Enforcement Decree of the Tax Act Article 17(2)(B)

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

The following facts are not disputed between the parties, or can be acknowledged in full view of the whole purport of the pleadings in each entry of Gap evidence Nos. 1 through 7.

A. On July 15, 200, the Plaintiff acquired the ownership of ○○○○○○-dong ○○○○○○ and the third floor building on the ground thereof (hereinafter “instant building”) and reported as a simplified taxable person, and thereafter, when the rental income amount in the course of operating a real estate rental business using the instant building exceeds the simplified taxable standard, the Plaintiff continued to conduct a business by converting the type of taxation into a general taxable person from July 200, and selling the instant building and its site to ○○○○○ on November 15, 2001, selling it to 360,000,000 won, and had the Plaintiff and the lessee succeed to all the lease relationship between the Plaintiff and the lessee on the instant building ○○○○○.

B. On December 21, 2001, ○○○ completed the registration of ownership transfer on the instant building and its site under its name, and thereafter, after reporting it as a simplified taxable person, the real estate rental business was also conducted using the instant building.

C. On March 3, 2004, the Defendant determined that the transfer of the building of this case constitutes the supply of goods subject to value-added tax, and determined the supply value of the building of this case as KRW 81,820,979, calculated in proportion to the appraisal value of the building of this case and its site in proportion to the above appraisal value of KRW 360,00,00,000, and additionally imposed value-added tax of KRW 12,972,710 on the Plaintiff (hereinafter “instant disposition”).

2. The plaintiff's assertion and judgment thereon

A. The plaintiff's assertion

(1) The Plaintiff’s transfer of the building and its site to ○○○ constitutes a transfer of the building and its site to include the lease relationship, which does not constitute a supply of goods under Article 6(6)2 of the Value-Added Tax Act and Article 17(2) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 1930 of Feb. 9, 2006), and thus, the transfer of the business is excluded from “transfer of the business which is not considered a supply of goods,” and even if Article 17(2) of the Enforcement Decree of the above Act transfers the business to a simplified taxable person, the real estate leasing business using the building of this case constitutes a business subject to simplified taxation beyond the standard of simplified taxation, and thus, the Enforcement Decree of the building of this case does not constitute a transfer of the business to a simplified taxable person, and the Plaintiff’s first transfer of the building is not subject to simplified taxation at the time of the transfer of the building, and thus, is not subject to simplified taxation at the time of the first transfer of the building.

(2) In addition, even though the transfer of the building of this case does not correspond to the "transfer of business" subject to non-value added tax under the above Enforcement Decree, the plaintiff and ○○○ determined the sale price of the building of this case as KRW 60,00,000 at the time of the transfer of this case, and Article 49(1)1 of the above Enforcement Decree also regards the market price of the building of this case as KRW 0,00,00,000, and Article 49(1)1 of the above Enforcement Decree is regarded as 10,000,000,000,000,0000,000,000,000,000,000,0000

B. Determination

(1) Determination as to the Plaintiff’s assertion

Article 6 (6) 2 of the Value-Added Tax Act and Article 17 (2) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 1930, Feb. 9, 2006; hereinafter the same) comprehensively succeed to all rights and obligations concerning business shall not be deemed to fall under the supply of goods subject to the value-added tax, but it shall not be deemed to fall under the case where a general taxable person transfers a business to a simplified taxable person. According to the facts acknowledged above, the plaintiff succeeded to all the lease relationship while transferring the building and its site to ○○○, so this constitutes "transfer of business" under the above Enforcement Decree.

However, the transfer of business is subject to non-taxation of value-added tax. Generally, since the transfer of business is a comprehensive transfer of human and physical facilities that are systematically combined with the transfer of business and the identity of the business owner is changed, it does not correspond to the intrinsic nature of supply under the Value-Added Tax Act, which is a requirement for taxation of specific goods. Moreover, inasmuch as ○○○○ (the transferee) reports the transfer of the building to a simplified taxable person as a simplified taxable person without any exception, it is anticipated that the transferee would be entitled to deduct the input tax without any exception, and thus, it is necessary to avoid unnecessary financial pressure for the transferee. Therefore, it is not subject to non-taxation of value-added tax. Meanwhile, in the above provision, in cases where a general taxable person transfers the business to a simplified taxable person, it is more than the amount of the general taxable person’s input tax generated by the transferee, and thus, it is possible to impose value-added tax on the transferor. Thus, even if the lease revenue of the building of this case exceeds the standard of simplified taxation, so long as the transfer of the business owner is not subject to the first taxable period.

Furthermore, even if the Plaintiff did not report as a simplified taxable person and did not receive the input tax deduction for the inventory goods, etc. while converting as a general taxable person in the course of commencing the business, such circumstance alone cannot be said to be subject to the non-taxation of value-added tax.

(2) Judgment on the Plaintiff’s assertion

Article 48-2 (4) of the Enforcement Decree of the Value-Added Tax Act provides that the value of the building shall be calculated based on the actual transaction price if the entrepreneur supplies the land and the building fixed on the land, and if the value of the land and the building is unclear among the actual transaction price, the appraisal value shall be calculated in proportion

Therefore, first of all, as to whether the distinction between the value of the land and the value of the building of this case among the purchase price of 360,000,000,000 won agreed between the Plaintiff and ○○○○ was unclear, according to the evidence No. 4, the above purchase price of this case is 60,000,000 won, and the value of the building of this case is 300,000,000 won and the value of the building of this case is 300,000 won, it is recognized that the confirmation document No. ○○○ was submitted to the Defendant’s employee, but the above confirmation document was prepared on February 18, 2004 after two years or more from the time of the above purchase and sale contract, and the Plaintiff did not submit a sales contract with ○○○, which can prove that each of the prices of the building of this case and its site of this case is distinguishable from that of the above purchase price of this case.

Meanwhile, Article 49(1)1 of the Enforcement Decree cited by the Plaintiff is a provision concerning the tax base for self-supply, etc., which cannot be applied to the tax base for value-added tax following the transfer of the instant building.

Therefore, in determining that the distinction between the value of the building of this case and the value of the building site is unclear among the above purchase price, the calculation of the actual transaction value of the building of this case in proportion to the appraisal value is lawful pursuant to the above Enforcement Decree. Therefore, the plaintiff's assertion of this part is without merit.

3. Conclusion

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