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Taxation issues on Contributed Acceptance - focusing on BTO method and BTL method -

  • Public Land Law Review
  • Abbr : KPLLR
  • 2011, 53(), pp.289-311
  • Publisher : Korean Public Land Law Association
  • Research Area : Social Science > Law

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ABSTRACT

Contributed acceptance has been used as a means of PPP(public private partnership). The PPP aims to cope with the lack of budget and to enhance efficiency of public service through the creativity of private sector. In the field of taxation contributed acceptance associated with gratuitous permission is mainly discussed. A private enterprise builds facilities and transfers ownership to a public sector or school through contributed acceptance and receives a operating permission to use it. The contributed acceptance associated with gratuitous permission is subject to taxation because a private enterprise receives a gratuitous permission in return for contributed acceptance. The Act on Private Investment toward Social Infrastructrue regulates several kinds of contributed acceptance. In the BTO(build-transfer-operate) model ⅰ)a private enterprise builds facilities and transfers ownership to a public sector or school, ⅱ)a public sector or school grants the operating right to the private enterprise, ⅲ)a private enterprise operates it. On the other hand, in the BTL(build-transfer-lease) model ⅰ)a private enterprise builds facilities and transfers ownership to a public sector or school, ⅱ)a public sector or school grants the operating right to the private enterprise, ⅲ)a private enterprise leases it to a public sector or school. Taxation issues related to contributed acceptance are as follows. First, the real estate leasing service of a public sector or school has become an object of a value-added taxation by Value-added tax law. A public sector or school receives a rent in advance through contributed acceptance, so the time when the taxable period expires is transaction time. Second, the value-added tax on the provision of goods or services associated with school facilities built by applying BTO is exempted. Tax exemption associated with school facilities should be applied to BTL method because there is not a essential difference between BTO d and BTL. Third, BTL is similar to installment sales and financial leases in economic substance. However, in the BTL value-added tax is levied twice at the transfer and lease stage. For the remedy to double taxation problems, it is not desirable to regard BTL as installment sales and financial leases since it is not in harmony with the purpose of The Act on Private Investment toward Social Infrastructrue. It is the better way to apply zero rate when a private enterprise transfers ownership to a public sector or school.

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