Appellate Court 2017Su2344 (Law No. 2017.07.20)

The balcony expansion project is a separate tax service that is not a part of the apartment construction services that is a tax-free apartment.

It is reasonable to view that the balcony expansion construction is a part of the apartment construction services, which is a tax-free apartment, and that it falls under a separate taxation service separate from the above construction services.

Article 106 of the Restriction of Special Taxation Act

Disposition of revocation of imposition of value-added tax, etc. by the Seoul Administrative Court-2017-Gu 81526

a

s. Tax office et al.

July 5, 2018

1. The plaintiff's claims against the defendants are all dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

On January 11, 2017, the Defendants’ imposition of value-added tax and corporate tax (including additional tax) listed in the attached Table [Attachment] against the Plaintiff shall be revoked.

1. Details of the disposition;

A. On November 7, 2011, 201, BB Co., Ltd. (hereinafter referred to as 'B') entered into a contract for the following (hereinafter referred to as 'the contract of this case') with respect to the new construction work of c (hereinafter referred to as c (hereinafter referred to as c) and b (hereinafter referred to as 'the execution company of this case') of d (hereinafter referred to as 'the apartment of this case') and O-type apartment of national housing scale (hereinafter referred to as 'the apartment of this case').

Article 2 (Scope of Business) (2) B, etc. shall perform the following as a contractor, at the responsibilities and expenses of B, etc., and shall perform as the b, etc. of B, among those of B, etc. when performing duties.

1. Construction of new multi-family housing in accordance with design drawings and specifications for project approval and approval for sale;

2. Cooperation in granting authorization and permission, such as deliberation on construction, approval for project plan, and approval for parcelling-out;

3. Cooperation in the sale of apartments and commercial buildings in the sale of apartments (public relations of the sale in lots, the sale in lots, the management of policyholders, M/H, etc.);

4. Extension of credit under Article 6 (1) when borrowing a loan from a financial institution to cover operating expenses;

5. Joint and several sureties for arranging part payments to contractors, and for lending part payments (each share in accordance with the construction ratio of each company, such as the group, b, etc.);

6. Cooperation in conducting pre-inspection of occupants before and after the commencement of occupancy;

7. Execution of works in the air and completion of responsibilities for the buyer and buyer;

8. Expenses for treating civil petitions when civil petitions occur due to construction works (noises, dust, rupture, etc.);

9. Guarantee of defects under relevant Acts and subordinate statutes;

10. Cooperation in managing buyers of a Si event;

11. All other operations which are objectively deemed to work, such as HyundaiMco, in connection with the execution of this project.

Article 3 (Contract Amount for Construction Work) (1) 230,295,000,000 won for construction contract (3,200,000 won/3.3 square meters, bb 138,177,00,000 won, c 92,118,000,000 won)

(3) The contract amount under paragraph (1) shall be based on the following matters:

5. Excluded construction works: Conditions construction works following construction deliberation and approval for projects, construction costs for balcony expansion, community facilities costs, costs for installing art decorations and food, costs for installing heavy water treatment facilities, solar structure, solar equipment, clean housing standards, etc.;

(5) The instant executor shall enter into a balcony expansion contract, and the instant executor shall set the payment key, including 15% of profits, in the construction cost for the balcony expansion project to b, etc., separate from the construction contract amount under paragraph (1).

Article 8 (Payment of Contract Amount for Construction Work) (3) The construction cost for expanding balcony which a general buyer pays to the account under Article 9 (3) shall be paid to b, etc. based on Article 3 (5) within 14 days from the date of payment.

B. B, etc. on February 29, 2012, the instant event and the content of the instant contract were modified as follows.

Article 2 (Revised Matters)

- Article 3(1): 239,195,70,00 won for construction contract (3,259,853 / 3.3 square meters, Bb 143,517,420,00 won, c 95,678,280,000 won for construction contract amount

- Paragraph 5 of Article 3: Proceeds from the construction cost of balcony expansion shall belong to the instant executor, and the instant executor shall pay to B, etc., the instant executor, including a maximum of 5% corporate profit at the cost of the implementation of balcony expansion construction (excluding value-added tax).

