Seoul Administrative Court 2008Guhap10898 ( September 12, 2008)

early 2007west3643 ( December 27, 2007)

Whether expenses incurred in the joint purchase of agricultural products are eligible for tax exemption.

It shall not be deemed that services provided in the course of joint purchase of agricultural products are essential, and the expenses are deemed to be collected as the overall expenses or operating expenses of the association, and the expenses are collected differently from the members and non-members, and it shall not be deemed services incidental to tax-free goods.

The contents of the decision shall be the same as attached.

Article 1 (Taxable Objects)

Article 2 (Taxpayer of Value-Added Tax Act)

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The Defendant’s imposition of value-added tax for the first term of 2002 on June 14, 2007; imposition of value-added tax for the second term of 202 on August 1, 2007; imposition of value-added tax for the second term of 2002; imposition of value-added tax for the second term of 203 on August 1, 2007; imposition of value-added tax for the second term of 203; imposition of value-added tax for 12,847,047,040; imposition of value-added tax for the second term of 2003; imposition of value-added tax for 16,026,560 for the first term of 204; imposition of value-added tax for 13,458,590 for the second term of 204; imposition of value-added tax for 13,357,420 for the first term of 205; imposition of value-added tax for the second term of 2014,2015

2. Purport of appeal

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff is a non-profit corporation established pursuant to the Small and Medium Enterprise Cooperatives Act for the purpose of promoting the welfare of its members and achieving economic benefits through cooperative projects with the members of the two parts and implied manufacturers located in Seoul Special Metropolitan City and Gyeonggi-do areas as its members.

B. As a part of a joint project for its members, the Plaintiff is running a business (hereinafter referred to as the “instant business”) that supplies the two kinds of parts to the Korea Food Industry Federation (hereinafter referred to as the “Korea Food Industry Federation, 2002, 2003, and 2007) or the Korea Agricultural and Fishery Trade Corporation (from 2004 to 2006 when the said Federation was withdrawn) to the members and non-members (hereinafter referred to as “members and non-members,” both of the members and non-members).

C. The Plaintiff received payment of KRW 29,00 for each purchase price of KRW 360, storage fees, KRW 150 for transportation expenses, KRW 390 (in the case of a partner), or KRW 29,900 (in the case of a partner) or KRW 30.760 (in the case of a non-member), which is the amount including KRW 1,250 (in the case of a partner), as the sales price for the rise from a person who has the actual demand for the business in the process of operating the business in this case, and reported it as tax exemption for the amount corresponding to the above purchase price, transportation expenses, and storage fees, but the amount corresponding to the expenses has been paid as value-added tax after receiving an additional payment from the person who has the actual demand for the payment of the amount corresponding to the expenses.

D. On January 31, 2007, the Plaintiff filed a claim against the Defendant for correction stating that “The amount corresponding to the expenses out of the sales proceeds of the head of the bank constitutes the value-free goods that are included in the proceeds from the rise of tax-free goods, and thus, falls under the subject of tax-free goods.” The Defendant accepted the Plaintiff’s claim for correction on February 26, 2007 that “The amount of value-added tax paid to the Defendant during the period from 2004 to 2006 is to be refunded,” and the Defendant refunded the Plaintiff the value-added tax of 16,026,540, value-added tax for the first period of 2004 to 13,458,590, value-added tax for the second period of 2004 to 13,357,420, value-added tax for the first period of 205 to 12,921,580, value-added tax for the second period of 2005 to 12,4307

E. On April 2, 2007, the Plaintiff filed a complaint with the Defendant on April 2, 2007, stating the same content as the above request for correction, “The amount of each value-added tax on the year 2002 and the taxable period 2003 already over which the period of the request for correction had already lapsed shall be refunded,” and the Defendant also accepted the Plaintiff’s above request for grievance on April 20, 2007, and imposed the amount of value-added tax 10,572,080 won for the first period portion of the year 2002, the amount of value-added tax for the second period of the year 2002, and the amount of value-added tax 10,97,050 won for the first period of the year 203, and the amount of value-added tax 12,847,040 won for the second period of the year 203, respectively.

F. However, on June 2007, the defendant revoked all the previous refund decision and notified the plaintiff on June 14, 2007 and August 1, 2007 of each value-added tax for the taxable period from 2002 to 2006 on the ground that "the amount equivalent to the expenses out of the sales proceeds of the large-scale bank was received from the association operating expenses for the purchase services that the plaintiff received from its members, and the supply of the above purchase services does not fall under the supply of services that are naturally incidental to the supply of tax-free goods, and thus, the value-added tax is imposed."

