Cho-2016-Divisions-2302 (Law No. 24, 2016)

The investment shares are returned in kind and are supplied with goods under the Value-Added Tax Act.

Business operators may choose one of the several legal relations in order to achieve the same economic purpose in conducting economic activities, and the tax authorities shall respect the legal relations chosen by the parties.

Article 9 of the Value-Added Tax Act, Scope of Supply of Goods under Article 18 of the Enforcement Decree of the Value-Added Tax Act

2016Guhap24299 Revocation of Disposition of Imposition of Value-Added Tax

The lowest Z

YThe director of the tax office

December 15, 2016

January 19, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

On January 14, 2016, the Defendant revoked the imposition of value-added tax 82,617 on the second year of 2014 against the Plaintiff, and the imposition of an employee at a trade-level school (it appears that November 17, 2015, which is the date of the disposition entered in the complaint, appears to be erroneous).

1. Details of the disposition;

가. 원고는 1981. 1. XX. AA BB구 CC동 37X-XX 공장용지 1,08X㎡와 그 지상 공장용 건물 각 1/2 지분을 취득하였고, 원고의 자녀인 김DD, 김EE, 김FF는 1984. 7. 2X. 위 토지 및 건물의 나머지 각 1/2 지분 중 각 1/6 지분씩을 취득하였다.

B. On January 1, 1983, the Plaintiff jointly carried on a real estate rental business (registration number: 606-1X-30) in the name of the joint owner (registration number: 606-1X-30) whose type of business is real estate business (non-residential building rental business) after completing the business registration (registration number: 606-1X-30).

C. On March 10, 2014, the Plaintiff: (a) divided the aboveCC-dong 37X-G factory site into 543.1 square meters (hereinafter referred to as “instant 1 factory site”); and (b) 370-X6 factory site 539.9 square meters (hereinafter referred to as “2 factory site”) on the ground of the instant 1 factory site into 370-X6 factory site; and (c) newly constructed the general steel structure 375.72 square meters (hereinafter referred to as “1 factory”); and (d) on the ground of the instant 1 factory site, the “general steel structure 2 factory site 375.72 square meters (hereinafter referred to as “375.2 square meters”) on the ground of the instant 2 factory site.

D. On June 13, 2014, the Plaintiff entered into a sales contract (hereinafter “instant sales contract”) with HeH, which sells the instant factory site and the instant factory in total of KRW 1,200,000,000, with the trade name “GGG” (hereinafter “instant sales contract”).

E. On July 1, 2014, the Plaintiff entered into a partnership agreement with KimD, KimE, KimF, and the reasons for the cancellation of the partnership agreement with each other on July 1, 2014 (hereinafter “instant partnership agreement”).

F. On July 2, 2014, the Plaintiff completed the registration of initial ownership of the instant factory No. 1, and the KimD, KimE, KimF on the same day, and KimF completed the registration of initial ownership of each 1/3 shares of the instant factory No. 2 on the same day. On the same day, the Plaintiff acquired 1/6 shares of KimD, KimE, and KimF in the instant factory No. 1, due to division of common property, and KimD, KimE, KimE, and KimF acquired 1/6 shares of the Plaintiff’s 1/2 shares in the instant factory No. 2, among the instant factory No. 2, for the same day.

G. The KimD, KimE, and KimF obtained a registration of business (registration number: 606-3X-32) on July 9, 2014 on the date of commencement of the business on July 1, 2014; the location of the two factories in this case; and the type of the business as a real estate business (non-residential building lease business) on the real estate business (registration number: 606-3X-32) and then jointly carries on a real estate rental business until now.

H. On July 24, 2014, the Plaintiff entered into an overall business transfer and takeover agreement (hereinafter “instant business transfer agreement”) with HH on setting the Plaintiff’s real estate business as KRW 1,200,000 as the transfer price to HH, and HH acquired the instant factory No. 1 and the instant factory No. 1.

I. On July 31, 2014, the Plaintiff reported the closure of the existing business registration (registration number: 606-1X-30).

B. On August 14, 2014, H moved the location of the instant 1 factory into the location of the instant 1 factory and continues to conduct a manufacturing business until now.

C. On November 17, 2015, the Defendant issued a notice to the Plaintiff on November 14, 2016, to rectify the amount of KRW 40,989,400 as of January 14, 2016, to reduce the amount of KRW 41,627,790 as of KRW 20,00,00,000 as of January 17, 2014 and issued a notice to increase the amount of KRW 41,627,790 as of January 17, 2015 (the Defendant corrected the amount of KRW 17,000,000 as of November 14, 2015, and subsequently corrected the amount of KRW 16,00 as of January 14, 2016, and issued a notice to the effect that the Plaintiff’s transfer of the instant factory to HuH constituted a supply of goods subject to each value-added tax.

