Whether it constitutes a transfer of business not falling under the supply of goods

The transfer of this case constitutes a "transfer of business" under the Value-Added Tax Act, which only replaces only the management body while maintaining the identity of the Cub manufacturing business.

Article 10 of the Value-Added Tax Act

The revocation of revocation of the imposition of value-added tax by the District Court 2016 Guhap792

AA

K Director of the Korean Tax Office

2017.9.12

oly 24, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of value-added tax of KRW 148,790,190 against the Plaintiff on May 11, 2015 shall be revoked.

1. Details of the disposition;

A. On July 15, 2014, AA established the Plaintiff on the following grounds: (a) on the trade name of “BB food”, in order to concurrently operate a business of manufacturing Cub and candys at a place of business located in the same area as “the first place of business” (hereinafter referred to as “the second place of business”) in Pakistan-Eup (hereinafter referred to as “the second place of business”) and to convert the business of manufacturing Cub with high profitability into a corporation, the Plaintiff was a representative and a single shareholder.

B. On August 7, 2014, AA transferred, to the Plaintiff, the land and buildings of the first place of business, and around September 2014, the machinery and instruments related to the manufacture of Cub (hereinafter referred to as “transfer of this case”) of Cub, such as 1, 2 composites of places of business, opportuns, opportuns, and opportuns (hereinafter referred to as “instant transfer”). On September 30, 2014, AA issued a tax invoice (total supply value of KRW 1,324,463,193).

C. On the premise that the transfer of this case constitutes a “supply of goods”, the Plaintiff filed an early refund of value-added tax by deducting KRW 132,446,319 from the input tax amount. However, on May 11, 2015, the Defendant deemed that the transfer of this case constitutes a “transfer of business” under Article 10(8)2 of the Value-Added Tax Act, and thus, did not deduct KRW 132,446,319 as the input tax amount, but rather corrected and notified KRW 148,790,190 for the second period of 2014 (hereinafter “instant disposition”).

D. On December 15, 2015, the Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on December 15, 2015, but the Tax Tribunal dismissed the appeal on April 14, 2016.

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The instant disposition should be revoked on the grounds that it is unlawful for the following reasons.

1) The Plaintiff does not comprehensively succeed to the business from AA, but merely takes over the land of the first place of business, buildings, and fixed assets related to the production of Cub, and thus, the transfer of this case constitutes not a "transfer of business" but a "supply of goods" rather than a "transfer of business.2) AA has received value-added tax on the transfer of this case from the Plaintiff and filed a return thereon, so the Defendant should deduct 132,446,319 won from the Plaintiff as the input tax amount.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether the business is transferred

A) Relevant legal principles

The purport of the Value-Added Tax Act is not to regard the transfer of a business as the supply of goods and to make a non-taxation object. The transfer of a business does not correspond to the intrinsic nature of the supply in case of the value-added tax which serves as the taxation requirement for the individual supply of specific goods. In general, it is anticipated that the transferee of the transaction amount and its value-added tax would be entitled to the deduction of the input tax amount without any exception. Thus, the collection of the output tax amount is connected to the tax or economic policy consideration that the transferee should be subject to unnecessary funding pressure and avoid this transaction. Thus, the "transfer of business not considered as the supply of goods" refers to the transfer of the business by place of business and the replacement of only the owner of the business while maintaining the identity of the business by comprehensively transferring physical and human facilities and rights and duties, etc. (see, e.g., Supreme Court Decisions 2004Du10593, Dec. 10, 2004; 97Nu1278, Jul. 10, 1998).

B) Determination

Examining the following circumstances in light of the aforementioned legal principles by comprehensively taking account of each of the aforementioned evidence and evidence Nos. 2 and 6’s overall purport of the pleadings, the instant transfer constitutes “transfer of business” under Article 10(8)2 of the Value-Added Tax Act, as it constitutes “transfer of business under Article 10(8)2 of the Value-Added Tax Act, while maintaining the identity of the Cub manufacturing business.”

1. AAA concurrently operates the business of manufacturing Kuki and candi products at the 1 and 2 places of business, thereby establishing the Plaintiff to separate only the business of manufacturing Kuki products into a legal entity, and then transfers the land and buildings of the 1st place of business, the 1st place of business, the 2nd place of business, the mixing of ooki products, and the machinery and appliances related to Kuki products (fixed assets), such as ooki products, to the Plaintiff.

② The fact that AA could have transferred the machinery, apparatus, etc. related to the manufacture of Kukis to the Plaintiff seems to be due to the distinction between the manufacture of Kukis and the manufacture of candies from the first and second places of business.

③ The Plaintiff continued to use the trade name called BB food, while maintaining transaction with the existing business partners of BB food. On July 17, 2014, the Plaintiff succeeded to the status of BB food business operators with respect to business registration for food manufacturing and processing business and business notification for food subdivision and distribution business. On the other hand, BB food was voluntarily closed by the Defendant on December 31, 2014.

④ If the managing body is replaced while maintaining the identity of the business, even if the credit purchase obligations, etc. are excluded from the subject of transfer as alleged by the Plaintiff, it cannot be an obstacle to recognizing the transfer of the business.

2) Whether the input tax amount is deducted

Where a business transferor in relation to the transfer of business collects the value-added tax from a business transferee, and makes a return and payment of the value-added tax, it would induce the tax authority that received the value-added tax without authority to return the value-added tax to the business transferee who bears the burden of return the value-added tax. However, in a case where the business transferor fails to report and pay the value-added tax even though he/she has collected the value-added tax from the business transferor, the tax authority has no authority to collect the value-added tax from the business transferor, and in such a case, the business transferee may recover the value-added tax that has been collected without any obligation against the business transferor. Accordingly, even if AA received the value-added tax from the Plaintiff, if the Defendant did not pay it to the Plaintiff, the Plaintiff’s aforementioned assertion is not reasonable (the end is to resolve the excess amount of the value-added tax reported under Article 45-2(1) of the Framework Act on National Taxes).

3. Conclusion

Thus, the plaintiff's claim is dismissed as there is no ground.