C. On February 29, 2012, B, etc. entered into a contract for the instant apartment building expansion construction project (hereinafter referred to as the “contract for the instant balcony expansion project”) with the instant city events and the following contents, and the instant apartment building expansion project under the said contract was the instant apartment construction project (hereinafter referred to as the “b, etc.”).

The event of this case and c, etc. are agreed as follows with respect to the construction of the balcony expansion project of the new apartment construction project in this case.

Article 1 (Purpose) The instant contract (Article 8(3)) and the amendment contract thereto (Article 2(5) of the Terms and Conditions of the Agreement in Article 3(5) shall be enforced by the instant executor and the matters concerning balcony expansion works performed by B, etc. shall be clarified.

Article 2 (Amount of Stalcon Expansion Construction Works) (1) The amount of balcony expansion to be paid by a contractor for general sale in accordance with the approval for the announcement of invitation of residents pursuant to the provisions of Article 8 of the Rules on Housing Supply shall be as follows:

② The contract amount of balcony expansion construction works to be paid by the instant executor to HyundaiMco, etc. is settled by applying the construction cost per the following household to the extended household.

Article 3 (Payment of Amount of balcony Expansion Works) (1) The extended amount to be paid by a general seller to a balcony expansion account referred to in Article 2 (1) pursuant to Article 2 (1) shall be an amount equivalent to 80% of the balance of the account in June 15, 2012 (the first intermediate payment of sales revenue) to b, etc.

(2) The instant executor shall pay b, etc. the amount of balcony expansion works (including value-added tax) prescribed in Article 2 (2), excluding an amount equivalent to 15% balance in the balcony expansion account referred to in Article 2 (1) as of the end of each month after the date of completion and completion.

Section 4 (Other Matters not prescribed in this Agreement) shall be subject to the work contract.

D. From March 5, 2012 to July of the same month, the instant apartment supply contract was concluded with the buyers, and upon entering into the said supply contract, several buyers selected whether to expand the balcony, and entered into a supply contract with the buyers of the instant apartment, separate from the supply contract for the instant apartment (the number of buyers who did not select the instant balcony expansion construction among the 1940 households of the instant apartment, and the number of buyers who did not select the instant balcony expansion construction among the 1940 households of the instant apartment, were nine households, and the remaining number of buyers selected the instant balcony expansion construction). The details of the balcony expansion construction pursuant to the balcony extension contract concluded between the instant city and the buyer are as follows.

E. B pursuant to the instant contract, on January 31, 2012, 2012, 1,940 households of the instant apartment building (59 square meters A-type 1,062 households, 59 square meters B-type 166 households, 84 square meters-type 712 households) and ancillary and welfare facilities were commenced. From April 3, 2014, the Plaintiff, who integrated the rights and obligations of B by absorbing B, performed the instant apartment construction services, and completed the supply of the instant apartment construction services upon completion inspection on August 29, 2014.

F. Meanwhile, on November 25, 2014, the Plaintiff and C (hereinafter collectively referred to as the “Plaintiff, etc.”) revised the terms and conditions of the instant city event and the instant contract and the instant balcony expansion contract as follows (b, etc., the instant executor agreed to settle the amount including value-added tax on the construction cost under Article 2(2) of the instant contract for the balcony expansion construction project, but the Plaintiff, etc. and the instant executor set the amount excluding value-added tax on the said construction cost as the ordinary construction cost through the said modified contract).

Agreed Matters

- The instant contract

Article 3(1): 240,541,382,100 won (3,278,170 won/3 square meters, Plaintiff 14,324,829,260 won, c 96,216,52,840 won) of the contract amount for construction work

- The instant contract for the construction of balcony expansion

Article 2(2)

② The contract amount of balcony expansion works to be paid to the Plaintiff, etc. by the instant executor shall be settled by applying the construction cost per household below to the extended household.

* Distribution of the cost of balcony expansion project: Plaintiff 9,623,120,940 won, C6,415,413,960 won

Other

Matters not provided for in this contract shall be governed by the contract for construction works, the contract for construction works, the contract for construction works, and the balcony expansion contract.

