Daegu District Court 208Guhap3205 (29 April 29, 2009)

Whether the price received for the services provided for forest tending projects pursuant to the contract for forest projects is exempt from tax;

Since a contract for forest project is concluded and receives compensation for conducting the project of this case as a forest project by providing one's own services, it is subject to value-added tax and cannot be deemed as a supply transaction of forest products or services incidental to the supply of forest products.

The contents of the decision shall be the same as attached.

1. The plaintiff's appeal is all dismissed.

2. All the lawsuits concerning the plaintiff's claims added in the trial shall be dismissed;

3. The portion arising between the Plaintiff and the Defendant out of the costs of appeal (including the additional costs of appeal in the trial) shall be borne by the Plaintiff, and the portion arising from the participation shall be borne by the Plaintiff’s Intervenor.

Purport of claim and appeal

The decision of the first instance is revoked. The defendant revoked the decision of June 2, 2008. The defendant imposed value-added tax on the plaintiff on the first term of 1,547,100 won (including additional tax; hereinafter the same shall apply), 18,676,560 won for the second term of 2,203, 204, 2,383,200 won for the first term of 2,204, 96,182,640 won for the second term of 2,204, 23,619,040 won for the first term of 2,205, 40,528,590 won for the second term of 2,205, 20, 20,360, 206, 208, 208, 204, 904, and 200 for the second term of 20 years for each of 20 years for the second term (3 years).

1. Details of the disposition;

A. The plaintiff is a legal entity that started business on February 1, 2001 with the type of business as "forest/forest business, etc." and opened business on February 1, 2001 as "forest/forest business, etc." and entered into a forest project contract as shown in the attached Table between the dietitians during each taxable period of February 2003, 2004, and January 1, 2005 and February 2006 (hereinafter "the contract of this case"), and accordingly, paid the construction cost (hereinafter "the construction cost of this case") from dietitians.

B. However, the Plaintiff did not issue an invoice under Article 163 of the Income Tax Act and report the value-added tax because the instant business is subject to VAT exemption or the instant construction cost is not included in the tax base of value-added tax.

C. The Defendant: (a) deemed that the instant project constitutes a taxable object of value-added tax; (b) deemed that the instant construction cost received by the Plaintiff from Nutrition was included in value-added tax; (c) divided the construction cost by 1.1 for each of the said taxable periods (2 years, 2003, 107, 272, 15,00,000, 15,636 for the first period, 205, 159,63,636 for the second period, 284,590, 206, 2005, 205, 206, 3636, 363, 206, 208, 2005, 206, 206, 2005, 206, 2005, 206, 2005, 206, 2006, 2005, 206, 2006, 20636, 206, 365, 28.

D. On July 17, 2008, the Plaintiff dissatisfied with the instant disposition and filed a request for examination with the Commissioner of the National Tax Service on July 17, 2008, but the Commissioner of the National Tax Service dismissed the said request for examination on October 22, 2008, and the Plaintiff filed a lawsuit seeking revocation of the instant disposition on November 12, 2008.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 5, 14 through 19, 22, 23, 34 through 51, Gap evidence 3-1, Gap evidence 4-1, Eul evidence 4, Eul evidence 1 through 6 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. Request to revoke the imposition of the value-added tax for the first period of January 2003 added at the trial and for the second period of February 2004.

Whether the law of action is appropriate

The Plaintiff added the Plaintiff’s claim for revocation of the imposition of value-added tax of KRW 91,547,100 for the first term of January 2003 and KRW 96,182,640 for the second term of February 2004, other than the instant disposition, which was corrected and notified on the same day. Meanwhile, the Plaintiff is also a person who did not go through the procedure under the Framework Act on National Taxes for each disposition.

As to whether the request for revocation of tax disposition in this part must undergo the procedure of the previous trial, the Plaintiff asserts that the above disposition without undergoing the procedure of the previous trial is a disposition issued by the Defendant on the same date along with the disposition in this case which was conducted through the procedure of the previous trial, and only the year to which the relevant tax belongs, and it cannot be deemed that both the disposition agency and the disposition agency are identical with the taxable object, the time of taxation, the type of taxation, the details of taxation, the reason for taxation disposition (illegal grounds) and thus, it is not necessary to undergo a separate

On the other hand, the provisions of Articles 18(2) and (3), and 20 of the Administrative Litigation Act shall not apply to tax litigation under the provisions of the Framework Act on National Taxes. However, in cases where two or more administrative dispositions have been conducted in the course of step-by-step and step-by-step, and are related to each other, or where the tax authorities have changed the taxation disposition subject to such disposition while a tax lawsuit is pending, and there are common grounds for illegality or multiple persons are jointly liable for uniform obligations under the same administrative disposition, such as prior disposition or when one of the persons liable for tax payment has granted an opportunity for the Commissioner of the National Tax Service and the National Tax Tribunal to re-determine the basic facts and legal issues, and in cases where there are justifiable grounds such as where it seems that the taxpayer would be harsh to have caused a tax obligor to go through the prior trial procedure, the taxpayer may file a lawsuit seeking the revocation of the taxation disposition without going through the prior trial procedure (see, e.g., Supreme Court Decision 92Nu4383, Sept. 8, 1992).

