the Corporation, he/she shall pay the unpaid membership fees and common contributions, and if the member fails to comply therewith, the person who takes over the place of business shall pay them within one month by succession;

Article 10 (Expulsion and Termination of Contracts by Members)

An expulsion may be made upon the resolution of the board of directors if any of the following grounds arises to a member:

1. A person who fails to pay membership fees, common contributions, etc. for at least six months without good cause;

Article 28 (Liquidation) When the Corporation dissolvess the Corporation, it shall distribute to members after obtaining approval from the competent authority, any residual assets remain after completely paying the obligations of the Corporation.

(2) As of 2002, regular members (factory and site owners) belonging to the Plaintiff are 64 companies and associate members (factory and site lease) are 152 companies and five management employees. If there is an enterprise wishing to move into the Plaintiff industrial complex, the Plaintiff shall, at the request of the said enterprise, examine the qualifications of the enterprise which wishes to move into the said industrial complex, enter into an occupancy contract with the said enterprise, and examine the application for permission for the establishment and registration of the above factories, and shall grant permission, and if a sales contract is entered into for factories and their sites within the said industrial complex, other than performing the duties prescribed by the Act, such as receiving reports, such as road car color and illegal stopping, etc. In addition to performing the duties prescribed by the Act, the Plaintiff shall conduct road management services such as personnel expenses, office supplies expenses, management expenses, etc., and collect 5 million won from the occupant enterprises each month as admission fees, and the Plaintiff shall collect 20 million won and 50 million won per land and building area from the board of directors (hereinafter referred to as 200 million won per month).

(3) Separately, the Plaintiff is paying corporate tax and value-added tax on the leased land owned by the Plaintiff, separate from this, by managing the rent of KRW 60 million per annum, and by managing the parking lot, thereby obtaining a parking fee of KRW 10 million per annum.

[Evidence] Each of Gap evidence Nos. 1, 4, 5, Eul evidence No. 17, Gap evidence No. 6-1 to 12, and the purport of the whole pleadings

(d) Markets:

(1) Determination on the disposition of imposition of the corporate tax of this case

Even if a non-profit corporation receives income from a profit-making business, corporate tax shall not be imposed unless the income is derived from the profit-making business, and in determining whether a business constitutes a profit-making business, the relationship with the purpose of business, such as whether the profit-making business is intended to achieve the proper purpose of the corporation, shall not be considered. However, in order to constitute a profit-making business, the business itself must be at least that of the profit-making business or that of the profit-making business (see Supreme Court Decisions 95Nu14435 delivered on June 14, 1996, 2003Du12455 delivered on September 9, 2005).

On the other hand, the plaintiff is a non-profit corporation established for the purpose of contributing to the development and development of the machinery industry by creating an industrial complex commonly used in the machinery industry under the Act and establishing a reasonable operation system of the machinery industry, and is supervised and controlled by the competent administrative agency which is the authorized administrator (Article 31(5) of the Act). A master plan for the management of an industrial complex is formulated and approved by the Mayor/Do Governor (Article 33(1) of the Act). A business conducted by the plaintiff is conducted with a member company who intends to move into an industrial complex, such as entering into a contract for occupancy, termination of an occupancy contract, and disposition such as industrial site, etc., and support for maintenance and repair complexes and management, etc., such as provision of market information, energy supply, labor relations promotion, and vocational training, etc., with the acquisition company. The plaintiff collected admission fees from regular members in order to raise the necessary expenses for the management affairs entrusted under the Act as above, and the amount of compensation for actual expenses is paid by the plaintiff's business itself from regular members and associate members.

Therefore, the disposition of the corporate tax of this case is unlawful.

(2) Determination on the imposition of value-added tax of this case

The supply of services refers to either providing services or allowing the use of goods, facilities or rights under all contractual and legal grounds. Unlike the supply of goods, the Value-Added Tax Act limits the supply of services to an external counterpart and receiving the price for the supply of services. Therefore, the supply of services without receiving the price is not deemed the supply of services. Thus, if the supply of services is excluded from the transaction subject to taxation, but can be seen as the price for the supply of services, it constitutes the supply of services subject to taxation.

In full view of the purport of the arguments in evidence Nos. 1, 1, and 17, if the plaintiff provides services to the members of the company, as provided in the law, the company's qualifications for the above company wishing to move into the plaintiff industrial complex shall be examined at the company's request, and the contract for occupancy shall be concluded with the above company, the company's application for the establishment and registration of the factory and its site shall be examined and permitted. If the contract for the establishment and registration of the factory and its site in the above industrial complex is concluded, the company shall receive the report, and the company shall build and operate the factory complex for public use in the machinery industry, attract the industrial complex of machinery industry, install and operate the public facilities within the complex (parking the parking lot management business for occupant enterprises and support institutions in the complex, rental business for occupant enterprises and support institutions in the complex), train the technicians and staff members of the company in the complex, jointly purchasing and selling raw materials, joint management business for the welfare of employees in the complex, construction and management of the public facilities in the complex, and other affairs related to the construction and management of the complex.

As above, the contents of the business conducted by the Plaintiff for its members shall be deemed to be the provision of services under the Value-Added Tax Act. As to the provision of services, such as the conclusion of an occupancy agreement with members on behalf of the administrative authority, and the provision of services, such as administrative affairs, management affairs, etc., between the members, even though the other party to the above services are members, the Plaintiff is a legal entity separate from the members, and thus the above membership fees and joint charges directly belong to the Plaintiff, not the members, and thus, the Plaintiff shall be deemed to be an independent business entity, and the Plaintiff shall not be deemed to be an independent business entity or a self-supply of the above services. Ultimately, the Plaintiff shall conduct real estate management business or business facility maintenance and management services

Therefore, the instant disposition of value-added tax is lawful.

4. Conclusion

Therefore, the plaintiff's claim against the disposition of imposition of corporate tax of this case is justified, and the remaining claim is dismissed as it is without merit. It is so decided as per Disposition.

Judges Kim Sang-sung (Presiding Judge)