G. The Plaintiff reported and paid value-added tax on the construction of national housing with an exclusive residential area of 85 square meters or less per household, and on the basis of Article 106(1)4 of the Restriction of Special Taxation Act (amended by Act No. 12853, Dec. 23, 2014; hereinafter the same shall apply) and Article 106(4)2 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 26070, Feb. 3, 2015; hereinafter the same shall apply) that the instant apartment construction service is exempt from value-added tax pursuant to Article 106(1)4 of the same Act and Article 106(4)2 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 26070, Feb. 3, 2015) on the following grounds: (a) deeming the instant apartment construction service as falling under the said construction service; and (b) deeming the amount of value-added tax to be included in the tax base for the relevant taxable period.

H. The Defendants deemed that the instant balcony expansion construction falls under a separate taxation service separate from the instant apartment construction service exempt from value-added tax, and included the construction contract amount under the instant balcony expansion contract in the base of value-added tax, and instead, deducted the input tax amount related to the instant balcony expansion construction from the output tax amount by deeming it as the input tax amount related to the taxable business, instead of deducting the said input tax amount included in deductible expenses in calculating the income amount for each business year for calculating the corporate tax base for the business year 2013 and the business year 2014, the said input tax amount included in deductible expenses was determined and notified to the Plaintiff on January 11, 2017 (hereinafter “instant disposition”).

I. The Plaintiff, who was dissatisfied with the instant disposition, filed an appeal with the Tax Tribunal on April 7, 2017, but was dismissed on July 20, 2017.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 13, Eul evidence 1 to 5 (including each number; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Since the balcony expansion construction of this case was supplied to the instant implementer by combining the instant apartment construction services with time, physical, and economic indivisible units with the instant apartment construction services, it is only a part of the instant apartment construction services subject to value-added tax exemption, but does not constitute a separate independent tax service. Accordingly, the instant disposition by the Defendants should be revoked on a different premise.

2) Even if the balcony Expansion Corporation constitutes a value-added tax-free service separate from the instant apartment construction service, which is a tax-free service, on the ground that the balcony Expansion Corporation’s mistake that it was a value-added tax-free service and did not perform its duty to pay taxes, etc., the portion of the penalty tax in the instant disposition should be revoked as unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether the balcony expansion construction in the instant case constitutes the instant apartment construction services and all tax-free services

A) Article 106(1)4 of the Restriction of Special Taxation Act provides that the supply of national housing prescribed by Presidential Decree and construction services for such housing shall be exempted from value-added tax. Article 106(4) of the Enforcement Decree of the Restriction of Special Taxation Act provides that “National housing and construction services for such housing prescribed by Presidential Decree” means housing below the scale of national housing under the Housing Act and construction industry, the Electrical Construction Business Act, the Fire-Fighting Business Act, the Information and Communications Construction Business Act, the Housing Act, the Sewerage Act, the Sewerage Act, the Act on the Management and Use of Livestock Excreta, etc. The housing below the scale of national housing under the Housing Act refers to housing whose exclusive residential area is not more than 85 square meters per household.

B) The fact that the instant apartment is a national housing not exceeding 85 square meters per household (59 square meters-type 1,228 households, and 84 square meters-type 712 households) and that the instant apartment is not in dispute between the parties or as seen earlier, the instant apartment construction service supplied by the Plaintiff constitutes a national housing construction service under Article 106(1)4 of the Restriction of Special Taxation Act, which is subject to value-added tax exemption. However, in full view of the following circumstances recognized by the purport of the above facts and the entire pleadings, it is reasonable to view that the instant apartment construction service constitutes a part of the instant apartment construction service, which is a tax-free service, and that it constitutes a separate taxation service that is separate from the above construction service. Therefore, the instant disposition by the Defendants is lawful, and the Plaintiff’s assertion in this part is without merit.

(1) The alteration of the balcony structure was legalized in accordance with the amendment of the Enforcement Decree of the Building Act on December 2, 2005, and it is intended to make the balcony installed in the balcony, which is a buffer space connecting the inside and outside of the building, available for various purposes, such as the living room, bedroom, storage, etc., if necessary, in order to enhance the convenience of occupants and the quality of dwelling.