(l) On February 11, 2016, the Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on June 9, 2016, but was dismissed on August 24, 2016.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 5, 8, Eul evidence 1 to 5 (including branch numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The Plaintiff: (a) sold the instant First Factory between the Plaintiff’s child KimD, KimE, and KimF, and paid the price to the Plaintiff as the return of equity shares; and (b) agreed that the instant secondary factory will continue to engage in real estate rental business. In the process, the Plaintiff entered into a contract to terminate the instant Dong business with KimD, KimE, KimE, KimF; (b) KimD, KimE, and KimF entered into a new business registration; and (c) thereafter, the Plaintiff did not engage in any business and filed a report on the closure of the existing business registration. The Plaintiff and KimD, KimE, KimE, and KimF did not complete the above procedures for the smooth tax affairs, but did not impose value-added tax on the Plaintiff in a way that the Plaintiff would return the sales price of the instant First Factory in cash, and did not incur any loss to the National Treasury; and (d) the Defendant’s improper disposition on the instant case’s actual business in accordance with the above procedures was unlawful.

2) The Plaintiff’s transfer of the Plaintiff’s existing business to HuH with the knowledge that H would purchase the instant 1 factory site and the instant 1 factory and operate a real estate rental business, which does not constitute the supply of goods, but it is unlawful for the Defendant to consider it as the supply of goods and take the instant disposition.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) As to the Plaintiff’s first argument

Unless there is a special provision that the value-added tax shall be exempted or imposed on the case where an entrepreneur delivers or transfers goods due to contractual or legal reasons, it is subject to the taxation of value-added tax, and the entrepreneur’s main business is neither continuously and repeatedly supplied goods, etc., but rather supplied goods, etc. with respect to its main business, and is subject to taxation, regardless of whether the purpose of supply is to maintain and expand the business or to liquidate the business (see, e.g., Supreme Court Decision 98Du16644, Feb. 23, 2001). Thus, where an entrepreneur engages in a joint business and returns equity shares in kind to dissolve the partnership relationship, it is subject to value-added tax on the grounds that the entrepreneur supplies goods to each individual (see, e.g., Supreme Court Decision 97Nu12082, May 14, 199).

In light of the above legal principles, the above facts are as follows: KimD, KimE, KimF, and KimF recognized by the overall purport of the evidence and arguments as seen earlier, namely, KimD, KimE, and KimF, after completing the registration of preservation of ownership of the factory building of this case and completing the registration of new business under the name of KimD, KimE, and KimF joints with the plaintiff; the plaintiff entered into the business transfer contract of this case with HH after the termination of the business of this case, and entered the business registration number used in the existing joints with HH in the contract, and the business operator like the plaintiff can choose one of the various legal relations in order to achieve the same economic purpose and the tax authorities like the defendant respect the legal relations selected by the parties, barring any special circumstance, and completing the registration of preservation of ownership of each factory of this case 21/3 in its name with respect to the above factory building of this case, and thus, it cannot be viewed that the plaintiff's first and the defendant's appeal against the supply of the goods of this case constitutes an unfair value-added tax.

2) As to the second argument of the Plaintiff

Article 10(8)2 of the Value-Added Tax Act and Article 23 of the Enforcement Decree of the same Act mean the comprehensive transfer of physical and human facilities, rights, and duties, etc. including business property, to replace only the managing body while maintaining the identity of the business. Thus, the business must be deemed as an organic combination of human and material facilities so that social independence can be recognized (see, e.g., Supreme Court Decision 2004Du8422, Apr. 28, 2006).

In light of the above legal principles, it is reasonable to view that the transaction between the Plaintiff and HH related to the First Factory of this case between the Plaintiff and HH as the object of transfer by specifying the title to the First Factory of this case, rather than that the rights and obligations of the real estate business operated by the Plaintiff with respect to the First Factory of this case were comprehensively transferred to HH, and that it is difficult for HH to deem that the real estate business operated by the Plaintiff was replaced only by the managing body while maintaining its identity. In light of the above circumstances, it is difficult to view that the real estate business operated by the Plaintiff had an asset and liabilities assessment or business rights assessment related to the real estate business operated by the Plaintiff between the Plaintiff and HH as an important factor. In addition, it is reasonable to view that the Plaintiff’s transaction related to the First Factory of this case between the Plaintiff and HH as the object of transfer by specifying the title to the First Factory of this case and the First Factory of this case, the site of this case, which is the site of this case, rather than the comprehensive transfer to HH while maintaining its identity.

3. Conclusion

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