Seoul Administrative Court 2014Guhap74855 ( October 24, 2015)

Seocho 2014west 1280 (Law No. 17, 2014)

Housing site preparation services independently provided shall not be deemed services incidental to national housing construction exempt from value-added tax.

National housing construction works that perform only housing site construction works that do not include national housing construction services, and national housing construction works that are the main service is not incidental services to national housing construction that is exempt from value-added tax if other construction works perform.

Article 106 of the Restriction of Special Taxation Act

2015Nu5506 Revocation of Disposition of Imposition of Value-Added Tax

AA Construction Corporation

○ Head of tax office

Seoul Administrative Court Decision 2014Guhap74855 decided July 24, 2015

on 14, 2016

on 18, 2016

1. Of the judgment of the court of first instance, the part of the penalty tax in the separate sheet of imposition 1 attached hereto, which the Defendant rendered against the Plaintiff on November 11, 2013, is revoked, and the Plaintiff’s lawsuit is dismissed.

2. The plaintiff's appeal is dismissed.

3. Of the total costs of the litigation, the part pertaining to the participation by the Plaintiff’s Intervenor is assessed against the Plaintiff’s Intervenor; 3/5 out of the remainder is assessed against the Plaintiff’s Intervenor; and

1. Purport of claim

The Defendant’s imposition of value-added tax on November 11, 2013 on the second term portion ○○○○ in 2008, the first term portion ○○ in 2009, the second term portion ○○ in 2009, the second term portion in 2009, the first term portion in 2010, the additional tax on the first term portion in 2010, the ○○○○ in 2010, the second term portion in 2010, and the second term portion ○ in 201 (including additional tax) is revoked.

2. Purport of appeal

A. The plaintiff

Of the judgment of the first instance court, the part against the plaintiff shall be revoked. The defendant's portion of the principal tax (excluding the portion for the first period of January 201, 2010) among each tax disposition stated in attached Table 1, which was issued against the plaintiff on November 11, 2013, shall be revoked.

B. Defendant

The part of the judgment of the court of first instance against the defendant shall be revoked. The plaintiff's claim corresponding to the above revocation shall be dismissed.

1. Details of the disposition;

A. On November 20, 2004, the ○○○○○○-gu, ○○○○-dong, and 485,076.5 square meters in a mistake-dong (hereinafter “CC”) designated a project implementer as a supplementary participant CC (hereinafter “CC”) with a view to improving the residential environment and building public rental housing units by developing and improving the underdeveloped village area, and contributing to stabilizing the living conditions of ordinary people, and establishing a development plan.

B. On February 8, 2007, on the entire area of the DD district (hereinafter “instant project district”), the Plaintiff and the BB Construction Company were selected as the contractor. Accordingly, on April 11, 2007, the Plaintiff and the BB Construction Co., Ltd entered into a construction contract for the construction of the instant project district complex construction project (hereinafter “instant contract”). The entire construction was composed of soil construction, excellent construction, sewage construction, waterworks construction, packing construction, structure construction and cultural heritage excavation construction (hereinafter “instant construction”).

C. Among the project districts of this case, housing construction sites supplied by theCC for a cost include the portion supplied for the construction of national housing as stipulated in Article 2 subparag. 3 of the Housing Act. In the initial contract of this case, excellent construction cost, sewage construction cost, waterworks construction cost, packing construction cost, structure construction cost, and drilling investigation cost for cultural properties are subject to value-added tax. The soil construction and its appurtenant construction cost are exempted from value-added tax as the supply price for national housing construction services, and they are subject to value-added tax only if the amount calculated by multiplying the ratio of the area of national housing site to the direct construction cost under Article 106 of the Restriction of Special Taxation Act to the total construction area. However, ○○ City reviewed the actual payment condition and improvement plan for value-added tax on national housing construction service project implemented by theCC, and concluded that the amount equivalent to the ratio of national housing construction site to the total area of the construction services supplied in collective ownership should not be deducted from value-added tax on September 3, 207.

D. On December 17, 2007, theCC entered into a contract with the Plaintiff and BB Construction by multiplying the total construction cost by the ratio of national housing site area to the total construction cost in the instant project district’s site area for the supply price of national housing, which is exempted from value-added tax as the supply price for national housing construction services and is subject to value-added tax only (hereinafter “instant modified contract”). (E) The Plaintiff issued tax invoices for the tax portion in accordance with the instant modified contract, and issued tax invoices for the tax portion in accordance with the instant modified contract, and reported and paid value-added tax accordingly.

F. As a result of a corporate regular investigation with respect to theCC, the director of the Regional Tax Office: (a) deemed that the Plaintiff’s provision of housing site preparation services to theCC was separately contracted by theCC for the creation of housing sites not for apartment construction services; and (b) did not constitute a national housing construction services exempt from value-added tax pursuant to Article 106(1)4 of the former Restriction of Special Taxation Act (amended by Act No. 111133, Dec. 31, 201; hereinafter the same) and notified the Defendant of relevant taxation data.

G. Accordingly, on November 11, 2013, the Defendant considered the invoice amount issued by the Plaintiff toCC as the proceeds from supply of value-added tax, and notified the Plaintiff of the rectification and notification of value-added tax as stated in attached Table 1, as the first correction of the attached Table 1.

H. On February 10, 2014, the Plaintiff appealed and filed an appeal with the Tax Tribunal on February 10, 2014. On February 25, 2014, when the trial was in progress, the Defendant deducted the input tax amount, which was not deducted from the output tax amount when the Plaintiff initially declared and paid the input tax amount at the time of filing the return and payment of the value-added tax, from the output tax amount, and corrected the total amount of value-added tax to 00 won by deducting the input tax amount which was deducted from the output tax amount at the time of the Plaintiff’s initial return and payment of the value-added tax. On September 17, 2014, the Tax Tribunal issued a disposition to reduce the amount of value-added tax by deducting the input tax amount, which was excluded from the reduction and correction, from the output tax amount at the time of the return and payment of the value-added tax. The Plaintiff’s remaining claims were dismissed.

