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

Cheong-gu Office

The Defendant’s refusal to refund KRW 173,432,443, which was paid to the Plaintiff on March 7, 2016 by the Plaintiff on March 7, 2016

Dispositions and the imposition of value-added tax of KRW 25,851,760, which was imposed on the Plaintiff on April 7, 2016, each disposition is revoked.

A. On January 28, 2015, the Plaintiff was a business operator operating AAAG real estate, and entered into a contract with BB (hereinafter referred to as “instant contract”) under which the Plaintiff would purchase each of the facility investment assets (including the cost of new construction of the building) in 1,591,679,704 won (including value-added tax) for the 37-00 ground building (hereinafter referred to as “instant building”) in the Kimhae-si, Seoul-si (hereinafter referred to as “B”), and the equipment investment assets (including the interior and various costs) in 399,628,495 won (including value-added tax) (hereinafter referred to as “instant contract”).

B. On August 1, 2015, the Plaintiff issued a tax invoice of KRW 1,810,280,180 (hereinafter “instant tax invoice”) from BB, and filed a claim for refund of KRW 181,058,018 (including input tax amount of KRW 181,280,018) that occurred during the second period of 2015 to the Defendant on January 25, 2016, after deducting KRW 8,946,525 from output tax amount of KRW 173,432,443 for the second period of 2015.

C. On March 7, 2016, the Defendant rejected the Plaintiff’s claim for refund (hereinafter “instant refusal disposition”), and notified the Plaintiff of the pre-announcement of taxation as follows on March 7, 2016.

The time of supply for goods (service) under the Value-Added Tax Act shall be the date of use or profit-making ( February 1, 2015), the date of payment ( February 9, 2015), and the date of transfer of ownership ( March 16, 2015), whichever is earlier. However, the purchase tax invoice, which was paid by BB, differently from the time of supply, intends to issue a notice of decision on the refund of the input tax amount because it constitutes a tax invoice different from the fact that the time of supply for the goods are received after the lapse of the time of supply.

D. Meanwhile, on April 14, 2016, the Defendant imposed value-added tax of KRW 25,851,760 on the Plaintiff in 2015 (hereinafter “instant disposition”).

E. The Plaintiff appealed and filed an appeal with the Tax Tribunal on May 18, 2016, but was dismissed on November 22, 2016.

[Ground of recognition] Facts without dispute, Gap evidence 2, 3, 5 through 10, Eul evidence 2, the purport of the whole pleadings

2. Relevant statutes;

It is as shown in the attached Form.

3. Whether the refusal disposition of refund of this case and the disposition of this case are legitimate

A. Summary of the plaintiff's assertion

In concluding the instant contract with BB on January 28, 2015, the Plaintiff determined that the instant building was used for six months, and that there was no defect in using the instant building. Therefore, the time of supply for the instant building was July 28, 2015, and thus, the instant tax invoice was withdrawn after the lapse of the time of supply under the condition of rescission. As such, the instant tax invoice was deemed to be a false tax invoice, and thus, the instant disposition rejecting refund and the instant disposition imposing refund, which did not deduct the input tax amount, is unreasonable.

B. Relevant legal principles

The supply of goods under the Value-Added Tax Act refers to the delivery or transfer of goods under all contractual and legal grounds, and in light of the nature of value-added tax, such delivery or transfer is premised on an act of transferring ownership so that the goods can be used and consumed. If a business operator concludes a sales contract to sell a building and then transfers possession of the building to the other party to the transaction even before the purchase price is liquidated or the registration of transfer in the name of the other party to the transaction is completed, it constitutes the supply of goods under the Value-Added Tax Act (see, e.g., Supreme Court Decision 2005Du2926, Oct. 13, 2006).

Meanwhile, Article 15(1)2 of the Value-Added Tax Act provides that the time when the goods are made available shall be the time of supply for the goods, in case where the transfer of goods is not required. "the time when the goods are made available" refers to the time when the goods are made available to be actually used, so in case where the goods supplied are real estate, the time when the real estate is ordered to be named, unless there are special circumstances (see, e.g., Supreme Court Decision 2006Du9900, Sept. 11, 2008).

C. Determination

1) On the other hand, in the sales contract for facility investment assets (Evidence A2) and the sales contract for facility investment assets (Evidence A3) prepared between B and B submitted by the Plaintiff, the seller and the buyer are required to issue a tax invoice of the sales price (including value added tax) when the buyer considers that there is no defect in all the matters, including buildings, in which the subject-matter of the contract is used for six months and the subject-matter of the contract is reported by the buyer for six months. ② The sales contract shall be cancelled at the time of the occurrence of the defect in all the matters, including buildings during the six-month test period. ③ When the sales contract is cancelled on the above condition, the seller shall refund the total amount of the purchase price (including value added tax) to the buyer without any justifiable reason (hereinafter referred to as “special agreement”).

2) However, according to the overall purport of Gap evidence Nos. 4, 5, 10, and Eul evidence Nos. 3 and 4, the plaintiff started running a restaurant of "DDDDDDDDDDD village after moving the building of this case from BB on February 1, 2015, and the plaintiff paid the purchase price of the building of this case to BB on February 9, 2015, and completed the registration of ownership transfer on March 16, 2015, and submitted a sales contract for facility investment assets and facility investment sales contract (Evidence No. 4) for which the special agreement was not specified at the time of the transfer registration of ownership of the building of this case, and in light of the following circumstances acknowledged by the evidence, Eul evidence Nos. 2 and 3 as mentioned above, and the whole purport of pleading No. 5, it is difficult to believe that each evidence No. 2 and 3 constitute the time of supply for the building of this case and facilities of this case under the Value-Added Tax Act.

A) It is natural in light of the legal doctrine that if there is a defect in the subject matter of sale, a sales contract may be rescinded through default or warranty against defects, and the matters asserted by the Plaintiff cannot be deemed as a condition for rescission.

B) In preparation for the unexpected problems in the process of administrative procedures such as registration, the Plaintiff asserts that he/she prepared a sales contract without any special agreement separately from the sales contract stating the special agreement and submitted it at the time of registration of transfer of ownership. However, the details of preparation are lacking persuasive power, and the possibility that a sales contract with any special agreement was prepared ex post facto because the Plaintiff owns 40% of shares of BB, and the Plaintiff can not be excluded

C) The Value-Added Tax Act provides that the input tax amount of the relevant goods may be deducted by submitting a tax invoice at the time of supply for the goods within the specified period (the tenth day of the month following the month to which the time of supply belongs). Under the current Value-Added Tax Act adopting the aforementioned Act, the tax invoice system has the function of mutual verification between taxpayers that facilitate the dissemination of income tax and corporate tax as well as value-added tax by exposing transactions between the parties concerned, and it is essential that the preparation and issuance of the tax invoice are made normally within the taxable period to which the time of the transaction belongs in order for the tax assessment and mutual verification to function properly as above due to the characteristics of value-added tax conducted for each taxable period (see, e.g., Supreme Court en banc Decision 2002Du5771, Nov. 18, 2004).

3) Therefore, the instant tax invoice constitutes a false tax invoice, which was prepared after the end of the first taxable period of value-added tax in 2015, and thus, the Plaintiff cannot be entitled to deduct the relevant input tax amount. Therefore, the Plaintiff’s assertion is without merit.

4. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.

(c)