[1] Standard for determining whether public utility charges, such as electricity and gas charges, are included in the tax base of value-added tax, and where only a mere receipt of public charges borne by a supplier of goods or services on behalf of the supplier of goods or services on behalf of the supplier of goods or services and a payment is made on behalf of the supplier for convenience, whether the public charges can be deemed as having a payment relationship with the supply of goods

[2] The case holding that since it is reasonable to view that Gap, a building management business operator, and Eul, a building management business operator, paid Eul the electric charges for the building that Eul paid to Gap, and accordingly, collected and paid the electric charges from the occupants of the building separately from the general management expenses, and then issued and delivered a tax invoice to occupants for the management expenses (including electric charges) received from the occupants of the building in the pertinent taxable period, and then filed and paid the value-added tax on the basis thereof, and later filed a claim for the correction of value-added tax to be deducted from the value-added tax base by recognizing the value-added tax on the electric charges paid by Gap as the input tax amount, but the tax authority rejected this claim, in case where Gap and Eul, a building management business operator, paid Eul the electric charges for the building that Eul paid to Gap, separately from the charges for the electric management services paid by them for the occupants of the building, they should be excluded from the tax base of each value-added tax on the grounds that it cannot be deemed that there is a relationship between the supply of management services and the payment for

[1] Article 13(1)1 of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; see current Article 29(1) and (3)1); Article 48(1) of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013; see current Article 29(3) of the Value-Added Tax Act) / [2] Article 13(1)1 of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; see current Article 29(1) and (3)1 of the Value-Added Tax Act); Article 48(1)29(3) of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013)

[1] Supreme Court Decision 2007Du9778 decided September 6, 2007 (Gong2007Ha, 1577)

Plaintiff (Law Firm Song-nam, Attorneys Park Young-nam, Counsel for the plaintiff-appellant)

The superintendent of the tax office

Seoul High Court Decision 2017Nu89751 decided September 7, 2018

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. The main sentence of Article 13(1) of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013) provides, “The tax base of value-added tax on the supply of goods or services shall be the sum of the values falling under each of the following subparagraphs: The tax base of value-added tax shall be the sum of the values.” In addition, Article 48(1) of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013) provides, “The tax base stipulated under Article 13(1) of the Act includes all monetary values in relation to consideration regardless of the names of the prices, commissions, fees, or any other things received from the parties to the transaction.”

Therefore, even in the case of public utility charges, such as electricity and gas charges, if it is determined whether it is included in the tax base of value-added tax, depending on whether it is in a quid pro quo relationship with the supply of goods or services, and if it is merely a fact that a supplier of goods or services receives and pays on behalf of the other party for convenience separate from the cost of the supply of goods or services on behalf of the other party, such public utility charges cannot be deemed as a quid pro quo relationship with the supply of goods or services (see Supreme Court Decision 2007Du9778, Sept.

2. Review of the reasoning of the lower judgment and the record reveals the following facts.

A. On August 23, 2007, the Plaintiff is a business operator engaged in building management business with the trade name of “○○○○○.” The Plaintiff entered into an agreement on the payment of electricity fees with the purport that “Cyd Co., Ltd. (hereinafter “Cyd”) and “the Plaintiff shall be entrusted with the management of the said building by the Cyd Co., Ltd. (hereinafter “Cyd”) and the Plaintiff shall be paid KRW 19 million per month (excluding value-added tax) in return.”

B. Accordingly, the Plaintiff received electric charges (including value-added tax) for the section for exclusive use and common use from the occupants of the instant building separately from the general management expenses, etc., along with the management expenses, and paid the electric charges imposed on the said building to the Korea Electric Power Corporation on behalf of the parties to the electric use contract.

C. However, the C&C was closed on September 4, 2009 by ex officio administrative disposition on September 4, 2009, as of July 1, 2009.

D. The Plaintiff issued and delivered a tax invoice to the occupants for the management expenses (including electric charges) received from the occupants of the instant building during the period from the first to the second period from 2011 in 2011, and on the basis thereof, filed and paid each value-added tax in the said taxable period (hereinafter “each of the instant value-added tax”).

E. Since then, the Plaintiff confirmed that “the tax base of each of the instant value-added taxes includes the electric charges received by the Plaintiff from the occupants of the instant building, and the value-added tax on KRW 231,903,224 of the said building that the Plaintiff paid to Korea Electric Power Corporation was omitted from the input tax amount,” and received 8 copies of the tax invoice for the electric charges that the Plaintiff paid by the Plaintiff from the person in charge of the technical dispute, and filed a claim for the correction of value-added tax on September 25, 2014, stating that “The Defendant recognized the value-added tax on KRW 231,903,224 as the input tax amount for the said KRW 231,903,224 as the input tax amount and requested the deduction from each of the said value-added tax base.”

F. However, on October 1, 2014, the Defendant rejected the claim for correction on the ground that “the instant tax invoice is about the transaction with the closed party and was issued after the time of supply.”

G. Meanwhile, with respect to the section for exclusive use of the building of this case, the Plaintiff imposed electricity charges according to the actual quantity indicated in each individual measuring instrument installed in each shop, and with respect to the section for common use for which no individual measuring instrument is installed, the Plaintiff divided the entire electricity charges in proportion to the size of each store by the occupants. Moreover, with respect to the electricity charges received from the occupants of the building of this case, no cost including value added tax,

3. Examining these facts in light of the legal principles as seen earlier, it is reasonable to view that the Plaintiff, who is engaged in the management of the building of this case, received and paid electricity fees for the occupants of the building of this case, separately from the price for the management service, on behalf of the occupants of the building of this case, for the convenience of convenience, and thus, the above electricity charges cannot be deemed as having relation to the Plaintiff’s supply of the above management service and the price for the above management service. Accordingly, the electricity charges received from the occupants of the building

4. Nevertheless, the lower court determined to the effect that, on the grounds that the Plaintiff’s electricity charge payment business is in quid pro quo with the “contract management expenses to be paid by the Plaintiff under the instant service contract” irrelevant to the tax base of the value-added tax in this case, the Plaintiff’s electricity charge total amount of KRW 231,903,224 paid to Korea Electric Power Corporation in each of the instant VAT taxable periods cannot be excluded from the value-added tax base of this case. In so determining, the lower court erred by misapprehending the legal doctrine on the value-added tax base, thereby adversely affecting the conclusion of the judgment.

5. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Sang-ok (Presiding Justice)