Whether it constitutes the transfer of business not deemed the supply of goods

The Plaintiff’s sales of the instant store is reasonable to see that the Plaintiff’s real estate rental business’s physical, human facilities, rights, and duties are comprehensively transferred, not to replace only the managing body while maintaining the identity of the business, but to transfer the goods provided for the business. Therefore, it does not constitute a transfer of business not deemed the supply of goods

The contents of the judgment are the same as attachment.

Article 10 (8) 2 of the Value-Added Tax Act

2018Guhap54129 Revocation of disposition of refusal to make a request for refund of value-added tax

KimA

b Head of the Tax Office

April 11, 2019

May 2, 2019

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The defendant's rejection disposition of correction of the value-added tax x,xx, andxxx members on December 12, 2017 against the plaintiff on December 12, 2017 is revoked.

1. Details of the disposition;

A. On October 23, 1989, the Plaintiff registered as a real estate business, and operated a real estate rental business using Nos. 1, 4, and 1 (hereinafter “instant store”) among the five floors of the first floor of the OO-O-O reinforced concrete collective buildings, O-O-O reinforced concrete building, which is one’s own ownership.

B. On August 23, 2017, the Plaintiff sold the instant store in total at KRW 750,000,000,000, and registered the transfer of ownership in the name of CCC with respect to the instant store on August 30, 2017, and reported the closure of real estate rental business on September 1, 2017.

C. On September 22, 2017, the Plaintiff calculated the value of supply in the part of the building among the instant stores to the Defendant as ax,xx, andxxxx, and reported and paid the value of value-added tax x,xx, andxxx in 2017.

D. On October 30, 2017, the Plaintiff asserted that the sales of the instant store constituted a transfer of business that does not constitute a supply of goods under the Value-Added Tax Act, and filed a request for correction to refund the value-added tax x, xx, xx, and xx won already paid to the Defendant. On December 12, 2017, the Defendant rejected the request (hereinafter “instant disposition”) on the ground that the sales of the instant store does not constitute a transfer of business.

[Reasons for Recognition] Unsatisfy, Gap evidence 2, 3, Eul evidence 1 to 5 (including additional number), the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The Plaintiff’s sales of the instant store constitutes a transfer of business that does not constitute supply of goods subject to value-added tax or that does not constitute supply of goods under the Value-Added Tax Act, and thus, the instant disposition is unlawful.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Whether it constitutes supply of goods subject to value-added tax

The term “supply of goods subject to value-added tax” means the delivery or transfer of goods under all contractual or legal grounds, and the person liable for duty payment is a person who independently supplies goods or services for a business regardless of whether they are for profit. Thus, in the event that an entrepreneur delivers or transfers goods due to contractual or legal grounds, it shall be subject to the imposition of value-added tax, unless there is a special provision that the value-added tax is exempted or not. In the event that an entrepreneur continues to supply goods or services for his main business, it shall be subject to the imposition of value-added tax even when the entrepreneur supplies the goods or services continuously and repeatedly. As long as the supply falls under the category of goods or services under the Value-Added Tax Act, it shall be subject to the imposition of value-added tax regardless of whether the purpose of the supply is to maintain and expand the business, or for liquidation, reorganization or discontinuance of the business (see, e.g., Supreme Court Decisions 2006Du1473, Jun

As seen earlier, the Plaintiff: (a) after acquiring the instant store and completing business registration; and (b) selling the instant store to CCC and closing the real estate rental business using the instant store; (c) as seen earlier, the Plaintiff, who had carried on the real estate rental business, sold the instant store offered for his/her own business, transfers goods related to his/her business to a business operator due to contractual reasons; and (d) this constitutes a supply of goods subject to value-added tax even if its purpose is to discontinue business.

2) Whether the transfer falls under the category of business that does not constitute a supply of goods

Article 10(8)2 of the former Value-Added Tax Act (amended by Act No. 15223, Dec. 19, 2017; hereinafter the same) and Article 23 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 28641, Feb. 13, 2018; hereinafter the same shall apply) mean the comprehensive transfer of property for business purposes and physical and human facilities, rights, and obligations, etc. to replace only the management body while maintaining the identity of the business. As such, the business should be an organic combination of physical and human facilities so that its social independence can be recognized (see, e.g., Supreme Court Decisions 2002Du8800, Jan. 10, 200; 2004Du8422, Apr. 28, 2006).