However, the taxation disposition different in a certain period of taxation, such as income tax and value-added tax, is separate and independent dispositions for each period of taxation, and there is a possibility that the dispute over the taxation disposition may differ if the cause and year of the tax base are different and abstract (see, e.g., Supreme Court Decisions 89Nu1414, Apr. 13, 1990; 95Nu12057, Feb. 23, 1996; 99Du8930, Jun. 12, 2001; 200, etc.). Even if each of the above dispositions without going through the previous trial procedure is issued on the same date as that of the remaining imposition disposition of value-added tax without going through the previous trial, each of the above dispositions cannot be subject to the effect of the previous trial procedure until the value-added tax cannot be completed as a matter of course, and it does not need to go through the previous trial procedure.

Therefore, the Plaintiff’s above assertion on a different premise is without merit. Ultimately, the Plaintiff’s lawsuit on this part is unlawful (for instance, it is apparent that the above part of the claim added in the trial has already been subject to the time limit for filing a lawsuit under Article 20 of the Administrative Litigation Act, and this part of the lawsuit is unlawful even in light of this point).

3. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) Since the instant project is a project that is naturally incidental to the supply of services related to forest products and that is exempt from value-added tax, the instant disposition that imposes value-added tax on the instant project is unlawful.

(2) The instant construction cost of this case, which the Plaintiff received from Nutrition, constitutes a national subsidy that is not included in the tax base pursuant to Article 13(2)4 of the Value-Added Tax Act, and thus, the instant disposition that included the construction cost of this case in the tax base of value-added tax is ultimately unlawful.

(3) At the time of the instant contract, nutrition group entered into a contract on the premise that the instant project is subject to value-added tax exemption. Since the Defendant did not impose a tax on the instant project for several years, and the Defendant expressed public opinion that the instant project constitutes a tax-free project, the instant disposition was unlawful as it violates the principle of good faith and trust protection under Article 15 of the Framework Act on National Taxes.

(4) From 2001, the Plaintiff faithfully paid value-added tax to the Defendant for a project implemented with a national subsidy on behalf of a group of forest projects entrusted by the Nutrition and Cheongong-gun, despite the receipt of only an agency project cost that does not include value-added tax, by 2002.

However, when Green Co., Ltd., a forest business corporation engaged in the same type of business in around 2003 (hereinafter referred to as "green") and Yusan Pungsan Industry Development (hereinafter referred to as "Pungsan Development") are refunded value-added tax from the competent tax office on the grounds that the forest business by national subsidies is not subject to value-added tax, the forest business corporation located across the country including the Plaintiff did not report and pay value-added tax on the forest business by national subsidies, and the Defendant did not raise any objection thereto and did not take measures such as notification of the payment of value-added tax against the Plaintiff.

Therefore, the instant disposition, which was retroactively imposed in violation of the non-taxation practice, is illegal as it violates Article 18(3) of the Framework Act on National Taxes.

(5) Even if the instant business is subject to value-added tax, the Korea Nutrition, a contracting authority for the instant business, did not pay value-added tax to the Defendant on the ground that the instant business is a government subsidy-free business, and the Defendant also received a tax invoice exempted from value-added tax from the Plaintiff for several years, and did not impose value-added tax on the Plaintiff. Thus, the Plaintiff failed to properly perform its duty to report and pay the tax, etc., as it is erroneous for the Plaintiff to believe that the instant business was a business exempt from value-added tax due to the act or omission by the State. Accordingly, the part on the penalty tax in the instant disposition is unlawful.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) Whether the instant project is subject to value-added tax

Articles 1, 2, and 7 of the Value-Added Tax Act impose value-added tax on a transaction of supply of goods or services. The taxpayer is an independent supplier of goods or services for a business purpose. The supply of services is intended to provide services or use goods, facilities, or rights for all contractual or legal grounds. The supply of goods or services, which is the main transaction, is considered to be included in the supply of goods or services. Article 12(1)1 of the Value-Added Tax Act provides that value-added tax shall be exempted for the supply of forest products.

As seen earlier, the Plaintiff is a corporate entity that was established for the purpose of forest projects, such as afforestation, forestation, and natural recreation forest development project, and the Plaintiff entered into a contract for forest projects with the nutrition group, which is the place of the order, and provided its services, and received the consideration therefor from the dietitian group. As such, the instant project is subject to value-added tax as a transaction of providing services under Article 7 of the Value-Added

In addition, the instant project is not the Plaintiff’s transaction of supplying goods that are forest products, but also the supply of services that are essential to supply forest products, and thus cannot be deemed the business exempt from value-added tax pursuant to Article 12(1) of the Value-Adde

Therefore, the part of the plaintiff's objection is not justified.

(2) Whether the cost of the instant construction is excluded from the value-added tax base

Article 13(2)4 of the Value-Added Tax Act provides a national subsidy as one of the items not included in the tax base of value-added tax. The above provision is interpreted as not including an amount equivalent to the above national subsidy in the tax base of value-added tax in cases where a business operator liable to pay value-added tax by supplying goods or services supplies goods or services as an executor of a subsidized project subject to a national subsidy and receives a national subsidy (see Supreme Court Decision 2000Du369, Oct. 9, 2001).

