Early High Court Decision 2009Du3263 (Law No. 19, 2010)

The disposition imposing tax on the payment in kind and the division of the article jointly owned as the supply of the goods is legitimate.

In light of the fact that the main process of the joint project has been carried out in the name of the joint project from the time of acquisition of the land until the registration of preservation of ownership of the building is completed, the division of the joint property to dissolve the joint project is in fact returned in kind to the partners, and falls under the supply of the goods.

2010Guhap3040 Revocation of Disposition of Imposition of Value-Added Tax

The two AA

○ Head of tax office

December 23, 2010

January 27, 2011

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of value-added tax for the second period of February 5, 2009 against the Plaintiff on February 5, 2009 exceeds KRW 9,225,40,000 among the imposition of value-added tax for the second period of February 2, 200, shall be revoked.

1. Details of the disposition;

A. On July 11, 2005, the Plaintiff and KimA transferred construction expenses to ○○○○-dong 1123-4, 1123-4, 3 underground, 9, and 1/2 each share of co-ownership in the instant building (hereinafter referred to as “instant land and building”), and completed registration of preservation of ownership. On October 10, 2005, the Plaintiff and KimA transferred construction expenses payment to 101 and 102 of the above building, which is a construction company of the above building (hereinafter referred to as “○○○-si Construction”), and the registration of ownership transfer for the remainder of the building, according to shares due to the division of co-owned property, is completed in their own name.

B. On February 5, 2009, the Defendant notified the Plaintiff and KimAA to jointly and severally pay value-added tax of KRW 280,125,580 (value-added tax of the portion of the payment in substitution and value-added tax of KRW 18,450,80, and value-added tax of the portion of the division in common property) to the Plaintiff and KimA (hereinafter “instant disposition”).

C. The Plaintiff appealed and filed an appeal on August 25, 2009, but was dismissed on April 19, 2010.

[Ground of recognition] Unsatisfy, Gap evidence No. 11, the purport of the whole pleadings

2. Whether the disposition of this case is legitimate

A. The plaintiff's assertion

(1) Since the partnership relationship between the Plaintiff and KimA has already been terminated on June 27, 2003, which was before the payment in substitutes and the co-owned properties were divided, the Plaintiff and KimA were not joint business operators at the time of the said payment in substitutes and the co-owned properties, and the Plaintiff is not joint business operators, and the Plaintiff is not jointly and severally liable with KimA, and thus, the part of the instant disposition on payment in substitution exceeding the amount of value-added tax corresponding

(2) Since the division of the above jointly-owned property is merely to resolve the co-ownership relationship, it does not fall under the supply of goods, and even if the division of the above jointly-owned property for household affairs falls under the case where the share in kind is returned in kind, the principal agent of the instant joint-owned property is not the Plaintiff and KimA, but the executor of the instant joint-owned property, but the △△△ General Development (hereinafter referred to as the “△△ General Development”). Therefore, taxation should be imposed on the comprehensive development of △△△.

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

(1) The Plaintiff and KimA acquired the instant land on April 16, 2003, with co-ownership share 1/2 from ○○ City, respectively, in order to jointly carry out the construction and sale business of the instant building (hereinafter referred to as the “instant joint business”).

(2) Upon the agreement of May 6, 2003, the plaintiff, KimB, the husband of the plaintiff, KimA, and KimB entered into a "joint business agreement and construction contract" with the plaintiff, KimB as an joint business owner of the building of this case and entered into a "joint business agreement and construction contract" with the plaintiff, KimB as an joint business owner of this case, and agreed to carry out the joint business of this case through an event separately established. The main contents are as follows.

(3) Meanwhile, on June 27, 2003, the Plaintiff became the owner of the instant building solely under the name of the sole owner after obtaining permission for the construction of the instant building. On February 2, 2005, the Plaintiff became the owner of the building jointly under the name of the KimA and the joint owner.

(4) On August 2004, the Plaintiff and KimA prepared a written agreement to prevent problems that may arise in relation to the claim for construction expenses between △△ comprehensive construction company and △△ comprehensive construction company. On January 2005, the Plaintiff and KimA jointly prepared a written agreement to pay KRW 30,000,000 to KimB.

