Appropriateness of a disposition imposing value-added tax on a business operator who has not leased real estate

If a registered business operator who has not leased real estate concludes a real estate lease agreement with the lessee and receives the price and supplies real estate rental services, the liability to pay value-added tax arises.

Article 7 of the Value-Added Tax Act [Supply of Services]

1. The plaintiff's claim is dismissed.

2. Litigation costs shall be borne by the plaintiff.

The Defendant imposed on the Plaintiff on April 2, 2007 the value-added tax for the first period of 2003 575,660 won, the value-added tax for the second period of 2003 557,020 won, the value-added tax for the first period of 204 58,460 won, the value-added tax for the second period of 2004 58,460 won, the value-added tax for the first period of 2005 85,600 won, the value-added tax for the second period of 205 821,880 won, the value-added tax for the second period of 205 791,730 won, the value-added tax for the first period of 206 757,890 won, each of the value-added tax for the second period of 206 36,208 206.

1. Details of the disposition;

A. The Plaintiff, as the owner of cement brick structure and cement block structure and cement block lux and fireproof panel roof 3-story stores, 41.09 square meters in 1st floor, 41.09 square meters in 2nd floor, 31.09 square meters in 41.09 square meters in 2nd floor, and 41.09 square meters in 3rd floor (hereinafter “instant building”), from the end of December 2002, leased part of the said building to Nonparty 00, and did not register the rental business operator.

B. On February 8, 2007, the Defendant discovered the fact that the Plaintiff did not register real estate rental and the fact that each of the following lease agreements between the Plaintiff and the above Kim 00 was entered into.

(1) On December 23, 2002: Lease area: 46m2 and lease deposit: 20 million won among the instant buildings, monthly rent: 2 million won, and the period: 24 months from the date of the contract (the evidence No. 3; hereinafter referred to as the “instant contract”)

(2) On January 1, 2005: 46§³, rental deposit: one million won per month, gold 1.1 million won per month, and period: 12 months from the date of contract (the evidence No. 5; hereinafter referred to as the "contract in this case")

(2) The above Gap evidence Nos. 3 and 5 are submitted at the time of inspection of unregistered registration of real estate lease and at the time of request for examination of the legality of taxation prior to the tax base described below (d)

C. Meanwhile, as to the above Kim 00, the Plaintiff filed a lawsuit seeking unjust enrichment equivalent to the delivery, delayed rent, and rent of the instant building on the ground that the contract of this case was terminated on December 31, 2005. On January 3, 2007, the Defendant ordered the Plaintiff to order the building of this case. The Defendant shall pay to the Plaintiff an amount equivalent to KRW 5.4 million per month from September 1, 2006 and from September 1, 2006 to September 1, 2006, the amount equivalent to KRW 1.1 million per month from the date of completion of the above name. The Plaintiff waiver of the remaining claims, which became final and conclusive.

D. Around February 23, 2007, the Defendant filed a prior notice of taxation of KRW 5,49,720 on March 21, 2007 with the Plaintiff on the following grounds: (a) the first and second term portion in 2003, the first and second term portion in 2004, the first and second term portion in 205, and the first and second term portion in 2006, and the first and second term portion in 2006, respectively; and (b) the Plaintiff is dissatisfied with this and filed a prior notice of taxation of value-added tax for the first and second term portion in 202, the second term portion in 205, the first and second term portion in 206, and the first and second term portion in 206, the Defendant filed a prior notice of taxation of value-added tax for the first and second term portion in 2007, which was already revoked ex officio, and the Defendant did not adopt the remainder of the prior notice of taxation.

E. On April 2, 2007, the Defendant imposed on the Plaintiff the first quarter value-added tax of 2003, 575,660 won, 557,020 won, 581,440 won, 558,460 won, 85,60 won, 821, 880 won, 790 won, 790 won, 2006, 2004, value-added tax for the second quarter of 2004, 58,460 won, 85,60 won, 821,80 won, 791, 730 won, 206, 2006, and 757, and 890 won, respectively, of value-added tax for the second quarter of 205 (hereinafter “instant disposition”).