I. After filing the instant lawsuit, the Defendant discovered errors in the process of the first reduction, and corrected the second reduction on March 30, 2015 (see attached Table 1, e.g., “the second reduction” part; hereinafter referred to as “the imposition disposition of value-added tax finally corrected according to the second reduction”).

[Reasons for Recognition] Facts without dispute, Gap's 1 to 13, 16 to 18 (including each number in the case where there are serial numbers) and the purport of the whole pleadings

2. Ex officio determination on the additional tax portion

According to the records, according to the purport of the judgment of the court of first instance on July 21, 2016, the defendant can know the fact that all of the additional taxes imposed on the attached Table 1 among the dispositions in this case was revoked ex officio. Accordingly, the plaintiff's lawsuit on this part is seeking revocation of the disposition that has not already been extinguished and became illegal as it has no interest in the lawsuit.

3. Whether the principal part of the disposition in this case is unlawful;

A. The plaintiff's assertion

1) The construction work of housing site among the instant construction work is a service that must be inevitably accompanied for the construction of housing. As such, the construction work of housing site is part of the housing construction work. Thus, even if the instant construction work is not itself, it constitutes a service that is ordinarily supplied for the construction work of national housing, and thus, the value-added tax should be exempted pursuant to the above provision and Article 12(3) of the former Value-Added Tax Act (amended by Act No. 11873, Jun. 7, 2013; hereinafter the same shall apply). In addition, the Plaintiff trusted the public opinion list of the National Tax Service and the views ofCC corporation, which is a public corporation of ○ City and ○○ City, and issued tax invoices and invoices, and reported and paid the value-added tax accordingly. Thus, the instant disposition is unlawful against the principle of trust protection.

2) Preliminaryly, the Defendant rendered the instant disposition on the premise that the entire construction works performed by the Plaintiff are subject to taxation. However, in the case of earth and sand and auxiliary works among the instant construction works performed by the Plaintiff, value-added tax should be exempted pursuant to Article 106(1)4 of the former Restriction of Special Taxation Act on the portion equivalent to the ratio of the total construction site area to the total construction site area from

B. Relevant statutes

Attached Table 2 shall be as stated in the relevant statutes.

C. Determination

The reasoning for this Court’s explanation is as follows: (a) it is identical to the entry from 6th to 11th of the sixth to 12th of the judgment of the court of first instance, except for the following modifications or addition of some contents; and (b) thus, it shall be cited in accordance with Article 8(2) of the Administrative Litigation Act, and Article 420 of the

Contents to be written or added.

The 6th parallel 17 to 7th parallel 6 shall be dried as follows:

① According to the land use plan and infrastructure plan according to the urban development project, land in the project district is composed of housing construction sites (road, parking lot, square, multi-family housing site, neighborhood living facility site), and public facilities site (road, parking lot, park, park, green area, school, public office building, sports facilities, educational facilities, social welfare facilities, religious facilities, religious facilities, etc.). The CC has to construct and supply public rental housing and housing units in housing construction sites. However, the instant construction project is a housing complex construction project in a project district to be implemented by the CC Corporation after being awarded a contract with the CC Corporation in the course of implementing a series of projects under the development plan and implementation plan of the CC Corporation, and is a soil construction, excellent construction, sewage construction, waterworks construction, packing construction, structure construction, cultural heritage excavation construction, etc. of the entire project district of this case. The construction project site of this complex can not be deemed specifically determined at the location or area of the national housing site (public rental housing complex and housing complex with exclusive use area of 85 square meters or less).

② Although the construction works, excellent construction works, sewage construction works, waterworks construction works, packing construction works, structure construction works, and drilling of cultural properties within the instant project district under the instant project plan, the Plaintiff’s construction and supply of national housing (public rental housing and housing for sale with an exclusive use area of 84 square meters or less) can not be included in the construction services of national housing solely on the ground that such construction and supply of national housing is included in the instant project district due to the circumstances after the completion of the Plaintiff’s service (construction). In other words, the Plaintiff only provided construction services related to the creation of the entire project district, rather than for the construction of national housing, and thereafter was constructed and supplied on some land.

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Part 8. The following shall be added to the 9th page:

C) Article 106 (4) 2 of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "the scope of national housing construction services shall be provided by a person registered under the Framework Act on the Construction Industry, the Electrical Construction Business Act, the Small and Medium Construction Business Act, the Housing Act, the Sewerage Act, and the Act on the Management and Use of Livestock Excreta" with respect to the scope of national housing construction services. As such, the construction services directly provide national housing to a person registered under the former Framework Act on the Construction Industry, such as civil construction services supplied by a person registered under the Sewerage Act, and services supplied by a person registered under the Sewerage Act, even if the national housing itself does not fall under the scope of national housing construction services, the essential services for the construction of national housing shall be included in the scope of national housing construction services. However, Article 106 (4) 2 of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "the construction and management methods of national housing under the Construction Industry Act shall be included in the construction and management methods of housing under the Housing Construction Business Act and the Housing Construction Business Act."

4. Conclusion

Therefore, the part of the penalty tax of this case is unlawful and dismissed, and the plaintiff's claim for the principal tax of this case shall be dismissed as it is without merit. Since the judgment of the court of first instance is unfair with different conclusions, the part of the penalty tax in the judgment of the court of first instance shall be revoked and this part of the lawsuit shall be dismissed, and the plaintiff's appeal shall be dismissed as it is without merit.