② According to the amendment of the above statutes, relevant regulations were enacted or amended. Article 7 of the procedures and standards for the alteration of the structure of balcony, etc. (Notice of the Ministry of Construction and Transportation No. 2005-400, Dec. 8, 2005) provides that, where a project proprietor makes a change in the structure of balcony, etc., he/she shall submit expenses incurred in the alteration of the structure of balcony, etc., separate from the sale price in filing an application for approval for housing supply. Article 38 (1) 3 of the Housing Act (amended by Act No. 12959, Dec. 31, 2014) 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) provides that, in cases where a project proprietor makes a change in the structure of balcony, he/she shall separately select the sale price of the balcony in accordance with 200 guidelines for the announcement of the construction project.

③ Accordingly, the instant apartment purchaser entered into a contract for the extension of balcony, separate from the supply contract for the instant apartment, and calculated and received the amount of balcony expansion, separate from the sales price for the instant apartment. Moreover, the buyers of the instant apartment, upon entering into the said supply contract, could choose whether to perform the balcony expansion construction, and some of the buyers in fact did not choose the balcony extension construction.

④ In addition, B, etc. entered into the instant contract for the expansion of balcony construction for the purpose of supplying the instant apartment building and the instant apartment building, separate from the instant contract for the instant construction, the instant contract for the expansion of balcony construction was not included in the cost of the instant construction project, and the amount, method, time, etc. of the instant contract was separately determined in the instant contract for the expansion of balcony construction. Thereafter, the instant contract for the expansion of balcony construction was amended by reflecting the number of buyers’ selection of the instant balcony expansion construction project, and accordingly, the instant construction project was carried out. In this regard, the Plaintiff stated that the instant contract for the expansion of balcony construction is not included in either the instant construction agreement nor the instant construction agreement for the extension of balcony construction project, as stated in Article 2(2)1 of the instant contract for the instant construction project. However, the instant contract for the expansion of balcony construction is not included in either the instant construction agreement nor the instant construction agreement for the purpose that the instant construction project is included in the instant construction agreement.

⑤ 원고는, 이 사건 발코니 확장공사가 이 사건 아파트 건설용역을 공급한 이후 별도로 이루어지는 것이 아니라, 위 확장공사의 시행 여부가 이 사건 아파트의 건설단계에서 이미 결정되어 아파트 건설용역과 함께 공급되므로, 이 사건 발코니 확장공사를 이 사건 아파트 건설용역과 구분되는 별개의 용역으로 볼 수 없다고 주장한다. 그러나, ㉠ 아파트 발코니 확장공사는 수분양자의 선택에 따라 이 사건 시행사가 원고 등 시공사에게 도급을 주어 이루어지는 것일 뿐, 부가가치세가 면제되는 국민주택 공급에 반드시 수반되어야 하거나 아파트 건설용역과 물리적으로 분리 불가능한 하나의 건설용역에 해당한다고 보기 어려운 점, ㉡ 발코니는 건축물의 내부와 외부를 연결하는 완충공간으로서 전망이나 휴식 등의 목적으로 건축물 외벽에 접하여 부가적으로 설치되는 공간으로서 주거전용면적에 포함되지 않고, 확장된 발코니 부분의 면적까지 고려할 경우 주택법상 국민주택으로 인정되는 면적을 초과하게 될 가능성이 있어 오히려 조세특례제한법에서 국민주택 내지 그 건설용역을 부가가치세 면제 대상으로 규정한 취지에 반하게 될 우려가 존재하는 점, ㉢ 국민주택의 공급을 부가가치세 면제대상으로 규정한 조세특례제한법 제106조 제1항 제4호는 건축법 시행령이 발코니 구조변경을 합법화하는 내용으로 개정되기 이전부터 존재하였던 규정이므로, 위 규정이 국민주택에 해당하는 이 사건 아파트의 공급을 넘어 발코니 확장공사의 공급까지 면세대상으로 하려는 취지라고 보기는 어려운 점, ㉣ 수분양자들의 발코니 확장비용과 원고 등의이 사건 발코니 확장공사비가 이 사건 아파트의 분양가격 및 이 사건 도급계약의 공사도급금액과 분리되어 별도로 산정된 점 등을 고려하면, 이 사건 발코니 확장공사가 이사건 아파트 건설용역 공급과 함께 이루어졌다는 것만으로, 서로 분리가 불가능한 하나의 거래에 해당한다고 보기는 어렵다.