G. On September 11, 2007, the plaintiff appealed to the National Tax Tribunal, but the National Tax Tribunal dismissed the plaintiff's appeal on December 27, 2007.

[Ground of Recognition] Facts without dispute, Gap evidence 1-1 to 10, Gap evidence 2, Gap evidence 3-1 to 10, Gap evidence 4-10, Gap evidence 12-20, and the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

(1) The mutual purchase business (the business in this case) for the rise of the Plaintiff constitutes a wholesale business that purchases and sells the rise, not a service of buying for the rise, but a sales business that purchases and sells it.

(2) Therefore, the costs that the Plaintiff received from the members and non-members constitute the tax-free goods as well as the costs for the services that are naturally included in the supply of the rise for which the value-added tax is exempted pursuant to Articles 1(4) and 12(3) of the Value-Added Tax Act and Article 3(1) of the Enforcement Decree of the Act.

(3) Therefore, each of the dispositions of this case by the Defendant, based on the premise that the amount corresponding to the above expenses is the value of supplies for the purchase services that is separate from the supply for the rise, is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) Facts of recognition

Article 23(1)1 of the Plaintiff’s articles of association provides that joint ventures such as production, processing, orders, sale, storage, transportation, environment improvement, trademarks, and services, and construction, management, and operation of industrial complexes and common facilities may be conducted in order to achieve its purpose. Accordingly, the Plaintiff’s "joint business operation regulations" provides that the scope of the Plaintiff’s joint purchase and sale, management, storage, transmission of facilities, and technical guidance" can be collected from members of the Association, and Article 11 of the Plaintiff’s articles of association provides that the Plaintiff may receive prescribed membership fees from members of the Association, and Article 14 provides that the Plaintiff may collect from members of the Association the total amount of expenses and fees necessary for the operation of the Association, and that the Plaintiff may receive 30,000 won per annum for the association’s purchase and sale, and that the Plaintiff may receive 20,000 won per annum for each business year from members of the Association, and that the amount of the Plaintiff’s annual demand for use and expenses for each item of the Association can be predicted to be less than 5,0, respectively.

(2) Determination

Article 1(1) of the Act provides that the value-added tax shall be imposed on the supply of goods or services. Paragraph (2) of Article 1 provides that "goods and services" means all tangible goods and services having property value, and Paragraph (3) of Article 1 provides that "services are all services and other activities having property value other than goods." Thus, in principle, the supply of all goods or services shall be subject to value-added tax unless otherwise provided for in the Act, and the interpretation of tax laws and regulations shall be strict and shall not be permitted without permission for final interpretation or analogical interpretation under the principle of no taxation without the law. Therefore, Article 12(1) of the Act provides that the provision of goods or services under each of the following subparagraphs shall be exempted from value-added tax, and it is not an example to list the goods or services subject to tax exemption until subparagraph 18 of Article 12(1) of the Act, and it shall not be readily concluded that they are exempt from value-added tax (see, e.g., Supreme Court Decision 94Nu1381, Feb. 14, 1995).

Furthermore, with regard to the supply of services that are essential to the rise in the supply of the business of this case, and whether the price is not separately imposed by including the value-added tax in the supply price for the rise in tax-free goods pursuant to Articles 1(4) and 12(3) of the Act and Article 3(1)1 of the Enforcement Decree of the Act, the following circumstances can be revealed through the facts and arguments recognized as above: (i) the Plaintiff is a non-profit corporation established for the economic interest of its members, and there is no content that the Plaintiff runs the sales business (market) in the articles of association or the purpose of establishment on the register; (ii) as a joint business for its members, it is stipulated that the Plaintiff should make a joint purchase (or the Korea Food Industry Federation). According to the external form of the business of this case, it cannot be seen that the Plaintiff’s purchase or resale of services for its members or non-members is not necessarily included in the supply price for the business of the Association (i.e., the Plaintiff’s purchase price for the business of this case and the sales of the Association)., it cannot be viewed that the Plaintiff’s supply price for the business.

3. Conclusion

Therefore, each of the dispositions in this case is legitimate, and the plaintiff's claim is dismissed as it is without merit, and the judgment of the court of first instance is unfair, and the judgment of the court of first instance is revoked and the plaintiff's claim is dismissed. It is so decided as per Disposition.