Whether the liability to pay value-added tax on transfer due to auction is possible (judgments without hearing)

The transfer of goods by auction constitutes the supply of goods subject to value-added tax, and the delivery or transfer of goods by auction under the former Value-Added Tax Act is stipulated as the supply of goods.

Article 6 (Supply of Goods)

Article 14 of the Enforcement Decree of the Value-Added Tax Act

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

We examine the grounds of appeal in comparison with the records and the judgment of the court below. Since it is clear that the grounds of appeal by the appellant fall under Article 4 of the Act on Special Cases Concerning the Procedure for Appeal, it is dismissed under Article 5 of the same Act. It is so decided as per Disposition by the assent

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Daegu High Court 2005Nu2781 (206.02)

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the plaintiff.

The judgment of the first instance shall be revoked. The imposition of value-added tax for the second period of August 17, 2000 against the plaintiff on August 17, 2004 by the defendant shall be revoked.

1. Details of the disposition;

The following facts are not disputed between the parties, or acknowledged in full view of the purport of the entire pleadings in Gap evidence Nos. 1, 3 through 7, and Eul evidence Nos. 1, 2, and 3.

A. From June 18, 1990 to ○○○○○○○○○○○○○○○○○○○○○ (hereinafter “instant place of business”) operated hotel business, etc. The Plaintiff was awarded a successful bid for KRW 4,789,00,00 on July 10, 200 for a site and building located in ○○○○○○○○○○○○○○○○○○, a business asset of the instant place of business, at a voluntary auction procedure commenced upon the Plaintiff’s application.

B. Accordingly, on August 17, 2004, the Defendant deemed that the transfer due to the auction of the part of the building (hereinafter “the building of this case”) among the real estate of this case constitutes “supply of goods”, and calculated the supply value of the building of this case in proportion to the ratio of the book value of the land and the building, and calculated the supply value of the building of this case in proportion to the ratio of the above successful bid price to the book value of the land and the building. After adding to the tax base, on August 17, 2004, the Defendant notified the Plaintiff of the payment of KRW 740,847,890 (including additional tax 315,562,074) for the second term portion of the

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) argument that a taxpayer is not a taxpayer

Unlike the supply of general goods, the supply of goods by auction is determined by the court, such as the supply price, the recipient of the goods, and the time of supply, and the entrepreneur cannot participate in all transaction. The seller at auction merely is in the status of losing ownership when the successful bid is determined not by the supplier but by the successful bidder, and thus cannot issue a tax invoice or trade the value-added tax by force from the successful bidder. Thus, the seller is not a person liable for the payment of value-added tax in the supply of the goods through auction. Nevertheless, including an entrepreneur who is put on auction in the taxpayer of value-added tax under Article 2 of the Value-Added Tax Act, is in violation of the principle of substantial taxation, the provisions on the interpretation of taxes, and the provisions on the guarantee of property rights under the Constitution. Accordingly,

(2) The assertion that value-added tax was not created

Value-added tax is a tax imposed on the creation of a value added in theory. The real estate of this case is awarded at a price that does not reach half of the actual sale price as a result of voluntary auction, and thus, the plaintiff was not added value-added due to the successful bid of the building of this case, and even though the plaintiff suffered a big loss, the Defendant’s imposition of value-added tax on the plaintiff is unlawful by significantly infringing

(3) The assertion that there are justifiable grounds for failure to report and pay

The penalty tax may be imposed in cases where a taxpayer violates an obligation under tax-related Acts, but even if a taxpayer violates an obligation under tax-related Acts, it may not be imposed if it is not due to a cause attributable to the taxpayer. In the event of an auction of goods, the entrepreneur cannot participate in the supply of such goods, and cannot issue a tax invoice, so that the court cannot submit a list of total tax invoices at the time of the preliminary or final return and payment of value-added tax unless a tax invoice is issued. In the auction procedure of this case, since the court did not issue a tax invoice, the portion of penalty tax in the disposition of this case is unlawful.

(4) Retroactive application of the amended Enforcement Decree of the Value-Added Tax Act

Article 14(3) of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 1930 of Feb. 9, 2006) provides that "the delivery or transfer of goods pursuant to a compulsory auction under the provisions of the Civil Execution Act shall not be deemed the supply of goods." However, Article 2 of the Addenda provides that "the provisions of the Enforcement Decree of the Value-Added Tax Act shall apply from the first supply or supply after the enforcement of this Decree." Article 14(3) of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 1930 of Feb. 9, 2006) provides that Article 14(3) of the Enforcement Decree of the Value-Added Tax Act shall not be applied retroactively to the plaintiff who is dissatisfied with the disposition of imposition of value-added tax on the ground of transfer of goods due to auction at the time of enforcement of the above amended provision, which discriminates against the plaintiff without any reasonable reason, and thus, Article 2 of the above Addenda is null and void.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) As to the first argument