F. The Plaintiff dissatisfied with the instant disposition and filed a request for review with the Commissioner of the National Tax Service on July 2, 2007. On January 20, 2003, the Plaintiff filed a request for review of the instant disposition with the Plaintiff on the following grounds: ① “Lease area: 46m2 from among the instant buildings: 2,000,000 won: monthly rent: 300,000 won from the date of surrender: 24 months from the date of surrender (the evidence No. 4; hereinafter referred to as “instant contract”) and submitted the above evidence No. 4, alleging that the Plaintiff entered into a lease agreement with the above Kim 00 on January 203 (the date of preparation in the evidence No. 4, Jan. 203; and the date of surrender of the leased object is written on January 31, 2005). The Commissioner of the National Tax Service dismissed the request for review on August 27, 2007.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 to 5, Eul evidence Nos. 1 to 5 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

① After the conclusion of the instant contract, Kim 00 offered a club business to the Plaintiff in order to minimize the rent burden, and the Plaintiff accepted it and concluded the instant contract on January 20, 2003. Therefore, the instant disposition that did not recognize the above contract as genuine is unlawful, and even if the instant contract is false, the security deposit that Kim 00 paid to the Plaintiff was deducted from the rent in arrears around November 2003. Thus, the part imposed on the subsequent period of the instant disposition was unlawful as to unjust enrichment or damages.

(b) Related statutes;

Value-Added Tax Act

Article 7 (Supply of Services)

(1) The supply of services shall be either providing services or having others use goods, facilities or rights, pursuant to all contractual and legal grounds.

Article 9 (Transaction Time)

(2) The time when services are supplied shall be the time when services are supplied or goods, facilities or rights are stolen.

Article 13 (Tax Base)

(1) The tax base for value-added taxes on the supply of goods or services shall be the aggregate of the following values (hereinafter referred to as "value of supply"): Provided, That value-added taxes shall not be included:

1. Where payments are given in money, the payments;

C. Key issue of the instant case

The key issue of the instant case is (i) whether the instant contract is authentic, and (ii) if the instant contract is false, whether there was no provision of services for the period after November 2003 among the instant cases.

D. Determination

(1) Judgment on the first issue

In light of the above facts, Gap evidence Nos. 3 and 5 under the contract of this case was submitted in the prior stage of the disposition of this case, i.e., ①, 2, Gap evidence Nos. 3 and 5 under the contract of this case. (3) Although the date of preparation was immediately after Gap evidence No. 3 was prepared, the plaintiff submitted it only at the time of the request for examination to the Commissioner of the National Tax Service after the disposition of this case. At the time of the pre-assessment review of the disposition of this case, the plaintiff did not seek cancellation of the pre-announcement notice of taxation based on the contract of this case. (3) The plaintiff submitted evidence Nos. 4 and 4 only at the time of the request for examination. (4) The above evidence No. 4 was written on Jan. 31, 2005, more than the date of preparation, and there was no specific agreement between the plaintiff and the above Kim 00 on the partnership (However, the plaintiff's investment in facilities, and there was no evidence to acknowledge the above part of the contract of this case No. 40).

(2) Judgment on the second issue

The issue of whether the lessee actually received the payment of value-added tax may have no effect on determining whether the liability for value-added tax is established (see Supreme Court Decision 94Nu11446, Nov. 28, 1995). Even if a lessee’s possession is illegal as a lessee’s lease contract is terminated due to the lessor’s termination notification, if the lessee continues to use the building without ordering the lessor, and the lessor owns the leased deposit and then deducts the amount equivalent to the monthly rent from the deposit, then it constitutes a supply of services subject to value-added tax (see Supreme Court Decisions 2002Da38828, Nov. 22, 2002; 2002Du8534, Nov. 28, 2003).

As to the instant case, the decision of recommending reconciliation between the Plaintiff and the above Kim 00 to pay 1.1 million won per month from September 1, 2006 to the date of completion of the name of the building of this case was confirmed on January 3, 2007, and in this case, it can be sufficiently known that the Plaintiff was paid the price to the Plaintiff if the lessee continues to occupy and use the object after the expiration of the lease term, the Plaintiff’s circumstance alone does not constitute value-added tax because the possession of the above Kim 00 after around November 2003 did not constitute an illegal possession without any contractual or legal cause, and there is no other evidence supporting this part of the Plaintiff’s assertion that this part of this case is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.