In full view of the facts acknowledged earlier and the following circumstances revealed by the respective descriptions of evidence Nos. 2, 3, and 6 (including paper numbers) and the purport of the entire pleadings, it is reasonable to deem that the Plaintiff’s sales of the instant store is not a comprehensive transfer of the Plaintiff’s real estate rental business’s physical, human facilities, rights, and obligations, and not a replacement of only the management body while maintaining the identity of the business, but a transfer of the goods offered for the business. Thus, this does not constitute a transfer of the business not deemed a supply of the goods under Article 10(8)2 of the former Value-Added Tax Act and Article 23 of the Enforcement Decree

① The Plaintiff merely entered into a sales contract with the CCC to sell the instant store, and did not enter into an agreement with the Plaintiff on comprehensive transfer of the Plaintiff’s real estate leasing business (it cannot be deemed that the Plaintiff comprehensively acquired the Plaintiff’s real estate leasing business on the ground that the CCC entered into a special agreement with the lessee of the instant store to assume obligations, such as the obligation to refund the lease deposit.

② The CCC, which purchased the instant store, prepared a letter of confirmation (No. 6) that it acquired the instant store, etc. in order to build a new building, and submitted it to the Defendant. The CCC did not register real estate rental business before and after the purchase of the instant store.

③ On September 1, 2017, the Plaintiff reported the reason for the closure of the real estate rental business to ‘other' rather than ‘transfer or acquisition'. The Plaintiff did not submit a report on the business transfer to the Defendant.

3) Whether the instant disposition is lawful

The Plaintiff’s sales of the instant store constitutes a supply of goods subject to value-added tax, and does not constitute a transfer of business that does not constitute a supply of goods under the Value-Added Tax Act, so the instant disposition rejecting the Plaintiff’s request for correction is lawful.

3. Conclusion

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

Related Acts and subordinate statutes

former Value-Added Tax Act (Amended by Act No. 15223, Dec. 19, 2017)

Article 2 (Definitions)

The terms used in this Act shall be defined as follows:

1. The term "goods" means things or rights that have property value. Necessary matters regarding the scope of things and rights shall be prescribed by Presidential Decree;

3. The term "enterprisers" means any person who supplies goods or services independently for business, regardless of whether the business aims to make profit;

Article 3 (Taxpayer)

Any of the following individuals, corporations (including the State, local governments, and local government associations), unincorporated associations, foundations, or other organizations are liable to pay the value-added tax pursuant to this Act:

1. An entrepreneur;

Article 4 (Taxable Objects)

Value-added tax shall be levied on the following transactions:

1. Supply of goods or services by an entrepreneur;

Article 5 (Taxable Period)

(3) Where a business operator closes his/her business, the taxable period shall commence from the taxable period in which the date of closedown falls to the date of closedown.

Article 9 (Supply of Goods)

(1) The supply of goods shall be a delivery or transfer of goods pursuant to all contractual and legal grounds.

Article 10 (Special Cases of Supply of Goods)

(8) None of the following shall be deemed the supply of goods:

2. Transfer of business, which is prescribed by Presidential Decree: Provided, That this shall not apply where a person who takes over the business under Article 52 (4) pays a price for such business, collecting and paying a value-added tax from the person who receives the price therefor

former Enforcement Decree of the Value-Added Tax Act (Amended by Presidential Decree No. 28641, Feb. 13, 2018)

Article 23 (Transfer of Business Not Deemed Supply of Goods)

"Those prescribed by Presidential Decree" in the main sentence of Article 10 (8) 2 of the Act means comprehensively succeeding to all rights and obligations with respect to the relevant business at each place of business (including cases of division meeting the requirements of Article 46 (2) or 47 (1) of the Corporate Tax Act, including cases of comprehensive transfer of assets meeting the requirements of each subparagraph of Article 37 (1) of the Restriction of Special Taxation Act, and cases where the transferee adds new type of business or changes the type of business other than the succeeded business). In such cases, even if the transferee succeeds to the relevant business without including the following rights and obligations related to such business, it shall be deemed that the relevant business is comprehensively succeeded to:

1. The amount receivable;

2. A document concerning accounts payable;

3. Land, buildings, etc. which are not directly related to the relevant business and prescribed by Ordinance of the Ministry of Strategy and Finance.