④ In addition, the instant apartment supply contract, separate from the instant apartment supply contract, entered into with the buyers of balcony extension contract, and the supply of balcony extension service to the buyers of the instant event under the said balcony extension contract is deemed as a tax-free service separate from the supply of national housing, which is a tax-free goods under the instant apartment supply contract (see, e.g., Supreme Court Decisions 2015Du48617, Jan. 28, 2016; 2014Du40036, Dec. 11, 2014); and the instant contract and the instant construction contract between the Plaintiff, etc. with the Plaintiff, etc., for the implementation of the instant apartment supply contract and the instant construction contract between the Plaintiff, etc., which entered into with the instant enforcement company, are merely for the implementation of the instant apartment supply contract and the instant construction contract between the Plaintiff, etc., which entered into with the buyer of balcony, and there is only some difference in the nature of taxable objects supplied at each stage of the instant apartment supply contract between the Plaintiff and the supplier of balcony construction.

Considering the fact that there may arise a increase in the burden of value-added tax on buyerss, whether the supply of balcony expansion to the instant executor by the Plaintiff, etc. constitutes a separate taxation service for the instant apartment construction service ought to be considered uniformly with the supply of balcony extension services to the buyers of the instant event. On the contrary, the Plaintiff’s assertion that there is only a supply of construction services that has been determined by the choice of buyers between the contractor and the executor, and that there is a different determination as to whether it is subject to value-added tax at each transaction stage is difficult to accept.

2) Whether there exists any justifiable ground to believe that the balcony expansion work in this case constitutes a person eligible for value-added tax exemption

A) In order to facilitate the exercise of a taxation right and the realization of a tax claim, penalty tax under tax law is an administrative sanction imposed as prescribed by the Act in cases where a taxpayer violates various obligations, such as a tax return and tax payment, without justifiable grounds, and the taxpayer’s intent or negligence is not considered, and does not constitute justifiable grounds that are not attributable to the breach of such obligations (see, e.g., Supreme Court Decision 2008Du12986, May 13, 201). Furthermore, justifiable grounds constituting grounds for preventing the imposition of penalty tax are deemed grounds for exemption of penalty tax. Therefore, it is reasonable to deem that a taxpayer is responsible to prove that there exists a justifiable reason, barring any special circumstances.

B) We examine the following circumstances, which are acknowledged by the facts of the above recognition and the purport of the entire pleadings, i.e., the Housing Act, the Enforcement Decree of the Building Act, the procedures and standards for alteration of the structure of the balcony, etc., the regulations on the calculation of the sale price of apartment houses, the design of the balcony and the guidelines for alteration of the structure of the balcony, etc., separately from the housing supply. Accordingly, the instant executor entered into a contract for the extension of the balcony with the buyer on the premise that the supply of the balcony is a separate taxation service by the national housing supply department, and (ii) the Plaintiff et al. entered into the contract for the extension of the balcony in addition to the instant contract for the instant apartment, separately from the instant city and the instant construction contract, and the Plaintiff et al. agreed to receive the payment of value-added tax including the instant construction cost in the instant balcony construction cost. Since then, it is difficult to view that the Plaintiff’s first supply of the instant apartment construction work constitutes a part of the apartment building construction cost, which is subject to exemption from taxation by the Plaintiff’s.

3. Conclusion

Therefore, the plaintiff's claim against the defendants is dismissed in its entirety, and it is so decided as per Disposition.

1) In the event that the intermediate phase is exempted from the input tax and the final phase is taxed, a tax-exempt entrepreneur is not entitled to the deduction of the value-added tax paid at the entire phase. As such, a tax-exempt entrepreneur is not entitled to the deduction of the value-added tax paid at the entire phase; thus, a subsequent taxable entrepreneur is entitled to the deduction of the input tax amount and supplies the above supply amount including the value-added tax at the purchase cost to include the purchase cost in the value of the goods, thereby increasing the burden of the final consumer’s value-added tax by again collecting the value-added tax for the entire phase. As can be seen, the effect imposing