As to the instant case, a person who carried out the instant project, which is subject to the grant of a national subsidy, is a dietitian. The Plaintiff is merely a person who provided the instant project with the construction services and received the payment from the said dietitian. As such, solely on the ground that the construction cost received by the Plaintiff was paid out of the funds provided with the national subsidy, the amount may not be excluded from the value-added tax base for the provision of the Plaintiff’s services.

Therefore, the first-party plaintiff's assertion on a different premise is without merit.

(3) Whether the principle of trust and good faith and the principle of trust protection is violated

The facts that the Korea Food and Drug Administration concluded a contract on the premise that the instant project is subject to value-added tax exemption or that the Defendant did not impose tax on the instant project for several years cannot be deemed to have expressed a public opinion that the instant project constitutes a tax exemption target, and no other evidence exists to acknowledge that the Defendant issued a public opinion statement that the instant project constitutes a tax exemption target. Thus, the Plaintiff’s assertion on this part is without merit.

There is also no reason.

(4) Whether it is against the principle of non-taxable practice or prohibition of sub-taxation

In order to establish a non-taxable practice under Article 18(3) of the Framework Act on National Taxes, there must be an objective fact that has not been taxed over a considerable period of time, and there must be an intent that the tax authorities will not impose taxes due to any special circumstance with the knowledge that the tax authorities could impose taxes on the matter. Such public opinion or intent should be expressed explicitly or implicitly, but for the sake that there is an implied indication, there must be circumstances that the tax authorities have expressed their intent not to impose taxes on the state of non-taxation for a considerable period of time, unlike a mere omission of taxation (see, e.g., Supreme Court Decision 97Nu11065, Jan. 21, 200). Meanwhile, the burden of proving the existence of such non-taxable practice lies on the taxpayer (see, e.g., Supreme Court Decision 2002Du172, Oct. 25, 2002).

On November 10, 2003, when filing a request for the correction of value-added tax for the second period of December 10, 2002 with the Hongsung-gun, which was included in the tax base at the first time, the head of the competent tax office decided to refund the value-added tax amount of KRW 11,827,613 on December 15, 2003. The above corporate accounting year, when filing a request for the correction of value-added tax on August 1, 2005, was also excluded from the tax base for the payment of the value-added tax on the basis of the contract for forest projects with the Jeonsung-gun-gun, which was included in the tax base at the first time. The fact that the head of the competent tax office decided to refund the value-added tax amount of KRW 11,827,613 on December 15, 2003. The amount of value-added tax on the basis of the contract for forest projects with Msan-gun, Haan-gun-gun, Yangcheon-gun, and Yangcheon-gun.

However, each of the items in subparagraph 7-1 through 7, subparagraph 8-1, and subparagraph 8-2 of the above evidence Nos. 7-7, and the purport of the entire argument is visible as a result of the order of submission of tax information to the Daegu Director of the Daegu Regional Tax Office of this Court. 20 forest corporations with the corporate location located outside the jurisdiction of the defendant in the Gyeongbuk-do, among which many of them reported and paid the value-added tax on the forest tending, specific projects, pine tree eradication projects, and miscellaneous removal projects entrusted by the State or a local government to which the government subsidies were granted, even though they were involved in the forest tending, separate projects, etc., which are forest tending, separate projects, pine tree removal projects, and miscellaneous removal, etc., the head of the competent tax office may again include the value-added tax base for the portion received from the national subsidies again on January 4, 2010 and notify the re-revision of the fact that the tax office, upon a taxpayer's request for correction, excluded the amount of value-added tax due to the national subsidies from the tax base.

Therefore, the plaintiff's assertion on this part is without merit.

(5) Whether the imposition of additional tax is unlawful

Under the tax law, where a taxpayer violates various obligations, such as a return 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, an additional tax is an administrative sanction imposed as prescribed by the Act, and in principle, the taxpayer’s intention and negligence is not considered, and it does not constitute justifiable grounds that do not constitute a breach of duty (see, e.g., Supreme Court Decision 2005Du10545, Apr. 26, 2007).

In light of the aforementioned determination as to whether the Plaintiff violated the principle of good faith, good faith, or non-taxable practice, it is difficult to deem that there is a justifiable reason that the Plaintiff is not liable for breach of duty as to the Plaintiff’s failure to enter the tax invoice in an unfaithful manner or to properly perform the return and payment of value-added tax. Therefore, the instant disposition, other than the principal tax, imposing additional tax on failure to pay the tax invoice, and additional

Therefore, there is no reason for the plaintiff to be dismissed in part.

4. Conclusion

Therefore, the judgment of the court of first instance that dismissed the plaintiff's claim seeking revocation of the disposition of this case is justifiable. Thus, all of the plaintiff's appeal is dismissed as it is without merit, and the lawsuit on the claim for revocation of the disposition of value-added tax for the first term portion of 2003 and the second term portion of 2004 added at the trial is unlawful, and it is so decided as per Disposition.