(A) According to Article 1(1)1 of the Value-Added Tax Act, the subject of the imposition of value-added tax is a transaction of goods or services. According to Article 6(1) of the same Act, the supply of goods refers to the delivery or transfer of goods by all contractual or legal grounds. Article 14(1)4 of the Enforcement Decree of the Value-Added Tax Act provides that the supply of goods is also a case of delivery or transfer of goods by auction. In addition, Article 2(1) of the Value-Added Tax Act provides that the supplier of goods and services independently from business is a person liable for value-added tax. Thus, the recipient of the supply is merely a person who is a taxpayer in finance and is not a taxpayer in tax law, and the provision that the person who receives the supply of goods and services must collect an amount equivalent to value-added tax from the person who receives the supply of goods and services is ultimately liable for the payment of the final consumer by transferring in sequence the amount equivalent to the value-added tax collected by the business operator. It does not mean that the person who receives the supply directly pays the goods or the value-added tax to the other party or State.

(B) The transfer of goods through an auction also constitutes the supply of goods subject to value-added tax. In the event of a transfer of goods by auction, the owner of the goods cannot be deemed a supplier of goods subject to value-added tax (see Supreme Court Decision 84Nu30, Sept. 24, 1985). The court, which is an auction institution, did not collect value-added tax from a successful bidder, to hold the owner liable for the payment of value-added tax. Thus, the Plaintiff is not liable for the payment of value-added tax. Article 14(1)4 of the Enforcement Decree of the Value-Added Tax Act provides for the case of delivery or transfer of goods by auction merely because Article 2 of the Value-Added Tax Act provides for the above legal principles, and thus, only the general supply transaction of goods conducted by an entrepreneur’s intervention in any form is not subject to the application of Article 2 of the Value-Added Tax Act, and therefore, it does not constitute a violation of the principle of property rights under the Constitution.

(2) As to the second argument

The Value-Added Tax Act adopts the method of tax credit at all stages to define the taxable object of value-added tax as the abstract supply of goods or services and the import of goods (Article 1(1) of the Value-Added Tax Act), and Article 13(1) of the same Act provides that the price of the supply of goods to be paid in money shall be the tax base of value-added tax and does not stipulate the added value as the taxable object. Thus, it is just to calculate value-added tax on the basis of the value of supply of the building of this case included in the successful bid price of the real estate of this case, and even if the supply price of the

(3) On the third argument

Under the tax law, in order to facilitate the exercise of the right to impose taxes and the realization of tax claims, when a taxpayer violates various obligations, such as a return and tax payment, under the individual tax law, the taxpayer’s intent and negligence are not considered as administrative sanctions. On the other hand, such sanctions cannot be imposed in cases where there are justifiable grounds for not misunderstanding the duty behavior, such as the taxpayer’s failure to know his/her duty, or in cases where it is unreasonable for the taxpayer to expect the fulfillment of his/her duty, etc. (see, e.g., Supreme Court Decision 9Du3324, Sept. 14, 2001). Article 58(6) of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 1930, Feb. 9, 2006) provides that a taxpayer may deliver a tax invoice to an auction institution without justifiable reasons. Thus, the Plaintiff’s failure to issue the tax invoice can not be viewed as not being a legitimate taxpayer’s right to issue the tax invoice.

(4) As to the fourth argument

(A) The principle of equality under Article 11(1) of the Constitution does not mean an absolute equality that denies all discriminatory treatments against all citizens, but is to prohibit discrimination against the citizens without reasonable grounds. On the other hand, the imposition and collection of taxes is based on the citizen’s duty to pay taxes, and it does not constitute a violation of property rights on the basis of the citizen’s duty to pay taxes, but if the legal provision on the imposition and collection of taxes is in violation of the principle of no taxation without law and the taxpayer’s right to own property is seriously restricted by the exercise of arbitrary taxation rights, it may be exceptionally infringed upon property rights.

(B) Therefore, even if the amended Enforcement Decree of the Value-Added Tax Act excluded the transfer of goods by auction from the supply of goods under the Value-Added Tax Act, and did not retroactively apply the Enforcement Decree after the amendment to the person dissatisfied with the disposition under the former Enforcement Decree prior to the amendment, as the Plaintiff, (i) determination of the timing and scope of the enforcement of the amended Act, as a matter of principle, falls within the discretion of the legislators taking into account the legislative intent and purpose, etc., and (ii) determination of the enforcement decree prior to the amendment in this case is not declared unconstitutional and unlawful; and (ii) the content of the provision is related to the imposition and collection of taxes based on the constitutional tax liability and this is an area where a broad discretion is granted to the legislators. In light of the above, Article 2 of the Addenda to the amended Enforcement Decree of the Value-Added Tax Act cannot be deemed to infringe property rights by treating the Plaintiff without any

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is just and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.