(5) After obtaining approval for use of the instant building on March 8, 2005, the Plaintiff and KimA completed registration of ownership preservation on July 11, 2005 with co-ownership shares as to the entire building of this case one half.

(6) On September 1, 2005, the Plaintiff and KimA agreed to the following terms for the settlement and payment of construction costs with △△ Comprehensive Construction Division.

(7) In addition, the Plaintiff made an agreement on the following terms based on the details of the construction cost finalized between △△ comprehensive Construction on the same day.

(8) Of the instant building on October 10, 2005, 101 were divided into 101, 102, 103, and 104. Of them, 101, and 102 were transferred to the ownership under the name of payment in kind for △△ Comprehensive Construction (Provided, That the ownership was transferred under the name of this case), 103, 301, 501, 701, and 901, the registration of ownership transfer was completed under the name of the Plaintiff on September 27, 2005, and each registration of ownership transfer was completed under the name of the Plaintiff on September 27, 2005 on September 27, 2005.

(9) As between February 10, 2004 and February 10, 2005, the △△ comprehensive development received KRW 340,000,000 from the ○○ Tax Office, the competent district tax office, as the refund of value-added tax. The Plaintiff filed a lawsuit against KimA, and received KRW 170,000,000, which is 1/2 of the said refund.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 6, 9, 10 evidence, Eul evidence 1, 2, 3, 6, 7, 14, 16, 17 evidence (including paper numbers) and the purport of the whole pleadings

D. Determination

(1) Determination on payment in kind

According to Article 25 (1) of the Framework Act on National Taxes, national taxes related to property belonging to a joint business (including value-added tax) shall be jointly and severally liable for payment by the joint business operator. As seen thereafter, since the same business relationship between the plaintiff and KimA has been maintained at the time of the above payment in kind, it is reasonable to deem that the property subject to the above payment in kind is the property belonging to the joint business in this case. Thus, the plaintiff, a joint business operator, is jointly and severally liable for payment of value-added tax imposed on the whole value-added tax imposed on the above 101 and 102, and thus, the plaintiff's assertion is not acceptable.

(2) Determination as to the partition of the article jointly owned

(A) According to the General Rule 6-14-2 of the Value-Added Tax Act, the return of equity shares in kind by a joint businessman constitutes the supply of goods. Generally, the division of common property to resolve a co-ownership relationship cannot be deemed the supply of goods subject to value-added tax by itself. However, in substance, the division of common property to dissolve a partnership can be interpreted as the supply of goods under the Value-Added Tax Act because it returns equity shares in kind to the partners.

(B) Therefore, the following circumstances, i.e.,: ① the main process of the instant joint project from the time of the acquisition of the land for the instant joint project on April 16, 2003 to the time of the completion of registration of ownership preservation for the instant building, was conducted in the joint name of the Plaintiff and KimA (with regard to the owner’s name, it was changed in the Plaintiff’s sole name at the time of the initial construction permission, but after the change in the name of the Plaintiff and KimA), ② the main content of each agreement between the Plaintiff and KimA, the Plaintiff, and Kim Jong, the Plaintiff, and Kim Jong-chul, and the Plaintiff, the above-mentioned joint ownership registration for the instant building was completed at the time of the completion of the instant joint ownership registration for the instant joint project, and the Plaintiff’s joint ownership registration for the instant building should be deemed to have been completed in the name of the Plaintiff and the above joint ownership registration for the instant building after the completion of each joint ownership registration for the instant construction project under the name of the Plaintiff and the above joint ownership registration for the instant building.

Furthermore, there is no evidence to acknowledge the Plaintiff’s assertion that the entity of the instant joint project is the △△ Comprehensive Development, not the Plaintiff and the SPA, and in light of the fact that the main process of the instant joint project was conducted in the name of the Plaintiff and KimA as seen earlier, the Plaintiff’s above assertion is rejected.

3. Conclusion

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