The Supreme Administrative Court rendered the 108-Pan-570 Decision of December 12, 2019 (hereinafter, this “Decision”), holding that a building on land, whether or not a user license is obtained for it or its initial ownership registration is completed, is deemed a special good subject to special sales tax as long as it is held for a period not exceeding two years.
According to the facts underlying this Decision, individuals including A who were not a party to this litigation (hereinafter, the “Trustors”) separately obtained the land at issue as a result of purchases. They entered into a self-benefit trust deed with the Appellant, registering the transfer of the land at issue to the Appellant (i.e., the Trustee). The Appellant subsequently sold by contract the land at issue to X, not a party to this litigation. The Appellee (the National Taxation Bureau of the Central Area under the Ministry of Finance) determined based on its calculation that the holding period of the trust property held during the existence of the trust relationship from the day when the Trustors originally obtained such real estate and completed its transfer registration was between one to two years. Therefore, the Appellant actively paid the special goods and services tax (hereinafter, the “Special Sales Tax”) assessed based on the selling price of the land at issue at an applicable tax rate of 10%, and the payment was approved by the Appellee based on the amount as filed. The Appellant subsequently issued a written statement to assert that since the land at issue did not fall within the scope of the Statute for Special Goods and Services Taxes (hereinafter, the “Special Sales Taxes Statute”), the Appellant was applying to refund the tax as paid in accordance with Article 28, Paragraph 2 of the Tax Collection Law. Since the Appellee failed to render a disposition in two months, the Appellant elected to file an administrative appeal in accordance with the Article 2 of the Administrative Appeal Law. After Appellee subsequently issued a letter (hereinafter, the “Original Disposition”) to reject the application and the Appellant’s subsequent administrative appeal was also rejected, the Appellant brought an administrative action with the original trial court to seek the reversal of the decision on the administrative appeal and the Original Disposition. The original trial court later rendered the original decision to dismiss the administrative action. Still dissatisfied, the Appellant appealed to reverse the original decision and cancel both the decision on the administrative appeal and the Original Disposition.
According to this Decision, an observation of the literary interpretation, systemic interpretation and the legislative objectives of Article 2, Paragraph 1, Subparagraph 1 of the Special Sales Stature shows that in order to avoid loopholes such as human speculation and evasion of special sales taxes, a building on a land, whether or not a user certification is obtained or initial ownership registration is completed for it, as long as it is held within two years, the “building and its base” shall be deemed “special goods” under the first part of Article 2, Paragraph 1, Subparagraph 1 of the Special Sales Tax Statute.
In addition, according to this Decision, it was indicated in the original decision that there was a building on the land at issue without initial ownership registration, that the tax period of the housing tax was January 1978 through July 2010, and the Appellee’s onsite inspection indicated signs of inhabitation. Although the Appellant only held his due share of the ownership of the land at issue but did not obtain the ownership of the building on the land, still there was indeed a building whose initial ownership registration had not been made on the land at issue before it was divided. Therefore, the land at issue is a tax object which is “a building and the base thereon which are possessed within two years” under the first part of Article 2, Paragraph 1, Subparagraph 1 of the Special Sales Tax Statute. Therefore, the Appellant’s payment of the special sales tax at 10% of the selling price of the land at issue in accordance with Articles 4 and 7 of the same statute is lawful, and there is no erroneous application of laws and regulations under Article 28 of the Tax Collection Law. The original decision, which upheld the Appellee’s rejection of the Appellant’s tax refund application via the Original Disposition, was not legally erroneous.