[1] The meaning of "transfer of business" not deemed the supply of goods under the Value-Added Tax Act

[2] The case holding that a transaction related to the sale and purchase of a building which is the object of the real estate leasing business does not constitute "transfer of business" which is not deemed the supply of goods under the Value-Adde

[1] Article 6 (6) 2 of the former Value-Added Tax Act (amended by Act No. 8142 of Dec. 30, 2006), Article 17 (2) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 1930 of Feb. 9, 2006) / [2] Article 6 (6) 2 of the former Value-Added Tax Act (amended by Act No. 8142 of Dec. 30, 2006), Article 17 (2) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 1930 of Feb. 9, 2006)

[1] Supreme Court Decision 97Nu12778 delivered on July 10, 1998 (Gong1998Ha, 2158) Supreme Court Decision 2004Du8422 delivered on April 28, 2006 (Gong2006Sang, 964)

Han LLC Co., Ltd. (Law Firm KCEL, Attorneys Choi Ji-dam et al., Counsel for the defendant-appellant)

Deputy Director of the Tax Office

Seoul High Court Decision 2005Nu13249 delivered on November 23, 2005

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. The term "transfer of business not deemed the supply of goods under Article 6 (6) 2 of the former Value-Added Tax Act (amended by Act No. 8142 of Dec. 30, 2006; hereinafter the "former Act") and Article 17 (2) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 1930 of Feb. 9, 2006; hereinafter the "former Enforcement Decree") refers to the replacement of only a managing body while maintaining its identity by comprehensively transferring physical and human facilities, rights, and obligations, including business property, etc.

In full view of the admitted evidence, the lower court determined that the Plaintiff, while entering into a sales contract with the Nonparty to purchase the instant land and building at KRW 8.45 million, he was operating the medical business (non-party) as well as the non-party’s medical business (non-party) on the 9th 346 m23 m2 of the instant building (hereinafter “non-party’s 9th m346 m23m2 of the instant building”), provided that “The buyer shall pay the seller the balance after deducting lease deposit and debt acquisition, and the seller’s right and duty on the instant goods shall be succeeded to the buyer, and the seller shall succeed to the obligations on the instant comprehensive transfer and takeover of the instant goods,” and that the non-party, prior to the transfer of the instant land and building to the Plaintiff, was operating the real estate lease business (non-party 6) on the 9th m23th m23th m2000 m200,000,000).

However, according to the facts established by the court below, the non-party, even before transferring the land and the building of this case to the plaintiff, operated the medical business that is exempt from taxation, and the building of this case was provided as real estate leasing business as well as the medical facilities as well as the real estate leasing business. After the above transfer, the plaintiff leased the 9th floor of the building of this case used as hospital to the non-party and operated it as it is. At the time of the above transfer, the plaintiff received a tax invoice equivalent to the purchase price of the entire building of this case from the non-party, and paid 420,170,000 won as value-added tax from the sale of the building of this case to the Dong, and the non-party did not pay the above tax amount as traded by the non-party after filing a tax return as output tax amount. In addition, according to the evidence established by the court below, it is difficult to view that the non-party's sales contract (Evidence evidence No. 5-1, No. 2) was clearly related to the sale and purchase of the land of this case and the building of this case to the non-party.

Nevertheless, the court below erred by misapprehending the legal principles as to "transfer of business" which is not considered as the supply of goods under Article 6 (6) 2 of the former Act, which affected the conclusion of the judgment. The plaintiff's ground of appeal pointing this out is with merit.

2. Therefore, without examining the remaining grounds of appeal premised on the premise that the sale and purchase of the building of this case constitutes business transfer, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yang Sung-tae (Presiding Justice)